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An Internal Report of the Central Government

About the Current Situation of Widespread Corruption in China And Strategies to Combat It

Over 600 Billion Yuan (US$72.5 billion) Lost in Gambling Annually

On February 19, 2005, CCTV’s evening program "Half an Hour on Economy" featured the rampant gambling activities by Chinese officials in China and overseas. According to an eyewitness, some people carried over US$10 million to overseas casinos to gamble. The former vice-mayor of Shenyang City (capital city of Liaoning Province) lost 30 million yuan (US$3.8 million) in three days of gambling. The former vice-mayor of Xiamen City, Lan Fu, lost 3.5 million yuan (US$0.42 million) on one occasion. According to statistics, China’s annual currency outflow to overseas casinos amounts to 600 billion yuan (US$72.5 billion). A huge amount of national property is wasted due to these corrupt practices.

Fake Job Positions Found in Provincial & Municipal Governments

A recent investigation discovered that 8.5% to 10.4% of government payroll positions were faked in the governments of Shanxi Province, Taiyuan City, Henan Province and Zhengzhou City. This practice has been going on for five to seven years already. About 182 to 212 million yuan (US$22 to 26 million) were internally pocketed each year from these fake payrolls.

Money from Land Sale Is Unaccounted For

A recent investigation in Xiamen City by the National Land Property Department confirmed that all state-owned land in Xiamen City had been sold out, making Xiamen the first city with a population of over one million in China to have sold all available land. Furthermore, the whereabouts of over 70 billion yuan (US$8.4 billion) from the land sale could not be identified.

300 Billion Yuan (US$50.6 billion) Missing from the Shanghai Land Development Fund

In mid-July 2004, after investigation of Zhou Zhengyi’s case, it was found that out of a total of 420 billion yuan (US$50.6 billion) of the Shanghai land development fund, 300 billion yuan (US$36.1 billion) could not be found. The situation was so serious that the central government issued an order: "Shanghai city-level officials must get permission from the Central Politburo before they can travel abroad."
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Senior Government Officials Captured While Fleeing

On July 16, 2004, six senior officials at the bureau level from Hubei Province were arrested in Guangzhou’s Baiyun Airport VIP Lounge. These officials were senior leaders in key government departments such as Finance, National Land Administration and Taxation. They were waiting to board a plane to escape to Australia via Thailand. Collectively, they were carrying foreign currencies of over 4.3 million U.S. and Australian dollars.

Early in the morning of May 11, 2004, near Zhuhai City, a speedboat heading to international waters got into a gunfight with a military boat. The exchange left the speedboat destroyed, five people dead, and three wounded. The military personnel found over US$10 million cash and 20 kg (44 pounds). gold bars on the seized boat. Several senior Communist officials from Yunnan Province were among the dead.

On August 3, 2004, the CCP’s Central Disciplinary Inspection Committee, Ministry of Supervision, and Ministry of Public Security issued a joint internal report. Up to June 30, 2003, statistics of Communist officials missing, escaped, and committed suicide, based on reports from provincial and municipal-level disciplinary committees and police departments, are compiled in table 1. (The data only include communist officials working at Party and administrative agencies and state-owned companies and departments.) From June 30, 2003 until now, how many more officials have escaped with foreign currency remains a question.

This report was posted on the website of Beijing Dajun Economic Monitor and Research Center at http://www.dajun.com.cn/shehuidt.htm

Internet Commentators: A New Tool to Guide the Internet Media

On April 28, 2005, Ma Zhichun, the head of the External Propaganda Division of the Shuqian Propaganda Department in Shuqian City, Jiangsu Province, received yet one more title Internet commentator.

In his office on the 7th floor of the Shuqian municipal building, Ma proudly showed the reporter his "Certificate for Internet Commentator." The certificate is made of sandalwood and looks very delicate. The associate director of the Shuqian Propaganda Department officially presented him with this two-year-term certificate, making Ma one of the first Internet commentators in Shuqian City.

On the same day, the associate director issued another 25 certificates, establishing the first team of Internet commentators in Shuqian City.

The team, called the "News Propaganda Team," was put together from Shuquian City’s propaganda system. Ma explained: "The 26 Internet commentators come from various government organizations, including the city propaganda department, the propaganda organs of various districts and counties of Shuqian City, as well as various departments of the municipal government. Most of them are either news heads or spokespersons themselves."

Instead of recruiting from the general public, the government referred the Internet commentators internally. Then the Department of Propaganda scrutinized them. At the beginning of this year, in accordance with the requirements of the city propaganda department, the propaganda organs and the various departments of the municipal government recommended over 60 candidates.

"Understanding the [government’s] policies, having a good knowledge of [communist] theory, being politically reliable, and having solid technical skills are the requirements for the commentators," Ma said. "Additionally, the candidates must be familiar with the Internet, have strong interest in obtaining information from the Internet, and preferably know the technologies well." Probably realizing that he met the "criteria," Ma felt a little abashed. Putting the certificate back in his drawer, Ma smiled and explained, in a humble way, that it was not particularly strict, since he was offered this title.

From his resume, however, Ma must have been a good candidate for the title of Internet Commentator—not quite 40 years old, a college graduate, and an editor for the Shuqian Daily newspaper before becoming the head of the External Propaganda Division. As a media and propaganda veteran, Ma is used to browsing the news on the Internet. After meeting with the reporters in Shuqian City and exchanging business cards, Ma is anxious to go back and search for the news that the reporters have written. This way, Ma will be able to talk with these journalists about their reports.

Mr. Lu Ruchao, the associate general secretary of the Shuqian Propaganda Department, is another Internet commentator within the department. Lu used to be a police officer. Twenty-four years old, Lu loves to chat on the Internet. "I am a regular visitor to the chat rooms of Shuqian," Lu said. "Chat rooms attract a lot of people and are important for propaganda. As commentators, we should pay a lot of attention to them," he added.
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According to the "Suggestions for Internet Commentary Work in Shuqian City," the city will form the "Office for the Administration of Internet Commentaries" and the "Department for the Internet News Administration" to manage the team of Internet commentators, hold regular meetings for news selection, and conduct year-end evaluation of Internet commentators’ work as a reference for their year-end bonuses and awards.

The Department of Propaganda will also conduct systematic training for the Internet commentators. The curriculum includes Marxist doctrines on news, propaganda strategies and policies of the Chinese Communist Party (CCP), knowledge of Internet news propaganda, and the status of the domestic and international development of Internet media.

"The Key Is to Gain the Upper Hand"

"Develop (the Internet) proactively, reinforce the administration, eliminate the harmful and strengthen the beneficial and take advantage of the Internet for our purposes." These are the guiding principles for the Internet commentators. At the ceremony for the founding of the Internet commentator team, Mr. Zhang Fenglin, the associate director of the Shuqian Propaganda Department, told the audience, "In this information age and the Internet era, it has become an important topic and urgent matter to gain the upper hand in the Internet media."

Speaking of this, both Ma and Lu have the same understanding: "The key is to gain the upper hand."

In fact, even before the Internet commentator team was formed, Ma and his colleagues at the Propaganda Department already realized how important the "upper-hand" was.

In July 2004, Shuqian City launched a campaign to establish an "Honest and Clean Government" and encouraged the general public to participate.

During the subsequent two campaigns, 2,476 officials were probed in Shuqian, with 10 officials being publicly criticized, 248 privately counseled and reminded of their problems, and 12 fired or removed from their posts. In addition, 17 officials were assessed as being unqualified or barely qualified, and 16 were found to be unsatisfactory or barely satisfactory.

All of a sudden, everyone was talking about the campaign in Shuqian. As an official at the Shuqian Business and Administration Bureau recalled, "On my way home, people were talking about it. But most of the comments were negative. People were discussing how corrupt the officials had become." Similar comments were quickly spread over the Internet.
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Instructed by the Propaganda Department, Ma Zhichun, who did not carry the title of "Internet Commentator" then, promptly clarified the situation regarding the "negative comments." Meanwhile, the staffs of the different propaganda organs continuously published a number of articles discussing the campaign.

"Finally we clarified people’s misunderstandings, and advanced our influence, which is beneficial to our work," said Ma.

During the city government’s various campaigns, including "Industry Breakthrough" and "Recommendation and Election by the Public," Ma and other propaganda officials faced the Internet users with diverse opinions and organized a dozen Internet forums using the identity of "ordinary" Internet users.

"Our Internet commentaries and Internet analysis and surveillance is very effective in guiding the direction of the media," Ma concluded. "Even foreign Internet users were logged on." According to the data from the Office for Foreign Propaganda, in January 2005 alone, more than 3,000 international Internet users posted comments on the subjects that Ma introduced.

"Internet commentators always guide the direction of media as ‘ordinary’ Internet users. This is particularly important, because it is a very effective means," Ma stressed. According to the official rules for Internet commentaries, unless it’s an emergency situation or an extremely important topic, the Internet commentators are not allowed to reveal their true identities.

In the Internet chat rooms, the young Mr. Lu Ruchao carries out the same "media guidance" job. Recently, Lu noticed in the chat rooms that some Internet users complained that the police in Shuqian were too arrogant and tyrannous.

Some commented, "They drive police cars. Their sirens annoy half of the Shuqian City." Following the posting, many messages criticized the police.

In response to the critics, Lu quickly posted a follow-up note, "Setting off the sirens is means of carrying out their duties. We should not get down on the police because of this." Lu argued: "We police are risking our lives to carry out our jobs. How can they curse us? I would certainly reverse the direction of the media." Lu became emotional while talking.

"Other media organizations often look up to Shuqian City," Ma exclaimed. According to ALEXA, the world website ranking system, "Shuqian Online" is ranked 16,022 out of over 100 million websites. Among all the cities in Jiangsu Province, it is second only to Wuxi. "It demonstrates that Shuqian attracts a lot of attention. But honestly, there are very few positive comments." Ma pointed out, "The duty of Internet commentators is to provide an internal guidance to the direction of media in a proactive manner, and strive to maintain Shuqian’s image."
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According to the "Suggestions for Internet Commentary Work in Shuqian City," the Shuqian Internet commentator team will "closely follow the important strategies and official work of the municipal government, carry out organized Internet propaganda, selectively publish Internet comments on important issues, and guide the Internet media in the right direction." In addition, regarding hot public issues, the goal is to avoid "agitating through the media, causing confusion, fueling the flames, disturbing people’s minds, and worsening the situation."

"A National Strategy"

While answering the journalist’s questions, Ma’s phone rang. It was from a colleague in Suzhou City. "They’re calling me to learn how we perform our Internet commentary work. Suzhou is establishing teams of Internet commentators as well." Ma explained right after he hung up.

In fact, Shuqian is not the first city to have Internet commentaries. In Jiangsu Province, Nanjing and Wuxi already formed their Internet Commentary systems independently last year.

Last January, the government of Jiangsu Province held a meeting for Internet administration. As was stressed in the meeting, "we must reinforce the administrative work of the Internet in our province with the highest political responsibility, use determination in combating harmful information, and strengthen the leadership in surveying and guiding the Internet media."

As one of the meeting attendees, Ma said, the spirit of an official document was conveyed at the meeting, requiring every city and region to strengthen the guidance of Internet media. The idea of establishing Internet commentator teams was also proposed at the meeting. "So we’re certainly not the ones who initiated the Internet commentary work. This is a national strategy," Ma said.

Unlike other regions in the province, the Internet commentator team in Shuqian is composed of the staff of the propaganda system. As a result, compared to the Internet commentators in other regions who are recruited from the public, Shuqian’s team, Ma believes, is obviously easier to manage. "They are politically reliable, so everyone can work independently."

After searching on the Internet, one will surely be convinced that it’s a "national strategy" as Ma described.

According to the search results, the Dajiang website in Jiangxi Province began to recruit Internet commentators at the beginning of the year and completed their recruitment in April. "A group of politically qualified, news conscious Internet users with good language skills has taken on the important duty of publishing news commentaries and guiding the direction of media."
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Recently in Quanzhou City of Fujian Province, the Department of Propaganda, Quanzhou Evening News, and Quanzhou Communications Inc. jointly recruited 20 "Internet news commentators." In a few short days, 60 people applied. In Quanzhou City, the Internet commentary work is under way under the guidance of the relevant government departments.

"More and more regions will begin to recruit Internet commentators, while many regions have already begun to operate without making it public," another official at the Shuqian Propaganda Department commented.

At the ceremony for the founding of the Internet commentator group, Zhang Fenglin, the associate director of the Suqian Propaganda Department in Suqian City, passed on official messages to the new commentators, "You must take full advantage of the Internet, provide timely guidance, proactively carry out the work of Internet commentaries, effectively influence the media on the Internet, and make the Internet a new frontier of ideological work."

"In terms of the Internet commentary work, we are surely not the first, and will not be the last either," Ma concluded.

The Road to Internet Media

Government leaders and the Party are paying more and more attention to the value of Internet news and media, which becomes not only an important channel for Party and government officials to get information, but also a good tool for monitoring the media.

It is estimated that there are currently over 100 million Internet users in China. These people have a relatively higher education and are eager to learn about what’s going on and the hot issues of the society.

Min Dahong, a research professor at the News and Propaganda Institute of the Chinese Academy of Social Sciences, indicates that the influences, the social status, the level of political recognition, and the reporting ability by China’s Internet media clearly demonstrate that it has become one of the mainstream media in China. Internet BBS provides the ordinary citizens, including the socially disadvantaged and the marginalized groups, with a platform to have their voices heard, Ma continues. The unprecedented vigor of Internet opinions has formed such tremendous media pressure that no government organs or public figures can afford to ignore them.
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The unique advantages of Internet media include an extensive network, timeliness, openness, sharing, and interactivity. This makes it an important ideological forefront, commented People’s Daily, an official newspaper of the central government, in its 2004 year-end issue.

Internet commentators must understand, as a propaganda scholar pointed out, that because of China’s special situation, Internet media cannot be taken as regular public opinions and public sentiment, but must be fine-tuned. Reasonable tuning is beneficial to guiding the direction of the media and public opinions.

"However, one cannot take Internet expression as the enemy of a harmonious media environment, or even use it as the excuse for influencing the media." The scholar continues, "Under free Internet environments, various information constantly flows. The information flow itself can become a process of filtering bad information and retaining good information, with truly good information eventually being able to flow through."

"The guidance of Internet media is necessary, but it must be performed under the condition of maintaining the environment of free information flow," commented the scholar. "Government guidance should be taken in the form of having true identity, i.e., publicizing the spokespeople, to clarify the truth and official positions," he said.

The Internet commentators do have their own working styles and approaches. Will they print the prestigious title of "Internet Commentator" on their business cards after receiving the certificates? When asked this question, an official at the Propaganda Department of Shuqian City thought a little bit, and smiled, "Probably not."

The article was translated and edited based on a publication in Southern Weekly, which belongs to the Southern Metropolitan Newspaper Group, on May 19, 2005. The article was rescinded from the website a few days after it was posted.

Zhao Ziyang: A CIA Agent?

The recent death of Zhao Ziyang, the ousted General Secretary of the Chinese Communist Party (CCP) for his support of the student demonstrators in the 1989 Tiananmen Square protest, has sparked new interest in this reformist leader once seen as heir apparent to Deng Xiaoping, the de facto ruler of the People’s Republic of China from the late 1970s to the early 1990s.

Zhao was last seen in public in Tiananmen Square on May 19, 1989, when he walked among the student demonstrators and told them: "Sorry kids, I have come too late." From then on, he spent the last fifteen years of his life under house arrest until his death on January 17, 2005. Zhao had become another casualty of CCP power struggles. Yet, his fate could have been a lot worse had a scheme, masterminded by Deng Xiaoping, then Premier Li Peng, and other CCP hard-liners played out.

The Plot

During a recent interview with New Tang Dynasty TV (NTDTV), Dr. Cheng Xiaonong, Chief Editor of Modern China Studies, with a Ph.D. in Sociology from Princeton, revealed that Party elders had sought ways to legitimize the Tiananmen Square Massacre in order to escape accountability for opening fire on innocent students and for deploying the military to Tiananmen Square without an official order of martial law, an act that amounted to a military coup. By framing Zhao as a CIA agent, they could argue that the crackdown was a necessary step to fend off a foreign infiltration attempt.

Before leaving China in 1989, Dr. Cheng worked in the Research section of the General Office under the China People’s Congress. Later he worked as a director of the General Research Office and an associate fellow at the Chinese Research Institute for Economic System Reform, which allegedly was the outfit Zhao used to contact the CIA.

According to Dr. Cheng, Deng held conclaves with hard-line Party elders prior to June 4, 1989, and secretly decided to deploy 500,000 soldiers to surround Beijing. They were willing to wage a bloody crackdown to secure the Party’s power. However, they kept this decision a secret from the Politburo and the Standing Committee.

Deng’s plan was to call for a Politburo Standing Committee meeting to rubber-stamp the order of martial law in Beijing in the evening of May 16, the day the soldiers were scheduled to enter Beijing. However, Deng was surprised when Zhao disagreed with his plan. Concerned that Zhao might block his move at the Politburo Standing Committee meeting, Deng postponed the meeting to May 17.

Yang Shangkun, then President of China, played a key role in ordering the military crackdown. On May 19, 1989, after the troops had entered Beijing, Yang told the army top brass that Deng had ordered the deployment. In the absence of a Politburo Standing Committee meeting on May 16, the army entered Beijing without an official order of martial law, a situation Yang described as "awkward."
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Without the Politburo Standing Committee’s approval or even notification of the deployment, for the army to enter Beijing was illegal. Nonetheless, Deng had arbitrarily deployed half a million troops into Beijing without informing the Politburo and the Standing Committee. Under the CCP doctrine of "the Party dictates to the Army," this constituted a gross violation of the Constitution. In essence, it constituted a military coup, Dr. Cheng explained. Yang’s confession of a "very awkward situation" was in fact his acknowledgement of a violation of the Constitution.

On May 19, Deng managed to pass the martial law by forcing Zhao Ziyang to resign. After the Tiananmen Massacre, the CCP’s reputation hit rock bottom. Eager to find a scapegoat, the Party came up with a farfetched scheme that made any 007 movies pale by comparison.

Soros’ Intervention

As reported by NTDTV, Dr. Cheng said that in early July 1989, Wang Fang, then Public Security Minister, delivered a speech to senior CCP officials in which he accused Zhao Ziyang of being a CIA agent.

This was the Party’s "evidence": Zhao was trying to contact the George Soros Fund for the Reform and Opening of China through the Chinese Research Institute for Economic System Reform. The middleman was Bao Tong, then Director of the Central Research Institute for Political Reform and a senior adviser to Zhao. The Institute had collaborated with The Soros Fund on several projects before, including field trips to Hungary and Japan that were sponsored by the Fund. Wang alleged that the Soros Fund had CIA connections, so by default, Zhao was a CIA agent.

"The CCP did not have any evidence because the whole thing was fabricated out of thin air. But they didn’t care because framing was a routine practice for the CCP. They arrested more than a dozen employees at the Institute and held them at the Qingcheng Prison (a specialized place for imprisoning political opponents) for interrogation in an attempt to find damaging information against Zhao so they could fabricate evidence to frame him," Cheng told NTDTV.

Wang’s secret speech leaked out and found its way to the West. A Washington Post reporter got wind of the story and reported it in mid-July 1989.

Soros was shocked and furious. However, it did not take long for the currency wunderkind to master the CCP’s logic. In his letter to Deng Xiaoping, Soros argued that his Fund was established in China and was in reality controlled by China’s National Security Ministry because Ling Yun, retired deputy minister of National Security, was on the board of the Fund. Therefore, if the Fund had CIA connections, then China’s National Security Ministry was also linked to the CIA. Soros threatened to go public with the facts.
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When Soros’s letter reached Deng Xiaoping, he and other CCP leaders realized that the story was too absurd and would cause more humiliation to the CCP if they allowed the farce to continue. They silently ditched the plot, and Zhao was spared from an undeserved ill turn.

A Vicious Circle

The ill-planned plot to label Zhao as a CIA agent was not Deng’s first assault on Zhao. Although Deng was the de facto ruler of China, his only official title in 1989 was Chairman of the Communist Party Central Military Commission. When Gorbachev visited Beijing in May 1989, he first met with Deng Xiaoping. When Deng told Gorbachev that their meeting was the equivalent of a summit meeting between the top leaders of the two nations, Gorbachev was clearly puzzled. Later that evening, Deng’s daughter called Zhao and asked him to explain to Gorbachev in their meeting the next day that Deng was the "Paramount Leader" and had final say among the Chinese leaders. She was asking Zhao to support Deng’s claim to Gorbachev, and Zhao obliged. Despite Zhao’s compliance, Deng’s followers and children later accused Zhao of pushing the responsibility of the June 4 Massacre to Deng by claiming Deng was the behind-the-scenes ruler.

What happened to Zhao is not unusual in CCP history. In the late 1950s, Deng Xiaoping, an old comrade and supporter of Mao Zedong, and then President Liu Shaoqi gained influence within the CCP amid growing disenchantment with Mao’s Great Leap Forward. They embarked on economic reforms that bolstered their prestige among the Party apparatus and the public. Mao grew apprehensive. Fearing that he would be reduced to a mere figurehead, he launched the Cultural Revolution in 1966 to destroy his enemies. Deng fell out of favor and had to retire from his offices, but returned in 1974. A second downfall in 1976 did not prevent him from a second return soon after Mao’s death the same year.

Liu Shaoqi was not as lucky. Labeled as a "traitor," "scab," and "the biggest capitalist roader in the Party" during the Cultural Revolution, Liu was removed from all his positions and expelled from the Party. He was confined under terrible conditions in an isolated cell in Kaifeng, where he died from "medical neglect" (untreated diabetes and pneumonia) in 1969.

Rising up from the CCP’s internal purges time and again, Deng didn’t seem to repent for his CCP-style cruelty. Instead, he continued the CCP’s tradition of maintaining an iron grip by any means, including killing.

Mao’s wife, Jiang Qing, known for forming the infamous Gang of Four, was arrested in 1976, after Mao’s death and when the Cultural Revolution had ended. She was sentenced to death followed by a two-year reprieve in 1981. The sentence was later commuted to life imprisonment. She committed suicide in prison.

In the case of Zhao Ziyang, had it not been for the Washington Post article and for Soros’s intervention, he could have been tried, sentenced, or even executed for treason.

When it comes to CCP power struggles, anything can happen.

Helen Chou is a freelance writer based in New York.

The June Fourth Movement and Its SuccessorsOn Its 16th Anniversary

It has been 16 years since the June Fourth Movement of 1989 took place. According to reports, this event that shook the whole world is little known among students in China, who seem indifferent to what happened and do not even want to ask about it.

That once-dynamic movement has seemingly faded into obscurity. Many formerly active students, who now felt "more mature" after years of reflection, were beset with remorse and their faces would redden at the mention of what they had done in their younger days. They have busied themselves with earning money and making a living. "To heck with state affairs!" they would say.

This is eerily similar to what happened after the May Fourth Movement of 1919. In fact, the June Fourth Movement has received even more of the cold shoulder than the May Fourth Movement of 1919. The central government over 80 years ago did not deprive the people of their right of free speech, and did not forbid the expression of public opinion regarding the May Fourth Movement. But today, the central government treats June Fourth as a scourge and takes every possible measure to remove it from public discourse. It plots a systematic policy of brainwashing for the younger generation and tightens its grip on all channels of information, all in a desperate attempt to wipe out all traces of that chapter in history. When its attempts fail in some cases, it resorts to the concealment of facts with lies. Its only intention is to brainwash the "New Generation," thus creating a buffer against the June Fourth Movement for the purpose of removing the event from history.

Without a doubt, Beijing’s policies have been partially successful.

Therefore, a question is brought before us—one that is chilling to contemplate:Has the torch of June Fourth been extinguished? Have we lost any hope of handing the torch of June Fourth down to a new generation?

The answer is a resounding "No!" Voices have recently reverberated across the landscape: "In our hearts the Tiananmen Mothers are not only mothers of the June Fourth martyrs, but also mothers of the generations before and after the June Fourth Movement, mothers of this nation that is tortured by political abuse. We therefore declare upon solemn oath that we are the sons of the Tiananmen Mothers. We feel guilty for our silence and indifference when they suffered, and we are willing to protest against the government persistently for its persecution of these mothers, with our tears, pens, human conscience and even our lives."—This was a public declaration by Yu Jie and Wang Yi last year, champions of the young scholars of the post-1989 generation.

"Whether it is for liberation or self-salvation, we appeal for starting again from that early morning. ‘Returning to June Fourth’ shall be the real starting point for China’s public politics… we, the generation who witnessed death or even chose death in 1989, still feel the warm blood as if it was shed just this morning. We make this joint declaration for liberation and self-salvation." —This was the declaration issued last year by Ren Bumei, Yu Shicun, and Pu Zhiqiang, and others, representatives of the "1989 Generation."
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In fact, the voice of righteousness has not been silenced in the past 16 years. Documents and files related to June Fourth have been smuggled out of China and put into publications. Oral and written condemnations of the bloody massacre have been heard or seen without end and have brought tears to many audiences. The Tiananmen Mothers, braving threats and going up against great pressure, rose up from the earth that is soaked with the blood of their children to investigate the truth, to charge those who had committed wrongdoings and to seek justice. Dr. Jiang Yanyong, who saved untold number of lives by exposing the truth when SARS raged through China two years ago, stood up again at risk to his life to appeal for the rectification of the government’s handling of the June Fourth Movement, to expose the crimes that took place there and demand the innocent dead be given their due. To our great comfort, quite a few young scholars of the 1989 generation or later generations have stood up with courage. They proudly call themselves the "Sons of June Fourth" and the "Sons of the Tiananmen Mothers," and assert that June Fourth had a great influence on their entire lives.

Perhaps the sons of June Fourth are not great in terms of sheer numbers. But history has proven that it does not matter if only a small number of intellectual successors exist. The difference between 1:0 and 1,000,000,000:0 is essentially the same when measured by the significance of intellectual succession. Once the spiritual value is passed on, it will cast its light upon every inch of the land, drawing multitudes from all corners of the earth.

As stated above, in the years after the May Fourth Movement, China was paralyzed because of the desperation and dejection of the intellectual world. There remained only a very few people who still considered themselves successors of the movement. However, with the passage of time, the May Fourth Movement has played an increasingly important role in the Chinese history of the 20th century. From a long-term, historical perspective, three types of ideology that are closely connected to China’s fate, whether in a positive or negative way, originated from the May Fourth Movement, namely nationalism, liberalism and Marxism. And as if handled by a magical hand, all of the significant events in the 20th century can be traced back to this movement. Most parties and intellectual schools in today’s China claim to be its successors, as if in fear of the denial of their identities if they did not make that claim. However, the historical account of this movement is not clear-cut, as it varies in different periods of time and is evaluated with different measures by different people. This is probably the only reason why the May Fourth Movement has been entered into the annals of history.

Without a doubt, unlike the May Fourth Movement, the June Fourth Movement has not yet been authorized to be part of China’s history. To make things worse, many people are in constant fear of being connected to it. However, as mentioned above, there have been both young and old people who have asserted themselves as the successors to and guardians of June Fourth. Meanwhile, I have noticed that not all who take an interest in this movement are liberalists. Quite a few are from other intellectual schools, such as Wang Hui, who is of the New Left Wing (or Liberal Left Wing, as it labels itself). In an essay of a considerable length, Wang calls the 1989 movement a leftist movement, and he places it in the leftist system of discourse. This is a phenomenon of remarkable significance, which implies, no matter what the will of the present authorities is and no matter how hard they try to quarantine the event, that the June Fourth Movement will inevitably become a public spiritual legacy of modern China, and will thereby merge into the long river of Chinese history.
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Therefore, I venture to foretell the fate of the June Fourth Movement.

I once gave my basic evaluation of June Fourth, which remains unchanged, and which I wish to hereby use to commemorate the 16th anniversary of June Fourth.

History is not a calendar. In a calendar, all the dates are treated without discrimination. But history has its partiality, usually for certain specific dates. Leafing through history, we see dates in capital letters-in which undulating human destinies, hymns for life and requiems for death, are focused and thus acquire their weight. How dull and pale history would be without Confucius’ birth in 551 B.C.; without Jesus Christ’s birth on December 25, 0 A.D.; without June 15, 1215, the day the English king was forced to affix his royal seal to the Magna Carta; without October 12, 1492, when Columbus found the New Continent; without July 4, 1776, when American Independence was declared; without July 14, 1789, when the Bastille was captured by French revolutionaries; without October 10, 1911, when the Wuchang Uprising broke out in China; without May 4, 1919, when the May 4th Movement started in China! It is because of those dates that the human race illuminates, that history and civilization are worthy of themselves!

June 4, 1989 is a date in capital letters, immortal in history – for China, and for the whole world.

Theatrically condensed within the temporal space of those dozens of days were the hundred years of our nation’s simple appeals and destiny. That was a tragic stage of history. Within seconds, a hundred years of joy and sorrow, glory and dreams of our nation exploded from the shouts at Tiananmen Square and the gun bursts of June 4th. In the wake of the Tiananmen Square events of June 4, 1989, a succession of the most monumental changes in the twentieth century took place: the collapse of the Berlin Wall, the disintegration of the Soviet and Eastern European Camp, the downfall of communism, the end of the East-West Cold War at the main frontlines. Judged from this broader historical view, June 4, 1989 has become a detour sign for world history.

After June 4, 1989, as far as the market orientation of the Chinese economy is concerned, the butchers of June 4, 1989 were forced to carry out the will of Tiananmen Square martyrs.

There is no need to ‘search the heavens above and Hell below’ for the purpose of rescuing the spirit of Chinese civilization. What we need to do is to take action right now to restore the memory of the June Fourth Movement, to mourn those who died in the massacre and to redress the injustice inflicted upon the innocent. June Fourth is a Crucifix borne by China, a Crucifix that Chinese people must carry. Only when this Crucifix, which is stained with the blood of the June Fourth martyrs, towers above us in the spiritual heaven of the Chinese people, will there come the chance for China to escape from disaster and win its final salvation.

.  .  .
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Justice knows no substitute. China’s trouble will not end as long as injustices remain uncorrected. Sooner or later, the fiery lava within the earth will spew out of the crater, billowing like the wild sea and bringing new features to the landscape. First, there will be the judgment as justice descends, and then the bounty of peace for the Chinese people.

The Sixteenth Anniversary has arrived. The bell has begun to toll. The last judgment is right around the corner.

Kuide Chen, Ph.D., is Editor-in-Chief of GUANCHA Magazine (www.observechina.net) and Executive Director of the Princeton China Initiative.

China: The Solution or Problem of The North Korea Nuke Crisis?

On February 11, North Korea announced for the first time that it possesses nuclear weapons. The claim grabbed headlines, but it was difficult to substantiate. What follows is an article I dashed off over that weekend (it was finished on February 13, according to my Word file), and which was rejected a couple of times by major newspapers the following week:

If I were President Carter, I would have announced yesterday, swiftly following North Korea’s telling the whole world that it now had nuclear weapons, that "I would like to return my Nobel Peace Prize earned for my work to broker a deal in 1994 to exchange more aid for North Korea’s promise to stop its nuclear program." Making such a statement will be important for Mr. Carter unless he found it savory being placed in history next to Mr. Chamberlain, who brokered the Treaty of Munich, as a naïve appeaser. Time is not on your side, Mr. President, as Chamberlain had hardly ever lived in shame because he was shamed to death not long after the eruption of World War II on the heels of his now infamous treaty, but you are still active on so many ambassadorial duties, trotting around the globe in the halo of that Prize. So hurry up!

If I were President Kim Dae-jung, of South Korea, I would follow suit, giving back my 2000 Nobel Prize for my sunshine policy to engage with my brothers and sisters in the North. Apparently, sunshine, smiles, and shaking of hands can’t keep our Northern siblings from making nukes targeting us. In the 1980s, I once almost drowned off the coast of Hong Kong for my pro-democracy activities; now, I am more than willing to plunge myself into water if only that can wash away this indelible blemish on my name.

If I was heading the selection committee for the Nobel Peace Prize, I would go home and ask my son to slap my face several times, to make sure I am sober whenever I make decisions in the future. Then I would go visit an optometrist to make sure I do have some vision. Stupid me, I had always thought "peaceful negotiations," "dialogues," as cherished by our colleagues at the U.N., are an end in themselves. Now, it seems real peace is more complicated than that. Now, to redeem the honor and prestige of the Prize, which could have been befittingly renamed "Nobel Appeasement Prize" for some of the selections we made in the past decade, we will ask Presidents Carter and Kim to relinquish their rights to the name and financial benefits of the prize. We, however, will ask President Kim Jong-II, of North Korea, to keep the prize and money that he shared with President Kim of South Koreabecause we really don’t know he would return them if we ever asked or, if he does concur, as President Carter will testify this time, we are not sure whether he will ever keep his promise.
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If I were that professor from Harvard’s Kennedy School, I would not make that appearance on PBS repeating all that has been repeated thousands of times about China and North Korea, that China is in fear of a refugee problem in case of a showdown in the peninsula and thus would willingly broker a rapprochement between the U.S. and North Korea. You know what, although my title does accord a lot of weight to what I said, I really don’t know much about what I am saying as far as those far-away countries whose languages are beyond my ken are concerned. Our analyses are all based on the assumption that the Chinese government would act like its U.S. counterpart, which we are truly familiar with, but whether that is really what will unfold is really none of our business. You know, we are eminent academics, but we live in our own world, or "Ivory Tower" as someone would call it. And sometimes, I really don’t understand why people keep coming to us for help although our analyses have proven to be wrong one after another. Here, I’d like to avail myself of the opportunity to make it clear that our strengthas well as major source of incomelies in our ability to write books and articles to keep the event in perspective afterward, but not in advance.

Since I am only me, not those dignitaries, I apparently don’t have much to worry about any serious fallout of my words or thoughts. You may call me a Monday morning quarterback, but my friends could be my witnesses that I did yell out many times in front of the TV showing a smiling Carter in North Korea ten years ago, "Stupid, it only takes a ten-year-old Chinese kiddo to understand this is nothing but Yu2 Hu3 Mo2 Pi2 (a Chinese proverb meaning "negotiating with a tiger for the price of his skin)." Okay, if this gives me a little bit credibilitybut I would understand if it is still not enough to put me on PBSlet me tell you this: All that theorizing about China having incentives to help the West in curbing the North is nothing but wishful thinking. China needs Kim and the North to make trouble for the U.S. so that it always has the trump card in dealing with the U.S., and the U.S. is always distracted when China and the U.S. don’t see eye to eye on something. The theory that China would worry about that hypothetical huge influx of refugees crossing the Yalu simply doesn’t hold water, either. Remember how they treated their own people at Tiananmen in 1989 and Falun Gong in 1999? There are already credible reports of hundreds of thousands of troops stationed along the Yalu, and when the first batch of North Koreans tries to escape their country in a crisis, such as the fall of the Kim family dynasty, the same machine guns that were releasing lethal fires upon Chinese in 1989 will fire again. And when that happens, do you think there will be a second batch coming? Just check how China treats those North Koreans being smuggled into China, and you will understand what I am saying here. Yes, you are right that if China ever dares to do that it will be put under international sanctions, but weren’t there international sanctions too in the wake of the 1989 massacre? And to Beijing’s amusement, those sanctions have only become the catalyst for the billions of dollars being poured into China every year.
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I don’t know what others might think, but as long as Kim Jong-II keeps his Nobel Peace Prize, and people like Falun Gong members who, by their sheer numbers could have made China a much more messy place if not for their embrace of peace and endurance of deadly persecution against them, are not getting the Prize, I am not sure whether it is an honor or disgrace to get such an award. Besides, I happen not to be a big fan of Kofi Annan, the most recent Nobel Appeasement laureate, either.

.  .  .

I regret that the original title of that article was a sarcastic "Nobel Appeasement Prize?"—which misdirects the attention to the negligible, petty, trifling vanity of the Nobel Prize, relative to what is at stake for the whole world. Even worse, at that time I was so obfuscated by strong feelings that I forgot the editors of those media outlets to whom I sent the article are mostly graduates of Harvard’s Kennedy School. Since that time, however, there have been several developments that suggest more attention might be needed to the issues I raised. So much so that we started hearing voices of concern from think tanks and academics about China’s role in the six-party talk.

Meanwhile, I still can’t understand why so many people still believe China would have big problems with a nuclear North Korea due to its geographical proximity—isn’t Pakistan, a recipient of China’s assistance in building its nuke bomb, China’s neighbor too? I don’t understand all those talks about the limited leverage China has over North Korea, either—Isn’t that true there is a North Korea on the map today only because of China’s involvement in the Korea War, and now the North doesn’t stand any chance of survival if China simply turns off its faucet? From this perspective, China’s declared neutral position between the U.S. and the North clearly shows its favored party, not to mention its manifest intention of vetoing any U.N. move against the North if it were ever proposed.

Indeed, if North Korea is a natural buffer that dilutes the pressure of democratization and a trump card in its deck against the United States in any game of diplomacy, then it would be in China’s best interest to see the continuation of a communist North Korea. Now the question that has to be discussed at the beginning of every discourse of this issue is: Will China want it to happen or not?

John Li is a New-York-based freelance writer on China and Sino-U.S. relations.

China’s Importation of Mineral Resources and Oceanic Shipping

[Summary: In 2003, China imported 35% of its crude oil supplies and 36% of its iron ore supplies. The sharp rise in 2003 of the shipping cost of iron ore had greatly impacted China’s iron and steel industries. Therefore, relying on foreign fleets for oceanic shipping of imported mineral resources has become a great challenge. To ensure China’s ability to ship its needed mineral resources, the author makes the following policy suggestions: A) Transport strategic materials using domestic fleets; B) Establish strategic cooperative relationships between the mining and shipping industries; C) Support the following: loans to purchase ships, tax incentives for the purchase of second-hand ships, development of ship chartering, and improvement of the laws and regulations for oceanic shipping.]

China’s Demand for Mineral Resources

Raw materials are fundamental to the nation’s industrialization and modernization. Consumption of mineral products exhibits the following pattern in major developed countries: A) During the rapid expansion period of industrialization, consumption of minerals’ products expands at a correspondingly rapid pace. Bulk mineral’s "consumption elasticity" (the ratio of mineral product consumption growth to GDP growth) is greater than 1. B) When the industrialization period ends, consumption of mineral products such as steel and copper tends to stabilize. C) Energy consumption grows with GDP growth.

The industrialization process has sped up since 1978 when China adopted its reform and open policies. Consumption of mineral products has risen sharply with increasing consumption elasticity. From 1985 to 2000, the average consumption elasticity for each five-year period was 0.46, 0.60 and 0.83, respectively. In 2004, it exceeded 1.0. The average consumption elasticity coefficient for steel, copper and aluminum in the past 10-year period all exceeded 1.0. This is a similar pattern to what other developed countries experienced during their industrialization periods.

The projection of demand for mineral products is based upon the general pattern and trend of the relationship between the growth of the national economy and the consumption of mineral products over the past 15 years. The potential effect of new industrialization paths and advances in technology on the consumption of mineral products must also be considered. By 2010, the total energy demand is expected to reach the equivalent of 1.867 to 2.273 billion tons of coal, including 300 to 350 million tons of crude oil (or 6 to 7 million barrels a day), 1.74 to 1.92 billion tons of coal, 78 to 120 billion cubic meters of natural gas (or 8 to 12 cubic feet per day), and 250 to 310 million tons of steel. By 2020, the total demand is expected to reach the equivalent of 2.6 to 3.2 billion tons of coal, including 470 to 480 million tons of crude oil (or 9.4 to 9.6 million barrels a day) and 2.2 to 2.4 billion tons of coal.
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Crude Oil

By 2010, it is expected that China will have access to 300 to 400 million tons annually of additional crude oil reserves in newly discovered oil fields, with a capacity of 18 to 25 million tons of crude oil per year. In 2010, the production of crude oil is expected to be 168 to 180 million tons, only 51-55% of the demand. By 2020, crude oil production is expected to be 156 to 185 million tons, only 34-40% of the demand. There will thus be a shortage of 275 to 304 million tons.

Iron

By 2010, domestic iron ore output is expected to reach 200 million tons, which will yield 70 million tons of iron. Scrap steel output will be 45 million tons. The demand for steel will be 250 to 310 million tons. Therefore, domestic iron production will only be able to meet 38% of the total steel demand. By 2020, domestic iron ore output is expected to be 156 million tons, yielding only 56 million tons of iron. Scrap steel output will also be 63.3 million tons. However, the demand for steel will be 273 to 334 million tons, so domestic iron production will only meet 29% of the total demand for steel.

Coal

It is estimated that by 2010 and 2020, the demand for coal consumption will reach 1.738 to 1.922 billion tons and 2.173 to 2.4 billion tons, respectively. However, because production capabilities are limited, the shortage of coal supplies will reach 250 million and 700 million tons, respectively. For this reason, beginning in 2004, China changed its coal export policy, and coal exports have been reduced by 10 million tons.

Natural Gas

In 2001, the remaining exploitable natural gas reserve was 1.8345 trillion cubic meters. The estimated long-term reserve of natural gas is expected to be 12 to15 trillion cubic meters. By 2010 and 2020, the demand for natural gas is expected to be 78 to 120 billion cubic meters and 180 to 280 billion cubic meters, respectively. The production will be 130 and 165 billion cubic meters, respectively. So demand can be basically met domestically in 2010. However, there will be a shortage of 65 billion cubic meters in 2020.
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Importation and Transportation of Iron Ore and Crude Oil

In 1993, China’s import volume of iron ore was about 33 million tons. In 1995, 41.2 million tons were imported, and that number increased to 55 million tons in 1999. The average annual growth was less than 5% during those years. There was even a negative growth of 7% in 1998. In 2000, the importation of iron ore grew more than 10% and reached 70 million tons. From 92.4 million tons in 2001, the amount increased to 111.5 million tons in 2002 and reached 148 million tons in 2003. Approximately 36% of China’s iron ore was imported. China has become the world’s largest importer of iron ore. While the total amount of the world’s iron ore shipments increased by 43 million tons in 2003, China’s import of iron ore increased 33 million tons in that year alone. China’s iron ore imports accounted for nearly 30% of the world’s oceanic shipping of iron ore. Even so, China’s fleets have shipped a very limited share of the imported iron ore due to the limitations of scale and structure of China’s shipping fleets. This is one of the main reasons why shipping prices of imported iron ore have risen sharply since 2003.

Since 1996 China has been a country with a net import of crude oil. In 2003, the net import of crude oil was 97.41 million tons, accounting for 15% of China’s demand for crude oil. In general, countries with huge demands for imported crude oil usually control a powerful crude oil carrier to handle shipping for its imported crude oil. For example, almost all of Japan’s crude oil is imported. Its annual import volume exceeds 250 million tons. The tonnage of large crude oil carriers controlled by Japanese ship owners exceeded 20 million tons and is able to handle the shipping of more than 80% of Japan’s imported crude oil. All the large crude oil carriers were leased to crude oil importers with long-term contracts, ranging from a minimum of 5 years to as long as 18 years. In Japan, in addition to the close cooperation between ship owners and crude oil companies, a stable, cooperative environment has been established among other relevant businesses, such as the shipyards, banking and finance industries, and insurance companies.

All of China’s imported iron ore was shipped by fleet and mainly came from Australia, Brazil, India and South Africa. Two major import routes for oceanic shipping are from West Australia to Beilun Port in Zhejiang Province and from Brazil to Beilun Port. China’s role has become increasingly more important in the world’s oceanic shipping of iron ore. In 2001, China’s iron ore imports grew by 22.4 million tons. That same year, the world’s oceanic shipment of iron ore grew only 6 million tons. There would be a 3.8% decline in shipments of the world’s iron ore without the growth of China’s imports. In 2003, China’s iron ore imports grew to 33 million tons, while the world’s iron ore shipments grew only 43 million tons.

In recent years, China’s import of iron and steel materials and products has grown by 50 to 60 million tons a year. With such rapid and continuous growth, supply and demand, as well as the overall structure of the world shipping market, have changed. This has brought the world’s dry bulk shipping market to China. Although the Western economies have not fully recovered, the international dry bulk shipping market has been vigorous for an unprecedented period since 2002.
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The Baltic Exchange Dry Index (BDI) reached a peak of 5,681 on February 4, 2004, 2.4 times the previous historic high in May 1995. The BDI started to ease down after the Chinese government released a series of macroeconomic policies when some industries in China appeared to show signs of over-investment. However, the world’s dry bulk shipping market is still a seller’s market. The market began to stabilize in late June and the BDI stayed at 4,000 points. China has become the driving force for the growth of the shipping market (see table 1).

The Sharp Rise of Iron Ore’s Ocean Freight Charges

In view of the freight charge, the fast increase of China’s iron ore imports is the cause of tension between the supply and demand for marine transportation. The year 2003 was the first time in history that cost of the freight was higher than the price of the commodity. In 2003 the global iron ore FOB price rose 9%. In 2004 the contracted FOB price grew 18.6%. In the "2004 Yearly Ores Price Agreement" signed between the six Japanese steel mills and the Australian mining company BHP BILLITON, the average FOB price for the BHP’s high-grade fine ore (with 65% iron content) rose from US$20 per ton in 2003 to US$23.78 per ton in 2004.

However, according to the freight index of the Baltic Shipping Exchange, the rate for iron ore marine transportation between West Australia and Beilun was US$6.7 per ton for 15,000-ton freighters at the beginning of 2003. It rose to US$18.78 by the end of the year, a 180% increase. On New Year’s Day in 2004, it rose to US$21, a 213% increase, much higher than the ore trade price increase. In two years, the transportation freight from Brazil to China rose from US $8 to US$40-50 per ton. Therefore, the freight cost is almost twice as much as the price of the ore.

Compared with the situation in 1999, the market has seemed to fluctuate to a greater extent. At that time the freight was only US$3 to US$4 per ton from West Australia to Beilun, while it was US$20 per ton at the end of 2003. For a Cape-of-Good-Hope ship that carried 168,000 tons of iron ore and transported it from Australia, the entire freight cost was only US$500,000 in 1999, but in 2004, the freight cost reached as high as US$3.43 million.

This kind of situation changes the international iron ore trade, with the trade terms changing to Cost and Freight (C&F). China used to use the FOB price to import the iron ore, but in recent years, several multinational corporations, through merger and reorganization, have controlled the international iron ore market, forming a "seller’s monopoly." At present Australia’s Hammersley, BHP BILLITON, and Brazil’s CVRD control more than 70% of the global iron ore trade. The more united the cargo owners, the more able they are to negotiate prices. The overseas cargo owners have expanded their contract volume under C&F and seized the right to dispatch ships, taking advantage of their control over resources. For example, 50% of Australian Hammersley’s export of iron ore to China changed the trade terms to C&F. In 2003, some Chinese iron ore consumers were unable to purchase the ore even if they had the money, pushing up the price of domestic iron ore even higher.
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The freight increase has seriously burdened the steel and iron industry in China. Moreover, the high freight costs will ultimately be shifted to downstream industries, adding to production costs. Take twisted steel as an example. When the price of upstream iron ore products rises from 300 yuan (US$35) to 900- 1,000 yuan (US$105-117) per ton, the billet price rises from 1,000 yuan to 3,700-3,800 yuan (US$433-445). The cost increase to the steel and iron industry will be transferred to further downstream industries such as construction, shipbuilding, and real estate. It will also impact agriculture and the chemical fertilizer industry, causing an imbalance in the entire economic system.

Factors That Influence Iron Ore Importation Freight Charges, and Chinese Shipping Companies’ Countermeasures

First, due to the insufficient capacity of domestic fleets, the foreign fleets usually take control of import transportation. Second, ocean transportation for the domestic ore import is almost completely exposed to the spot market, with no long-term contracts. Third, the purchase of iron ore from scattered suppliers gives the foreign ore exporter the opportunity to exploit the situation. Lastly, the harbors become overstocked, and railroad transportation is unable to take over.

COSCO’s (China Oceanic Shipping Company) bulk cargo transportation fleet has 210 ships with 12.3 million deadweight tons. It also has 120 rented ships with 10.46 million deadweight tons. Among them, COSCO owns and controls nearly 50 Cape-of-Good-Hope vessels for iron ore transportation, nearly 25% of the total transportation capacity of the spot market. Nevertheless, foreign-owned shipping companies hold the majority of marine transportation contracts for China’s imported iron ore. According to preliminary statistics, of China’s overall iron ore imports in 2003, Chinese transportation companies ship approximately 25%. In this 25% transportation volume, only 10% is a highly profitable first-hand contract. In other words, the Chinese marine transportation company only enjoyed 10% of the total Chinese transportation of iron ore imports, while the foreign transport companies have taken the majority. We should learn from the Japanese experience in this respect. The Japanese government implements a very favorable policy toward the Japanese shipping enterprise, giving them subsidies and low-interest loans to buy ships. They also give tax incentives. Japanese steel mills, business organizations and Japan’s shipping companies have established close relations by share-holding and making long-term agreements. It is very difficult for foreign ship owners to infiltrate the Japanese large bulk cargo marine transportation market. Chinese ship owners find it difficult to transport iron ore imported from Japan, as well as China’s coal exports to Japan.

China’s iron and steel enterprises and the shipping enterprises should strengthen their ties by means of signed agreements and transportation contracts or even cooperation at the level of property rights. If domestic ship owners purchase ships according to the demand, and the steel mills, aided by ship owners’ ocean transportation superiority, take control of ocean transportation power, it will be impossible for the international mining businesses to continue to maintain the high profit margin over ocean transportation that they now enjoy.
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Current Status of China’s Crude Oil Ocean Transportation

There are about 60 shipping companies that are engaged in crude oil transportation operating out of mainland China. The total fleet of 660 oil tankers can carry nearly 5 million deadweight tons. At the beginning of 2000, COSCO formulated a strategic plan to rapidly develop large-scale oil tanker fleets to meet the large increase of crude oil demand. It is estimated that by 2007, COSCO’s fleet will reach 31 tankers, with 4.2 million-deadweight tons. Adding the oil tankers ordered by other mainland companies, it is estimated that by 2007, the mainland shipping companies will have 23 Very Large Crude Carriers (VLCC) and six 100,000-ton tankers. If 50% of the 29 oil tankers are used in crude oil import transportation, 30 million tons of crude oil import can be shipped. Compared with the total import transportation need of 120-135 million tons, China’s shipping capacity will still have a large shortfall.

In recent years, as a result of not applying the "domestic products transported by domestic companies" policy, our own fleet has only been able to transport less than 10% of total imports. Despite increasing import concentrations in the Middle East and West Africa, the capacity of middle- and large-sized Chinese oil tankers has not grown correspondingly. Transportation by our own fleet occupies only a small portion of the total. In 2002 for example, COSCO transported 1.6 million tons of China’s crude oil imports, which only equaled 2.2% of the total import volume. If COSCO put three VLCC and three SUEZMAX oil tankers into full service on the Middle East route, the annual transportation volume would be about 10 million tons. Together with other transportation, the total volume of transportation could reach about 12 million tons, less than 13% of the 100 million tons of total imports in 2004.

Suggestions and Measures to Strengthen Oceanic Shipping of Mineral Resources and to Improve Ocean Transport Capabilities

1. Speed up the construction of large-scale petroleum-loading wharfs. Transform or build seven to nine 200,000-ton mooring berths by 2010 to secure crude oil import transportation. Confirm a second batch of petroleum strategic reserves projects as soon as possible, besides the four currently approved petroleum strategic reserve bases.

2. Establish a large-scale oil tanker fleet alliance to share profit and risk. A joint oil tanker alliance can be established by COSCO, China Marines, and other shipping companies with long-term transportation contracts with China National Chemicals Import & Export Corporation, China Petroleum Corporation and China Marine Petroleum Corporation. With an alliance created, shipping capital and management companies can be established.
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3. Actively participate in international organizations and the international affairs related to international petroleum transportation. At present, the Malacca Strait, an international channel, has not been subject to an internationally recognized management organization. Japan, as the main user of the channel, started cooperating with the countries along the Strait in 1968. Japan has gradually become involved in the administration of the Malacca Strait. An entire package has been formulated for Japan to participate in the construction and shipping management of the Malacca Strait. As the second largest country after Japan to use the Malacca Strait, China should begin to participate in the management of the Strait as soon as possible and establish a Malacca Strait Construction and Management Fund.

4. Shipping enterprises should continue to expand their fleets. Because of the large capital investment required to build ships, China’s shipping companies have difficulty obtaining ship purchase loans and paying them back with interest. With shortage of capital being a bottleneck for China’s shipbuilding industry, the government may need to intervene to encourage the development of a ship chartering industry.

The article was based on a research report published on the website of Beijing Dajun Research Center of Economy (http://www.dajun.com.cn/kuangchan.htm).