Skip to content

News Briefs

Over 16 Million Acres of Tillable Fields Lost in China 

[Central News Agency, June 26, 2005] Li Yuan, Vice Minister of the Chinese Land Resource Department, revealed in the "Constructive and Economical Society International Seminar" conference held in Beijing that China has lost 100 million mu (16.47 million acres) of tillable fields over the past 10 years, and by 2004, the average tillable field per person was only 1.41 mu (0.19 acre), nearly 40 percent of the world’s average.

Li Yuan said that although the main reasons include ecological retrograde, agricultural reorganization, and disaster impact, construction taking up excess land has caused a permanent loss of tillable fields.

Drug Abuse Costs China 27 Billion Yuan (US$3.4 billion) per Year

[Xinhuanet, June 25, 2005] Since the 1980s, 33,975 people have died in China due to drug abuse. To date, more than 2,102 counties, cities, and regions, which account for 73.5 percent of the total, have found drug addicts among their population. Nationwide there are 791,000 people addicted to drugs, consuming at least 27 billion yuan (US$3.4 billion) of heroin every year. The government, consequently, is forced to invest at least 3 billion yuan (US$0.375 billion) per year in drug control. Zhang Xinfeng, the Deputy Director of the National Drug Abuse Control Committee and Vice Minister of the Public Security Department, stated that, between 1998 and 2004, the Chinese government reported more than 638,000 drug-related crimes, arrested 320,000 drug-related suspects, seized 62 tons of heroin, 60 tons of ice (methamphetamine hydrochloride), 14 tons of opium, and 1,538 tons of chemicals that are used in drug products.

China’s Land Desertification Accelerates

[The Beijing News, June 17, 2005] By the end of 2004, the amount of land in China that suffered from desertification was 2,636,200 square kilometers, accounting for 27.46 percent of the national territory. Zhu Lieke, the Vice Director of the National Forestry Bureau, stated on June 14, 2006, that 320,000 square kilometers more land has desertification potential. This land, if not utilized appropriately, will then become new sandy wasteland. The Director of the Desertification Control Office, Liu Tuo, stated that in China, five sand storms occurred in the 1950s, eight in the 1960s, 13 in the 1970s, 14 in the 1980s, and 23 in the 1990s. By the end of 2004, 32 sand storms had already occurred.

Top CCP Authorities Issue Secret Order to Launch a "100-Day Strike Hard Campaign"

[Secret China, June 16, 2005] In March 2005, the Chinese Communist Party (CCP) determined Falun Gong to be a "Reactionary Political Organization." The top authorities of the CCP issued a secret order to launch a 100-day strike hard campaign that would include the six-year anniversary of the April 25 (Falun Gong peaceful appeal), the 16th anniversary of June 4th Massacre, and the sixth anniversary of July 20 (the day of the CCP crackdown on Falun Gong began), in order to prevent people from downloading and spreading the forbidden book Nine Commentaries on the Communist Party as well as other prohibited information.{mospagebreak}

China Secretly Tightens Control of Officials Going Abroad

[The Epoch Times, June 11, 2005] Three Chinese officials sought refuge from the Australian government successively within a week. They exposed the Chinese Communist Party’s persecution of overseas Chinese as well as its huge overseas spy network. China’s response to this took the form of a secret tightening on officials going abroad and of increasing checkpoints and procedures.

According to a report by the British paper The Times on June 10, 2005, sources in China’s Public Security Department confirmed the same information: that China has secretly tightened its policies regarding officials going abroad and increased checkpoints and procedures. China requests that all government and army officials obtain a workplace permit before applying for a passport from the Public Security Department, and submit their passport to their workplace after returning. They have to re-apply for permits if they need to go abroad again. The new policy not only applies to officials who are going abroad for the first time, but also to officials renewing their passports.

Laborers’ Pay Short by 100 Billion Yuan (US$12.5 Billion)

[China Youth Daily, June 9, 2005] According to statistics done by the Beijing Youth Center of Aid and Law Study, by mid-November 2004, the payment of laborers from the countryside was short by around 100 billion yuan (US$12.5 Billion). To compensate for this shortage, the whole society would have to pay at least 300 billion yuan (US$37.5 billion).

This investigation was done through 8,000 questionnaires in eight provinces in China. Among these laborers, 48.1 percent cannot get any part of their salary at all, 30.6 percent reported that their pay was short by from 100 yuan (US$12.50) to 1,000 yuan (US$125), 5.7 percent were short by 1,000 (US$125) to 5,000 yuan (US$625), and 1.6 percent were short by 5,000 yuan (US$625).

"Land Revolution" in Premier Wen Jiabao’s Hometown

[Asian Times, May 22, 2005] Land belonging to villagers in Premier Wen Jiabao’s hometown, Yixingbu Town in Tianjin City, has been taken by force in recent years. Indignant because they have not received proper compensation for their land, around 600 farmers have gathered around the local government compound. They hope that Premier Wen will come back to see what has happened to the village where he grew up. Villagers say that the local government has refused to give any compensation for the land seizures under the pretext of financial insolvency. As much as 100 million yuan (US$12 million) was paid for the villagers’ lands, but currently no one can say for sure where it went.{mospagebreak}

Huang Qi, Creator of the Tian Wang Website, Released

[The Epoch Times, June 5, 2005] Huang Qi, the first Chinese webmaster ever arrested, was released on June 4, 2005, after serving five years in prison. Huang is the creator of the Tian Wang website, which helped more than 70 people locate missing friends and relatives by publishing information and research on cases of missing persons in China. The website also opened a column for those who had been treated unjustly to "speak for themselves," a topic that must have offended the authorities. On June 3, 2001, the day before the 12th anniversary of the 1989 Tiananmen Square Massacre, he was arrested in Sichuan Province and charged with "subversion." He was sentenced to five years in prison that August. In an interview with the BBC, Huang said he was ordered to sleep on the floor next to the toilet for the first year he was in jail. He was also severely beaten, resulting in several lost teeth and serious bodily injury. He suffered from headaches, eczema, and heart disease. His request for treatment at a hospital in Chengdu was refused. He denied the criminal charge of subversion and insisted it did not apply to him.

Huang said, "If someone in China fights for democracy and freedom, he is then accused of being a member of the June 4th incident, Falun Gong or pro-democracy activists. I am definitely going to tell the Chinese regime that I am one of them and proud of it."

Shi Tao Given Chinese Youth Human Rights Award

[Radio Free Asia, June 2, 2005] Shi Tao, a Chinese poet and reporter, was named the recipient of the Chinese Youth Human Rights Award. The award committee in the United States declared on June 1, 2005, that the winner of the fifth Chinese Youth Human Rights Award would be Shi Tao, commending his conscience and courage in spreading the ideology of freedom and democracy. Shi Tao used to be editorial director of The Modern Business News in Changsha City, Hunan Province. In 2004, the Central Propaganda Department sent a summary to the editors of the paper specifying that certain items could not be reported, including specifically, information about the commemoration activities for the 15th anniversary of the June 4th democracy movement, and about strictly preventing pro-democracy activists from crossing the border. Shi Tao took some notes, wrote some critical comments about these violations of the freedom of the press, and then submitted them to the U.S.-based Democracy Net. He was arrested in October 2004. In March 2005, Shi Tao was sentenced to 10 years in prison for "Illegally providing national secrets to foreigners." He received the Chinese Youth Human Rights Award while in prison.{mospagebreak}

Anti-Corruption Reporter’s Health Deteriorates in Prison

[The Epoch Times, May 25, 2005] The Committee to Protect Journalists, headquartered in New York, issued a statement concerning the health of reporter Jiang Weiping, who has been imprisoned for exposing corruption within the Chinese Communist Party. The prison authorities have barred Jiang from reading books or making phone calls.

Jiang Weiping was the northeast China bureau chief for Hong Kong-based Wenhui Bao newspaper. In 1998, he wrote a series of reports about corruption in the high-level leadership in Liaoning Province. By the end of 1999, Jiang was dismissed by Wenhui Bao under pressure from China’s National Security Department. In December 2000, he was arrested by the National Security Agency in Dalian and arraigned for "revealing state secrets." In May 2001, Jiang was sentenced to eight years in prison during a secret trial for, among other crimes, "damaging national security." The Committee to Protect Journalists awarded Jiang an International Press Freedom Award on November 20, 2001.

Twenty Branch Managers from the Bank of China Dismissed

[China Youth Daily, June 3, 2005] In a recent move involving personnel reshuffling at the Bank of China, 20 second-level branch managers have been dismissed from their positions. Most of these branches are in the Northeast and Guangdong Province, with a few in Shangxi Province, Hebei Province, and Shenzhen City. The bank’s spokesperson claimed that the main reason for the massive layoffs was because of inappropriate management that had a negative influence or caused huge monetary losses.

812,000 in Western Guangdong Lack Drinking Water

[Information Times, May 23, 2005] Drought in western Guangdong is causing drinking water difficulties for as many as 812,000 people. A water information update from the Guangdong Hydrology Bureau indicates that the biggest "flood" since the rainy season occurred at noon on May 21 in the North River in southern Guangdong. Yet, the water came and left in a hurry. The water levels in the major rivers in the provincethe West, East, and Han riversfell again in just two days. Normally, spring and summer are rainy seasons in southern Guangdong. Thus, the insufficient water this year forecasts a severe drought.

Chinese People Dislike the China-Russia Border Agreement

[The Epoch Times, June 6, 2005] On June 2, 2005, the Ministers of Foreign Affairs from China and Russia officially exchanged the Supplemental Border Agreement, which had been approved by the supreme legislative bodies of both countries. For consecutive days, China’s media was reporting, "China has peacefully resolved the China-Russia border issue," and "China takes back Heixiazi Island," omitting the fact that China will relinquish the 1.5 million square kilometer (0.56 million square mile) national territory occupied by Russia. Some people appealed on the Internet to establish the "China Outer North East History Study Association" aiming at long-term recovery of the national territory bordered by Heilongjiang, Outer-Xinan Mountain, and the Wusuli River.{mospagebreak}

Milk Powder Causes "Big-Head" Baby Disease

[Xinhuanet, May 25, 2005] Eight-month-old Wang Mingyu from Handan, Hebei Province, developed what Chinese doctors have called "big head disease," a condition in which the baby’s head swells due to malnutrition and has been found in babies fed with fake milk products in China. Despite two weeks of treatment, little Mingyu still had a swollen face and gray hair. She has gained less than six pounds since birth. Her grandma says that Mingyu has been consistently fed with the same Hailaer brand powdered milk. According to state media, as many as 200 babies have developed "big head disease" from drinking fake infant formulas and milk powders.

Underground Churches in Jilin Province Searched and 600 Christians Arrested

[Voice of America, June 10, 2005] Recently the Chinese authorities launched a surprise attack on more than 100 underground churches in Jilin Province and arrested 600 Christians, including university professors and students attending Bible studies held in the universities.According to the China Aid Association (CAA) headquarters in the United States, on May 25, 2005, every local police station in Changchun City launched a surprise attack on 100 unregistered underground Christian churches and detained 600 Christians, most of whom were students and university professors. On June 27, CAA reported that it had received several credible reports from China that a nationwide campaign against unregistered house churches was also underway. Numerous house churches have been raided in recent weeks, hundreds were arrested and many are still in prison.

210 Million Counterfeit Yuan Seized in First Quarter in Mainland China

[The Epoch Times, May 25, 2005] In the first quarter of 2005, 210 million in counterfeit yuan (approximately US$25.4 million) was seized in mainland China, with counterfeit money activities mostly concentrated in Guangdong and Henan provinces.

Many farmers in eastern Guangdong Province are reportedly involved in printing the counterfeits; some are even incorporated into printing lines set up like domestic workshops. Counterfeiting technology is increasingly advanced. Some counterfeit bills even carry the anti-counterfeiting technology.

On U.S.-China Trade Conflicts

The Drunk Man’s Mind Is Not on Textiles

[Editor’s note: This is a translation from an article published on, a website of the Chinese government official news agency, on June 2, 2005]

After China announced the removal of export duties for 81 types of textiles, European Union reacted strongly. On May 30, European Union Executive Committee expressed firm opposition to massive imports of Chinese textiles. On May 31, European Union delegation to China stated that they hoped China would voluntarily limit its export within 15 days. Otherwise European Union may unilaterally impose limits on imports from China.

It appears that a textile trade war between China and the United States/Europe is inevitable. China will not fear a trade war if it is indeed inevitable. In order to reduce conflicts caused by integration of the textile industry, China has twice voluntarily raised duties on textile exports. China has fulfilled its responsibilities as a sovereign state. However, the United States and Europe have disregarded China’s efforts. Instead they view China’s efforts as a sign of weakness and hopes China will accept "the treaty signed under coercion." Therefore, we must have the courage to "come face to face with adversaries" as we have no other choice.

On one hand, we must be prepared for the worst, which is to fight a trade war with the United States and Europe. On the other hand, we need to clarify why they would throw away their idealism of free trade when it comes to China textiles. This would help us observe clearheaded the international trade and understand China situation.
The author believes we can look at it at two different levels. On the textiles issue, the United States and Europe myopically view China as the shortsighted "scapegoat." The global elimination of textile trade quota has been proposed over 10 years ago. The U.S./European manufacturers and governments should have foreseen the changes in global textile market and taken appropriate measures. However, many U.S./European manufacturers and governments have ignored this issue. This is reflected in their last-minute cancellation of trade quota. In other words, the failure on the part of U.S./European governments and manufacturers to take appropriate measures is the major cause of unemployment in their textiles industries. Yet they put the blame on the massive influx of low-priced quality Chinese merchandise, misdirecting the workers’ dissatisfaction with manufacturers and governments toward China textiles. The United States and Europe have been exercising this "scapegoat" technique for the past two centuries and with much success.

However, there is another unspoken reason for the United States/Europe insisting on trade quota for China textiles, which is to delay the rise of China. The U.S./Europe governments are well aware that the rise of China is inevitable. With this in mind, the best strategy would be to slow down the process of China rising so as to reap as much benefits as possible. The textile industry simply happens to be a breakthrough that the United States/Europe finds may delay China rising to power.
Yet another breach is the issue of Chinese currency exchange rate. Although the textile industry is a dying industry in the West, it is an important industry for China. Textile exports account for 16 percent of total exports. More importantly, the Chinese textile industry is a labor-intensive industry, directly employing 19 million workers. Taking into consideration workers of related professions, the industry affects the interests of more than 100 million employees. The quota imposed by the United States on seven classifications of textiles has already cost China US$ 2 billion of exports and 160,000 jobs. European Union quota will also affect more than US$ 300 million of exports and a corresponding number of jobs.

Providing jobs for the huge population will continue to be one of the most important tasks facing China for a long time. The textile industry is a major channel for redirecting rural labor. Therefore imposing quotas on China textiles is in fact no different from stirring up social conflicts.

In this regard, the United States/Europe are indeed quite "forward-looking." In order to get China into the United States/Europe controlled international free trade system, they have proposed harsher conditions for China joining the World Trade Organization: (1) China is not considered a free economy for anti-dumping law; (2) There are special safeguard provisions for China exports; (3) China’s promise will be examined each year for 15 years after China joins the WTO.

Therefore, in order to guard against the rise of China and its influence on the present international trade system and international power balance, the United States and Europe have taken deliberate measures. Only with this broad background can we understand the United States/European unusual measures that are "harmful to others yet not beneficial to themselves." In an opportunistic market the best strategy for dealing with big clubs is to strike back with big clubs. Of course, this strategy is based on self-confidence.

U.S. Administration and Congress Act Together to Create Trade Friction and Pressure China

[Editor’s note: This is a translation from an article published on, a website of the Chinese government official news agency, on June 5, 2005]

Recently the U.S. government made several moves in trade relations with China, causing frictions between China and the United States and concerns among the international community. These activities also cast a shadow on the bilateral relationship between the two countries. First, the U.S. Senate passed a legislative amendment about Chinese RMB exchange rate, demanding that Chinese RMB appreciate or the United States will impose 7.5 percent import duty on all Chinese imports. Then the House of Representatives passed a "Chinese Currency Bill" which asks the Bush Administration to investigate and determine if the Chinese government "manipulated the exchange rate." Also, the Commerce Department announced special restriction on seven textile imports. Using trade as a stick, the Bush Administration and the Congress are acting together to attack China.
It’s clear to seasoned observers that the ever-increasing trade imbalance between China and the United States is the result of the difference in economic systems. The root cause is not China. Even a huge appreciation of RMB will not solve the problem. In addition, the bilateral trade is mutually beneficial; large amount of "Made-in-China" in the U.S. market brings benefits the U.S. consumers. The trade has brought business opportunities to importers and retailers. It also helps to curb inflation. Further the U.S. government’s behavior hurts its image: the United States that has always advocated free trade is now promoting protectionism. Can we say that the United States is applying double standards on international trade? Also, RMB exchange rate is China’s internal affair. The United States has gone too far trying to tell what China should do. In fact, it’s a mistake to assume that the U.S. government and its think tanks are too naïve to know all these. But why did the U.S. government insist on pushing the wrong buttons? The United States did this on purpose to serve a hidden agenda. They are talking about trade issues, but thinking something else. In fact, the United States is playing a poker game using trade as one of the cards.

The sequence of the performance by the Administration/Congress was that the Congress came on stage and acted first, followed by the Bush Administration. From this, the White House was probably making the move in response to the pressure from the Congress. On one hand, the U.S. foreign policy making was always influenced by the power struggles between the While House and the Congress. The Congress has now gained an upper hand and the White House is playing defense. It is because a second term president will always have the lame duck problem. On the other hand, the episode reflected some Congress members’ dissatisfaction with the China-U.S. trade relations. These members want to express the views of the interests of the groups they represent—the mid-term election is only a year away. To these Congress members, votes are their political lifeline. Interestingly, many members of the Congress abandoned their partisan fights and came together. The Democrats represent the union; they claim that they will defend workers’ interests. The Republicans are loudly supporting the businesses. They came from different backgrounds, but now have reached the same conclusion. They formed an alliance against China.

One might ask, aren’t these members of Congress "seasoned observers" as we mentioned earlier? Objectively, some Congress members are indeed not that clear about the issue; they tend to focus on issues related to their home districts; they don’t know much about international issues and foreign affairs; they tend to not care either. So when they are asked to make a decision on international affairs, they became biased and failed to see the big picture. On the other hand, many members of Congress are indeed "seasoned observers" who know all the facts and understand the consequences. They took their position for their own interests and joined the crowd to cheer each other. In addition, some Congress members are very conservative. They hold on to their cold war ideology and their views on China are based on stereotypes. They just don’t like China no matter what. These people have many sticks ready at their disposal, such as human rights, democracy, military buildups, trade, and etc. People of this group are few in number and isolated. Usually they don’t dare to lead an assault without popular support, lest they tarnish their images and lose votes. Right now, they are more than happy to join the "Anti-China" crowd, wagging the stick of trade to make noises. There are yet others who were influenced by the traditional power politics. They don’t want to see the rise of China. In their thinking, a stronger China would be strategic competitor of the United States. They would do anything to curb China’s development and delay China’s eventual rise. Trade disputes are one important weapon to hit the target.
Actually, some Congress members and the Administration, especially those in the White House inner circle, shared the last two kinds of ideology. Right now, the new and old conservatives who are major influence to Bush Administration somehow share the "Contain China" mentality based on different motivations. The new conservatives want to promote democracy. They just cannot tolerate a China under Communist Party walking on a socialist road. The old conservatives base their policy on geo-political consideration. They believe that China after rising to the power will challenge the superpower status of the United States, even endangering U.S.’s national security. These two policies came to the same conclusion: Contain China’s development. They never forget about "containing" China while working on the overall bilateral cooperation. When they see China’s rapid economic development and its rising comprehensive strength, they have a sickening worry. But to their dismay, the global anti-terrorism campaign is not over, the United States cannot afford to "offend" China. Therefore, they resort to play some sneaky tricks that would not jeopardize the overall China U.S. cooperation. For example, they pressure EU from selling weapons to China, and have added Taiwan’s security as a common "strategic goal" in the U.S.-Japan alliance and etc. Now when the Congress is looking for excuses to blame China, the new and old conservatives are ready to go along. On one hand, they can defend themselves when explaining to China. On the other hand, they can also get back to the American people and the international community. They can innocently say: we have to do it because of the high pressure from Congress. The White House and Congress are supposed to be opponents. But in reality, they are more like friends who complement each other like actors playing different roles in the drama. In the old days, when the U.S. Congress passed the "Taiwan Relations Act," President Carter signed it right away—he never considered to veto. The truth was the Congress and the White House shared the same view all along except out of diplomatic consideration, it was better for the Congress to lead. Similarly, the current frictions in trade relations are just another such act in a drama.

U.S. Commerce Secretary Was Sweating Buckets While Questioned by Qinghua University Students on The Textile Export Quotas

[Editor’s note: This is a translation from an article published on, a website of the Chinese government official news agency, on June 3, 2005]

On the first day of his visit to China, U.S. Commerce Secretary Gutierrez was under "waves of bombardments" by students on the "issues of textile trade between China and U.S." at Tsinghua University. He was constantly wiping off sweat and finally left the conference hastily amid the questions.
Gutierrez gave a speech at Tsinghua University yesterday in the afternoon and discussed with 60 Tsinghua students. Although his acts paid much respect for Tsinghua students, students apparently took advantage of him and peppered him, the guest from far away, with questions. Gutierrez started to wipe off sweat after 15 minutes. He did it again after 30 minutes and again after 45 minutes. One hour into the discussion at around 4 pm, he broke students’ questioning and ended the trip to Tsinghua in a hurry.

Compared to his hard-line position toward China prior to the China visit, Gutierrez’s attitude has become much soft while making the speech. He emphasized that the U.S. government hoped to continuously improve trade relations with China. Since China is playing a more prominent role in the world, the United States hoped to solve the problem of the textile dispute between China and the United States through negotiations.

He also said, however, the quota on the import and export of textile products after one’s market opened is well regulated in the world trade rules and the measure that the United States adopted to comply with those rules. Now it is necessary for both countries to have a common understanding of the rules. Accordingly, the main purpose for his trip to China was to explain these rules to officials from China’s Ministry of Commerce. But maybe he "forgot" that, in accordance with WTO rules, the United States should carry on a 90 days negotiation with China after its investigation of special safeguards on China’s textile products. However, it was less than half a month from its launching the investigation to imposing the quota.

China’s Ministry of Commerce did not respond to Gutierrez’s statement yesterday. Earlier China’s Ministry of Commerce strongly protested against the quota unreasonably imposed by the United States and requested the United States to correct its mistake as soon as possible.

Gutierrez Took a Hard Line-Issues of Intellectual Property Rights Are Non-Negotiable

Yesterday morning, while giving a speech to the Chinese American Chamber of Commerce, Gutierrez emphasized that the issues of intellectual property rights could not be solved by negotiations and Chinese government has to adopt effective measures to protect intellectual property rights.

He stated as the result of piracy activities in China United States has lost tens of billions of U.S. dollars. Chinese government must promulgate tough measures to crack down on the piracy and counterfeit. Gutierrez added the United States refused to put both issues of textile products and intellectual property on the same negotiating table. China and the United States may discuss the dispute of textile product, but the intellectual property issue is non-negotiable. Since the former is the problem of contract, but the latter is a crime, which cannot be treated as the same.
As to Gutierrez’s opinion above, Xu Guowen, Director of An Pu Da Intellectual Property Representative Company in Beijing, commented: "The issue of intellectual property is a worldwide problem, which should not be as emotional as what Americans have criticized. China has paid attention to the issue of intellectual property. Recently, Chinese government has taken a lot of efforts to protect intellectual property. Along with the further globalization of economy, the problems with intellectual property will increase because enterprises in each country apply patents in their own countries and bring the patents to other countries, which often times would cause conflicts. Therefore, to unilaterally blame Chinese enterprises is obviously not fair. The American government always takes the intellectual property as an issue, which in fact is a kind of tactic. Its purpose is to increase its advantages in the trade negotiation."

Guilty of Intention

Around 3 p.m. on June 4, 2005, Hu Jing, a 37-year-old man from Chongqing, China, was arrested in Tiananmen Square, where uniformed and plainclothes police officers outnumbered tourists on this politically sensitive day. They arrested Hu Jing because he "intended to burn the Chinese Communist Party (CCP) flag." Since then, Hu seems to have been sucked up by a black hole, and his whereabouts remain unknown to this day.

A friend of mine sent me a text message asking what kind of law Hu broke if he was simply intending to burn the Party flag. Since actually burning the Party flag does not constitute a crime, at least according to the laws publicized by the Chinese government, how can the intent to burn it be a crime? As many readers have asked, if it’s not a crime, then why was Hu Jing arrested?

The stories I’m about to tell may help you find the answer.

Story One

Before June 4, 2004, the authorities were tipped off that Hu Jia, a well-known human rights activist, might go to Tiananmen Square on the night of June 4 and light candles in front of the People’s Hero Monument to commemorate those killed on the same evening in 1989. The mighty government responded swiftly and in strength. Nearly ten police cars arrived at Hu Jia’s residence. Over 30 anti-riot policemen blindfolded Hu Jia and took this frail scholar to an unknown basement, where dozens of police officers watched him for several weeks.

This long-term, large-scale action against citizen Hu Jia was successful. It successfully made the totally despaired Hu Jia agree not to go to Tiananmen Square and light candles on the evening of June 4. Hu’s ordeal, however, was not over yet. Just before June 4, Mr. Hu’s phone rang. "Although you won’t be going to Tiananmen Square to light candles on June 4, are you going to do it at home?" asked a government official. Barely able to control his anger, Hu replied, "How can my lighting the candles at home be any of your business?!" and hung up the phone.

To his surprise, the authorities, out of extreme concern for national security, dispatched several police cars with eight officers to station themselves in Hu’s home, just to make sure that he would not light candles in his own home. A few dozen police officers watched him nervously around the clock for several weeks and eventually extinguished, successfully, his intention to light candles at home. Their mission to safeguard national security was accomplished.

With a smile on his face, Hu later told me that he truly admired the dedication of the police to our national security. I was amazed at how calm Hu was when he told me this story.
Story Two

In late March 2005, Chiang Bingkun, vice chairman of the CCP’s arch rivalthe Chinese Nationalist Party (KMT), visited the mainland. On March 31, the ever scrupulously dutiful police discovered an unfamiliar face among the welcoming crowds gathered at Biyun Temple in Fragrance Mountain Park in Beijing. The face belonged to Zhang Wenhe, a Beijing resident. The police took Zhang away and detained him for 12 hours. Because he showed up uninvited in a sensitive location, Zhang Wenhe instantly became a dangerous element harmful to national security.

From April 26 to May 3, 2005 when Lien Chan, Chairman of the KMT, visited China, and days after May 5 when Soong Chuyu, Chairman of Taiwan’s People First Party (PFP), was touring the mainland, Zhang Wenhe received VIP treatment as well. He was surrounded by ten police officers and six security guards around the clock in his home. Their mission was simple: to prevent Zhang from welcoming Mr. Lien and Mr. Soong without permission, thus jeopardizing national security.

Both times he was placed under house arrest, Zhang Wenhe called me for help. Unfortunately, he misjudged the situation. How could I handle the 16 tough guys and the vast national apparatus behind them? I could only express my sadness with a deep sigh.

Story Three

When Mr. Lien and Mr. Soong’s high-profile visits were over, Zhang Wenhe’s special treatment, courtesy of our government, was over as well, and he eventually regained his freedom. Still upset about being deprived of his personal freedom without even a legal formality, Mr. Zhang insisted that he meet with me. I was in the Shangdao Café at Beijing’s International Club to meet with two ladies from Shanghai. One was an elderly lady in her 70s, mother of Hong Kong citizen Shen Ting; the other was the wife of the imprisoned lawyer Zheng Enchong. When Zhang arrived at the café, he laid eyes on a scene that shocked him speechless: nine men, all in black with dark sunglasses and most of them with shaved heads, surrounded both women and followed them closely. The older lady was obviously frightened. She told me that these men had several kinds of vehicles at their disposal to make sure that they could follow the two women under any circumstances. She asked me in a trembling voice, "Attorney Gao, they openly follow us in broad daylight. Do they really think that we, two frail ladies, are dangerous?"

I did not have an answer for her. Zhang Wenhe, who had come to complain about his own plight, spent his time comforting the two poor ladies instead. It was quite dramatic.
Story Four

Even more dramatic have been my own personal experiences. Last summer I traveled to a particular province to work on a case. When I got off the plane, I was surrounded by several police cars. Over the following several days, whenever I went outside, I had at least four police cars providing constant "protection." Whenever I stayed in, I had seven to eleven police officers as "bodyguards" 24 hours a day. This was, using their words, to "guarantee your absolute safety under our provincial jurisdiction." Translation: to guarantee that you cannot accomplish anything under our provincial jurisdiction. Their blatant, shameless behavior made me feel absolutely helpless.

When I went to Gaizhou City in Liaoning Province in early March 2005, several elderly citizens, who had repeatedly appealed to the government protesting personal injustices, wanted to confer with me. Within five minutes of our meeting, more than ten police cars and several dozen police officers surrounded us, claiming that they had received information that we were holding an illegal meeting. I was baffled.

I’m hoping that, after reading these stories, you are prepared for any unforeseeable event in China. In a country where citizens are considered bandits by the rulers who live in a constant state of anxiety and hide behind the almighty power of the state, you even need to be careful of what you dream every night. With advancements in modern technology, our government can track your mind activities in your sleep. You may wake up in handcuffs. I say this because I’m sure that I should be arrested every morning when I wake up.

Gao Zhicheng is a civil rights lawyer in China. His willingness to help those who cannot afford lawsuit expenses to have the courage to challenge the privileged officials has won him the reputation as one of the top ten human rights lawyers in China.

Beijing Plays Politics with InvestorsThe Story of a Taiwan Businessman

From Most Favored Guest to Least Welcome Businessman

Hsu Wen-lung, a 78-year-old Taiwan businessman, is known as the "Father of Taiwan Acrylic" and the "King of ABS (material for production of PC, home appliance and communication products)." In 2004, Forbes Magazine ranked him number six out of ten Taiwanese billionaires. Hsu founded Chi Mei Corporation in 1959, and by 1999, the corporation had become the largest manufacturer of ABS in the world. Hsu led the Chi Mei Corporation in starting its China adventure in 1991. His investment experience in China has had ups and downs and is a good example of the political pitfalls foreign investors may run into.

When Hsu began to invest in China in 1991, the country was isolated internationally and was offering lucrative business incentives to attract investment from Taiwan. The Communist government promised to separate business from politics and announced that political views would not intervene in cross-strait trade.

Hsu initially set up several plastic dyeing factories in Danyang in Guangdong Province, and Suzhou in Jiangsu Province. In 1996, he decided to put major investment in China and chose Zhengjiang (a city in Jiangsu Province) as the Polystyrene and ABS production site for Chi Mei. He also planned to set up Chi Mei Electronics factories in Shanghai and Ningbo before 2000.

Hsu is politically influential in Taiwan. He is a personal friend to two presidents of Taiwan, former president Lee Deng-hui and current president Chen Shui-bian. During Lee’s presidency, Hsu was his National Advisor. Now, Hsu is the Presidential Advisor for Mr. Chen. As a businessman interested in China’s market, Hsu used his influence as presidential advisor to convince the Taiwan government to be more lenient in its cross-strait trade policy. This helped to facilitate Taiwan investors in moving capital and factories to China. Hsu was welcomed on both sides of the Taiwan Strait, and his investments enjoyed a welcome environment on the mainland.

However, his business hit an unexpected political bump in 2000 when Hsu was labeled by Beijing as a "Green" businessman for his association with the pro-independence Democratic Progressive Party (DPP) in Taiwan. Hsu gave his support to Chen Shui-bian’s presidential candidacy in the 2000 race. Chen and the DPP won the election. However, due to the "Green" label, Hsu Wen-lung was "downgraded" from the most favored to the least welcome businessman in China. Consequently, Chi Mei Corporation started to have a lot of trouble on the mainland. Local authorities frequented Chi Mei’s factories under pretexts of account audits, fire safety inspections, and the like. Rumors were spread about shutting down Chi Mei’s plant in Zhengjian. Chi Mei’s suppliers started to cancel their contracts. Chi Mei’s financial loans were cut off. One of its senior managers was imprisoned, and the list goes on.
Why Such a Change in the Business Environment?

In the 1990s, Hsu and other overseas investors were needed to boost mainland China’s economy. The Chinese government treated those businessmen as most welcome guests, providing business incentives and a friendly environment. Things changed dramatically a decade later. China was no longer short of foreign capital but had to worry about how to cool down the overheated economy. At the same time, the Chinese government had made Taiwan a top issue in China to serve as a political scapegoat. The state-controlled media led the Chinese people to deeply resent Chen Shui-bian, who is for Taiwan independence.

Conditions were ripe for the communist government to pick on some Taiwan businessmen in order to set an example for others. When Chen Shui-bian won the Presidency of Taiwan in 2000, Beijing appeared shocked and angry. Because Hsu gave his support for Chen’s presidential candidacy, that qualified him as an "enemy" of the Chinese government and a prime target.

Hsu had little choice but to continue his business in China. With billions of dollars invested in China, it was too late for him to pull out. Yet, he would have to face more economic and political pressure from the government in the years to come.

Making a Political Statement to Save the Business

On May 25, 2004, two months after Taiwan’s President Chen Shui-bian was reelected as Taiwan’s president, China’s official news agency once again referred to Hsu Wen-lung as the "Green" businessman. Three days later on May 28, 2004, Hsu announced his retirement as president of Chi Mei Corporation. Chi Mei’s stock tumbled for six consecutive days and lost 18 percent of its market value.

Zhang Mingqing, spokesman of the Taiwan Affairs Office of China’s State Council issued a statement: "China doesn’t welcome those who make money on the Chinese mainland but support ‘Taiwan Independence’ when returning to Taiwan." Hsu’s retirement as president in 2004 did not stop harassment of Chi Mei because, as the chairman of the board, Hsu was believed to still have strong influence on business decisions. So, the Chinese government imposed more demands.

On March 26, 2005, less than a year after Hsu’s retirement from Chi Mei, Xinhua News Agency published an open letter from Hsu stating that he favored a "One China" policy and that "Taiwan independence could only lead Taiwan to war and drag people to disaster." However, it is widely believed that Hsu shifted his political stance due to pressure to save Chi Mei Corporation in China, which is valued at US$3 billion in total investment.
Hsu’s close friend and former president Lee Deng-hui observed that the turn of events reflects that the Chinese government is beginning to pressure China-based Taiwanese business people. "As his friend, I can understand why he says such a thing," Lee said. "Hsu’s statement is at the expense of his own reputation and for the sake of over 100,000 people working for him in China because he doesn’t have any other choice."

Taiwan’s Vice President Annett Lu said that the statement released by Hsu is "a white paper written by others," that is, Mr. Hsu was asked to sign the statement prepared by the Chinese Communist Party. According to Taiwan’s China Post report on May 11, 2005, Wang Xin-nan, a Democratic Progressive Party legislator, told the reporter that Hsu had shown him the letter the day before it was published, saying the contents were dictated by Beijing. Hsu said if he failed to do what he was told to do, the business group would fall, affecting thousands of workers and shareholders. Hsu had to sacrifice his personal honor in order to save the business. Hsu himself did not officially comment on the report.

Surviving Communist Politics

Beijing’s attempt to tie allegiance to the communists’ "one-China policy" with investment opportunities in China impacts many Taiwanese businessmen. There are currently 400,000 to 600,000 Taiwanese entrepreneurs with permanent residence in China. Their total investment is around US$60 billion and accounts for 50 percent of total overseas investment in China.

Taiwan authorities have issued many warnings on investing in China and ask entrepreneurs to diversify their investments and shift them to other countries. Some Taiwanese entrepreneurs have started to pull their investments out of China. Many are hoping that after China joins the WTO, conditions will change. Others are undecided and waiting because it is too costly to pull out their investments.

Hsu’s case has prompted many pro-Democratic Progressive Party (Green) Taiwanese entrepreneurs to keep a low profile on their political views and to pay attention to political boundaries. During Taiwan’s presidential general election in 2004, many would not talk publicly about the election, and almost all Taiwanese entrepreneurs said in public that they were pro-Blue (as opposed to pro-Green). On those sensitive days, many pro-Green entrepreneurs, fearing trouble, postponed their trips to China. According to a 2002 survey conducted by the Chinese Professional Management Association of Taipei, the tense cross-strait environment is the biggest concern among Taiwan’s entrepreneurs.
In addition to being sensitive to political boundaries, Taiwanese entrepreneurs also face a worsening business environment, including ever-changing business policies, unexpected local taxes and fees, arbitrary tax investigation, shortage of water and electricity, increased interest rates, and the pressure of appreciation of the yuan. For example, in order to attract entrepreneurs and investment, China implemented all kinds of tax deduction programs. However, once the political atmosphere changed, the government reversed its policy and the tax departments started to investigate "tax evasion."

In a July 1, 2004 report, Taiwan’s Liberty Times quoted a statement by Gao Weibang, the Director of the Association of Victimized Taiwanese Investigators in China, that at one time it was estimated that nearly 1,000 Taiwanese entrepreneurs were imprisoned in China for tax evasion.

Had Hsu Wen-lung known that one day he might be the victim of China’s unpredictable, politicized business policies, he might not have advocated for easing trade with China.

Lukun Yu is a financial analyst in New York.

China: A Tale of Two Economies

The commentary and debate over CNOOC’s attempt to pursue Unocal and, to a lesser extent, Haier’s offer to take over the struggling Maytag, may have given Americans an inward shudder. China, like Japan in the 1980s and early 1990s, is emerging as an economic powerhouse that directly challenges the dominance of the United States. Two neglected anomalies, however, should first be consideredand hopefully, resolvedbefore it makes sense to jump on the bandwagon of the boom in the Chinese economy.

According to a Wall Street Journal report on July 6 that, mysteriously, is not widely quoted, Chinese regulators have imposed a freeze on new issues of stock in a bid "to support sagging share prices on the country’s two domestic exchanges." The same article also reports that, "The Shanghai Composite Index closed down 0.8 percent at 1039.04 yesterday. The benchmark has fallen 18 percent since the start of the year, and is hovering just above its lowest level since 1997." The article, however, fails to mention that since the markets peaked in 2001, their capitalization has lost 60 percent of its value, triggering an emergency bailout from the government.

Another fact that contradicts belief in the barometers for economic prosperity, concerns the job market for college graduates in China: Half of them are forced to settle for unemployment when the euphoria of graduation gives way to frustration, anxiety, and confusion. In the United States, every time the stock market tanked and a tight job market replaced a robust one, the country entered a recession. Surprisingly, despite similar signs in the Chinese market, nobody is so much as hinting at the same possibility for the Chinese economy.

If these data and facts give interested parties a certain amount of pause about the Chinese economy, it becomes easy to see that different pictures are being painted about Chinaat the same time, in the same article. Just when excitement sets in because China is becoming a growing trade powerhouse enjoying a respectable surplus with the United States every year, puzzlement follows as we find that China actually has a net trading deficit of over US$10 billion in each of the last several years, and is relying more and more on the outside for oil and raw materials to sustain its development. It is true, however, just as Shan Weijian, an alum of mine, pointed out in a recent Wall Street Journal, that China’s trade statistics suggest an undervaluation, rather than an upward revaluation, of its currency.

Surprisingly, similar instances, with wry contrast, permeate the Chinese economy. Just as you are awe-struck by the annual inflow of US$50 billion into China, your breath will be taken away by an even greater amount of capital flight each year.

Just as you become excited about the privatization of state-owned enterprises (SOEs) by way of management buy-out, in a form that is supposedly more advanced than Russia’s share-purchase program, you would learn most of those "buy-outs" are ill-disguised looting, with all the debts mysteriously written off, with the Party secretaries, the so-called managers, paying less than one tenth of their enterprises’ market value to become the new private owners.
Just as you are stunned by the announcement that China will export cars into Americaat less than half of the regular price we’re seeing these daysyou are told the cars are just too, too similar to one of the mini models GM is working on. So, again, just as quickly, a confident debut to announce China’s arrival in global competition becomes a highlight of its inveterate failure to protect intellectual property.

Just as you are proud, as a Chinese person, to hear people call your country the "world’s factory," you realize, on an afterthought, that it is probably as much an insult as a complimentafter all, a factory in the current hi-tech era means your only assets are people who have manual labor rather than mental power to sell.

Like me, any Chinese person will feel good about the number of people who have been lifted out of poverty in China, but will be totally flabbergasted at the following statistics of China’s Gini coefficient. It shows a steady rise from 0.1 in 1980 to the current 0.6, one of the highest in the worldbear in mind that the Gini coefficient by design ranges from 0 to 1, with a higher number signifying a higher level of income inequality in the society. Of course, there is always the cloud over China’s moribund banking behemoths, sitting on US$500 billion worth of bad loans and aspiring to be listed abroad after huge capital infusion from the Chinese government to improve the looks of its balance sheet.

Such an awkward juxtaposition and blend of pretty and ugly, hope and despair, new and old, static and dynamic, defines the economic reality of today’s China. Contemplating the economic realities of China is as if when heading out after a relaxing break in a Starbucks at Tiananmen Square, you lifted your head, and a shudder ran through you as your eyes met the empty but stern stare of Mao Zedong still hung on the rostruma reminder of where you really were.

Before the 1992 presidential election, a lot of people were anticipating an easy success for George Bush Sr., because he had just won a war in a most beautiful, if not easy, manner and his approval rating had been at an all-time high. But his mismanagement of the timing of economic recovery cost his second term, and spawned the now popular wisecrack for anyone who is politically inclined in the United States, "It’s the economy, stupid!!"

In my groping search for a thread, a theme, which runs through the 16 years of post-1989 Chinese economy, that vernacular aphorism for electioneering in the United States suddenly becomes inspirational. Indeed, to put all the froth and bubble puffed out by the Chinese economy into perspective, another wisecrack comes in handy and proves adequateIt is about political survival, stupid!!

In 1989, China chose to stick to authoritarianism at the crossroads where the other signpost read "Liberty," which turned out to be the path taken in the same year by all its ideological buddies in Russia and Eastern Europe. At that time, creating a bloodbath in Tiananmen might have been an easy decision and had the appearance of success to the Chinese regime, but the real challenge lay ahead. How to feed China’s ever-growing population while only tinkering with the economic system set up in the early 1980s? The regime had no choice but to confront this issue head-on, because in the wake of the total collapse of the Soviet-bloc, its legitimacy could only be guaranteed through economic growth.
Since then, the Chinese government has been busy pumping an inordinate amount of capital flowing in from the outside, into the abysmal hole of SOEs, to save it from bankruptcy, so that chances of social unrest due to mass layoffs are reduced. In fact, the government has in recent years quickened its pace to hand over the market and natural resources to foreign businesses, in the hopes of feeding its own people via foreign capital. This was evidenced by the dramatic accession to WTO by China in the year 2001, which amounted to handing down a death sentence to most of China’s SOEs.

Indeed, over half of China’s total export is now accounted for by foreign enterprises based in China, and the proportion of fully owned foreign enterprises permitted in the 1990s has been increasing exponentially in recent years, now reaching the percentage of 65 percent. These fully owned foreign enterprises are much less inclined to transfer technology, and they dominate the hi-tech exports. Which means, unlike joint ventures, these foreign enterprises will have no contractual obligation to help the Chinese obtain or develop advanced technologythe only benefit it brings are jobs for Chinese workers.

Many people have likened the Chinese economic growth to experiences of other Asian economies, and hope it will ultimately tread on the same path to democracy. But data in this respect suggests a divergent pattern. According to Professor Huang Yasheng of MIT, no more than 20 percent of the exports of Taiwan and South Korea were accounted for by foreign enterprises during the 1970s, their take-off period, and now are much lower. In Thailand, the share dropped from 18 percent to 6 percent by the mid-1980s. In contrast, all the Asian tigers instituted hugely preferential policies to help privately owned enterprises to develop international brands. South Korea’s Hyundi and Samsung are typical examples. In the case of Taiwan, it has become the #1 provider of computer chips, accounting for 70 percent of the world market worth US$8.9 billion, and the leader in many other computing areas. Taiwan is also the recipient of 5,299 U.S. patents, while China has only gotten 366. Not to mention Japan, whose Ministry of International Trade & Industry of Japan (MITTI) has been legendarily effective in cultivating home-grown competitive prowess.

The above analyses might help you understand the downward spiral of China’s competitiveness, as reported by the most recent report by IMD, a prestigious business based in Switzerland. More importantly, they should reveal a more serious problem underlying the Chinese economy: the fundamental mismatch between its governance and development. Political calculations of the communist regime have compelled it to sacrifice the country’s long-term development to maintain its grip on power. Big businesses from the West seem to have become another winner, on the back of the misery of cheap Chinese labor. But this pleasant party, cheered on by the press and pro-business politicians, can’t go on forever.

Imagine this, most liberal democracies these days have their economies propelled by the engine of productivity on four wheelsrespect of private ownership, competition, transparency, and accountability. Ahead of them, however, is a gigantic cyclist, going fast, on two huge, spinning wheels. One reads cheap labor, and the other foreign capital. To stay in the race, the cyclist pedals so hard while the people in the other cars look on. One person in the crowd, a Mr. Gordon Chang, who authors the book titled The Coming Collapse of the China, and who knows the cyclist very well, opines, "This poor guy will collapse soon," but his words only invite a huge "boo!"everyone is enjoying the show and nobody wants to be bothered. Their indifference, apathy, and callousness continue to cheer the cyclist onward. Now, you tell me, who is right?

The China-U.S. Trade Conflict: Just a Beginning

In the escalating China-E.U. and China-U.S. textile trade dispute, the Chinese government recently flip-flopped its policies almost overnight. On May 20, China announced increases in export tariffs on 74 categories of textile products as of June 1. The tariffs on these textile products increased in some cases by 400 percent. On May 30, however, before the United States or the European Union had had enough time to react to the "good news," the Chinese government suddenly announced the withdrawal of export tariffs on 81 categories of textile products as of June 1, completely annulling the "good news" on export tariff increases announced on May 20.

Why the Sudden Change?

In just 10 days, China had shifted its policy from an export tariff increase of up to 400 percent to the actual withdrawal of export tariffs. What happened during those 10 days? Why did China change so dramatically?

The China-E.U. textile trade dispute intensified after the E.U.’s publication of Guidelines on Special Safeguard Measures on Textile and Clothing Imports from China, which suggested that China impose limitations on its own textile products. On May 17, an E.U. commission decided to impose quotas on T-shirts (Category 4) and flax-yarn items (Category 115) made in China. Since May 18, besides cotton trousers, cotton shirts, and cotton and man-made fiber underwear made in China, the U.S. government has added four other categories of cotton products made in China to its "Safeguard Measures" list. Under great pressure, China announced significant increases in export tariffsin some cases four times the previous tariffson 74 categories of textile exports beginning June 1.

The Chinese government had expected the compromise would lead to positive reactions from the European Union and the United States. The Deputy Minister of Commerce of China, Gao Hucheng, was sent to Brussels for emergency talks with E.U. Commissioner Peter Mandelson. After the talks, the E.U. Commission postponed the start date for the "Safeguard Measures," and the last meeting was scheduled for May 31. Even as the dispute seemed to be cooling off, the E.U. Commission issued a brief statement on May 27 to start "Safeguard Measures" immediately on two categories of Chinese textile products.

The United States, however, did not give any response that pleased the Chinese government. U.S. Secretary of Commerce Carlos Gutierrez was scheduled to pay a three-day visit to China from June 2 to 4. According to The Wall Street Journal of May 27, Gutierrez said of his upcoming visit to China, "This is an opportunity to explain the United States’s view. I’ll also explain the importance of implementing quota limitations." Gutierrez also announced through the Department of Commerce that, during his trip to China, he would try his best to explain that the decision of the United States to place constraints on Chinese textiles was a legal action based on World Trade Organization (WTO) agreements.
To the Chinese government, the repeated levying of quota limitations on Chinese textiles by the United States and the European Union are simply hostile acts that totally ignore the Chinese government’s kind gesture of self-imposed export tariffs on textiles. Plus, the Chinese government knew early on that this time the two parties would discuss China’s notorious weaknessthe one thing against which China has no defensenamely, intellectual property rights. In order to take charge in the negotiations, the Chinese government had to re-establish the bottom line. That is the reason for the sudden change of policy.

Are the United States and Europe Intimidated by China’s Growing Strength?

In terms of trade, China is in a weak position, because China needs the U.S. and E.U. markets. The United States and the European Union are in a strong position, because similar products from other countries can be easily obtained in the absence of Chinese products.

In terms of the mechanics of setting trade policy, China, as a totalitarian government, is a formidable presence. So far, the United States and Europe have been talking about economic issues in terms of countries’ economies and have shown no signs of extending the discussion into the political arena. Even if an individual politician wanted to resolve a trade dispute by political means, the business community would not follow the government’s or senate’s lead, because it is extremely time-consuming to establish new policies. China, in contrast, can change its policy almost overnight. The current change of policy in 10 days is just one such example. China can also incite nationalistic sentiment by using the media to forge "the people’s opinion" and then use this as a diplomatic gambling chip. Since 1990, in order to cover up its diplomatic incompetence, the Chinese government has often used this secret weapon of "public opinion" in dealing with the United States and Japan. This time when the United States and Europe proposed to re-impose quota limitations on Chinese textiles, it was very difficult for the Chinese government to get satisfactory results through diplomatic channels, so it again employed nationalistic sentiment.

How did the Chinese government play the "nationalism" card this time? They first politicized the issue of foreign trade through its public media. Once again the theory of the United States and Europe’s "conspiracy" to prevent China from rising peacefully as an economic power was very much in the air. An article entitled "Their Target Is Not the Textile Industry" states, "The United States and the European Union have an ulterior motive in maintaining quota limitations on Chinese textile imports, viz., to hold back China’s rise as an economic power. The U.S. and E.U. governments know that nothing can prevent China from rising as an economic power. Given this, it will be most desirable if they can decelerate China’s rise to some extent and gain as much profit as possible before that happens. The textile industry is a place where the United States and Europe can work to hold back China’s rise." According to the article, China’s export of textile products makes up 16 percent of China’s entire export. The textile industry directly employs 19 million, and the employment in related industries exceeds 100 million. More importantly, the implementing of quota limitations on seven categories of textile products by the United States has decreased China’s exports by US$300 million and has affected employment accordingly. The textile industry is one of the main channels by which China is able to absorb the vast surplus labor pool from the countryside. Therefore, the imposition of the quota system amounts to fostering social conflict in China.
The article reviews the heartbreaking process of China’s effort to join the WTO, when China was treated unfairly by the United States and the European Union, "To engage China in a U.S. and E.U.-dominated world trade system, they imposed more rigorous conditions than they did on other countries. First, they insisted on treating China as a non-market economy as far as anti-dumping is concerned; second, special protective annexes were appended to Protocol on the Accession of the People’s Republic of China as regards China’s export; third, within 15 years of China’s accession, there will be an annual evaluation on how China is fulfilling its commitments. This shows how far the United States and the European Union will go to restrain China from rising economically." The article was published in the May issue of International Finance and was subsequently put on almost all major websites. Tsinghua University students later relied almost exclusively on this article in questioning the U.S. Secretary of Commerce.

Instigate Nationalism

Since it is related to "the conspiracy by the international anti-China forces to prevent China from strengthening itself," it is "natural" for China to resort to nationalism to resolve the issue. Since the end of May, many Chinese websites have subsequently launched an online signature campaign to "support the export of China’s textiles." Unfortunately, the campaign has not been as successful as that of the Anti-Japanese movement. Otherwise, the number of supporters would have been made public to show how much the Chinese people oppose the "Western conspiracy."

The China Association of the Textile Industry also issued a press release to strongly protest the quota imposed by the United States, which it claims violates WTO’s principles and the spirit of the "Textile and Apparel Agreements" and contradicts the WTO’s merit of free trade. Interestingly, the association’s complaints dovetailed perfectly with the media attacks. As a matter of fact, although all the various industries’ associations appear to be non-official, the government controls every one of them. As stated in a Chinese high school textbook on politics, "The concept of non-official organizations is clearly defined as ‘the official organs in the name of folk organizations.’"

On the first day of his visit to Beijing, U.S. Secretary of Commerce Carlos Gutierrez certainly "smelled the smoke" after the Chinese students bombarded him with questions on the "issue of Sino-U.S. textile trade." Carefully designed by the Chinese government, the students’ questions demonstrated how well they played the "ethics" card. "The new quota on China’s textiles by the U.S. will lead to a dramatic increase in unemployment in the nineteen-million-strong Chinese textile industry and will negatively impact local businesses and employment," the students commented. To prove China’s victory of "diplomacy in the people’s war," the Chinese media was obsessed with exaggerating how uncomfortable Mr. Gutierrez was.
China Is Overly Relying on Overseas Markets

The less-than-polite manner demonstrated by the Chinese government during the textile trade war actually reflected its anxiety, which can be attributed to China’s heavy reliance on overseas markets for the health of its economy.

The ratio of the import and export values over the GDP of a nation is called the degree of reliance on foreign trade, which represents how much an economy depends on foreign trade and how much the country is involved in the world division of labor. It also reflects various elements of its strategy for the economic development of the country. Finally, it greatly affects the country’s foreign policies as well.

In the past 10 years, the scale of China’s foreign trade has expanded rapidly. In 2004, out of the US$1.65 trillion of China’s GDP, 70 percent, or US$1.1547 trillion, was attributed to foreign trade. This is equivalent to a reliance degree of 70 percent, a 60 percent increase from that of 1978. In terms of this measure, China certainly ranked very high among the major economies in the world.

In contrast, between 1980 and 2001, the United States, Japan, India, and Germany’s reliance on foreign trade was between 14 percent and 20 percent. It is apparent that China’s economy has a distinct characteristic: Its products rely very heavily on foreign markets.

Although China knows where its weakness lies, it is not able to overcome it. This is because the only way for China’s economy to take off is to mimic the "Four Little Dragons of East Asia" by taking advantage of foreign capital and building a relationship with foreign markets according to the "theory of comparative advantages."

According to this theory, only through exporting products with comparative advantages and importing those without comparative advantages can a developing country optimally utilize the efficiency of labor distribution in the world to serve its national economy. Although the theory has been successfully applied to the "Four Little Dragons of East Asia" in the past, its application to China will surely cause serious problems. This is because, in the history of world economy, China’s rapid development and its excessive reliance on world markets are unprecedented. Indeed, the Four Little Dragons of Singapore, Korea, Taiwan, and Hong Kong did develop rapidly in a short period of time and quickly surpassed many of the developed countries, but their economies are not very large. On the other hand, the United States once jumped from a second-class world economy to a first-class one, but it had a large and fairly stable domestic market.
Trade Counterforces Always Accompany China

The reason why it is problematic to apply the theory of comparative advantages to China is twofold. First, as a result of chasing "comparative advantages" and the excessive production capacity in many of its industries, China is bound to face the awkward situation that whatever it produces will be cheap. Second, lacking a domestic market supported by effective demands, China will surely have to rely excessively on overseas markets. Because of the heavy weight of China’s foreign trade in the overall world trade stage, the effect of China’s pricing in its trade with the world economy cannot be underestimated. In particular, the concentration of China’s exports in several countries and regions is problematic. For example, China’s trade volume with the United States, Japan, and the European Union accounts for half of the overall trade. Consequently China’s dumping of any products on these three markets will surely create tremendous pressure on these countries.

China has been trying to rely on the gigantic world markets to support its own economy and to feed its huge supply of cheap labor. Such strategy may work well for a short period of time. As time goes by, however, it will surely create friction with other countries due to the conflict of interests. The textile trade war is only the beginning of a larger war of the upsetting of markets caused by China’s tremendous supply.

Mrs. He Qinglian is a renowned economist and journalist from China. She is currently staying in the United States as a guest researcher.

Free High Quality Images Download Free Stock Images Download Free Images Free Stock Photos & Images Beautiful Free Stock Photos (CC0) Free stock photos