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East Meets West: A Cup of Tea

The origins of tea are steeped in legend and date back over 5,000 years to ancient China. One tale tells of the great monk Boddhidarma, who once fell asleep while meditating. To resolve this problem, he sliced off his eyelids and cast them to the ground. It was from this place on the ground that the tea tree was born, and from its leaves came a drink to conquer sleep.

According to another myth, the discovery of tea was by accident. In 2737 B.C. the Chinese emperor Shen Nung was in the forest boiling drinking water. A wayward leaf was said to have drifted through the air and landed in the boiling pot. A brown liquid infused into the water. With curiosity, he drank the liquid and found it refreshing.

Although myth, the tales above hold some truth. For instance, the history of tea does begin in ancient China, probably somewhere near the Vietnamese border. Around 800 A.D., a man named Lu Yu wrote the Ch’a Ching, the first true book on tea. Because of his lifelong observations and expertise on the subject of tea cultivation, he was later patronized by the emperor and considered a near-saint.
The Buddhist monk Yeisei, later known as the "Father of Tea," brought the leaf to Japan. Over time, drinking tea evolved into an art form known as the Japanese Tea Ceremony. This tea culture spread from monasteries and the imperial society to the rest of secular Japan.

In 1560 the Portuguese Father De Cruz first encountered tea. It is said that tea made its way to Europe during the era of Elizabeth I and Rembrandt. The Marquise de Seven first mentioned that milk be added to tea in 1680.

In 1650 Peter Stuyvesant introduced tea to New Amsterdam, later recognized as New York. Before long the city was drinking more tea than all of London. To this day, although popular in North America and Europe, these two continents are the only ones in which tea is not abundantly grown.

Tea Types

All tea comes from the evergreen tea tree, Camellia sinensis. Many other drinks that are considered teas are actually herbal infusions, named after the plants they come from.

There are five types of tea: white, green, oolong, black and pu-erhs. The differences between them lie mainly in the ways in which they are processed. For example, white tea is minimally processed and is usually picked and air-dried; green tea is picked and heated by steaming or pan firing. In contrast to oolong and black teas, green tea is not oxidized. Pu-erhs is aged and post-fermented and gets its name from the town Pu-erh in Southwest China.
Even among green teas there is much variation. Some green teas from Japan often have a seaweed-like flavor, while others have grassy notes. Other teas, like Lapsong Suchong (a black tea), are smoked, giving an altogether new character to the beverage. Sometimes green teas are mixed with roasted rice or barley for a unique flavor, as well as being a digestive aid.

Experience and Preparation

The experience of tea drinking is delicate and comparable to that of enjoying a glass of fine wine. It is a sort of art and culture based on various factors: from the tea-ware to the quality of leaf used, from the brewing method to the length of time each cup is steeped. In addition, the whole atmosphere really matters. To maximize the taste in each cup, there are a few brewing guidelines to follow. First, it is recommended to begin with cool, filtered water. With black and oolong teas, bring the water to a slow, rolling boil and then pour it over the leaves. Because white and green teas easily burn and turn bitter, use water just under the boiling point. Steep to the desired taste. Usually green tea is only steeped for up to three minutes, while the others can be steeped up to five or eight minutes.

Tea and Health

The Executive Director of the Tea Council, Mr. Bill Gorman says that there is a huge body of scientific evidence showing that tea can make a significant contribution to a healthy lifestyle. Of teas, three main substances — antioxidants, nutrients and caffeine — antioxidants are often first looked at when considering health benefits. Antioxidants, mainly consisting of polyphones and falconoid, inhibit substances called free radicals in their ability to damage the molecules in our bodies. Major nutrients in tea included carotene, vitamins B1, B2, B6, C, as well as the minerals potassium and fluoride.

Studies show tea aids in enhancing immune functions, lowering high blood pressure, reducing the risk of strokes, heart attacks and various forms of cancer, aiding in digestion, boosting connectivity, and preventing dental cavities as well as certain forms of plaque and gingivitis.

Shoe-Nots and Shoe-Haves

A Chinese saying, "the barefooted are never afraid of those wearing shoes" (guang jiao de bu pa chuan xie de) captures very well the standoff between the West and some states. Traditionally, China, an agrarian nation, has largely been populated by farmers who, for the convenience of working in the fields and saving some hard-earned money, are barefooted throughout most of the production seasons. The tradition was well-kept at least until the Cultural Revolution, when the "barefooted doctors" system — where farmers working in the field received some basic medical training to serve the community — won wide acclaim at the United Nations, a distinction easily recognizable when China was writhing in one of its most tumultuous historical periods.

Now, I can see the puzzlement in your eyes: Does this historical fact about Chinese farmers’ footwear — or lack thereof — go any further? The relation between the West and the axis-of-evil countries are defined by nukes, not shoes, right? I agree; yet, I still believe the Chinese proverb about shoes is penetrating in capturing the essence of the relationship. If you were a poor farmer in China, a barefooted "ni tui zi," (literally, "mud-covered legs,") as you would be called, you have little, if not nothing, to lose in your fight with someone rich enough to buy himself a pair of shoes. Since you don’t have shoes, you don’t need to worry about the stains to your shoes, and may care less about the bruises to your body or mind in case of a fight. Moreover, if you can’t afford shoes or prefer going without them, you may not have much property to start with, while the shoe-haves may have to worry about broken windows or other property damage — so, in the jargon of economics, it is about asymmetrical loss functions. Perhaps, the shoe-haves would warn you that you could be put in jail if you make too much trouble for them, but isn’t that a hilarious proposition? You would be fed punctually while lying on the bed watching TV, no longer having to do the tedious work to earn your take. Speaking of any damages you have to pay, you don’t even have shoes…

Actually, the Chinese proverb became a proletarian formula that released forces more powerful than what Einstein could have imagined in response to his famous energy equation. In China’s most impoverished quarters, Mao Zedong and his comrades led the mob of shoe-nots to rob those shoe-haves. "Farmer friends, you have nothing to fear; you shall go to the beautifully decorated harems of the landlords’ daughters and jump and roll to your whims in their beds on ivory frames," he famously exhorted in one of his many incendiary works, which only set me dreaming about the good times I had missed when I studied it as a mandatory political reading in elementary school. As it turned out, it took Mao and his small farmers’ army less than 20 years (excluding the time to fight the Japanese) to conquer the vast countryside and drive out the rich from the cities for good, to be the creator and leader of the "New China." He called it the strategy of "taking the countryside first and then encircling the cities," a theory that has since mesmerized numerous Maoist guerrillas, including Fidel Castro, Pol Pot, and Bin Laden.
"Aha, I got it now." Your strained face is loosening into a smile — "It is quite an analogy; the shoe-haves are the ones that have nukes, and those ‘shoe-nots’ are the ones without nukes but wanting to get their hands on them." You’re only half right, though. Because the proverb is more about a mentality — those with nuking power can still use it if they have the same mentality.

The Chinese general Zhu Chengwu made it clear to the world that China planned to use nuclear weapons to attack America at the expense of two thirds of its population and all the prosperous areas. His words suggest that China, as one of the five declared nuke powers and the fastest-growing economy, still falls into the trap of the "shoe-less" mindset, which has been so successful for the communist regime to take over the country. Indeed, as in the wars against the Nationalist government and the United States in Korea, the Chinese Communists refuse to see the Chinese people as the rightful recipient of their service and beneficiary of their protection. Rather, they would see themselves as "barefooted," devoid of attachment to anyone or any physical object, including land, so that maximum benefits and concessions can be extracted when dealing with the West, the "shoe-haves."

Now, let’s swap the positions. Suppose you are the one who wears shoes. When someone in the street threatens you, what do you want to do? If it is about your personal security, you probably have to relocate to somewhere else, leaving behind your beautiful house and other properties. That was exactly what happened to the rich in China in the face of the encroachment of the communist-led "shoe-less" revolution — they fled the mainland and stayed on the island of Formosa, until now. Well, if the threat is less serious and you don’t want to leave your home, what do you want to do? You will negotiate. That is right; you want to talk to that "barefooted" guy and cut a deal with him.

But if your attempt to come up with a deal fails, do you still have an option? Yes, you want to get more people involved: your friends, the friends of that "shoe-less" guy — and some people who you thought should be your friends but turned out otherwise. Now, welcome to the six-party talk to resolve the nuclear tension on the Korean peninsula. The North Koreans, the shoe-nots, won again, just as they did in 1994, when they waited until President Carter came to the rescue. This time, it took the Bush administration much longer to blink, but the smile on the face of Condoleezza Rice reminded us of the same one worn by President Carter, suggesting that the North was destined to win from the very beginning. This is a fact that dictated by the different way the United States goes about its business than the North, something even a seemingly hard-nosed Bush with steely resolve can’t change. The good thing about being an unfortunate "shoeless" is that he is somehow the privileged party in any negotiation who can turn the table upside down anytime he needs money, attention, or "formal recognition," just like a three-year-old’s tantrum, as no rules apply to him. If you are not convinced, consider this, the compromising North backtracked only several hours after the handshaking and champagne drinking that celebrated the success of the talk in Beijing.
The terrorists, or "insurgents" as they are more often called in the press, in Iraq are betting on the same strategy. No one, including themselves, would believe they can defeat the Americans on the battlefield. But they believe as long as they endure, they will succeed, because someone will help them out — not necessarily in the fights but maybe in the editorial pages. Indeed, they are the ones without shoes, and when they win, they will get everything; it is always the "advantaged" party that is more eager to cut a deal. Call it a "superiority complex."

Karl Marx proclaimed in the Communist (Communist Manifesto) that "all that the proletariats will lose (in their fight) is their shackles; what they gain will be the entire world." Since then, when Pandora’s Box was opened, a cataclysmic force was gathered to crush the old paradigm, traditions, values, and systems that humankind had respected for thousands of years. They almost won, with the non-proletariats, the ones with shoes, retreating and accommodating as a way of strategy, until 1989, when the Berlin Wall fell and the tide turned, with no foreboding at all. None of this, however, would give us the peace of mind that the lethal maelstrom of this unorthodox thinking has receded once and for all, because if you discount the few bastions it still has today, there will always be people who feel "unfairly disadvantaged" as they don’t have "shoes," and who will find it inspirational to read Karl Marx to make it even. Now, ask yourself — am I going to blink?

How Far Away Are China’s State Banks From Wall Street?

The Royal Bank of Scotland (RBS) just invested US$1.6 billion in the Bank of China (BoC), becoming its major "strategic investor." The initial public offering (IPO) of China’s state banks on overseas stock markets has caught the attention of international economic circles.

Bank of China Finally Married to a Foreign Bank

In the eyes of foreign investors, in the past few years, China’s state banks have experienced both ups and downs, from "princesses" to "foundlings." In December of 2003, eleven international investment banks, including Citigroup, JP Morgan, Goldman Sachs, UBS-Warburg, and Morgan Stanley, all enthusiastically purchased China’s bad loans. The bidding war spurred the Chinese government’s unlimited imagination. Since investment banks found purchasing the state bank’s bad loans so attractive, they figured out that listing the state banks in an IPO would bring them even more interest and more money.

Although the government tried hard to raise capital in foreign markets, the results were unexpectedly disappointing. China’s Big Four state banks even became "foundlings." Not one investment bank, including those of China’s long-time partners, wanted to invest. It seems that, during the process of purchasing bad loans, the investment banks uncovered the reality of China’s banking system. Realizing it was a black hole that could never be filled, these banks backed off.

After extensive fishing, BoC finally managed to hook RBS, ending its two-year-long effort of seeking "strategic investors." Thus it was able to go public on the Hong Kong market in the first half of 2006. China’s propaganda organs quickly spread and even greatly exaggerated this piece of good news. The Xinhua News Agency, China’s popular state-owned media, reported the news on August 19 with the headline, "RBS spends US$3.1 billion to purchase a 10 percent ownership of Bank of China." Of course, examining the details reveals that it was not RBS alone that invested the US$3.1 billion. Led by RBS, the group included Merrill Lynch and Hong Kong tycoon Lee Kashing.

Here’s how the stock was allocated. RBS spent US$1.6 billion to purchase 5.16 percent of the ownership of BoC and to get one seat on the board of directors; Merrill Lynch and Lee Ka-shing, on the other hand, invested US$1.5 billion for the remaining 4.84 percent of ownership. What few people know is that the investment banking group only promised three years of stock ownership under an unprecedented bargaining condition that the Chinese government guarantee that their investments will not be affected by any sudden deterioration of BoC’s financial situation or other risks.

The official reports did not disclose Merrill Lynch’s ownership percentage. They purposely mingled Merrill’s ownership with that of the Chinese government’s "family member," Lee Kashing. Since Merrill Lynch was competing for the underwriting business for this transaction, it is unlikely that it would put up a lot of money. Most likely Merrill Lynch simply loaned its prestigious name to BoC to help the latter demonstrate to the rest of the world that BoC is hot. Regarding Lee Kashing’s involvement in the transaction, it would be too obvious to the public that the Chinese government used its own "relative" to decorate the transaction, which would not be a glorious thing for the government. No wonder Xinhua‘s headline shrewdly let RBS take the honor for all of the US$3.1 billion investment.
The Plans of China’s State Banks to List on the International Markets

The year 2005 is key to China’s reform of its financial industry. In the first half of this year, China’s banking industry tried its best to implement five strategic tasks: raising the overall competitiveness of its banks, pushing for IPOs on the overseas markets, seeking strategic investors, cleaning up major corruption in the banking system, and implementing a system of accountability and asset capitalization. Their main goal is to sew a few "beautiful new clothes" to cover up the gaping holes in order to raise much needed overseas money.

On June 23, having failed to recruit its "strategic investors," the Construction Bank of China was forced to go IPO on the Hong Kong Exchange. On the first day, the stock closed at HK$2.825, 13 percent higher than its IPO price of HK$2.5 per share. The value of the stock reached HK$5.158 billion, the highest of the day. According to the investment banking industry, however, this "great" news was widely circulated to be related to the anticipated appreciation of the Renminbi.

The rest of the four major state banks are also warming up to go public. In chronological order, they are:

The Bank of China

In the past few years, BoC has expanded its businesses in Hong Kong. In the meantime, it has implemented shareholder reform. On August 26, 2205, the Bank of China Ltd. was formally founded, setting the timetable for its IPO in the first half of 2006.

The China Construction Bank

The China Construction Bank Ltd. was formed on September 21, 2004. Its initial public offering time could be as early as this year.

The Industrial and Commercial Bank of China

Reform has been formally initiated, and the plan to raise capital is taking shape. It was reportedly to register the limited share corporation at the end of September. Currently, it is contacting American and European financial firms to negotiate how to introduce strategic foreign investments into the bank.

The Agricultural Bank of China

The Agricultural Bank of China has the highest rate of bad loans and the lowest capital adequacy ratio of all four major state banks of China. Therefore it is facing the most difficult challenge of reform in preparation for an IPO. Currently it is reorganizing its financial structure.

Although it is a relatively small bank, the Construction Bank of China will probably have no problem selling its ~US$700 million worth of shares on the Hong Kong stock market. However, expecting Hong Kong’s stock market to bring in as much as US$15 billion for shares of both the China Construction Bank (CCB) and BoC is most likely too optimistic. Instead these two banks may have to look for capital outside of Hong Kong.
The Road to Finding Strategic Investors Is Not Smooth

Because of the current condition of China’s state banks, it would be nearly impossible to go public overseas without the involvement and assistance of foreign banks. Therefore, the most important step for them to go public overseas is is to invite overseas "strategic investors." An official from China’s financial administration pointed out three things that foreign strategic investors will provide: strong capital, advanced corporate structures and management experience to run the companies, and help with elevating the quality of financial services in China’s banking industry. The last two are companions of the first, since any single foreign bank is officially prohibited from owning over 20 percent of the total shares. With such a low involvement, it would be difficult for foreign investors to be effective in the bank’s management.

Early in July of 2005, BoC tried to get underwriting for its overseas IPO by interviewing seven investment banks that are qualified to bid for the business. These investment banks include Citigroup, the Bank of Germany, Goldman Sachs, Morgan Stanley, Solomon Brothers, Merrill Lynch, and the Bank of Switzerland. It has been estimated that the IPO of BoC will raise as much as US$5 billion, which means 3 percent, or US$150 million of underwriting fees to the three or four underwriters. Experts in the investment banking industry believe that Bank of China International, Bank of Switzerland, and Goldman Sachs will likely earn most of the US$150 million of underwriting fees. As a close partner with Bank of China International, Merrill Lynch will also likely be able to share the profit.

As the second largest bank in China, BoC has over 11,000 subsidiaries and branches. Together they own 12 percent of China’s credit market, and 14 percent of residential savings. To support BoC’s reform, the Chinese government injected US$22.5 billion into it at the end of 2003 to clean up its bad loans and to prepare it for its IPO in the first quarter of 2006. Despite their competition for the underwriting rights for BoC’s IPO, none of the 11 investment banks showed any interest in becoming its "strategic investors." They even failed to keep their promise of purchasing shares prior to the IPO of China Construction Bank. Citigroup was crossed off the list of underwriters and lost about US$87 million as a result.

As a "strategic investor" this time, however, Merrill Lynch is reluctant to make public its actual investment amount. Given the rumor that Merrill Lynch will become the underwriter, one has to suspect that the intention of Merrill’s investment is to establish a good relationship for further cooperation.

From the process of RBS’s investment, it is clear how important it is for China to find this "strategic investor." Right after it made public its intention to buy shares of BoC at the end of July, RBS’s stock price dropped 5 percent. The Wall Street Journal reported that, according to people familiar with the bank, due to the resulting pressure, the management of RBS would, at its next board meeting, propose reducing the amount of its stock ownership in BoC. Based on the final investment ratio, this news seems to have proved true.
Which Banks Are Willing to Become the "Strategic Investors" in China’s State Banks?

There are two reasons that foreign investors do not want to be the shareholders of China’s state banks. One is that investors are cautious because of the lack of transparency about these banks’ financial information and various rumors about the bad loans and corruption in China’s banking industry. The other is that foreign banks can’t obtain sufficient shares for them to own the decision-making power in running the businesses.

So far there are three foreign banks that have become the "strategic investors" in China’s state banks. The most prominent among them is Bank of America, which is often interpreted in China’s reports as "United States Bank," or even mistakenly quoted as "Citigroup."

On June 17, 2005, in Beijing, CCB and Bank of America signed the final agreement of the latter’s strategic investment and collaboration with the former. Investing in CCB in multiple steps, Bank of America will eventually own 19.9 percent of the shares of CCB, which is close to the 20 percent limit that the Chinese government imposes on foreign investors in owning China’s banks. This transaction becomes the largest single investment of foreign companies in Chinese firms, which makes CCB the first of the Big Four state banks in reaching agreements with foreign strategic investors. On July 4, Singapore’s Temasek Holdings also signed a final agreement with CCB to become CCB’s second foreign strategic investor. By spending US$1 billion, Temasek bought one seat on CCB’s board of directors.

Like RBS, Bank of America does not have a lot of businesses in China. Both companies’ investment in China’s state banks is apparently an investment in relationship. Their purpose is to use their capital to gain advantage in expanding their businesses in China’s vast market, to take advantage of CCB’s existing sales channels in China in the name of collaboration, to sell various retail banking services, and to elevate their global status.

Nevertheless, experts in the industry do not expect good results from such strategic investment. Cameron Fagan, director of research at Straszheim Global Advisors in the United States, called RBS’s investment "not a strategic investment, but a relationship investment." With only 10 percent of stock ownership, RBS will hardly have any material impact on the management and reform of BoC. "To many foreign banks such as RBS, their Chinese partners remain structurally large, very inefficient, and heavily bureaucratic government branches that carry a lot of risks. With these risks, it is hard to expect normal investment returns. These are not strategic investments based on profit returns, but relationship investments to establish good connections with the Chinese government to facilitate their long-term development."
United States’ Concerns: The Wave of China’s Capital-Raising Effort May Negatively Affect the Security of the U.S. Economy

The United States, which China regards as the "heaven of capital raising," is cautious of China’s activities in the U.S. capital market. A number of China’s state-owned companies want to enter the U.S. capital market. BoC and CCB alone are planning to raise $15 billion in the U.S. capital market. To address the trend of China’s fundraising in the United States, the U.S.-China Economic and Security Review Commission (USCC) of the U.S. Congress held a hearing on August 11 to evaluate how this wave of Chinese fundraising will affect U.S. national security.

Two of the experts the committee invited have a business relationship with China. They believed that those reviewing China’s companies should not be too strict. Donald H. Straszheim, the former Chief Economist of Merrill Lynch, suggested that U.S. lawmakers should trust the ability of the market to distinguish winners and they should not create any obstacles to the IPOs of China’s state-owned firms. Having processed many IPO businesses of Chinese companies, Robert G. DeLaMater, a partner of Sullivan & Cromwell LLP, was concerned that if the United States starts to impose too high a requirement for the IPOs of foreign firms, the American capital market might lose its attractiveness.

The voice for strict review was much higher. Frank J. Gaffney Jr., the director of the Center for Security Policy in Washington, insisted that the massive IPOs of China’s state-owned institutions in the U.S. capital market would affect the national security of the United States. "I believe that it is neither in the interest of American investors nor of the country as a whole to be underwriting Communist China’s state-owned enterprises engaged in such activities as: the manufacture of intercontinental-range ballistic missiles and space-based weapons designed to blind our satellites; the proliferation of weapons of mass destruction; the suppression, in conjunction with police units and regional and national level governments, of human rights; the despoiling of the environment; the crushing of Tibetan freedom; and various business dealings with terrorist-sponsoring states," said Mr. Gaffney.

Richard D’Amato, Chairman of USCC, thinks that even from the perspective of economic interest, American investors should be cautious of the IPOs of China’s state-owned firms, "because we have just experienced the bubble burst of our stock market when millions of Americans incurred losses as a result of the bubbles of the technology shares. I don’t want to see millions of American investors trapped once again by the stock bubbles of Chinese companies." D’Amato expressed his special concern over the extent of China’s state banks’ bad loans and the opacity of its banking system. He cautioned investors to be alert for the risks of investing in Chinese companies. "As Chinese financial institutions prepare for an estimated combined US$15 billion in listings, questions need to be raised regarding the loan portfolios of these institutions. I am concerned that U.S. investors may not have sufficient information to make informed decisions about the risk of these investments. Furthermore, the possible links between listed state-run firms and banks and China’s military industrial complex has here-to-for lacked comprehensive examination."
Hearing Co-Chair Michael R. Wessel stressed concerns to the USCC about the lack of transparency of the Chinese firms.

Despite the big differences between the USCC leaders and their invited testimony experts with regard to whether to restrict Chinese firms’ listings in the U.S. equity market, the United States has at least been alerted about China’s listing strategies, as is demonstrated in the concerns raised by USCC. The swearing-in of Conservative Rep. Christopher Cox as the new chairman of the Securities and Exchange Commission (SEC) makes the Chinese government particularly uneasy. Back in 1999, Cox authored the "Cox Report" in which he accused China of stealing U.S. nuclear secrets in a planned way. He is therefore regarded in China as a "representative of the Anti-China and Anti-Communist force." As the U.S.-Sino relationship tends to be more and more distant, the nomination of Cox for the critical position on the SEC certainly has subtle implications. With Cox guarding the door of the U.S. equity market, the IPOs of the Chinese state-owned firms that have routinely deceived and robbed the Chinese equity market and are full of bad loans will surely face stricter examinations.

He Qinglian is an renowned Chinese economist currently residing in the United States as a guest researcher.

Recent Personnel Changes in China’s Military

August 1 is China’s Army Day, which is a time when new policies and personnel moves in the (Chinese) People’s Liberation Army (PLA) are announced. Rumors were swirling around for a while that there would be promotions from lieutenant generals to full rank generals, a common strategy for building military ties when a new generation of leaders gets into power. Although no such changes are reported so far, there are still quite a few PLA personnel changes at this unique time.

According to a report from Wenweipo on August 4, 2005, this year’s personnel moves involved several military regions: Langzhou, Shenyang, Nanjing; and Beijing; the moves also affected the General Staff Headquarters, General Logistics Department, and General Armament Department. Two nominations were eye catching:

1. Lieutenant General Sun Dafa, Deputy Political Commissar of Nanjing Military Region, became the Political Commissar of the General Logistics Department.

2. Zheng Baohua of Dalian Naval Vessel College is reported to have become Deputy Commander of the Navy.

This personnel move affected Shenyang Military Region the most. Shenyang Military Region Political Department Director Pan Ruiji succeeded the retiring Zhou Yongshun to become the Deputy Political Commissar of the Region. Pan’s old job was filled by Major General Zhang Tiejian, previously Director of the Political Department of a Group Army of the Shenyang Military Region and subsequently promoted to Director of Organization under the General Political Department. The former President of the Dalian Army Academy, Major General Gao Fenglou, was promoted to become Deputy Chief of Staff of the Shenyang Military Region. Wang Zixin, a staff member at Shenyang Military Region Headquarters, became Chief of Staff in the Liaoning Province Military Region.

In the Lanzhou Military Region, Major General Chang Guixiang, former Ningxia Province Military Region Commander, was recently moved to become Deputy Chief of Staff of the Lanzhou Military Region. Xinjiang Military Region Chief of Staff Major General Zhang Shiming was promoted to Deputy Commander of the Xinjiang Military Region. Zhang’s predecessor, former Deputy Commander Major General Li Xinguang, has become Deputy Commander of Xinjiang Production and Construction Corp.

The Beijing Military Region also has some minor changes. Major General Zheng Qin, Deputy Chief of the Staff of Beijing Military Region, was moved to become commander of a Group Army. General Zheng is the son of former Commander of the Beijing Military Region Lieutenant General Zheng Weishan. General Zheng’s predecessor, Feng Zhaoju, has become Director of the Armament Department for the Beijing Military Region.
In mid-July, Lieutenant General Sun Dafa, Deputy Political Commissar of the Nanjing Military Region, will become the Political Commissar of the General Logistics Department. But his name has not appeared as yet on the Chinese military’s official website "Leaders in four General Departments." But General Sun has made his inaugural appearance in a group activity by the General Logistic Department just before August 1.

Major General Zhang Chi was promoted to become Director of the Electronics Division in the General Armament Department.

In the General Staff Headquarters, Major General Qi Jianguo, former Commander of a Group Army, has become Director of the Combat Department. Former Director of the Electronic Division in the General Armament Department, Major General Yu Ancheng, has retired. Major General Zhang Chi succeeded General Yu. Prior to his current position, General Zhang was the Director of Foreign Affairs in the General Armament Department. Before that job, he was Deputy Director of Planning in the General Armament Department.

In the Navy, the Deputy Commander of the Navy and the Director of the Navy Armament Department, Jin Mao, recently retired. Zheng Baohua of the Dalian Naval Vessel College was promoted to Deputy Commander of the Navy. Zheng Baohua was born in 1948 in Fengnan County, Hebei Province; his status is at Army Commander rank; he is a Navy Major General. Major General Hou Jian, former Political Commissar of Zhanjiang Secure Navy Base, was promoted to Director of the Political Department for the South China Sea Fleet.

Lily Qu is a correspondent for Chinascope.

New Army Regulations Underscore the Plight of the Chinese Army

On August 1, 2005, The PLA (People’s Liberation Army) Daily of the Chinese Communist Party (CCP) published an editorial calling people "to continue to be highly in sync with the Central Committee of the Communist Party; to strictly follow the guidelines laid out by the Central Committee of the Communist Party, the Central Military Committee (CMC), and Chairman Hu; and to ensure the smooth execution of both political and military orders." For those familiar with China’s politics, the mere publication of such a statement is an admission that the implementation of "political and military orders" has met with some resistance.

Different from countries in the West, where the army serves the state, the Chinese army is an instrument solely of the CCP. Adhering to the philosophy of "power comes from the gun," China emphasizes the absolute control of the army by the CCP. Therefore, the top leader of the country must also hold the position of Chairman of the CMC.

Not surprisingly, a few days later, the CMC issued "Supplemental Stipulations for Carrying Out ‘the Disciplinary Action Articles of the CCP’ in the Army" and published the document in The PLA Daily and on Xinhuanet. Other major newspapers and websites subsequently quoted it in their publications.

The "Supplemental Stipulations" comprise 30 articles, so it is also called the "30 New Articles." The contents of the "30 New Articles" are not necessarily new. Rather, it’s merely a way to once again stress the CCP’s absolute leadership and power over the army. For instance, the "30 New Articles" "prohibit military personnel from having private memberships in any unofficial organizations," "prohibit participating in or organizing any religious activities," and "prohibit privately possessing any informational materials of a sensitive political nature." They also state that any military personnel who organize or participate in any demonstrations or group appeals will be severely punished.

What Do the "30 New Articles" Reveal About the Chinese Military?

Mr. Wu Baozhang, a senior journalist who once worked for the Xinhua News Agency, comments that the "30 New Articles" have revealed more about the situation in today’s Chinese military than any other document. According to Mr. Wu,

"There are individuals in the CCP’s military who privately join various organizations and participate in religious activities.

"Some military personnel secretly possess politically sensitive information.
"Some people in the military have published articles and given speeches that oppose the absolute leadership of the CCP.

"Some people affiliated with the PLA have been involved in demonstrations and organized group appeals."

Evaluated against the points above, the CCP’s "30 New Articles" simply reflect the situation in today’s Chinese military. Thanks is due to the authors of these documents, who clearly reveal that unofficial organizations and activities do exist in the army and that theism wields significant influence. In addition, possession of information deemed "politically problematic" is a sensitive issue. Apparently the "problematic information" refers to banned materials such as the Nine Commentaries on the Communist Party, published by The Epoch Times, and the historical truth of the Anti-Japanese War, as well as to other politically sensitive materials downloaded from various websites. The "30 New Articles" also imply that there are those in the PLA whose opinions are in opposition to the absolute leadership by the Communist Party and whose actions have challenged the current political system.

With the information available from the Internet and various other sources, more and more soldiers have been able to ferret out the real history of the CCP, a far different version from the one taught by the army. The CCP has constantly revised its history, including its part in the Anti-Japanese War and in the so-called "Anti-American War to Aid Korea," which was started by North Korea. Just imagine their shock when these soldiers learn the true stories. Obviously, the authorities are afraid that the spread of this knowledge will shake the foundations of the CCP’s absolute leadership of the army.

The "30 New Articles" Target the Officers And Soldiers Who Defy CCP Orders

The "30 New Articles" once again stress that the army must follow the instructions of the Communist Party. This is to ensure, first of all, that officers and soldiers alike strictly follow orders in case China declares war against other countries such as Taiwan, the United States, or Japan. The emphasis on the CCP’s absolute leadership of and power over the army certainly has other implications as well. For example, in case of any social turbulence, the army is required to stand behind the CCP. It is also a warning to the middle to high-level officers, especially the younger officers, not to make trouble.

The CCP is particular about seniority. With regard to that preoccupation with rank, there are quite a few officers in the army who are older and have more seniority than the current Secretary of the CCP. At the same time, it is not easy to convince the younger generations in the army to listen to the current CCP leader, who is simply a 1960s graduate of Qinghua University and lacks the political authority of the older generations of the CCP.
Increasing Number of Appeals by Army Veterans Worries the Authorities

The "30 New Articles" vow to punish those who organize or participate in any demonstrations or organized appeals. "Those who organize, participate in, and support parades, demonstrations, silent sit-ins, petitions, or group appeals, must be harshly punished," reads one article.

With the surge in the number of appeals by retired army veterans this year and the sheer volume of such appeals, each of which commonly involves hundreds or thousands of people, the CCP is seriously alarmed because demonstrations by army veterans have a much greater impact on society than any other group. On August 1 when the CCP was celebrating "Army Day," over a hundred PLA veterans came to Beijing to hold a protest in front of the General Political Department of the PLA. In the face of hardships due to the lack of social security, these veterans demanded that the government improve their welfare. A witness estimated that there were over a thousand people present, including the protesters and the onlookers. According to a report by the South China Morning Press, the police carried many people away.

On May 1, 2005, before the "Appeals Stipulations" were implemented, over 2,000 veterans went to Beijing to appeal in front of the National Appeals Office. The authorities carried them away in buses, and no one knows their present whereabouts. The veterans, who reportedly came from all over China, had been discharged from their PLA service and had to find civilian jobs. They were later subject to "forced management" (dismissal from their jobs) and lost their life-supporting incomes.

On July 19, 2005, hundreds of veterans went to appeal in front of the National Appeals Office in Beijing. Most of them were carried away in buses to Majialou, where officers from their local governments took them home.

After the "30 New Articles" were publicized, one Chinese veteran told Voice of America that not only would the new rules not resolve the issues of appeals by veterans, but they would also become counter-effective. He warned that if the issues that veterans are appealing are not resolved, more and more veterans will continue to appeal. In addition, servicemen will likely unite and stage appeals in ever greater groups.

Lily Qu is a correspondent for Chinascope.

Weiquan, the Chinese People Rise Up to Protect Their Rights

On October 27, 2004, about 50,000 peasants in Hanyuan County, Sichuan Province, took a stand and confronted thousands of armed policemen at the construction site of a hydroelectric dam on the Dadu River.

The hydroelectric dam project is known as the Pubugou (meaning Cataract Ravine) project. It is located in Hanyuan County, and was approved by the State Council on March 2, 2004. The project will flood 44,000 Chinese Mu of farm land, approximately 7,300 acres, and force 100,000 people to relocate. Peasants protested because they allege that the local government absconded with a large part of the relocation compensation and left very little for the peasants who have to relocate. They first protested and demanded a higher compensation for their land and houses. The government refused to listen to them. Instead, the date for the dam closure was pushed forward. Tens of thousands of angry peasants went to the dam site to stop the construction. The government, in response, sent armed police to meet them.

When the armed police beat an over-70-year-old woman, the peaceful protest turned into a confrontation. During the confrontation, the police killed a middle-aged peasant with a brick. This made the local people even angrier. Over the next two days, over 100,000 people took to the streets. Carrying the body of the dead peasant, they broke into the county government building. It turned into a mass riot.

The government sent in more police reinforcements and soon got things under control. On November 3, the government announced the resumption of the dam construction. This ignited another confrontation. The number of people participating in the protest was in the tens of thousands; at its peak it reached about 150,000.

On November 5, the Sichuan Province Party Secretary, Zhang Xuezhong, went to Hanyuan County to look over the situation. The protesters surrounded him and he could not escape until late that night. On November 7, about 200 military trucks carried military personal to Hanyuan. According to eyewitnesses’ information sent out by telephone, military police fired teargas on and shot into the crowd. They killed 17 people and injured 40 more. The Chinese military force put down the unarmed "rebellion."

Beijing came to intervene at last. They designated the protests as a "large-scale assembly of people who did not know the truth." They fired a few top county officials, who may face corruption charges as a result of their acts. The central government also ordered an increase in compensation for the relocating residents from 320 yuan (US$38) per square meter of living space to 428 yuan (US$51). It has been reported that Party General Secretary Hu Jintao and Premier Wen Jiabao ordered "not to resume the dam project until the issue of the Hanyuan peasants is resolved."
Even though there was some loss of blood and life, in a way the Chinese peasants finally won over the corrupt local officials. Everyday people in China hardly know anything about the event itself, because the Chinese media are not allowed to report any details. However, in the recent movement of Chinese people fighting for their rights, the Hanyuan event marks a great breakthrough. It is an important step in the Chinese "weiquan movement."

What is the Chinese People’s Weiquan Movement?

A new word, weiquan, has become popular in the past few years in China. It marks the emergence of a Chinese rights movement. The word weiquan means citizens fighting against the abuse of their rights. This new phenomenon comes at a time when China’s economy is on the rise. Even though China signed the U.N. International Covenant on Economic, Social and Cultural Rights in 1997 and the U.N. International Covenant on Civil and Political Rights in 1998, and made promises to protect human rights, government and local officials’ violations of human rights are on the rise.

The Chinese are well known for their endurance. In the years under communist rule, the Chinese people have been made totally obedient, through the use of constant terror and the threat of violence and bloodshed. As documented in The Black Book of Communism, the Chinese Communist Party (CCP) has caused an estimated 65 million deaths in China in the 80-plus years of its existence. As a result, the Party and government officials have come to have absolute control over the people, including their property, their life style and their very thoughts.

At the turn of the century, gradual economic and political changes in China weakened the Party and revived people’s longing for human rights. At the end of the 1970s the Chinese government began to seek foreign investment and to allow a market economy in its effort to save the close-to-bankrupt socialism. The relaxed economic control freed the Chinese people’s creativity and the Chinese economy went on a fast track. Meanwhile, the reality in China as well as in Eastern Europe proved the failure of communism and the failure of Marxist ideology. The ideas of human rights, rule of law, and checks-and-balances have entered and started to influence Chinese people’s thinking. In spite of this new vision, no true "reform of the political structure," as the CCP terms it, manifested in any meaningful way.

On one hand, having tasted the sweetness of private ownership in a market economy, the Chinese people want more freedom. Business owners want the law to protect their assets and their property; they want policies and decisions to be made in a transparent manner, and they want to read uncensored news from many sources. The working people want to have jobs and a social security system that can benefit them and their families. They want the law to be administered in a fair and reasonable way. In one word, Chinese people want to have a more humane society.
On the other hand, the top priority of the Communist Party is still to secure its monopoly of power. Despite its gestures of signing the U.N. International Covenant on Economic, Social and Cultural Rights and the International Covenant on Civil and Political Rights, and its effort to enact a large number of laws, the CCP still places its one-Party rule above all else.

In this conflict, the people have very limited resources to fight back while the CCP can use the state machine to crack down whenever necessary. To fight within the state allowed zone, to fight for the rights that the state already promised, has become a self-protecting framework for the new rights movement in China—weiquan.

Brief History of Chinese People’s Weiquan

Falun Gong Appeal as a Pretext

Falun Gong is a spiritual practice rooted in Chinese traditional values of Buddhism and Taoism. It was the first large group to openly appeal to the state for the right of freedom of belief as promised by the Chinese Constitution. On April 25, 1999, after fellow practitioners were unduly detained in Tianjin City, tens of thousands of Falun Gong practitioners went to the State Bureau at Zhongnanhai, the Chinese leadership compound; many wrote letters and made phone calls to Beijing to petition for their detained fellow practitioners. The then premier, Zhu Rongji, met with a few representatives from the group, listened to their request, and ordered the release of those detained in Tianjin. It was the first time that the Chinese government peacefully resolved a large-scale petition in the center of Beijing through negotiation. Zhu Rongji wasn’t able to set a good precedent for the government, however, because the then CCP general secretary, Jiang Zemin, soon ordered the massive persecution of Falun Gong, citing the group’s April petition as a major excuse.

After the CCP’s brutal persecution of Falun Gong started in July 1999, millions of Falun Gong practitioners peacefully appealed nation wide for the right to continue their practice and be treated justly. They visited the local and central governments, wrote letters to officials as well as to the press and other media, and eventually went to Tiananmen Square to unfold banners to protest. Practitioners’ efforts did not stop the government from trying to eradicate the Falun Gong, but their courage, their peaceful ways of resistance, and their stories became real-life lessons for the Chinese people on standing up for their rights.
A Workers’ Strike Was Harshly Suppressed in Liaoning

In March 2002, as many as 30,000 Liaoyang Ferroalloy Factory workers from around 20 local factories, demonstrated for their rights. At the time it was described as the biggest demonstration in China since the 1989 pro-democracy protests in Tiananmen Square. The workers had been lobbying the authorities since 1998, demanding basic living allowances, pensions and back pay. They demonstrated against official corruption and mismanagement, which they believed led to bankruptcies and large public expenditures funded mainly so that officials could line their own pockets. When the workers took the demonstration to the streets, riot police violently disbursed the peaceful protesters and arrested their leaders.

The government identified two workers, Yao Fuxin and Xiao Yunliang, both in their 50s, as the demonstration leaders and charged them with "subversion." The two were sentenced in 2002 to a seven-year and a four-year sentence, respectively. Both are still in prison and are reportedly in poor health due to mistreatment. The harsh crackdown in Liaoning set an unyielding tone on how the government treats other similar conflicts between unpaid or laid-off workers and the corrupt officials who caused them damage. This situation is widespread in China with many noncompetitive state-run companies going bankrupt.

A Successful Internet Uproar

The Sun Zhigang case in April 2003 was a turning point. Sun Zhigang, a university graduate and young fashion designer who newly migrated to Shenzhen, died in police custody. He was detained because he forgot to take his ID and temporary living permit with him when he was walking down the street on his way to an Internet café. At the policemen’s instigation, other detainees beat him very badly because he disobeyed and did not have the "proper" attitude toward the police. He soon died of his wounds.

Sun’s friends disclosed the story of his death on the Internet, shocking many Chinese. People learned that the "regulation on repatriation" allowed the police to arbitrarily detain people while leaving no protection for migrants. Similar incidents happened before but the victims were low-class citizens. Sun’s story was particularly shocking because he was a university graduate, regarded as the elite in Chinese society. People suddenly realized that if the police could arbitrarily detain even an elite member of society when he was just walking down the street and then subsequently beat him to death, then everyone could be in danger.

An uproar of angry protest soon appeared on the Internet and then in the press, before the central government could put a lid on it. Petitions for abandoning the "repatriation" system and for following the rule of law, were at a high point in China. The government soon stopped the "repatriation" system, and prosecuted those who were involved in beating Sun Zhigang.
Sun Zhigang’s case started as a tragedy, but the successful petition afterwards made the Chinese see a way to protect themselves against the abuse of their rights. A new word in Chinese—weiquan—was born.

A Weiquan Website

The Chinese website is a website dedicated to weiquan. It was founded by Mr. Li Jian in Dalian, Liaoning Province, in late October 2003. It states on its home page,


Translation: This website is the result of individual citizens coming together in civil society, on the basis of humanity and the rule of law, using constructive and rational approaches, to follow up and fight for citizens’ rights, to raise citizens’ awareness, to build a humane and open society, and to build a country based on the rule of law.

The Beijing administrative authority soon shut down this website (its Internet service provider was in Beijing), the first one specifically devoted to weiquan. Mr. Li Jian filed a lawsuit in his effort to keep this website open. Not surprisingly, in early 2004, the court ruled in favor of the authorities. Mr. Li had to move this website to an Internet service provider located overseas. He soon found out the Chinese government blocked his URL so that Chinese Internet users could not access it.

The Increased Voice for Human Rights

The year 2004 saw an increase in the number of petitions addressing human rights. Their voices were able to spread widely because of the increased Internet usage in China.

On February 22, Professor Ding Zilin and 124 other relatives of the June 4th (1989) victims publicized their petition to the People’s Assembly asking for redress for the June 4th massacre.

On February 24, Dr. Jiang Yanyong, the Chinese hero who bravely broke the news of the SARS epidemic in Beijing the year before, openly petitioned to the central government to re-evaluate the 1989 June 4th massacre.

On March 5, Bei Cun and 30 other Chinese scholars petitioned to modify China’s Constitution to increase human rights protection.
Also in March, dissident Internet writer Zheng Yichun filed five petitions on various civil issues, including one that requested the restoration of Falun Gong’s innocence and rights.

Some government insiders also made petitions for human rights, including Guangdong representatives’ petitioning to demolish the "education through labor" system (also known as labor camps or Laogai), and former Beijing University president Ding Shisun’s petitioned to end the persecution of Falun Gong.

Internet Signature Campaigns

Signature campaigns on the Internet are becoming a popular vehicle for Chinese weiquan. The Internet allows rights protection to be moved from isolated incidents to collective nationwide efforts.

On February 1, dissident writer Liu Xiaobo and 102 other influential Chinese started a signature campaign for the release of Du Daobin, an Internet writer who was arrested for publishing articles criticizing the government.

In late February, Zhang Zuhua and 44 other Chinese scholars started a signature campaign for increasing funding for education.

On March 7, a worldwide effort started a signature campaign for Jiang Yanyong, who the authorities arrested for his earlier petition. This campaign soon got over 6,000 people’s signatures. It was one of the largest in Chinese Internet weiquan history. Jiang was later freed-a remarkable success for the weiquan movement.

Widespread Weiquan Activities

The Chinese rights movement does not have one central focus. The concept of weiquan covers a wide range of subjects and involves many different social groups. For example, many migrant workers cannot get their pay after months of work and they have become a huge weiquan group, demanding their unpaid wages. Laid-off workers who cannot get promised compensation are another large group in weiquan. City residents forced out of their home by land developers form a popular weiquan group, demanding fair compensation. Many Chinese people find they have a need to stand up for their rights. When petitions to the government fail, many resort to demonstrations, and sometimes they collide with the police or with the Public Security Department. The effect has been a dramatic increase in incidents of social unrest.
According to China’s Ministry of Public Security, there were 8,700 incidents of social unrest in 1993 and 32,000 in 1999. In 2004, however, the number of incidents of social unrest increased to 78,000, involving 3.8 million participants.

Chinese Lawyers in Weiquan

Taking a stand for the rule of law is the essence of the weiquan movement. However, most weiquan activities are not fought in courtrooms. The Chinese legal system is not independent of the Party and people have little trust in it. In addition, most Chinese lawyers do not want to fight for human rights cases due to fear of government reprisal. The few who are willing to represent people in weiquan cases have become great advocates for the Chinese rights movement. Attorney Zheng Enchong is one of them.

Mr. Zheng had a law firm in Shanghai. On October 28, 2003, the Intermediary Court of Shanghai City sentenced him to three years in jail for "unlawfully supplying State secrets or intelligence to an organ, organization, or individual outside the territory of China." His defending lawyer, Mr. Guo Guoting who now lives in Vancouver told Chinascope how Zheng Enchong got into trouble by helping Chinese people with weiquan, "This case gave me a deeper understanding of China’s legal system. The Zheng Enchong case was a typical retaliation against the attorney. It was a typical case of a joint action of the courts, police, and the government framing the attorney."

Before he was arrested, Mr. Zheng had represented people in more than 500 cases of citizens being forcibly relocated. The lawsuits were usually filed against real estate developers and local governments. When Mr. Zheng won the case for his clients, he also made enemies with the rich developers and the corrupt government officials. In many corruption cases, the property developer colludes with officials to make huge profits by paying unfair prices as compensation for the confiscated land and property. In representing a high-profile case in Shanghai, Mr. Zheng offended the interests of some senior officials and eventually paid a heavy price.

The retaliation was carried out in two steps. First, the government refused to register Mr. Zheng, making him unable to take the annual lawyer’s examination. Despite the fact that Mr. Zheng couldn’t operate as an attorney anymore because he could not renew his license, he continued assisting people by writing their complaints for them or giving legal advice. When the government realized that he was not only continuing to help people, but also disclosing such information to Human Rights Watch, it escalated the retaliation. That’s when he was charged with "leaking national secrets."
During the whole process, Mr. Zheng’s alleged crime changed names three times. First it was "leaking national secrets." Then it was "leaking national secrets" and "unlawfully supplies State secrets or intelligence to an organ, organization, or individual outside the territory of China." Then it was "unlawfully supplies State secrets or intelligence to an organ, organization or individual outside the territory of China."

According to his attorney Mr. Guo, the fax Mr. Zheng provided to an overseas recipient was merely an internal report from the Xinhua News Agency. The report was called, "Forced Evacuations Cause Conflict; Reporters Encounter Group Attacks at the Demolition Site." It talked about how a conflict developed over forcibly moving someone and how the police surrounded and attacked the Xinhua News Agency reporters. Mr. Guo said, that the Shanghai Secrecy Bureau provided an affidavit in which it determined that report was a "national secret." This affidavit was used as key evidence for sentencing Mr. Zheng. However, the affidavit simply provided a conclusion without any deduction process. It also didn’t bear any individual’s signature. According to China’s criminal law, a business or organization cannot provide a valid affidavit without such content.

"The Zheng Enchong case was one in which the lawyer had to finally deal with his own rights. If even lawyers do not have basic rights, then how can we trust that the rights guaranteed by China’s Constitution can be upheld?" Mr. Guo said.

Mr. Guo himself is another real-life proof that Chinese lawyers lack basic protection. Mr. Guo, 46, was the best Maritime lawyer in China in 2001 and 2002. He dealt with thousands of cases of business conflicts. In recent years, Mr. Guo started defending pro-democracy advocates, dissident writers, and Falun Gong practitioners. Then on February 23, 2005, he found himself under house arrest. Not able to continue his law practice in China, Mr. Guo went to Canada.

In explaining the difficulties Chinese lawyers face when defending human rights cases, Mr. Guo told Chinascope that the Bar Associations in China were quasi-governmental organizations. Lawyers in China may have their licenses invalidated and even face survival issues if they accept cases that the government doesn’t like. So most of the lawyers simply keep their heads down, ignore such rights cases and keep making money. When Zheng Enchong got into trouble, he wrote to the Shanghai Bar Association to ask for help. He didn’t get any. Not one person commented on his situation. When the government harassed and threatened Mr. Guo, none of the 5,600 lawyers in Shanghai gave him any public support. One lawyer called him in private to express his sympathy. The next day, the police gave that lawyer a strict warning.

Terrence Chen is a correspondent for Chinascope.