All posts by bob - 10. page

[Bowen Press, Beijing, May 16, 2006] In order to cooperate with the "Eight Glories and Eight Shames" education policy that was recently mandated to all corners of Chinese society [a new public education campaign initiated by the current Hu-Wen administration], the top leaders of the Chinese Communist Party’s (CCP’s) Central Committee made an important adjustment to the existing anti-corruption policies. According to inside sources, the yet-to-be announced adjustment may reverse the existing anti-corruption policies.

This change was made in the politburo meeting earlier this year after the "Two Conferences" [the Chinese National People’s Congress Conference and the Chinese Political Consultation Conference] in March 2006. Following the "Two Conferences," the CCP’s politburo held two more expanded meetings, where President Hu Jintao made speeches with emotion and declared that the communist government "is in critical condition." He also pointed out, "If the CCP fails, it must be caused by its own corruption." These two high-profile meetings intensified the effort to fight corruption and promote a clean government.

But according to Bowen Press‘s exclusive source, after a politburo meeting at the end of March, the standing committee of the politburo had a crucial, smaller scale meeting. In that meeting, a new policy was agreed upon to ensure that high-ranking officials would not be involved in the anti-corruption campaign.

In that meeting, Luo Gan summarized the situation of how the overseas "anti-China forces" had taken advantage of China’s anti-corruption campaign, especially corruption scandals involving high-ranking officials, to stir up anti-China sentiment both on the mainland and overseas. Luo Gan’s speech drew rapt attention from the members of the politburo, including Hu Jintao. Hu later commented that this new strategy on the part of the anti-China forces was worth special attention.

By the meeting’s end, the eight-member (one absent) politburo standing committee had made a decision: In principle, when a senior Party or government leader above deputy governor level is found guilty in a corruption case, he or she will no longer be tried in a court of law or in front of any other judiciary organization. When the cases are not very serious, or when the offenders have returned the embezzled money and properties and shown remorse, these people can be forced to resign or be fired. These cases should be handled within the organization. If the cases are serious, they should be handled by the Party disciplinary committee. These cases should not be made public, lest they have a negative social impact.

Among the politburo standing committee members, only Wen Jiabao and Zeng Qinghong had reservations about this decision. All the rest agreed. Luo Gan later also said that the executions of Hu Changqing [former Vice Governor of Jiangxi Province], and Cheng Kejie, [former Vice Chairman of the Standing Committee of the National People’s Congress, and Vice Secretary of the CCP Committee of Guangxi Zhuang Autonomous Region], had not curbed the senior cadres from committing crimes. In addition, some overseas individuals with ulterior motives were using the criminal activities of these two former officials to attack the CCP. These were serious lessons to be pondered.
{mospagebreak}
Although the CCP is still discussing this matter, it will issue a policy document soon. In the meantime, this "Justice does not apply to high-ranking officials" policy has already quietly influenced actual cases since the beginning of April. From reliable sources, Deputy Governor Wang of Hainan Province was scheduled to go to trial, but he was "saved" by this new policy. Three deputy-governor-level officials from Shanghai, Jiangsu, and Hubei Provinces were also going to court for corruption, but this new policy spared them as well.

Translated by CHINASCOPE (excerpt) from http://www.bowenpress.com/cn/2006/china/37_1.shtml

[Dajun Editor’s comments: The major potential economic risks that China is facing today involve capital resulting from corruption. It may be a judgmental mistake to believe that capital resulting from corruption constitutes a small portion of the Chinese economy. For most ordinary Chinese people, who know little about the real situation, their benevolent thoughts may be far from the actual truth. Professor Yang Fan, one of a few who are relatively closer to reality, has included reasonable estimates in his article, although readers might not necessarily agree with his point of view.

Two different views coexist regarding how to judge capital resulting from corruption. Those who believe it as an inevitable consequence of economic reform want to offer amnesty to all criminals; those who strongly deem it to be illegal are concerned with the lasting search for accountability. This has become a historic puzzle for Chinese politicians to handle.]

China’s Economic Growth and the Influx Of International Speculative Capital

The Chinese economy is now on a path of long-term high growth, with society automatically driving itself forward. However, its potential growth depends on macroeconomic and social stability to be fully realized. Except for two issues, many tricky problems can either be solved or alleviated as long as the authorities and society make great efforts. The first issue results from the fact that China’s economy has become more and more reliant on the international market. Thus, an unexpected external attack or blockage might be sufficient to halt domestic progress. The second is if a financial crisis occurs. In order for such a crisis to take place, three preconditions must exist. 1) Long-term accumulation of potential crisis factors such as state banks’ bad debts. A financial crisis will occur if the debts are not handled properly. 2) Realistic superficial crisis factors such as the scale of speculative capital. 3) A political environment such as improper reform or macroeconomic policy.

The turning point in China’s economic growth will be the aging of China’s population over the next 10 to 15 years. During the 60 years after the People’s Republic of China was established, the economy has been growing at a high speed. Using an annual rate of seven percent, the economy has expanded 64 times, and it will be as much as 128 times in 10 more years. This is the longest period of sustained high-speed growth in human history. The top reason for the growth is not the reform of the system, but the steady high-speed growth of China’s population, creating a relatively younger population. When there are more young people, the savings rate will be higher. Thus the investment rate will be higher and the economy will grow at a higher rate. With the aging of the population, the savings rate and economic growth rate are certain to be lowered, exposing the problem created by banks’ bad debts. If domestic technology does not advance and domestic industrial production is controlled by foreign capital, when the profits are taken out of the country, a financial crisis will be inevitable.{mospagebreak}

The crisis may even come sooner. Some foreign [anti-China] forces don’t allow China to really rise, and don’t allow China to adjust the policies that may endanger their interests. They may use various measures to influence China’s policies. The most likely one could be spreading the "theory that China’s reform is going backward," and plotting for capital withdrawal.

How Much Foreign Capital Can Be Withdrawn?

The first part is foreign debt, which amounts to around several hundred billion U.S. dollars.

The second part is the profit that foreign investors earn in China. The current annual amount is US$30 billion, and in a few years it will reach US$ 60 billion, close to annual foreign direct investment; China will no longer have a net foreign capital inflow. Over the years, the return of foreign profit, which constitutes the discrepancy between GDP (gross domestic product) and GNP (gross national product), has become larger and larger. The problem is that most of the profit generated by foreign direct investment was not returned, but was kept within China in the form of reinvestment in Chinese yuan. The withdrawal of foreign capital, once it occurs, will not only include the annual yield of tens of billions of U.S. dollars, but also the total investment stock of hundreds of billion of U.S. dollars.

The third part is the reflux of international speculative capital. The more speculative capital that flows into China, the bigger the economic bubble it creates, and the larger the impact it will have when the capital is withdrawn. During the 1998 Asia Financial Crisis, there was an expectation that Chinese currency would depreciate, spurring a removal of foreign money out of China in an amount as high as US$20 billion. After 2000, with the rising expectation that the Chinese yuan would appreciate, together with the requirement to open the domestic market after China’s joining the WTO, massive international speculative capital rushed into China. From 2000 to 2002, the item of "statistical discrepancies" on the balance statement of international income and payments, a rough indicator of the magnitude and direction of international speculative capital, has been growing from a negative US$10 billion to a positive US$10 billion. Ever since 2002, our foreign exchange reserve has increased from US$300 billion to US$900 billion. After trade surplus and foreign direct investment are excluded, the rest can be counted as international speculative capital, which totals at least US$400 billion.

The fourth part is the domestic capital resulting from corruption, which substitutes for and merges with international speculative capital. One thing to note is that some of the foreign capital entering China is the reflux of domestic corruptive capital leaving China. Capital outflow is for money laundering; the Chinese economy and the favorable policy for foreign investment attract the inflow.{mospagebreak}

How Much of China’s Capital Results From Corruption?

According to the estimates in my article "Capitalization of Political Power" published in Chinese Reform Daily in 1988, over the 20 years of economic reform, the money siphoned off as a result of political power amounts to 30 trillion yuan (US$3.75), which includes graft from the agriculture sector, the business sector (including deductions in domestic and international trade), dual-tracking of prices of the means of production, dual-tracking of exchange rates, stock IPOs, and judicial corruption. For the seven years after 1988, the bad money generated from the privatization of state-own enterprises and from the real estate industry should add up to no less than 15 trillion yuan (US$1.9 trillion).

Hu Angang [translator’s note: Hu Angang is an economist in China] summarized the systematic economic losses from corruption into 10 categories based on the investigation and punishment published by the government. The economic losses from corruption is defined as the economic losses resulting from various government agencies or public sectors abusing their public power within the system so as to profiteer for groups of people within the system. Between 1999 and 2001 alone, the annual losses accounted for 14.5 percent of GDP.

Take the list of economic losses from corruption for 1998 as an example:

• Officials’ corruption, bribery and embezzlement—2.0 billion yuan (US$0.25 billion)

• Smuggling—80 billion yuan (US$10 billion)

• Monopolistic sectors such as electricity—5.0 billion yuan (US$0.625 billion)

• Pharmaceutical industry—10 billion yuan (US$1.25 billion)

• Tax evasion—10 billion yuan (US$1.25 billion)

• Public sector expenditure including the fiscal, financial and food sectors—100 billion yuan (US$12.5 billion)

• Corruption in public investment—6.0 billion yuan (US$0.75 billion)

• Privatization of state-owned enterprises and bad state bank loans—60 billion yuan (US$7.5 billion)

• Arbitrary fee collection in the public sector—10 billion yuan (US$1.25 billion){mospagebreak}

• Financial fraud—10 billion yuan (US$1.25 billion)

The total of economic losses from corruption was 300 billion yuan (US$37.5 billion), and this is only the part that can be investigated. If the ratio of the investigable part is 30 percent, the actual total money from corruption will be 1.0 trillion yuan (US$125 billion). For the eight years between 1998 and 2005, we can roughly estimate this amount to be 8.0 trillion yuan (US$1.0 trillion).

We have not counted the private luxury consumption for which people applied for reimbursement from the state funds. As I once estimated, the underground transactions (such as the sex industry) in 1998 were about 500 billion yuan (US$62.5 billion), 300 billion yuan (US$37.5 billion) of which were reimbursed by state funds. For 10 years, the total amount of reimbursed private luxury consumption would have been 3.0 trillion yuan (US$375 billion). Combining that with corruption in education circles, the medical profession, and mass media, I estimate that total money from corruption amounts to 60 trillion yuan (US$7.5 trillion) for the 30 years since the economic reform started.

In 2005, China’s GDP totaled 17 trillion yuan (US$2.13 billion), with the growth part being 1.6 trillion yuan (US$200 billion). The scale of capital from corruption, if calculated as 20 percent of GDP, should be 3.4 trillion yuan (US$425 billion), which is twice as much as the GDP growth part. We may compare the total of capital from corruption, 60 trillion yuan (US$7.5 trillion) over 30 years, with other economic stock variables. The total residential bank deposits are 14 trillion yuan (US$1.75 trillion), and the total market value of the stocks of listed companies is just over 2.0 trillion yuan (US$1.25 billion).

This capital from corruption includes about US$30 billion that is transferred out of China every year so as to avoid foreign exchange regulation. For 10 years, the total capital outflow was US$300 billion, which is so-called flight capital. By definition, flight capital means the transfer across the border of income from illegal sources, including that earned from smuggling, trafficking drugs, money laundering, tax evasion, and foreign exchange evasion. The government investigated and punished US$30 billion of flight capital. We estimate that because of foreign exchange regulation, 90 percent of the money from corruption could not leave China. The money leaving China and flowing back into the country is called reinvestment after money laundering.

Net Domestic Capital Outflow and Turnaround of Speculative Capital

Flight capital is not the same as capital outflow. Flight capital, with a total scale of US$400 billion (and there is also 10 times more capital from corruption waiting for flight), is an illegal capital outflow, while the net domestic capital outflow is due to the fact that domestic saving exceeds investment. The influx of international capital, including foreign direct investment, international speculative capital, and domestic corruptive capital joining international speculative capital after money laundering, is influenced by China’s macroeconomic and political conditions.{mospagebreak}

Capital outflow includes mainly the currency capital, including US$900 billion of foreign exchange reserves, US$400 billion of legitimate domestic residents and business deposits, and US$400 billion of capital from corruption, for a total of US$1.7 trillion. At the same time, China has attracted US$600 billion of direct investment, which consists of capital goods including equipment and intellectual property rights. The international speculative capital in the form of currency flowing into China, which only became significant after 2000, amounts to US$400 billion. So the total capital influx is US$1.0 trillion. By reckoning, there is a net outflow of capital from China with a total scale of US$700 billion.

Although it seems against common sense, it is actually not against economic principles. According to macroeconomic equilibrium, domestic savings should be equal to investment. If savings is less than investment, there will be a net capital inflow. Ever since 1993, China’s domestic saving has been surpassing investments continuously every year, so there can only be net capital outflow. If China continues to attract foreign capital goods using favorable policies or accepts the entrance of international speculative capital, the domestic capital surplus will be squeezed out in the form of foreign exchange. It has only been at great risk and low yield to circulate more than US$1.0 trillion on the international market. Even if the money was invested in a safe place, such as in U.S. Bonds, the annual yield is only 4.0 percent. However, foreign capital goods when invested in China will generate at least a 20 percent profit.

In other words, China’s economy has been out of balance with the international economy for a long time. For China, the benefit is to gain in export-oriented manufacture and more employment, at the cost of low capital yield. Although the benefit still outweighs the cost at present, the situation will be different once the international environment deteriorates. Over the past 10 years, China’s growing exports have covered up the reality of net capital out flow; international speculative capital has covered up the flight of domestic capital from corruption. The real danger is the capital that will leave sooner or later. If it flows back in an intensified way under certain circumstances, a financial crisis will be unavoidable.

Yang Fan is Professor at China University of Political Science and Law.

Translated by CHINASCPOE from http://www.dajun.com.cn/jubaizijin.htm

The costumes of ancient China were emblems of Chinese tradition, as well as essential elements in the history and culture of each dynasty. Costume maintained an important place in Chinese culture for more than 3,000 years. The culture of China is ancient and well established, brilliant and resplendent. The costumes are likewise magnificent and colorful. There were many dynasties throughout China’s history, each having its own unique style of dress. And each style would change or disappear as its dynasty changed, declined, or was replaced.

With the advent of each new dynasty and the progression of time, costumes were revolutionized. The style was classical and conservative in the Qin and Han dynasties, luxurious and glamorous in the Tang dynasty, delicate and exquisite in the Song dynasty, graceful and magnificent in the Ming dynasty, and very intricate in the Qing dynasty.

The Tang dynasty was the most thriving, prosperous, splendid, and glorious period of ancient Chinese culture and art. For nearly 300 years—from the early period, through the thriving and prosperous period and into the later period of the Tang dynasty—the clothing, especially the women’s dresses, had novel and unique styles, were made of colorful cloth, and were adorned with elegant ornaments. The costumes of the Tang dynasty are like exotic flowers in Chinese history. The quality of the material was particularly fine and delicate, and the decorations lustrous.

In the Tang dynasty, men’s daily wear basically consisted of a round-neck robe. Besides regulations regarding the color, animal images—such as a lion, Chinese unicorn, tiger, jackal, hawk, wild goose, and so on—were specially conferred upon civilian and military officials by authority, to be embroidered on their robes, which were called "embroidered robes."

In the Tang dynasty, there was "the rule of the wide belt." This convention dictated that the quality and quantity of decorations on the belt be used to indicate the rank of government officials. For example, officials lower than the first rank wore a sword or knife, officials and generals higher than the third rank wore jade belts, officials of the fourth and fifth rank wore gold belts, and the sixth- and seventh-ranking officials wore silver belts. In comparison, ordinary people could only wear a small bronze or iron knife.

The style of women’s clothing during the Tang dynasty is the most outstanding in China’s history. The attire was characteristically distinctive and natural, displaying the beauty, grace, and freedom of people from heaven. Hair was styled to cover the temples and frame the face, and gowns were low-cut with a high waistband.{mospagebreak}

Women’s outfits consisted of a short-sleeved shirt and a long skirt; or a loose-sleeved shirt, long skirt, and a shawl. Also worn were a short jacket-shirt with half-length sleeves and a long skirt, with a shawl. After the prosperous Tang dynasty, sleeves became looser and larger. Shoes during the Tang period were either made of silk and decorated with a phoenix or woven from grass. Hair was coiled high in a bun, with such names as "gazing-gods bun," "cloud bun," "double handing-down bun," and so on. In order for a woman to wear a bamboo hat, the hair was coiled into a "flower bun."

Tang dynasty fashion has become a type of ceremonial dress commonly accepted by Chinese people and a type of national costume surely to be worn at festivals and traditional holidays. Tang-style dress has become a symbol of China’s long tradition and culture, and the high art of costume.

A number of Chinese scholars and leaders criticized China’s economic reforms in a private meeting held on March 4, 2006. The event was organized by The China Society of Economics, a research institute affiliated with the State Council. The blunt criticisms highlighted many serious issues surrounding China’s economic reforms. The call for political reform has become louder.

About 20 distinguished scholars in economics and law were invited to the session to discuss and advise the top leaders of the Chinese Communist Party (CCP) on the direction of China’s macroeconomic reform.

Many topics were discussed at the meeting, including medical reform, educational reform, issues related to farmers and their ownership of land, poverty reduction, taxation, the relationship between the local and central governments, and ownership of stock by foreign investors.

The meeting was closed to the media, but Huayue Forum managed to post on its website minutes from the meeting that were leaked. Open Magazine (Hong Kong, May 2006 issue) and The Epoch Times (May 13, 2006) both reported on the event.

Heated Opening Speech

In his opening speech, Gao Shangquan, Chairman of the China Society of Economic Reforms and a reform guru, said, "Presently there is unprecedented controversy and dissent concerning the reforms." The meeting was chaired by Chi Fulin, the Director of the Hainan Reform and Development Research Academy. The meeting minutes revealed disagreements inside the CCP’s elite toward the reforms and that the debate was very intense.

Gao Shangquan described three core controversies:

1. Privatization vs. protection of public ownership

2. Who benefits from the market economy?

3. The widening gap between the rich and the poor related to unfair distribution of wealth, corruption and embezzlement of public property, and intensified social conflict

The group that opposed the economic reforms concluded that the current situation was not working because the reforms were not in line with the socialist principles and the Chinese Constitution. They labeled the reforms "New Liberalism" and alleged that the reformists were cooperating with the CIA to carry out the task of peacefully transforming China from a socialist country into a capitalist one.{mospagebreak}

The opposition group contended that the market economy was harmful to the interests of the majority of working people, identified in the meeting as the "disadvantaged class." In particular, ordinary people could not afford housing after the housing reform, the masses could not afford medical services after the medical reform, and children could not afford schooling after the educational reform.

The grave problems they depicted are indeed the most serious issues in today’s China. These issues have not only negatively affected any assessment of the reforms, but also demonstrated that economic reform without parallel political reform will hurt the interests of the majority of people and become a tool for the few elite to monopolize the power, the national resources, and the wealth.

Nevertheless, this group was also criticized for wanting to return to a Maoist-style "planned economy."

A "Marriage" of Political Power and Market Economy

Sun Liping, a professor in the Department of Social Sciences at Tsinghua University, presented interesting ideas at the forum. "Many people in the past believed that the political power (meaning the single party ruling power) and the free market economy are contradictory. Today, however, this contradiction has disappeared in China." He joked that it was like two people who apparently could not get married, yet managed to live together fairly well. In fact, he gave it a new name—"Authoritative Capitalism." It used to be thought that checks and balances in a market economy would restrain political power, but the emergence of markets in China is now providing more opportunities for political power to demonstrate its usefulness in securing personal gains. Sun pointed out, "As a result, power can be priced and sold, which is what we’re facing today. We’re not sure if such a marriage is merely a phenomenon in the transition period or a permanent mechanism, but our challenge is to prevent political power and the free market from getting married."

Professor Sun described the current social structure as an "oligarchy at the top but cynicism at the bottom. Those at the top become more and more oligarchic, arrogant, and imperious, while those at the bottom are more and more cynical—a situation that will inevitably cause conflicts between the two groups. The superior group does not have a good relationship with the bottom one, while the bottom group will cheer on the Internet and celebrate like it’s a holiday whenever there is a scandal at the top," Sun continued.

The CCP Is Technically Illegal Because It Has Never Registered

The harshest speech was attributed to He Weifang, a law professor at Beijing University. He bluntly recommended splitting the CCP into two political parties, giving the government—instead of the CCP— controlling power over the Chinese military forces, and ensuring freedom of the press.{mospagebreak}

In discussing rule by law, he first explained that the Chinese Communist Party, as an organization, is in violation of the Chinese Constitution because the Party has never registered itself with the government. "When the (CCP) asserts its power and authority over the Constitution, and (the Party) seriously violates the Constitution, how can we talk about ruling the country by law?" He suggested placing the CCP’s power under the rule of law and called for clarification of the boundaries between the CCP and the Congress, between the CCP and the justice system, and between the CCP and the government.

Secondly, he alerted the leaders that the Chinese People’s Congress’s current method of operation and its annual meetings was "an extension of the CCP meetings" rather than a true parliamentary system. Thirdly, he emphasized that basic human rights, including the freedom to gather, the freedom to demonstrate, and the freedom of religious belief, need to be implemented in China.

Lastly, Professor He Weifang indicated that the CCP’s interference in the justice system has recently increased. Supreme Court regulations state that the courts should not accept any case of forced demolition or land seizure. "Who made this rule? How can we let some kind of ‘classified document’ from the CCP supersede the law?" He cited another example to illustrate the point: "When Zhou Yongkang, Minister of Public Security, visited the Supreme Court, Xiao Yang, who is the Chief Justice of the Supreme Court, had to report the court’s work status to Zhou. Why in the world is the Chief Justice reporting to the police chief?" Professor He questioned.

Failed Medical Reform

Song Xiaowu, who helped draft the medical reform for the State Council several years ago, and Ge Yanfeng, the minister of Development and Research for the State Council, spoke on medical reform. While Song described medical reform as being very difficult, taking off slowly, but making slow progress, Ge characterized medical reform as a failure. Ge illustrated his point by citing the following:

"According to data published by the Ministry of Public Health, 49 percent of people with medical problems reported that they were afraid to go to a hospital, and nearly 30 percent reported that they dared not stay in a hospital even if a doctor told them to. What is the problem? It is the market-orientation of medicine," Ge concluded. "Medicine falls in the domain of public health, which requires government attention and needs to be fair and universally available and accessible," he argued. "Financial support from a government that takes responsibility for providing adequate medical care is essential."{mospagebreak}

To rebut the argument that the central government cannot afford such support, Ge used a concrete example: "China’s fiscal income exceeded three trillion yuan (US$375 billion) last year. To treat the common and chronic diseases of China’s population, rural or urban, would require 150-200 billion yuan (US$20-25 billion), which is six to seven percent of the annual fiscal income. The increased income in 2005 alone, which totaled 500 billion yuan (US$62.5 billion), would be more than enough to cover the expenditure. Using a fraction of the government surplus to fund the public medical services will not only improve people’s health but also enhance social harmony and is of great political and economic significance."

Education Reform: Selling Education For Profits

Disagreeing with the success story of the education reform published by the Ministry of Education, Yang Dongping, who is a researcher at the Higher Education Research Institute of Beijing University of Technology, and Zhang Luxiong, the Deputy Secretary of the China Society of Economic Reforms, both criticized the education reform.

Instead of being responsible for and taking care of China’s compulsory education for its citizens, the authorities have been pushing education into the marketplace and forcing the ordinary people to pay the bill. This has created severe problems in the Chinese countryside. Under the influence of a market-oriented economy, schools are directed to be self-reliant financially and encouraged to promote profit-making activities, one of which is to raise school fees at will. Yang called this "selling education for profits."

In many other countries, higher education mostly comprises private colleges that are supported by private investments. In China, however, the regime monopolizes higher education, promotes power-centric administration, carries out the planned academic research, and thus fails to form the mechanism of an academy-centric administration.

Zhang Luxiong echoed Yang on the negative impact of the market economy on education. He focused on the Key School system and the College Admission Exams system. In the Key School system, elementary schools and high schools are divided into key and non-key schools, where different curricula are used. Zhang stated that this system created inequality in students’ educational opportunities. He also criticized the elementary and high schools for basing their teaching too much on passing the college admission exams.

Zhang maintained that political reform, referring not to grassroots democracy but to internal democracy in individual institutions, is the key to resolving the issues in education. The topmost administrative position at each school must be elected. Universities should be run by educators rather than by the CCP. Professors should be involved in the decision making for hiring and promoting faculty. Universities must be able to have the final say on student admissions.{mospagebreak}

Foreigners’ Ownership of Stock in Chinese Banks Benefits Both

Xie Ping, the general manager of the Central Huijin Investment Co., raised provocative propositions. Central Huijin Investment Co. is a state-owned investment company formed by the central government. Its function is to use national foreign reserves for injection into state-owned banks or financial organizations. As a result, Huijin Investment Co., representing the Chinese communist government, gains ownership of these enterprises.

According to the agreements reached before China entered the WTO, China pledged to open its financial industries in 2007. Beijing allowed ownership of stock in China’s banks by foreign investors before the deadline in order to advance the reform of its banking system. For example, last year the Bank of America and Temasek of Singapore bought stock in China Construction Bank, HSBC Holdings bought into the Bank of Commerce, New Bridge bought into Shenzhen Development Bank, and Citibank bought into Guangdong Development Bank; and Goldman Sachs of the U.S., German’s Allianz Insurance Company, and American Express purchased shares in the Industrial and Commercial Bank of China.

While there are still risks to investing in Chinese banks, with scandals and improper management, foreign investors are willing to take the risk because they are interested in nationwide branches and the customer-base of the Chinese banks. Because of the brand names and credibility of these foreign companies, the stock prices of the Chinese banks unexpectedly surged, which made sizable profits for the foreign investors.

Gap Between the Rich and the Poor

Dr. Wang Xiaolu, the associate director of the Research Institute of National Economy, made some insightful comments on the gap between the rich and the poor. According to a World Bank report, China’s Gini Coefficient is 0.45.1. This figure is calculated based on data from the Statistical Bureau of China. The actual figure is expected to be much higher.

While some people with political connections can turn into millionaires-or even billionaires-overnight, many people cannot afford basic medical insurance. In the hands of the rich, the accumulated owed income tax to the government can be turned into tax refunds through bribery. Therefore the biggest challenge of the reform movement is the reform of the government. It is not sufficient just to demand that the government become more open, more transparent, and more ruled by law. "There must be some checks-and-balances by the public, including the press," Wang concluded.

The above are selections from the meeting. Many scholars spoke and their viewpoints were diverse. On an optimistic note, everyone was able to be outspoken and voice their opinions.

Translated by CHINASCOPE (excerpt) from May 2006 issue of Open Magazine (Hong Kong).

With their heads bowed and hands held, President George W. Bush, Vice President Dick Cheney, Secretary of State Condoleezza Rice, and three Chinese Christian dissidents prayed for the freedom of religion in China.

On May 11, 2006, President Bush met with Yu Jie, Li Baiguang, and Wang Yi on the second floor of the Yellow Office at the White House in Washington, D.C. The three—writer Yu Jie, law professor and blogger Wang Yi, and legal scholar Li Baiguang—are active in China’s underground Protestant churches, which have been under a Chinese communist government crackdown. Many Christians, as a result, have been arrested.

Yu is part of a Protestant congregation in Beijing that includes many intellectuals and some political dissidents. The congregation refuses to register with the government. Yu, the author of several books and a founding member of the Chinese PEN center, was arrested and held briefly in 2004 during a crackdown on independent intellectuals. PEN is an international organization for writers.

Li was a founding member of the Association of Human Rights Attorneys for Chinese Christians and was chosen by Asia Newsweek to be among the magazine’s "Persons of the Year." He was detained in 1998 for organizing student "salons" to discuss political change for China.

Wang’s Web log-Wang Yi’s Microphone—was nominated for the "Best Blogger" top prize in the annual Best of the Blogs competition, sponsored by the German radio service Deutsche Welle. He also was nominated by the organization Reporters Without Borders for its annual award, presented in conjunction with the Deutsche Welle awards. Wang Yi’s Microphone finished fourth in both categories.

When President Bush visited Beijing in November 2005, he attended a service at a government-registered church. The Communist Party in China allows citizens to worship only in state-monitored churches, temples, and mosques. Underground Chinese churches, both Protestant and Roman Catholic, are known as "house churches," which is a reference to their use of private homes for services instead of government-monitored churches.

According to the three Chinese Christian dissidents, during the May 11 meeting they raised the issue of political prisoners in China not being allowed to be baptized or to worship in prisons. They also said they had brought up concerns that Yahoo email account information was being used to jail Internet writers in China.

While the meeting has been widely reported by media as a meeting with dissidents and rights activists, the three Chinese Christians have emphasized that it was a meeting among Christians. According to the White House, President Bush met "with Chinese Human Rights activists."{mospagebreak}

According to information on the Internet in China, there were originally seven people from the mainland invited to attend the Freedom in China Summit in Washington. In April 2006, the U.S. government requested information about Chinese human rights activists for the Freedom in China Summit, including Gao Zhisheng, Fan Yafeng, Guo Feixiong, Zhang Xingsui, Li Paguang, Yu Jie, Wang Yi, and others. Due to interference from the Chinese communist regime, Gao Zhisheng, Fan Yafeng, and Zhang Xingsui were not able to make the trip.

Guo Feixiong went to the United States and attended activities but was not included among those who met with Mr. Bush on May 11.

According to Gao Zhisheng, Guo was excited when he learned on May 8 that the meeting with Bush was confirmed, only to be advised by Bob Fu, President of Texas-based China Aid Association, and Wang Yi that he would not be attending the meeting since he is not a Christian.

According to Guo, Bob Fu reiterated that he was pressured by Yu Jie and Wang Yi, who were threatening to leave the group.

Gao Zhisheng believes that if Guo had been included in the meeting with Bush, he would have raised the issue of the persecution of Falun Gong in China. That is why Guo was not allowed to attend the meeting. "Think about it. After they met with Bush, they called the meeting a ‘religious gathering.’ They did not mention even one word about the most heinous religious persecution."

Regardless of how we classify the nature of the meeting, its aftermath would have been the same.

Yu and the group returned to Beijing the night of May 18, 2006. At the airport, a number of plainclothes State Security agents, along with an official from the Bureau of Religious Affairs of the China State Council, followed them.

During Yu’s visit to the United States, the authorities in China detained and interrogated his wife.

Under Mao Zedong’s iron fist, organized crime in China was at an all-time low. However, it has made a resurgence starting in the late 1970s, coinciding with China opening its doors to the West to stimulate its economy. In recent years, organized crime has become a growing concern that is threatening social stability and worsening steadily. Official statistics show that there are currently 20,000 organized crime syndicates in China, with over 15 million members. Organized crime cases have ballooned to an estimated four million in 2005 from just half a million in 1974.

Chinese organized crime groups are often referred to as triads, or "black society." Chinese triads are heavily involved in illegal gambling, extortion, drug trafficking, smuggling, prostitution, illegal immigration, fraud, and the manufacture and sale of pirated goods. In some areas, these groups work through businesses that are often the home of drug trafficking and prostitution, and constitute a major part of the local economy.

China’s organized crime has its distinct features due to China’s unique social structure and rampant official corruption. It is no exaggeration to say that almost all the major organized crime groups have connections with government officials. The folk saying, "Police and bandits are the same family," has never rung more true. Indeed, despite numerous "Strike-Hard" campaigns to combat organized crime, only superficial, temporary gains were made in stopping organized crime, with the syndicates getting ever stronger and bolder.

At the same time, the authorities are increasingly employing triad-like groups to deal with various dissident groups and to quell civil unrest. In these cases, thugs are often hired through back channels by the authorities, or plainclothes police carry out attacks disguised as triad members. Afterward, the attacks are then attributed to unidentified criminal groups.

The current issue highlights the topic of organized crime in China. We also get into the Chinese scholars’ debate on the ongoing problems of economic and political reform, the impact of corruption, and other related issues.

On June 22, 2006, authorities in the southwest city of Chongqing arrested a 23-year-old student for marking the 17th anniversary of the 1989 Tiananmen Square Massacre by publicly flying the flags of the Republic of China (ROC), which was the pre-communist Chinese state, and the Chinese Nationalist Party (KMT), which ruled China before losing the mainland to the communists in a bloody civil war and retreating to the island of Taiwan in 1949. The student, named Zhang Qi, was detained for 20 days for "illegally organizing activities."

It is hardly surprising for China’s communist authorities to keep an unruly student behind bars for a few weeks. But unexpectedly, this incident caused an uproar in mainland’s cyberspace and attracted a lot of media attention in Hong Kong, Taiwan, and overseas Chinese communities.

Symbols from the Past

Though the detention itself was little more than a routine exercise of a repressive regime, the action that led to the detention was by no means ordinary. The symbolism and audacity of this rare act of flag-waving on the regime’s most sensitive date caught people’s attention and provoked imagination.

The detained student, Zhang Qi, is a member of an increasingly influential Internet-based community—China Pan-Blue Alliance—which brings together hundreds of young people who call themselves "spiritual members of the KMT" and aspire to restore the Republic of China to the mainland.

Before Chongqing, other members of the alliance had publicly shown the ROC and KMT flags in Wuhan. Digital pictures of both events were widely circulated on the Internet both in China and overseas.

Similar stunts had been performed before. Last year, when then Taiwan KMT Chairman Lien Chan visited Beijing University to give a speech, one person in the welcoming crowd unfurled a ROC flag and started waving it. He was quickly snatched and whisked away from the scene. It was unclear if he belonged to the same group.

Waving the flags from a past government was not just an act of open defiance against the one-party rule of the Chinese Communist Party (CCP) but also a bold challenge to the legitimacy of the People’s Republic of China (PRC), which the communists founded after overthrowing the ROC.

As discontent with the communist regime grows, the political and national symbols from a past era seem to have gotten a new lease on life. For many people, these old symbols can evoke nostalgia and intensify their yearnings for change.{mospagebreak}

Such symbolism could gain momentum and become a powerful influence, as the history of Eastern Europe testifies.

The Return of the Republic

Since the Republic of China government retreated to Taiwan in 1949, the PRC has ruled over the Chinese mainland without any serious challenge to its power. In the communists’ eyes, the ROC is just a historical term.

Indeed, even on the small island of Taiwan, the last patch of land under its name, the ROC is not faring well. Since the KMT lost the 2000 election to the pro-independence Democratic Progressive Party (DPP), the new administration has seen the national title, which includes the word "China," as an eyesore that should eventually be ditched to make way for an independent "Republic of Taiwan."

For many, the ROC is an anachronism left over from a confusing historical period, and has become a laughable misfit for what it actually represents. Surely, it can no longer pose any threat to Beijing, which controls vast territories with an iron hand.

But destiny works in mysterious ways. Now some unsettling signs have emerged that the ROC is coming back to haunt the CCP, not from across the Taiwan Strait, but from within people’s minds.

Ironically, it was the communist government itself that started it.

True History of the War Against Japan

In the CCP’s orthodox history textbooks, though the KMT’s founder Sun Yat-sen was credited with overthrowing the imperial Qing Dynasty, the KMT was demonized in almost every possible way, and its most important leader—Chiang Kai-shek—depicted as a stereotypical bad guy.

But in the mid-1980s, buoyed by the initial success of the economic reforms and improved ties with the West, a confident CCP decided to tackle its long-term rival-the KMT in Taiwan—with a new strategy. In a bid to lure the KMT administration into a political settlement toward reunification, the CCP, on the 40th anniversary of the end of World War II, recognized 85 KMT generals who were killed during the war as "martyrs," and admitted that the KMT did play a role in the war, even though not as important as that of the CCP itself.{mospagebreak}

The CCP had always held that it single-handedly defeated the Japanese. The role of the allied forces was deliberately downplayed, and any talk of the KMT’s war effort had been taboo. But Beijing’s new "united front" ploy opened a crack in the tight restrictions on studies of China’s contemporary history, and led to an explosion of academic and literary works on the KMT forces’ heroic resistance against Japanese aggression in the 1930s and 1940s.

It soon became clear to many Chinese people, especially intellectuals, that it was the KMT who did most of the fighting in the war, and that what the CCP did was not much more than hiding in a corner, preserving and developing its strength, and waiting for the Japanese to weaken the KMT so that it could overthrow the KMT government in the end.

These revelations were extremely damaging to the CCP. As the communist ideology became completely bankrupt after the Cultural Revolution, the CCP had to use nationalism to legitimize its continued rule and rally the population around it. However, when it was exposed that the CCP not only failed to defend the country during its most perilous times but also took advantage of the Japanese invasion to grab power, the very nationalistic feelings it had encouraged to its own advantage now turned against it.

Who Is the New China?

Throughout the late 1980s and the 1990s, many academic papers and novels about China’s Republican era were published. As more and more historical facts were revealed, veiled calls for a reassessment of the KMT and the ROC began to emerge.

Of course, a complete overhaul of the official version of history can never be allowed to happen as long as the CCP remains in power, as the KMT’s gain would unavoidably mean the CCP’s loss. A thorough reassessment of history could only be done from outside China.

And so it happened. In 1999, an important book entitled Who is the New China (in Chinese) was published in the United States. The author of the book, Mr. Xin Haonian, is a distinguished Chinese historian now living in the United States. He wrote the book after more than a decade of painstaking and risky research in China.

Mr. Xin rejects the CCP’s assertion that it founded a "New China." According to his book, the CCP was responsible for rebelling against the Republic of China at the instruction of the Soviet Union, refusing to defend the country against Japanese invasion in order to preserve its own strength, starting a civil war immediately after China’s victory over Japan to overthrow the Chinese government with Soviet support, and setting up a totalitarian regime in mainland China that led to an unprecedented calamity to the Chinese nation-costing 80 million Chinese lives.{mospagebreak}

So, if the PRC is not the "New China," then who is? According to Mr. Xin, it is none other than the Republic of China founded by the KMT, which replaced the imperial Manchu Court with a Chinese republic based on democratic institutions, brought the warlord-held provinces under central control, defended China against Japanese aggression, abolished all the unequal treaties imposed on China by Western imperialist powers, and won China a permanent seat on the U.N. Security Council. Even after its defeat in the civil war, the Republic of China thrived in Taiwan, resulting in a democratic and prosperous society unprecedented in Chinese history.

In Mr. Xin’s view, the way forward is to go back to Sun Yat-sen’s Three Principles of the People (which can be roughly translated as nationalism, democracy, and people’s welfare) and rebuild a democratic and unified Republic of China.

As Mr. Xin made clear in his book, he did his thinking on the back of a vast amount of research conducted by mainland scholars over the past decade. He simply built upon all the preceding work and said what many in China had wanted to say but could not.

Not surprisingly, Mr. Xin’s book had a ready readership. Though it cannot be published or sold in China, its electronic version is easily circulated over the Internet. Its impact cannot be overestimated.

Unexpected Change in Taiwan’s Political Landscape

Shortly after Mr. Xin published his book, the political situation in Taiwan took an abrupt turn. In the spring of 2000, the KMT lost the election to the pro-independence DPP, and Chen Shui-bian, a hardline advocate of "Taiwan independence," became the president. On the surface, it was a huge setback for the Republic of China, which appeared to be losing its last foothold.

But things are never as simple as they look. Worried that Taiwan was drifting away from the mainland, Beijing began courting Taiwan’s pro-unification opposition in a bid to curb the pro-independence Chen administration. As a result, the KMT and its sister parties, collectively known as the "Pan-Blue Coalition" (a name derived from the KMT’s party color), suddenly became the good guys in the CCP’s book. Even the "Republic of China" became less of a taboo because it was seen as a connection between the mainland and Taiwan, which the pro-independence forces wanted to sever.

In mainland China, most people genuinely dislike the idea of "Taiwan independence," mainly because of an inbred sense of national pride and patriotism. And their patriotic feelings naturally make them like the KMT and the "pan-blues" in general, who are on the front line fighting against the pro-independence forces.{mospagebreak}

But their patriotism is toward China, not necessarily the PRC, though the communists have been trying to mix the two different concepts for the last six decades. If the ROC means national unification and Taiwan-style prosperity and democracy, most mainlanders will probably find it hard to resist.

In other words, as a result of the rise of "Taiwan independence" forces, the KMT, the "pan-blues" and the ROC have not only become less unacceptable to the communist regime but have also gained popularity among many mainland Chinese people.

China Pan-Blue Alliance

It was against this background that the China Pan-Blue Alliance was established on the Internet in August 2004. It borrowed its name from the Pan-Blue Coalition in Taiwan. But, while the pan-blues in Taiwan seem to be falling into the CCP’s "united front" trap, the mainland Pan-Blue members, many of whom were inspired by Mr. Xin Haonian’s book, have stuck to the KMT’s traditional anti-communist principles.

On its homepage, the China Pan-Blue Alliance clearly states its agenda: "Oppose communism, agree with the Three Principles of the People, and work together with the Chinese Nationalist Party for national unification." In their view, a unified China will not be an enlarged PRC, but will have to be a revived Republic of China-which is democratic and free.

Recently, the China Pan-Blue Alliance has become increasingly active. At present, hundreds of people regularly go to the Alliance’s online forum for discussion. The Alliance also holds meetings in Beijing, Wuhan, Chongqing, and Chengdu.

Last year, immediately before the 60th anniversary of Japan’s surrender at the end of World War II, the group’s convener Sun Buer was detained for 15 days for organizing activities in honor of the KMT’s resistance during the war.

Apart from nationalism, the China Pan-Blue Alliance has also supported democracy and human rights. It took part in the labor rights movement of Chongqing Special Steel Group workers, and has published articles in support of the human rights of Falun Gong. It also lent its support to the spread of the book Nine Commentaries on the Communist Party published by an overseas media, The Epoch Times, and the movement to quit the CCP.{mospagebreak}

Although the China Pan-Blue Alliance still exists largely in cyberspace, the communist authorities have seen it as a grave threat. It was labeled an "illegal organization," and many members have been called by the police for interrogation.

These young people appear undaunted. Now, many members of the Alliance are planning to participate in the local elections in their personal capacities for seats in the "People’s Congress," in a bid to change these rubberstamps toward genuinely representative assemblies.

Different Shades of Blue

The mainland-based "spiritual KMT members" did try to get in touch with the "real" KMT in Taiwan. Chen Rongli, a member who fled from the mainland to Taiwan, even met with the current KMT leader Ma Ying-jeou in May. But the KMT, whose priority is understandably Taiwan’s domestic politics, has looked very much baffled by the whole thing and doesn’t seem to know how to deal with its eager "spiritual members" on the mainland.

Unlike his predecessor Lien Chan, Ma Ying-jeou seems to be genuinely concerned about democracy and human rights in mainland China. He attends memorials of the June 4th Tiananmen Massacre every year, and has repeatedly said that unification is not possible if the mainland fails to redress the Tiananmen Square tradegy.

Mr. Ma is also ambitious about the KMT’s future on the mainland. In a call-in program with the BBC’s Chinese Service in February, several callers from the mainland asked how they could join the KMT. Ma responded by saying, "If one day the mainland lifts its restrictions on political parties, the KMT will definitely go there."

However, as the KMT’s current political platform is based on making peace and developing economic ties with the mainland, Ma Ying-jeou’s attitude toward the mainland-based pan-blues is lukewarm at best.

When Chen Rongli, a mainland Pan-Blue member now living in Taiwan, applied for formal KMT membership in February, his application was politely turned down on the grounds of his not being a ROC citizen.

When Zhang Qi was detained, in spite of calls from pro-democracy and human rights activists for the Taiwan KMT to use its influence to rescue him, Ma Ying-jeou kept his silence. This greatly disappointed the mainland-based Pan-Blue members.{mospagebreak}

Taiwan’s ruling DPP seized this opportunity to score political points. Lai Yi-chung, director of the DPP’s Department of China Affairs, openly called on the CCP authorities to release Zhang Qi. Taiwan’s pro-independence media also used this incident to accuse Ma of being hypocritical.

Disproportionate Impact

Zhang Qi was released on July 13, after 20 days of detention. For a regime known for its merciless and brutal treatment of dissidents, this appeared to be a particularly feeble punishment for what it sees as an organized subversive act. In contrast, members of the China Democracy Party could be sentenced to 10 to 20 years in prison for a much lesser offense.

The mainland pan-blues, unlike traditional pro-democracy activists, have put the CCP in an awkward situation. As the CCP is actively developing its relations with the KMT, it probably fears that a severe crackdown on the mainland-based pan-blues could rattle the pan-blues in Taiwan, or at least provide ammunition to the pro-independence forces.

Though the pan-blues have not paid too high a price for their activities, they could potentially make a disproportionately big dent in the CCP’s armor.

Successive generations of Chinese pro-democracy activists have spent most of their time criticizing the regime, but have failed to come up with meaningful alternatives. As a result, their criticisms often sound as if they were targeting China, rather than just the CCP. Understandably, such "China-bashing" does not always go down well with the Chinese people. The regime has found it easy to simply dismiss them as "anti-China."

But the pan-blues are different. Proudly waving the ROC flag, they are at a vantage point from which they can show themselves as real patriots and real democrats at the same time. Also, the ROC and the KMT are old, tested brand names and can be presented as credible alternatives to the status quo.

On the key issue of Taiwan, few traditional activists have been consistently vocal in opposing "Taiwan independence," because most of them are sympathetic to democratic Taiwan and do not want to be seen as saying the same thing as the CCP. With most Chinese people favoring unification, such ambivalence cannot win them points.{mospagebreak}

But the pan-blues, again, are in a good position. Recognizing the ROC as the only legitimate government of China, they can easily be anti-communist and against "Taiwan independence" at the same time without sounding self-contradictory. Their opposition to Taiwan’s pro-independence forces is a matter of principle, but their criticisms have been rather polite and rational because they recognize the DPP as a force for democracy.

A "Pan-Blue Revolution"?

It is hard to estimate how strong this "Pan-Blue" movement on the mainland is at present. That is one of the reasons why the Taiwan KMT has been so cautious in its dealings with the mainland pan-blues.

However, recent happenings appear to suggest that more and more mainlanders are accepting the pan-blues’ ideas. When a large section of the society is looking for political alternatives, a relatively known quantity like the ROC could prevail over other proposals. And when one political alternative gains momentum, it could gradually evolve into a rallying point.

It is not hard to find precedents. After the fall of communism in Eastern Europe, most countries there reverted to their pre-communist national titles and national flags. For people living in communist countries, going forward seemed to mean going back and undoing what communism had done to their country.

Everyone knows China needs change, and most believe the country eventually will change. In the last few years, there have been a number of largely peaceful "revolutions" around the world, each associated with a specific color. When the moment inevitably comes for China, it could well turn out to be a "pan-blue revolution."

Yue Wei is a U.K.-based journalist.

[Editor’s Note: Hao Fengjun is a former secret agent with the Tianjin Public Security Bureau. After graduating from Nankai University in 1994, Hao worked in the Heping District Bureau of the Tianjin Public Security Bureau for two years as an anti-riot police officer and spent another two years as a safety patrol officer. In 2000, he went to work for the "610 Office," which was organized by former head of state Jiang Zemin on June 10, 1999, for carrying out the campaign to persecute Falun Gong adherents.

In February 2005, Hao fled China and applied for political asylum in Australia. On June 7, 2005, in Melbourne, he publicly denounced the Chinese Communist Party (CCP). Since then, Hao has been traveling around the world participating in forums and conferences on the Chinese Communist Party and the mass movement of resignations from the Party.

On December 17, 2005, Hao was invited to Taiwan to speak at a lecture and expose the strategies that China uses to frame Taiwanese businessmen in order to confiscate their investments and coerce them into spying. The Taiwan Hsinchu Science Industrial Park, located in the "silicon valley" of Taiwan, sponsored the lecture. It was one of a series of lectures to educate Taiwanese businessmen on how to stay safe when doing business in mainland China. Below is the summary based on the audio recording of Hao’s speech.]

In 2000, Hao was randomly picked by computer to work for the 610 Office in Tianjin. After witnessing several torture cases of Falun Gong adherents, he started to question the legitimacy and purpose of the 610 Office. He requested to be transferred back to the district office but was denied due to a staff shortage in the 610 Office.

In 2003, the 610 Office changed its name to the "Bureau for Handling and Taking Precautions Against Crimes Committed by Evil Cults." The main function has expanded to oversee 14 religions, such as Catholicism delegated by the Vatican and some Christian sects.

The CCP allows only the "patriotic" Catholic and Christian churches recognized by the Three-Self Patriot Churches, and considers the rest illegal "evil cults." The CCP takes religious belief as a major threat to its ideology, and people who participate in independent religious activities can be charged with "breaking the law by being involved in evil cult activities."

In 2003, Hao was transferred to the division that monitors the activities of Taiwan businessmen who hold religious beliefs. Whether Taiwanese nationals are businessmen or students, the CCP regards them as potential spies, and the CCP’s intelligence organization closely monitors them.

Citing a case from 2003 in which he was personally involved, Hao said, "We knew everything about him." The object of surveillance was a Taiwanese businessman, a Christian who had invested two million yuan (US$244,000) in Tianjin.{mospagebreak}

The minute that Taiwanese businessman set foot in China, he was closely monitored and followed. His hotel and business phones were tapped, and his daily contacts and activities were recorded. For instance, any activities such as contacting other Taiwanese, joining prayer congregations, or going to baptism ceremonies, as well as the location of the hotels where such ceremonies are held, how the ceremonies are performed, what songs are sung during the ceremonies, who sings the songs, who presides over the ceremonies, and who baptizes the babies are videotaped. In one instance, when this businessman intended to spread his religion to some local university students in a large park, all activities, including singing hymns and praying, were put under surveillance.

In October, the Ministry of Public Security formed the plan for his arrest. It was to be carried out by the offices of the Public Security Bureau of the 610 Office, the Commercial Bureau, the Bureau of Taxation, and the Commodity Pricing Bureau. The detailed plan was to have the Commercial Bureau confiscate his property, including manufacturing facilities and warehouses. The Bureau of Taxation would audit the company’s financial books for accounting fraud. The Pricing Bureau would find loopholes in the company’s exporting procedures. Lastly, the Public Security Bureau would complete his arrest.

The arrest was supposed to take place before his trip back home prior to the New Year. But when the businessman made a sudden decision to visit a different city to purchase a piece of land for a new manufacturing site, the arrest plan was then suspended under orders of the Ministry of Public Security in order to wait for all of his investments to come in before taking any action.

Hao Fengjun warned the businessmen to be on guard for any special treatment, including dinner parties, bath and massage services, and prostitution arranged by Chinese officials since their aim was to confiscate all the investments they could get from him. "They will do anything to make it happen," he said.

The most common ploy used for arrest is tax fraud. For example, one chooses to invest in Tianjin to build a factory and has paid all the taxes. The government tells him that if he chooses to build another site in the suburb of Tianjin, he won’t need to pay taxes since the new site will be under the same license permit. But later when the CCP officials are ready to take action against him, they can easily charge him with "tax evasion" on the piece of property for which he hasn’t paid taxes.

Prostitution is another common trap used to frame Taiwan businessmen. In China, engaging a prostitute is subject to a six-month to two-year detention and a fine of 5,000 yuan (US$600).{mospagebreak}

Hao illustrated a typical example, which is still being played out today. Besides being a special agent, Hao had another identity as a government official, which made it easy and legitimate for him to have personal contact with Taiwanese businessmen. He would introduce himself as an officer from a certain department of the municipal government with connections to the top of the chain of command. In the meantime, a few people would be assigned to contact the targeted businessman and take him to some nightclubs or Karaoke bars. The arrest could be easily arranged and a setup implemented in order to show evidence of prostitution.

The Taiwanese businessman would be asked whether he knew anyone in the government who could bail him out. Not knowing many people, he might think, "I know a high-ranking official in the municipal government. He may help me." Because the officers who made the arrest were from the same group as the official, he would be released "with the help of the high-ranking official."

After that, the businessman would be asked directly to offer some information about Christians and Falun Gong activities in Taiwan or else his investments will be in danger. "We can’t go to Taiwan, so we would like you to bring some information to us." Since the information is not related to Taiwan’s military intelligence or politics, most Taiwanese businessmen will quickly cooperate, Hao said.

Such schemes are also used to take over Taiwanese businessmen’s investments. Many businessmen who were entrapped often did not dare to speak up to expose the conspiracy for fear that their investments would be jeopardized. They were led to believe that they could still hope to recoup their investments. For example, the government might confiscate their assets in two provinces, while leaving the assets in the third province intact. Officials would then threaten that the third piece of property would also be taken away if they chose to disclose the entrapment scheme. Another game the government officials play is to convince the businessmen that the problem can be corrected in a year or two, so they should just wait and keep quiet.

Hao reminded the Taiwanese businessmen to use "self-discipline" because the CCP’s secret agents often use various means to frame, exploit, and coerce Taiwanese into spying for them while at the same time confiscating all their investments. He said that the CCP is not afraid of having its crimes exposed in Taiwan since most Chinese media organizations in Taiwan have been infiltrated by the CCP. However the Party is concerned about exposure by the Western media, and don’t want them reporting on its schemes.

Lukun Yu is a writer based in New York.