For about the past 13 years, Chinese-speaking media outlets have seen a steady and systematic expansion in the United States. This development is mostly attributed to investments by the Chinese government since the majority of these outlets, especially for TV programs and newspapers, are either directly backed by the Chinese government or carry content that is in line with the Chinese government’s agenda.

It appears totally legal for the Chinese government-backed media groups to acquire a foothold in the United States and continue to expand. Of course, while these media outlets are free to spread Chinese government rhetoric and propaganda in the United States, the Chinese mainland has remained closed to outside news sources.

With state-owned media monopolizing the news sources in China itself, the Chinese government is able to carry out anti-American campaigns in China without any check-and-balance from independent news sources outside of China. At the same time, it is able to continuously broadcast pro-government propaganda and anti-American sentiment in the United States through its overseas media outlets, without interference from the U.S. government.

What’s more, the Chinese Embassy and Consulates in the United States have been able to gain dominance within the Chinese communities on American soil and promote the Chinese Communist Party’s (CCP’s) agenda.

Global Expansion of CCTV

During the last decade, the systematic expansion of Chinese propaganda began to occur in communities abroad at an accelerated pace. Take China Central Television (CCTV) as an example. According to its Chinese language web site, "CCTV is the important news agency of China. It is an important mouthpiece of the [Chinese Communist] Party, government and people. It is an important base of mind and culture." "The safe broadcast of CCTV is an important political task." CCTV is a state monopoly. It offers 16 channels, delivered terrestrially and by satellite, broadcasting 329 hours of programming a day, 596 hours per day if paid channels are included. In China, it oversees 36 provincial stations and more than 700 city stations. These stations mix their own local programming with CCTV’s. Through 10 satellites, its broadcasting covers the entire globe. The CCTV website, cctv.com, has a daily page views of over 15 million, and is one of the top six strategically important government websites in China. In America, CCTV is on nationwide satellite network and cables in at least 15 metropolitan areas (see Table 1).

CCTV began its global expansion in 1992 by carrying out a systematic, global growth plan aimed at reaching Chinese audiences around the world. The focus from 1992 to 1995 was Asia Pacific, United States, and Middle East. The target group in 1996 was European overseas Chinese. The year 1997 saw the expansion into Africa; and in 1998, more expansion into the United States. Currently, CCTV plans to establish a 24-hour news channel and make itself available on satellite and cable TV systems. The expansion steps completed within the United States (see Table 2) are as follows:

• Establish global satellite channels: CCTV-4 (Chinese) and CCTV-9 (English), CCTV-E&F (French and Spanish, 12 hours programming each per day)

• Purchase cable channels or hours in major U.S. metropolitan areas

• Provide CCTV programs, especially news, to public and private stations for free

• Contribute to TV stations on campuses of American universities

Infiltration of Chinese-Language Media in America

The method of infilitrating the American Chinese-language media is twofold: One is to sponsor local Chinese media groups that are registered as independent media, and then impose news censorship through direct and indirect financial control or ownership; the other is to suppress independent Chinese-language media in the United States through political and economic pressure.

In the Boston area alone, five out of the eight local Chinese-language newspapers are either controlled by, or under the heavy influence of, the Chinese government. Dr. Pengfei Wei, a physicist working at MIT who is familiar with the Boston-area Chinese community, revealed:

"Beginning with the Sino American Times, this is a free weekly newspaper previously called the Boston Chinese Report. It is believed that the Chinese government funded its expansion in August 2002. The director of this newspaper, Mr. Liping Liu, had worked for the Xinhua News Agency for many years before he and his wife came to the United States. From different sources I learned that the editing and typesetting of the Sino American Times main pages are conducted in mainland China and then forwarded to Boston for publishing."

Daily newspapers in the Boston area include China Press, Mingpao, Singtao Daily and World Journal. These newspapers are distributed across the United States, and are known to be influenced by the Chinese government, as revealed by a report in an issue of the Jamestown Foundation’s China Brief (How China’s government is attempting to control Chinese media in America, by Mei Duzhe, CHINA BRIEF, Volume 1 , Issue 10, November 21, 2001).

Inside sources revealed that the news of China Press is directly from the Xinhua News Agency or the China News Agency, which are the two major official government news agencies. "Mingpao and Singtao Daily did not have the authority to report on Hong Kong’s Article 23 legislation or SARS in a timely manner," observed by Ms. Jiang Zhu, a local reporter for The Epoch Times. Managers of these newspapers told Ms. Zhu that news is censored, such as the news about Jiang Zemin and other Chinese government officials being sued in the United States and in other countries. They also told her that, as ordered by their headquarters office, they cannot report any positive information with the words "Falun Gong," in it, or run any advertisements provided by a Falun Gong group in their newspapers, Ms. Zhu went on to say.

Dr. Samuel Zhou, Vice President of Programming at New Tang Dynasty Television (NTDTV) and a prominent scholar on media policy in China, summarized the Chinese government’s methods for infiltrating and dominating the overseas Chinese-language media as such:

"One popular way is to build up a ‘United Front’ by inviting selected overseas media to contribute at overseas Chinese media forums. The Chinese government runs these types of conferences every year or two, and invites over 100 overseas media to attend. Individual meetings are arranged with some of the owners and/or chief editors of the local newspapers, television stations, and radio stations. Through purchasing shares, the government can gain complete ownership or own the majority of shares."

One typical example is the Singtao Newspaper Group (STNG). STNG was established in Hong Kong in 1938. In the 1960s, regional offices were established in San Francisco, New York, and Los Angeles to publish Singtao Daily in North America. In the late 1980s, the Chinese government bought shares from STNG’s owner Sally Aw Sian. The past decade or so has seen the transformation of Singtao Daily into a pro-Communist newspaper. Sally Aw Sian has since become a member of China’s National Political Consultative Conference. The current owner, Global China Group, established Greater China Media Services Limited, a joint venture with People’s Daily’s Da Di Distribution Center in September 2002.

"Other strategies include purchasing broadcast time and advertising space from existing independent media and to influence what they can and cannot report," said Dr. Zhou. "They also deploy government personnel to work in independent media, achieving influence from within their ranks."

Suppression of Independent Overseas Chinese Media

As for those few Chinese-language media agencies independent from the control of the Chinese government, the Chinese Embassy and Consulates have used political and economic means to suppress them. According to John Yu, a cameraman for NTDTV, during the visit of Chinese Premier Wen Jiabao to the United States, a staff member at the Chinese Embassy pressured White House officers to block his team of reporters from entering a U.S.-China joint press conference on December 9, 2003. On December 10, 2003, Chinese Consulate staff members from New York tried to block Radio Free Asia and The Epoch Times reporters from attending a seminar at Harvard University in Boston.

The Epoch Times has also encountered theft that specifically targeted the newspaper’s distribution. According to the newspaper’s reports, in late February 2005, The Epoch Times’ Los Angeles staff noticed that a man was stealing hundreds of copies of the Chinese-language edition of The Epoch Times, which was free at distribution sites in Chinese communities throughout the L.A. area. They began following this man, whom they learned was named Mr. Lum, and found the situation was far worse than they had imagined. Mr. Lum spent full time, every day, driving to distribution points throughout L.A., and stealing every single paper at each location, totaling thousands of copies each day. After finishing his route, Mr. Lum would take his pick-up truck full of papers to a recycling center, where he would earn a few extra dollars by selling those collected papers. He would only steal The Epoch Times, although other free Chinese newspapers were just as easy to take. When a reporter from The Epoch Times attempted to videotape him at the recycling center, Mr. Lum saw him and drove his truck into the reporter’s leg. Later that day, Mr. Lum was arrested for assault with a deadly weapon.

Infiltrating the Chinese Community

Media infiltration goes hand-in-hand with the CCP’s effort to control the Chinese communities in the United States.

Again, we can use an example from the Boston area. At the same time when Sino American Times expanded in August 2002, the Boston Asian Culture Center (BACC) was also founded. It turns out that the Sino American Times and the BACC belong to the same parent company. Officials from the Chinese Consulate in New York are often present at BACC-held activities.

Besides business entities, community-based Chinese associations are the main targets for the Chinese Embassy and Consulates to infiltrate in order to extend CCP influence. There are many types of Chinese associations in the United States, such as student and scholar societies, cultural exchange organizations, business groups, alumni associations, and even associations of people who come from the same hometown in China. The Chinese Embassy and Consulates actively support, organize, and finance the establishment and activities of such associations in order to gain control over them. For example, on the CSSA (Chinese Scholars and Students Association) Union website (http://www.cssa-union.org/aboutus.html), it says, "This web site has signed an official agreement with the magazine Shen Zhou Xue Ren (Chinese Scholars and Students, an official magazine by China’s Department of Education), and has obtained great support from the Chinese Embassy and Consulates." Three out of the five named advisory board members are Chinese Consulate officials. Another one was formerly a high-ranking government official in mainland China. During the second meeting of CSSA’s Presidents in the areas serviced by the Chinese Chicago Consulate (http://www.chisa.edu.cn/newchisa/web/2/2003-11-24/news_13539.asp), student leaders hoped to have more financial support from the Consulate, and vowed to continue supporting the Consulate in its struggle against anti-China forces.

Regional Chinese associations in the United States often attract their members along lines of origin. People originally from Taiwan, people from Hong Kong, and new immigrants from the mainland, for example, have their own separate associations. These associations have come to understand that they can receive funding, directly or indirectly, in whole or in part, from the Chinese Embassy or Consulates, as long as they are willing to maintain "friendship" with the Embassy and observe the Party line laid down by the CCP. The Chinese Embassy and the Consulates in general tend to dominate the mainland associations, while further expanding into the other associations.

Leaders of these associations are motivated by various benefits that the Chinese Embassy or Consulates offer, ranging from dinner party banquets and free movies, to cheap housing for student leaders and special treatment or business favors in mainland China. A regional union of associations is formed when the number of local associations has grown sufficiently large. Once under the Embassy and Consulates’ wing, these types of associations can serve as effective tools for the Chinese government in influencing the Chinese American communities.

Mr. Jingning Li, former president of the Chinese Student Association in the Catholic University of America said:

"The system of ‘uniting’ Chinese Americans around the Chinese Embassy has already been consolidated and is achieving great efficiency. For instance, since the persecution of Falun Gong began in July 1999, the Chinese Embassy organized and sponsored many dinners, parties, and forums through which to defame Falun Gong. Their influence in the associations guaranteed attendance of such activities and reinforced the extension of Communist policies in mainland China into U.S. territory."

One example can be taken from a criminal case tried in the Circuit Court of Cook County in Chicago in 2002. Mr. Bill Fang, a victim in the case, told this story:

"The Chicago America-China Fujianese Association (CACFA) has close ties with the Chinese Consulate of Chicago. Its president, Zhang Liguang, said at a celebration party for CACFA’s third anniversary that the Association had been like an infant in its cradle, and thanks to the care from the Chinese General Consulate in Chicago, the Association was able to grow healthily and fast. When the Chicago Consulate was working on defaming Falun Gong, Zheng Jiming and Weng Yujun, respectively listed as the Standing Vice President and Vice President of the Association, assaulted Falun Gong practitioners in front of Chicago’s Chinese Consulate, and the two were subsequently sentenced in the Circuit Court of Cook County in Chicago on Nov. 13, 2002, and on January 14, 2003.

"A similar incident happened in July 13, 2001. Alexander Hugh (also named Chaolian Qiu), who was the Vice President of the Chinese American Association of Greater Chicago (CAAGC), was involved in attacking Falun Gong practitioners in front of the Chicago Chinese Consulate. After the incident, Hugh was appointed in 2003 by the Chinese Consulate in Chicago to be the overseas consultant for the National Association of Returning Overseas Chinese. This National Association of Returning Overseas Chinese is led by the Chinese Communist Party and its first source of funding is from the Chinese government budgets."

Student associations in U.S. universities usually serve their members by providing social activities to promote diversity and take care of students’ interests. Yet in the Chinese Students and Scholars Association (CSSA) of American University, Mr. Jun Yu, the person in charge of CSSA, told all CSSA members that they must abide by China’s law. When a student posted an email on the Listserv to initiate an activity that sought to promote freedom of belief, Mr. Jun Yu told her that she would be de-listed, and that, "We also report our situation to the Chinese Embassy by memorandum."

If the Chinese Embassy and Consulates rely only on their own staff, it is impossible to control the entire Chinese community in a country. The number of ethnic Chinese totals more than 2.4 million according to U.S. Census 2000 data. The Embassy must rely on agents and informants to monitor the Chinese community. Chen Yonglin, the former consul for political affairs at the Chinese Consulate in Sydney who defected in late May, disclosed to media that the Embassy and the Consulates "have over 1,000 agents in Australia." Mr. Chen’s claim was confirmed by another recently defected Chinese state security officer, Mr. Hao Fengjun, who arrived in Australia at the beginning of this year from his station city of Tianjing. Mr. Hao told The Epoch Times reporters, "What Chen Yonglin said about 1,000 Chinese agents in Australia is true. If we take all types of agents into account, the number is even larger."

The Chinese Embassy has various ways to punish those who object to the Chinese government’s control. From denying passport renewal for Chinese students and scholars to rejecting visa applications for Chinese Americans wanting to visit China, the Chinese Embassy has a lot of leverage against the Chinese people. In extreme cases such as the one against Ms. Jun Guo, described later in this article, relatives in China are harassed and family safety is threatened.

The degree of control that the Chinese Communist government can exercise is illustrated in another example, which occurred in October 2002. At the request of the Chinese Consulate in Houston, the Friendship Association of Chinese Students and Scholars (FACSS) at the University of Houston organized a welcome team for the visit of then CCP General Secretary and PRC President Jiang Zemin. FACSS required all participants to sign a legal agreement. The agreement: 1) asked participants to report on activities of Falun Gong; 2) asked participants to waive their legal rights in connection with Jiang’s visit; 3) threatened to sue those who violated the "agreement."

The following is the "agreement" that the FACSS asked members to sign.

Totalitarian Control on the Mainland Extended Overseas

The gradual take-over of American Chinese media is no surprise to some Chinese Americans who have been on the receiving end of the Chinese Communist government’s tactics. Chinese Embassy and Consulate activities in the United States demonstrate that they are run by people who are not hesitant to use strong-arm methods to get their way even on the free soil of the United States. Here are two instances.

Case One

Anne Yang, an economist working at The World Bank during the day, and an amateur independent documentary film producer at night, is a woman without a nation.

"The Chinese Embassy refused to renew my passport, and I cannot go back home," Anne Yang said in an interview in Washington DC on June 4, 2005. She is not alone. Since 1999, there are 140 written cases of Chinese citizens being denied passport renewal by the Chinese embassies and consulates in more than 20 countries, according to a report by The Epoch Times. In 2004 alone, 12 written cases were denied passport renewal in the United States. Among the applicants were electrical engineers, accountants, as well as students from Stanford, Ohio State, and the University of Southern California. The reasons given by the Chinese Embassy and Consulates in the United States were the applicants’ political opinions, religious beliefs, and sometimes just a blunt answer of "no reason."

Case Two

In February 2005, Jun Guo, The Epoch Times Chief Editor, was threatened. Her family in Guangzhou, China, was visited by agents from the Chinese National Security Bureau, which functions like America’s FBI. During the conversation with Jun’s sister, who is a Psychology Professor and the Vice-Chair of the Department of Psychology at Zhongshan University in Guangzhou, the agents told her that their visit was a direct order from the central government in Beijing. They told Professor Guo to tell her sister in the United States to pay attention to her safety and the safety of her own family. The agents was very specific: "Jun’s four children go to school in Washington DC, and we are very clear about that."

This is not an isolated case either. In the greater Washington DC area, there are more than a dozen people who had similar experiences. Their parents or family members in China were visited and threatened by agents from the Chinese National Security Bureau.

June 4, 2005, marks the 16th anniversary of the massacre of pro-freedom activists at Tiananmen Square in Beijing. For the past half century and even before the take-over in 1949, the Chinese Communist Party (CCP) has engaged in violence to rule China. In The Black Book of Communism, a 1999 Harvard University Press release, socialist researchers established that Mao Zedong and his successors murdered 65 million Chinese. This number was based on recently opened archives from former Communist countries.

How Propaganda Brainwashes the Chinese People

How can the Chinese people live under a regime like this? Dr. Samuel Zhou said in a recent interview:

"The Communist government stresses the need to maintain stability and social order, and is committed to perpetuating the rule of the CCP and its hierarchy. To achieve this goal, it has continuously utilized propaganda that brainwashes the Chinese people. In recent years, the CCP-controlled media spread anti-American propaganda worldwide to discredit values such as freedom and democracy. This propaganda has been disseminated through Chinese-language media in mainland China, as well as Chinese media in the United States and throughout the world. Such propaganda is designed to block the Chinese people from knowing the facts and keep them away from ideas of freedom of speech and democracy.

"Along with its propaganda, the Chinese government has successfully influenced and infiltrated American societies, especially the Chinese community and Chinese—language media. Such infiltration secures an audience for the propaganda outside of China. The United States—as leader of the free world-has not done very well in penetrating the political ‘Firewall’ to reach the Chinese people with uncensored news and information and to urge them toward political reform."

The Insidious Influence of Propaganda on American Chinese

While it is hard to assess the impact of media, the influence of propaganda on people’s viewpoints can certainly accumulate and has manifested in some incidents in the past.

During the Iraq War, Chinese Central Television (CCTV) used footage provided by major foreign media, but associated the footage with a different story than what the rest of the world heard. CCTV fabricated the death tolls of Iraqi citizens and quoted many media articles from the Arab press against the Iraqi War to make it appear to the Chinese audience that the war was being supported by no one and causing tremendous death of Iraqi people.

According to a Voice of America report by Dong Fang on Feberury 2, 2003, some Chinese people who were influenced by the government-controlled media, rejoiced over the Columbia Disaster, calling it the most beautiful fireworks of the New Year (Analysis of some Chinese’ Anti-American Sentiment by Dong Fang, Voice of America, February 2, 2003).

Another example comes from an official survey conducted by the Chinese government shortly after September 11. In the survey, while 98% were sympathetic to the victims of 9/11 in the United States, 80% of the people thought the United States was a hegemony. In many of the chat rooms on the Internet, many young people expressed the opinion that it "serves the U.S. right."

Dr. Samuel Zhou commented:

"These people are not bad people; their thoughts reflect what they see and hear from state-controlled media. Unless the United States, as the leader of freedom and democracy in the world, provides an alternative, making available objective, accurate and timely information, the Chinese people will probably continue to believe the hateful anti-American propaganda that targets the United States by the Communist Government."

As to community infiltration and control, the consequence can be even bigger. For example, when the accidental bombing of the Chinese Embassy in Belgrade happened in May 1999, over 120,000 Chinese in America were mobilized in the streets on the east coast, protesting on the same date. The event was selected for the Ten Top International News of that year by CCTV and the Xinhua News Agency.

The influence and control over the community associations by the Chinese Embassy and Consulates guarantees attendance of such activities and consequently extends CCP policies into U.S. territory. The Chinese government also uses such networks to influence American policy, as evidenced by its instruction to lobby the U.S. Congress in March 2004.

At issue was a "Dear Colleague" letter circulated in Congress that called on lawmakers to go on record supporting Taiwan’s March 10th referendum. The referendum called for peaceful means to settle the China-Taiwan issue. The Chinese Consulate organized the lobby starting with an email in Chinese, dated March 12, 2004, marked "Urgent" to Chinese Students and Scholars Association (CSSA) chairpersons in universities throughout the United States. The letter started with "The Consulate General has an important task to assign," and asked Chinese students and scholars to personally email each state’s Congress persons, urging them not to support Chen Shuibian’s "wrong action." A copy of the email is shown below.

Each Chairman,

The Consulate General has an important task to assign below:

We heard recently, Florida Congressman Peter Deutsch is trying to convince all Senators and House Representatives in the United States to co-sign and support the so-called "Defense Vote" on March 20 held by Chen Shuibian. Now please write on behalf of the Chinese Scholar/Student Associations, and also encourage Chinese students and scholars to personally write to each State’s congresspersons with e-mail, and urge them to not support Chen Shuibian’s wrong action, and hurt Chinese people’s feelings. (I put the outline of letters to congresspersons in the attachment. You can read carefully, do necessary editing, make sure your tones are sincere. Congresspersons’ e-mail addresses are also included in the attachment).

Please finish this task before March 20, definitely, and e-mail me about the situation before March 16 (especially tell me how many Chinese students and scholars you mobilized to write their personal letters to Senators and Representatives of U.S. Congress).

Hope all work with our love to the country, express our strong wish to unite our motherland with peaceful means.

Zhang Zhigang

3/12/2004

The email was forwarded to CSSA/FACSS members in several states, and many members followed the instruction and reported to leaders in CSSA/FACSS that "Action is taken."

Moreover, the freedom offered by the U.S. political system is at great contrast to the totalitarian control in China. Free society may fail to differentiate political propaganda from cultural programs. For instance, the CCTV channel or programs on different cable networks in major metropolitan areas are treated as cultural programming and often shown on public access channels. Yet, given the content and the news manipulation in CCTV programming, it is more political than cultural. However, according to Dr. Samuel Zhou, "Oftentimes news from China’s state-owned media is considered just another point of view, and enjoys freedom of speech in the United States."

An Unequal Contest

The Chinese government is actively taking advantage of freedom of speech in the United States to spread Communist propaganda, but it does not grant U.S. media the same rights in China.

The United States is fighting its opponent with one hand tied behind its back.

Several other asymmetries are notable in China and U.S. engagement, or, competition.

Aggression vs. Reluctance

The Chinese Communist regime made systematic and consistent efforts in the past 10 years to utilize and increase its propaganda influence. By contrast, there lacked concrete policy and financial support by U.S. administrations to seriously influence China in becoming a democratic society (see Table 3).

Progressive vs. Reactive

WorldNet TV was first launched in June 1989 as a response to the Tiananmen Square Massacre (U.S. International Broadcasting Chronology: http://www.ibb.gov/bbg/chron.html). However, its current broadcasting power from the United States to China falls short compared to that of CCTV. While CCTV broadcasts 24-hour programming every day in China, WorldNet TV has only 30 hours of Mandarin programming each week. CCTV also has significant influence over the broadcasting and programming of local U.S. Chinese-language cable TV stations by providing free programs or other financial support. By contrast, WorldNet TV programs do not even focus on promoting democracy in China. The station fails to act as an alternative information source, as it does not have a news program. The impact of WorldNet TV is further diminished given the fact that the Chinese government effectively bans personal ownership of C-band receiver dishes, which are needed to pick up WorldNet TV’s signal.

State-Sponsored Infiltration vs. Insufficiently Protected Independent Media

The Chinese Communist regime’s effort to spread propaganda worldwide is backed up by its state resources, including its political, financial, and human power. The few independent Chinese-language media groups in the West are often created and run by traditional businessmen, political dissidents, and new immigrants who seek to promote education and American values to the Chinese people. These groups often lack financial resources for large-scale operations, often find it difficult to make ends meet, and are much less equipped to battle state-sponsored suppression. Independent media also lack resources for public relations and political lobbying activities. Furthermore, they are not in a very strong position to acquire legal protection when their businesses are interfered with. The consequence is that many Chinese media organizations that intended to be independent at the beginning have eventually been bought up or influenced by the Chinese government (see Table 4).

So far, it’s been a big victory for a totalitarian regime when China’s propaganda machine is allowed to freely exploit the freedom of speech in the United States and influence American citizens. In doing so, the United States is unwittingly legitimizing Beijing’s power over its own people as well as the Chinese people residing in the States.

Footnotes:
[1] Seven days a week unless specified.
[2] Regular 24 hr. program unless specified.
[3] From CCTV International web site.
[4] "CHINA BRIEFS: CHINA CENTRAL TELEVISION" by Telenews Asia, May 18,1995 published by 3rd Wave Communications Pty Ltd.
[5] "Worldwide Chinese TV service" by Music & Copyright: February 15,1995, published by FT Information Online Ltd.
[6] "PanAmSat, CCTV Eye Expansion" by Space News, April 8,1996, published by Army Times Publishing Co.
[7] "CCTV to Africa" by Hollywood Reporter, June 10,1997, published by BPI Communications, Inc.
[8] CHINA’S CCTV-9 TO BE LAUNCHED IN PHILIPPINES" by Asia Pulse News, November 8, 2000, published by Asia Pulse Pte Ltd.
[9] "MTV’s clearance for 24-hour China channel" by Television Asia, April 4, 2003, published by Cahners Business Information.
[10] "China Central Television Chooses GlobeCast’s DTH Platform" by Satellite Today, March 13, 2003, published by PBI Media, LLC.
[11] "CCTV extends Latin American influence" by Asia Image, June 10, 2003, published by Reed Business Information.
[12] CCTV Chinese language web site.
[13] "AUDIOVISUAL SECTOR: CHINESE TELEVISION POSTS INTERNATIONAL AMBITIONS" by Tech Europe, December 10, 2004, published by Europe Information Service.
[14] "China’s media: radio, TV expand and newspapers hold readers" by Market Asia Pacific, December 2000, published by PRS Group.
[15] From CCTV International web site.

Over the past four years, Chen Yonglin, a senior Chinese diplomat from the Chinese Consulate-General in Sydney, had attended every rally commemorating the June Fourth anniversary of the Tiananmen Square Massacre in Sydney. Chen would normally stay behind the crowd, covertly taking photos of participants and then sending them back to the security department in China. This year, however, Chen stepped forward to the front, publicly announcing his defection and criticizing the Chinese Communist government.

"The current regime is just a power representing those who already have power. All those people who join the Communist Party, it’s not for the people, it’s for their own individual purpose," Chen said, "I believe this undemocratic government will finally be overthrown by the people in China."

A week ago, Mr. Chen left his consulate post as "consul for political affairs" and sought political asylum in Australia, saying that he could no longer support his country’s refusal to embrace democratic reform or its persecution of Falun Gong members. He said that his job in Sydney had been to "monitor" political dissidents and Falun Gong practitioners in Australia and implement countermeasures against those groups.

The Australian government didn’t extend a warm welcome to Mr. Chen, turning down his application for political asylum almost immediately. Before granting Chen any protection, the immigration official even contacted Chen’s consulate for an identity check, effectively informing them of Chen’s defection.

Fearing for the safety of his wife and 6-year-old daughter, Chen went into hiding and then made his position public at the rally.

Chen revealed that there are 1,000 Chinese spies in Australia. He said that Chinese spies had previously kidnapped critics of Beijing in Australia and returned them to China.

"They have successfully been kidnapping people in Australia back to China," he said. "Each year they have kidnapped a good number." He detailed several cases of what he described as confidential consular information, including the case of former vice mayor of Xiamen City, Lan Fu, who entered Australia on November 27, 1999, on a tourist visa.

To get Lan back to China, Chinese security agents kidnapped Lan’s son, who was studying in Australia. Lan’s son was drugged and put on a boat for the "high seas," where a Chinese cargo ship took him back to China. Mr. Lan eventually went back to China in January 2000, and was tried and sentenced to death three months later.
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The information provided by Chen didn’t generate much interest from the Australian government. "I told this to the Australian government when the immigration and foreign affairs officials interviewed me on the 31st of May, but they didn’t care," he said at the rally.

In contrast to the government’s indifference, the public showed great interest in Chen’s defection and his exposure of China’s overseas espionage. In the following week, a number of major media interviewed Chen or published articles about his story.

Many private groups also expressed support for Chen’s defection. In Chen’s daughter’s school, parents signed a petition letter asking the government to provide help for Chen’s family.

Chen’s public appearance prompted another Chinese official, Hao Fengjun, to break his silence. Hao was a police officer of the 610 Office (an agency set up to handle Falun Gong issues) in the Tianjin Bureau of State Security and sought political asylum in Australia after he fled China in February 2005. He backed Chen’s claim of Chinese spies in Australia and revealed that he personally handled Australian Falun Gong practitioners’ information collected by agents in Australia. Hao left his work because he no longer wanted to be involved in the persecution of Falun Gong and other religious groups.

A third, anonymous defecting official now seeking asylum in Australia also made similar statements through his attorney.

Australia’s handling of Chen’s case has drawn concern and criticism. Bob Brown, the leader of the Australian Green Party, criticized the government for not giving Chen immediate protection and requested a hearing of the event, saying that the government had put trade above human rights.

In recent years, China has become the third largest trade partner of Australia, and now the two nations are seeking to hammer out a free trade deal they say would be worth billions more.

Professor Hugh White, head of the Australian National University’s Strategic and Defense Studies Center, said China has made it clear that the development of the economic and trade relationship was dependent on Australia being sympathetic to China’s concerns on political and security issues.

"I think it does potentially put the government in a tough diplomatic position," he told ABC, "The concerns in the Australian community about the human rights of this individual are significant and valid; on the other hand, China I think will want this guy back and would tend to view a decision by the government to grant him political asylum or even refugee status … as a fairly adversarial thing to do."
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As the government’s human rights obligation comes under public scrutiny, more news in connection with China’s vast network of spies broke out. It was reported that almost 50 Chinese people held in Australian immigration centers were put in isolation for more than two weeks last month and interrogated by Chinese government officials from the embassy.

Refugee Action Coalition spokesman Ian Rintoul said smuggled letters had revealed some of those interviewed were asylum seekers who now feared persecution. "If it is not illegal, it is certainly reckless," he said.

The agents are targeting Chinese dissidents and are also being used to influence political thought "to turn Australia into a political colony of China," former Beijing University law professor Yuan Hongbing, the fourth Chinese defector to surface in Australia in the past month, told ABC radio.

"The term ‘political colony’ means the Chinese Communist Party will use its ideology to influence Australia’s politics and gradually turn Australia to betray its fundamental principles of freedom and democracy," Yuan said.

Along these lines, Australian Foreign Minister Alexander Downer has issued certificates each month over the last two-plus years to prevent Falun Gong members from using banners in their human rights appeal outside the Chinese Embassy in Canberra. Mr. Downer indicated that the banners "impair the dignity of the [Chinese] mission."

After repeated requests to Mr. Downer to reconsider the decision fell upon deaf ears, Falun Gong practitioners lodged a lawsuit against Mr. Downer in the Australian Capital Territory’s Supreme Court. The lawsuit is seeking a ruling from the court that deems Mr. Downer’s certificates to be illegal and to have infringed upon their right to freedom of expression.

So far, public reaction in Australia to the moves by the local government has been quite negative. By siding with the Communist government in the balance between trade and human rights, Sydney is taking a big gamble that the Communist regime will continue to prevail in China for the years to come, or that changes, if any, will only happen from within the Party.

The surprising defection of senior Chinese diplomat Chen Yonglin to Australia sent shockwaves from Sydney to Beijing. Chen subsequently gave insight to a vast Chinese spy network in Western countries and its inner workings. Many elements of his statement were later confirmed by a couple of other former Chinese security officers who were also seeking asylum protection in Australia.

In a friendly environment, spying can be achieved completely "legally," as in the case of Mr. Chen. He professed to work as an agent to monitor pro-democracy activists, Falun Gong, and various dissident groups. It was revealed that many espionage activities are carried out with the assistance of students and pro-government individuals in the ethnic Chinese community, and collected information is sent to the Chinese consulates and embassies or directly transmitted to the security department on the mainland.

With the help of international investment, China is gaining increasing economic clout, but has not brought about the political reform the world has been hoping for. Instead, the Communist government is utilizing its growing economic power as leverage to consolidate control domestically, silencing critics from democratic countries and using international corporations to help its cause. Australia’s reluctance to offend Beijing in handling Chen’s asylum application is a prime example. Another good example is the fact that Microsoft recently complied with Beijing’s demands to install filters in its Internet blogging portal MSN Spaces in China, blocking users from using "democracy," "freedom," "human rights" and other sensitive words.

Domestic control is only the first step, as overseas infiltration and expansion has always been a part of the CCP’s long-term goal. Ideology control has traditionally been first and foremost. Fully exploiting the freedom of speech in democratic countries, the Chinese authorities are dominating the overseas Chinese media market, including Chinese-language TV programs and newspapers. English-based programs can also be viewed 24 hours a day through satellite and some cable channels, as well. All in all, this media blitz signals an alarming trend, and the current issue will be focused on this topic.

Over 16 Million Acres of Tillable Fields Lost in China 

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

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

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

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

China’s Land Desertification Accelerates

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

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

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

China Secretly Tightens Control of Officials Going Abroad

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

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

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

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

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

"Land Revolution" in Premier Wen Jiabao’s Hometown

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

Huang Qi, Creator of the Tian Wang Website, Released

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

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

Shi Tao Given Chinese Youth Human Rights Award

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

Anti-Corruption Reporter’s Health Deteriorates in Prison

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

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

Twenty Branch Managers from the Bank of China Dismissed

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

812,000 in Western Guangdong Lack Drinking Water

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

Chinese People Dislike the China-Russia Border Agreement

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

Milk Powder Causes "Big-Head" Baby Disease

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

Underground Churches in Jilin Province Searched and 600 Christians Arrested

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

210 Million Counterfeit Yuan Seized in First Quarter in Mainland China

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

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

The Drunk Man’s Mind Is Not on Textiles

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

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

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

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

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

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

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

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

http://news.xinhuanet.com/fortune/2005-06/02/content_3035606.htm

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

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

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

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

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

http://news.xinhuanet.com/world/2005-06/05/content_3047202.htm

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

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

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

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

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

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

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

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

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

http://news.xinhuanet.com/newscenter/2005-06/03/content_3039116.htm

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

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

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

Story One

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

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

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

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

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

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

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

Story Three

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

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

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

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

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

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

From Most Favored Guest to Least Welcome Businessman

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

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

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

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

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

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

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

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

Making a Political Statement to Save the Business

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

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

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

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

Surviving Communist Politics

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

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

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

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

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

Lukun Yu is a financial analyst in New York.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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