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

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

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

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

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

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

How Much Foreign Capital Can Be Withdrawn?

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

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

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

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

How Much of China’s Capital Results From Corruption?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Net Domestic Capital Outflow and Turnaround of Speculative Capital

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Heated Opening Speech

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

Gao Shangquan described three core controversies:

1. Privatization vs. protection of public ownership

2. Who benefits from the market economy?

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

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

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

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

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

A "Marriage" of Political Power and Market Economy

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

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

The CCP Is Technically Illegal Because It Has Never Registered

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

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

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

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

Failed Medical Reform

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

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

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

Education Reform: Selling Education For Profits

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

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

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

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

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

Foreigners’ Ownership of Stock in Chinese Banks Benefits Both

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

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

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

Gap Between the Rich and the Poor

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Taiwanese Spies: Millions of Dollars Spent Every Year to Bribe U.S. Officials for Taiwan’s Independence

Source: Xinhuanet, August 16, 2004

Our exclusive report on the inside story about American Chinese, Dong Wei, spying for Taiwan received a strong reaction in the U.S. The Washington Post published the entire article in their report. The Associated Press interviewed officials at the U.S. Embassy in China and confirmed the news.

Dong recruited as a Taiwanese spy

Here is the story of how Dong Wei was recruited by Taiwan’s Spy Agency.

Dong Wei went to the United States in July 1986. As a newspaper reporter from Mainland China, he quickly built a huge network of contacts. In 1989, Dong Wei met Lai Shengquan, a Taiwanese businessman, at a New Year’s festival party held by a Chinese business association in New York. They soon became very close. Lai, now 62 years old, graduated from Taiwan University and mastered both the English and Japanese languages. After joining the Central News Agency, he was a reporter in Japan and the U.S., but was actually engaged in espionage. Lai Shengquan arranged for Dong to travel to Yokohama, Japan, to meet Li Haitian. He was a senior agent in Taiwan’s Military Intelligence Bureau in Japan, a former member of the National Unification Council (NUC), the KMT’s Central Committee and the Legislative Council. The meeting with Li actually assured Dong’s position as a Taiwanese intelligence agent. Li Xiang, a member of Li Haitian’s staff, was assigned to be Dong’s contact person. He was responsible for instructing him on what information to collect. This information Dong collected and his working expenses were reported to the Military Intelligence Bureau of Taiwan by Li Xiang.

Having received a lot of valuable information through Dong, The Taiwan’s Intelligence Agency felt they could exploit more of his contacts. In 1990, Dong brought Wu Jianming and Qing Guangguang, two trained agents, to Singapore to meet Wang Xitian. Wang has long been coordinating the spying and lobby activities in the U.S. for the Taiwan Intelligence Agency as Chief of the third department under the Military Intelligence Bureau. Wang is currently the Deputy General Secretary of the National Security Bureau. Dong formally joined Taiwan’s intelligence agency at Wang’s request. He was paid $3000 (U.S.) per month under the name Guan Yu.

In October 1997, Wang was transferred from Taiwan’s Military Intelligence Bureau to the National Security Bureau. Dong was then transferred to the National Security Bureau and assumed a new name, Xiao Li. His monthly pay was still $3000. His contacts changed several times but he kept providing information for Taiwan continuously. In 2003, Dong entered the Mainland to gather more information but was arrested by the security department.
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Two partners captured first

Dong confessed to having 98 contacts. There were 11 contacts, 5 developed by Dong, from Taiwan’s Military Intelligence Bureau and National Security Bureau. Dong introduced 28 contacts to Taiwan’s intelligence agency. Another 54 contacts were related to this case in some way. Among the 5 contacts trained by Dong, the arrests of Wu Jianming and Qing Guangguang are the most important to this case.

Wu Jianming who acquired U.S. citizenship, English name “Jimmy”, was a former teacher at a Beijing school. Tan Guangguang holds a U.S. green card and was a college instructor in philosophy.

As cover for his espionage activities, Dong registered a company called Mei-Ji-Ya (美吉亚) Co., Ltd. This was done immediately upon returning to New York from Singapore. Wu and Qing were responsible for collecting, analyzing and summarizing information. The written analyzed material was then revised by Dong
and faxed to Li Xiang. Dong declared that Taiwan’s Military Intelligence Bureau had paid Dong $250,000 to buy a luxurious villa in Shunyi, Beijing, due to Qing’s outstanding work. In 2000, Qing was arrested in Beijing and was sentenced to 10 years for espionage. He was then released on bail for medical treatment in July, 2001. Wu was arrested in Guangzhou in 2001 and was exiled during the same year. Both Qing and Wu provided very detailed information about their activities. Their confessions are the key evidence for Dong’s indictment.

U.S. officials bribed three times

In 1999, Wang Xitian was transferred to Taiwan’s “National Security Bureau” as a “special representative” in the U.S. His identity was an official from Taibei Economic & Cultural Representitive Office (TECRO), he represented Taiwan’s Intelligence Agency to lobby the U.S. Congress. Dong Wei was asked to join the activities. Dong confessed that Taiwan spent ¡®tens of millions’ of dollars in cash every year to secretly bribe the U.S. members of Congress. On holidays and other important days, they would send presents and cash to U.S. government officials in various departments. They generally asked consulting firms and foundations to help with nearly 600 Congressmen in total. The National Party and Democratic Progressive Party both spent a lot of money on this.

Dong stated that he participated three times in the ¡®gift giving’ to the U.S. government officials on behalf of the Taiwanese Government. The first time was in 2001, when the Aunt of a U.S. Senior official in charge of foreign affairs was celebrating her birthday. Wang’s secretary, Chen, asked Dong to help present the present. The present was Chinese ceramics and crafts. They were in a box, wrapped with golden foil paper and a bow. Dong asked if they should send money the congressman(as present). Secretary Chen just smiled without answering. The second time was before Thanksgiving. Secretary Chen brought a present to a Congressman from New York State. A Caucasian lady, named Susan, joined him. Susan understood some Chinese language. She studied Chinese in Beijing at the Normal University for a year. The gift they presented was a very expensive Orchid plant from Taiwan. On the way, Dong again asked if they should send money to the Congressman? Susan overheard it and said, “It is illegal to give money in the United States.” Later, Secretary Chen secretly told Dong money is usually given via the consulting firms for Congressmen. It was always cash. Checks were never used. All of these incidents were just routine business.
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The third time was during the 2002 Chinese New Year, when TECRO in Washington D.C. was planning to have a new year’s party at the Twin Oaks Hotel. Secretary Chen asked Dong to help with the invitation of a House Representative from New York State. Then to invite a Senator through the congressman. The purpose of inviting them was to make their activities look good. Dong Wei and his associates drove in two cars to that Senator’s mansion. After the senator received two cloisonne vases and a ¡®red envelope’ with a cash gift in it, he happily agreed to attend the party.

In addition to giving presents to important government officials and the U.S. members of Congress, Taiwan also worked hard on the business community. Wang once lobbied the oil magnates to use their influence on the U.S. government and the President. Some U.S. officials spoke loudly on the issues of “Taiwan Independence,” even ignoring the “One China” principle that the U.S. Government claimed to follow. It is hard to say whether Taiwan’s monetary gifts did not affect this.

Famous artist from Mainland China involved

Dong felt that the consulting firm had studied the U.S. officials well, from his gift giving experiences. The presents given away not only were adequate but also sophisticated. Like the top grade Orchid plant given to the Congressman, it needed proper care. For this, Taiwan National Security Bureau had assigned special individuals to take care of the plant at the Congressman’s home.

According to Dong’s statement, the most expensive present given by the Taiwanese Government to U.S. Officials were paintings from a famous artist originally from Mainland China. Secretary Chen said that TECRO and Taiwan’s Intelligent Agency were the biggest buyers of this artist’s work. This artist knew who bought the paintings and who would be the recipients. Generally, each painting was priced between $100,000 to $200,000.

At this point, Dong is in a legal process. The reporter asked Attorney Chen Manping about some legal issues. Attorney Chen answered carefully, Criminal Law of the People’s Republic of China states that a foreigner outside of the PRC who has committed a crime against the PRC or its citizens, can be held accountable under that law. Our newspaper learned that, based on the agreement between the U.S. and Taiwan, the Taiwanese Intelligence Agency should not conduct any espionage activities in the U.S. But, the U.S. legal system rarely reacts to Taiwanese spies. It was rather puzzling.
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U.S. "Abandons" Chalabi: Modern Farce of "The Hounds Are Killed For Food Once All the Hares Are Bagged" [1]

Source: People’s Daily, June 4, 2004

Recently, the U.S. made a painful decision to “murder” the major opponent of Saddam and an important member of the Iraqi Interim Governing Council—Chalabi. Both sides are completely set apart and pointing fingers at each other. The former closest of allies have now become enemies. A modern rendition of the farce “The hounds are killed for food, once all the hares are bagged.” is playing out in Iraq.

“The most favored” becomes “the first abandoned”

According to International News Online [a Chinese web site], The U.S. took four steps to “abandon” Chalabi. First, was to end his political career. Chabali has been excluded from the list of predetermined members of an interim Iraqi government. Second, was to cut off his financial income. It cut off its monthly payment of $340,000 to Chalabi’s group, the Iraq National Congress (INC). Third, was to damage his reputation. Chalabi is accused of spying and passing secret information to Iran. The U.S. claimed to have a lot of evidence to support this allegation. Fourth was to raid his home. Iraqi police and U.S. soldiers raided Chabali’s home and office days ago. They broke in and removed stuff. They pointed a gun at Chalabi’s head. It was just like a play—four armed gunmen to beat, smash and loot. The INC angrily criticized the U.S. for an action that is an “assassination of human dignity.” On May 24, in his speech about Iraq policy, President Bush stated, “Although the U.S. was going to hand over sovereignty to Iraq, more than 100,000 U.S. troops are going to stay in Iraq for the long run.” It means “abandoned” Chalabi will not have any opportunities in the future on the Iraqi political stage.

The situation has developed pretty dramatically. Chalabi is the one who stood up against Saddam at first. His opposition group, the INC, among others against Saddam, is the most steadfast, active one and the most famous group. Chalabi was the most favored by the U.S. government. Every year the U.S. government provided huge financial support to Chalabi and his group, through the State Department, Pentagon, and CIA. Just between the years of 2000 to 2003, the U.S. State Department provided up to $33 million dollars to the INC, which made other opposition groups envy them. Every year, the U.S. government would meet with Chalabi and discuss plans to oust Saddam. Chalabi accepted the assignment and traveled around to unite all the different forces. During the U.S. strategy to oust Saddam, he worked like a dog or a horse. For a long time, U.S. Officials considered him a potential key leader in Iraq, after ousting Saddam. No one expected to see the most favored become the first abandoned in the post-war on Iraq.
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Chalabi is the new sacrificial object under the U.S. hegemonic strategy

The characteristic of hegemony (domination of one nation over others) lead the U.S. to treat Chalabi in such a way. American media cite many reasons for the U.S. to abandon Chalabi, such as; providing false information to mislead the U.S. government, spying for Iran, involvement in corruption, bank fraud-for which he was convicted in absentia in Jordan and sentenced to 22 years imprisonment, bad reputation in Iraq and so on. But all these are just excuses or trumped-up charges. The real reason Chalabi lost the favor of the U.S. is that he lost any hope of entering the governing group in the future. So, he took the opportunity of the Iraqi people currently fighting against the U.S. to show a certain degree of independence. He criticized some details of American policy and conduct.. He even suggested the U.S. should give full sovereignty to Iraq. U.S. foreign policy is based on maintaining its power dominance. The hegemonic logic, which even applies to its allies, is: favor if useful, abandon if useless. “Those who submit will prosper, those who resist shall perish.” For example, the countries that have been treated in such a way are: Yugoslavia before and after the Cold War; Iraq before and after the war between Iraq and Iran; the politicians counted as Syngman Rhee in South Korea; Ngo Dinh Diem in South Vietnam; Lon Nol from Cambodia and Eduard Amvrosiyevich Shevardnadze in Georgia. Now Chalabi is following in their footsteps and becoming the new sacrificial object of U.S. hegemonic strategy.

Chalabi’s bitter experience promises insecurity for those politicians that seek U.S. patronage. If they volunteer to assist the U.S. because of its dominance, like Tony Blair in the U.K., Jose Maria Aznar in Spain, etc., they disgust their own people and international society. The consequence may be loss of reputation, resignation of their position of power in disgrace and leaving a stain on their place in history. If they do not listen to the U.S. completely and show a certain degree of independence, they may offend and be kicked away immediately. There would not be a good ending.

Chalabi’s experiences expose the hypocrisy in the U.S.’s handling of the sovereignty of Iraq. Days ago, the Bush government made a great show of announcing its plan to return sovereignty to Iraq before June 30. However, when Chalabi requested the Iraqi people have control of Iraqi security, finance and foreign affairs, the U.S. became angry and immediately removed him – essentially the same fate as the ousting of Saddam, i.e., removing its opponents to ensure absolute power and authority in Iraq.

The U.S. will be utterly isolated

In international affairs, the U.S. often shows it is not afraid of anything. However, domination is not easy and the price that has to be paid eventually is that others will realize the nature of the matter and bring the U.S. more opposition. Until May 20, Chalabi just asked the U.S. to give full sovereignty to Iraq. It is the U.S. bullying that drove him apart from the U.S. completely. Now Chalabi has clearly requested that the U.S. should pull its troops from Iraq and let the Iraqi people manage themselves. The members of the Iraq Interim Governing Council generally showed sympathy and felt bitterly disappointed in the U.S. action against Chalabi. The utter isolation of the U.S. in Iraq is showing. With time the people are awakening. The hegemonic strategy of “those who submit will prosper; those who resist shall perish” will inevitably lead to a dead end. The U.S. plight will eventually be that of a loner in international society.
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(Footnote)
[1] The Chinese idiom “ The hounds are killed for food, once all the hares are bagged”

During the Spring and Autumn Periods (770-476 BC), there were two famous senior officials in the State of Yue. The King of the Yue, named Gou Jian, didn’t accept the advice of Fan Li and blindly launched an attack against the neighboring State of Wu. As a result, he suffered disastrous defeat and was caught by the King of Wu. The King of Wu took him and kept him as a slave. Fan Li persuaded him to endure humiliation, pretend to surrender and wait for an opportunity for revenge. Later, Wen Zhong went to the State of Wu on a diplomatic mission and helped Gou Jiang gain their confidence. Years later, Gou was set free. With the help of Fan and Wen, the State of Yue was rapidly rehabilitated and later annexed the Wu. As they had contributed so much, both Fan and Wen were awarded great riches. Gou Jian even offered half of the state to Fan. But, knowing Gou too well, Fan rejected it and decided to live in seclusion. As a hermit, Fan wrote to his friend Wen. In his letter Fan said, “When all the flying birds have been shot down, the good bow is put away, when all the hares have been bagged, the hounds are killed for food. I suggest you withdraw in order to avoid disaster.” Wen took his advice and pretended to be ill and stopped attending imperial court meetings. But it was too late. Gou Jian believed the slanderous gossip about Wen and ordered Wen to kill himself. Later people use this idiom to mean trusted aides are eliminated, when they have outlived their usefulness.

A Senior U.S. Official States Publicly: If Bush Is Re-Elected, U.S. Would Wage War on Iran

Source: Xinhuanet, July 23, 2004

Recently, The Times, an English newspaper, reported that if Bush’s re-election bid is successful, then punishing Iran would be the administration’s first priority. The source was a high-ranking U.S. official with a Hawkish background.

Recently, the American media has published article after article of negative reports on Iran. The tone of the Bush Administration is anti-Iran and getting stronger. All of these things seem to suggest that the U.S. is plotting against Iran. It is said that the 9.11 investigation report due to come out soon will target Iran. It will claim that Iran is the real number one target of the U.S. war against terrorism.

U.S. intelligence believes there is a channel open specifically for Mujahideen (Muslim “holy warriors”) along the border between Iran and Afghanistan. It is believed that eight of Bin Ladin’s subordinates went to Germany through that channel. They later snuck into the U.S. and eventually implemented the “9.11” terrorist attack.
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According to U.S. media, the 9.11 Investigation Report will cite three accusations against Iran: First, Iran “faked” the passports for the terrorists. Second, Iran’s anti-terrorist activities constitute only a cosmetic effort. Iranian intelligence claimed that Iran has already arrested many of the organization’s members, but the U.S. concluded that Iran’s anti-terrorism efforts were only for show. Third, Iran incited the U.S. to attack Iraq. Iran lured the U.S. into shifting its attention to Saddam Hussein. This has led Saddam Hussein to fall from power and left the U.S. mired in war.

Hawkish U.S. senior official “tells the truth”

The media in the U.S. states that what truly worries Americans is Iran’s nuclear capabilities. This official interviewed by a reporter of The Times said that if President Bush wins the election, his administration will do whatever it takes to overthrow the present political power in Iran. The U.S. will intervene in the internal affairs of Iran by encouraging the Iranians to overthrow the present political power.

This official also disclosed that once Bush is re-elected, his administration would destroy the nuclear facilities inside Iran. He implied that if Europe cannot force Iran to comply, then during related conferences this month, the U.S. would immediately submit the Iran issue to the United Nations Security Council. The U.S. then will, at an appropriate time, solve the problem once and for all, in their own way.

What is the U.S.’ motive?

Some analysts of the U.S.’ strategy believe that Iran has become the number one target in Bush’s “axis of evil”. The so-called efforts against terrorism and the elimination of the nuclear facilities are only a pretext. Even Acting CIA Director John McLaughlin pointed out on the 18th that there is no conclusive evidence to suggest that the Iranian government is in cooperation with Bin Ladin. He stated that Iran is far from ready to produce a nuclear weapon.

From this perspective, we can see that just like Saddam Hussein’s regime, even if Iran didn’t commit any wrongdoing, it will hardly be able to escape being plundered. Iran’s present administration, which favors Islamic principles, will not be able to satisfy the U.S. no matter what it does. The U.S. will surely try their best to take over Iran, as this would allow them to control this important strategic location and gain the rich oil resources. In addition, if the U.S. succeeds in conquering Afghanistan and Iraq, Iran would be sandwiched on both sides. So for the Bush administration’s perspective, having Iran go back to its pro-American days would certainly be an ideal outcome.
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Liu Hong of the Institute of Taiwan Studies Analyzes Lee Hsien-Loong’s Visit to Taiwan

Source: Xinhuanet, July 14, 2004

Q: I’ve read many analyses on the Internet. People wondered why Lee visited Taiwan right after (Condoleezza) Rice. In your opinion, is there any connection between Lee’s visit to Taiwan and Rice’s recent visit to Asia?

A: In terms of its appearance or the timing, Rice’s visit to China and Lee’s to Taiwan were almost at the same time. I think the key issue here is not whether they cooperated with each other in advance on the timing, but Lee’s action is the one that has harmed the Chinese people and is an abnormal way to gain certain interests between the two sides of the Taiwan Strait. In fact, I feel that his visit fits into the political background that has been echoed by the U.S. policy of “utilizing Taiwan to cope with China” and the recent act of sending wrong signals to the separatists of “Taiwan Independence” by the U.S.

Q: Some people speculated that Lee’s visit to Taiwan is to please the U.S.

A: This friend’s remark is very sharp and to the point. From the substantial facts, it is too early to say to what extent the U.S. is involved in it. However, the act of Lee’s visit to Taiwan was indeed agreeable to the U.S. strategy of “utilizing Taiwan to cope with China” or, let’s say, his act coincided with the peak of the U.S. presidential election and some U.S. anti-China forces use the Taiwan issue to incite anti-China emotions or to earn more votes in the election. Under such a situation, there would certainly be some people who could not restrain themselves from following in the U.S.’ footsteps in order to gain certain interests they seek. Therefore, generally speaking, there are probably some international factors involved in Lee’s activities in Taiwan.

Q: Did Rice’s visit to China have any effect on the development of relations between both sides of the Taiwan Strait?

A: As for Rice’s visit to China¡­ I think that, be it Rice or the U.S., their positions of sticking to the “one China” policy towards the Taiwan issue remained unchanged. Or we could look as far back as the previous century. Since the 1970’s, there have been eight U.S. presidents who have followed the “one China” policy. I think that it would be simply impossible for any one to try to abolish this policy. Recently, some members of the U.S. Congress and the anti-China media advocated the U.S. to review the “one China” policy. They even connected their advocacy with Rice’s visit to China. I think that did not mean the “one China” policy was changed by the U.S. government, but just an act by the anti-China forces. We of course should have observed that, from or before the Taiwan presidential election on March 20, the U.S. indeed had a shameful performance. I would say with disrespect that the U.S. also wants to make a living and gain some interest from the relations across Taiwan Strait. Therefore I think after we realized the U.S.’ tactics, the dialogue with Rice would have helped both China and the U.S. to keep on following the “one China” policy and to further secure the China-U.S. relation.
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Q: Mr. Zhou Xiaochuan, Governor of the People’s Bank of China (PBC), has cancelled his visit to Singapore. Was this because of Lee Hsien-Loong’s visit to Taiwan?

A: I don’t know the reason for the cancellation of the PBC Governor Zhou Xiaochuan’s visit to Singapore. But as to Lee’s visit to Taiwan, a matter that seriously harms the Chinese people, a matter that interferes and damages the normal development across the Taiwan Strait, I think any Chinese person could, like these many friends on the Internet, have his own opinion and express his own position. So, I think there must be a reason for Governor Zhou to cancel his important international visiting activity.

Lee Hsien Loong’s Visit to Taiwan Could Be Staged by the U.S.

Source: Xinhuanet, July 14, 2004

Despite the strong opposition by Chinese authorities, Lee Hsien Loong, deputy prime minister of Singapore, still made his trip to Taiwan for an unofficial visit on July 10. Chinese people were puzzled and disappointed by this. Haven’t China-Singapore relations been good? What were Singapore’s intentions in so doing? To find the answers, let’s briefly review a series of events that have happened recently:

On May 28, the U.S. Department of Defense (DoD) released its 2004 annual report, “The Military Power of the People’s Republic of China”. [The report] intentionally exaggerates China’s military power and expenditures on national defense and the insufficiency of Taiwan’s military power, distorts the PLA’s “aggressive defense strategy” and promotes the theory of the “Chinese threat”. Only a few days after the release of the report, Taiwan authorities declared that it would procure advanced weapons from the U.S. worth up to 600 billion New Taiwan Dollars.

On June 7, according to the “Defense Weekly”, the U.S. Department of Defense points out in the report that, to deter China, Taiwan may consider targeting the Mainland’s infrastructure, such as the Three Gorges Dam. Actively cooperating [with the report], Chen Shuibian’s administration revealed the so-called “Scorpion Operation Project”, declaring to target objects of five categories, including attacking Beijing and the Three Gorges Dam.

On June 28, the U.S. hastily handed over power two days earlier to Iraq’s temporary government.

Starting from July 8, the U.S. Air Force and Japan’s Self-defense Forces are having a two-week joint military exercise called “Against the North” at Kadena Air Base in Okinawa, Japan. In addition, the U.S Defense Department stated on July 5, that 7 U.S. Naval carrier battle groups would gather in the western Atlantic to conduct a multinational exercise called “Summer Pulse ¡®04” running until August.
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On July 6, the Japanese cabinet approved the publication of the 2004 annual white paper, “Defense of Japan”, by the Japan Defense Agency, in which China is categorized as a hypothetical enemy.

Some people predicted from these activities that the U.S. military strategy is starting to move to the East, targeting China. There is such a possibility, but it is too early to reach this conclusion because the U.S. hasn’t been freed from the nightmare of terrorist attacks, the problem in Iraq is far from resolved and the issue of the Middle East-one of the most important issues in the U.S. economy-is still not in order. The U.S. will hold its presidential election in November. But due to constant scandals over the Iraq issue, the U.S. Government is in a passive position. The results of recent polls were unfavorable to Bush. The gap between Bush and Kerry is getting bigger. U.S. politicians are good at leading public opinion by creating a red herring or a hot issue which can easily divert the public’s attention. It is highly possible that Lee’s visit to Taiwan was staged by the U.S. just for this purpose. Lee was just an actor.

For Singapore itself, we were overly zealous toward it during the last few years and forgot what state it is in. Singapore is in fact a country short of self-confidence. It sometimes appears very self-reliant, but only for covering up its lack of self-confidence. As a small country, it has to find someone to rely on to secure itself. We shouldn’t forget it had a firm alliance with the U.S. during the Cold War.

This is not to say that because of this analysis we can pay less attention to the matter. It would be foolish to be careless. But we should also be careful not to overreact. The smartest way is to react appropriately and not allow the Bush administration’s intent any success. If we are temporarily unable to dictate their actions, we should at least not be led by him.

U.S. Congress Reiterates "Taiwan Relations," Promotes Arm Sales to Taiwan

Source: Xinhuanet, July, 19, 2004

Spokesperson for the Chinese Ministry of Foreign Affairs: “China firmly opposes the U.S. reiteration of its promise to the “Taiwan Relations Act.”

When answering reporters’ questions on July 17, Zhang Qiyue, spokesperson for the Chinese Ministry of Foreign Affairs, said that, “The U.S. unilaterally formulated the so-called ¡®Taiwan Relations Act’ in 1979 which blatantly encroaches upon Chinese sovereignty and seriously interferes with Chinese internal affairs, and we have always firmly opposed it. Presently the U.S. House of Representatives, without paying attention to China’s and the U.S.’s “Three Joint Communiques”, as well as the basic principles of international relations, reiterates the “Taiwan Relations Act, “ and we express our intense discontent and firm opposition.”
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Zhang Qiyue said that, “this draft resolution distorts black to white, fabricates from nothing the so-called Chinese military threats, and promotes increasing arms sales to Taiwan; these actions not only will harm the Taiwan coastal region’s peace and stability, it will also destroy the relationship between China and America, and finally, will also harm America.

American Congressman attacks the “Taiwan Relations Act”, referring to it as a violation of the “One China Policy”

According to People’s Daily, some American Congressmen on the evening of (July) 15th on Capital Hill fiercely attacked and criticized the so-called “Taiwan Relations Act”. They believed that the “Taiwan Relations Act” indicated that the U.S. overly interfered with affairs of foreign countries, departed from the diplomatic ideas of the founding fathers of the U.S., and contradicted the “One China Policy”.

These Congressmen expressed strong opposition to the resolution that stated the United States will firmly carry out the “Taiwan Relations Act”. This newly passed resolution even advocates that “the U.S. will consider increasing the weapon supply to Taiwan” in accordance with the “Taiwan Relations Act”. Observers believed that the purpose of voting again by the U.S. House of Representatives on the issue of the “Taiwan Relations Act” is to provide an excuse to increase the U.S.’s arms sales to Taiwan, strengthen the military exchange between the U.S. and Taiwan and to continue to interfere with China’s internal affairs.

As the Olympic flame in Athens flickered out, curiosity about the 2008 Games in Beijing was only rekindled. Winning 32 gold medals, compared with the Americans’ 35, China has eased itself into the top echelon of the world’s sporting powers, and it is likely that Athens was only the breeding ground for even more gold in Beijing.

Some might attribute China’s Olympics success to its growing economic might, stemming from the government’s sweeping economic liberalization since the 1980s. Those glimmering Olympic medals, however, are more a product of Soviet-era central planning than Deng Xiaoping-style laissez faire.

According to China’s top official in charge of sporting activities, the country is expected to invest more than $7 billion in the next several years to further improve its Olympic performance, most of it going to the 20,000 or so “Olympic medal hopefuls,” who are carefully gleaned from different tiers of government-sponsored training schools.

Modern Olympics have always been about national prestige. When the jingoist sentiment goes to the extreme, the Games can sink to being a crude show of supremacy, or even an orgy of hatred, as happened in Berlin in 1936. The Olympics have also been transformed by younger countries into a stage to herald their bright futures, and by authoritarian regimes into a showcase for their leaders’ legitimacy—or for that matter, for the embarrassing failures of their ideological opponents. Some of the cold war’s hotter battles were fought at the Olympics Games: in the Olympic pool where Hungarian and Soviet water polo teams fought in the aftermath of the Soviet invasion of Budapest in 1956, or at the Lake Placid ice rink where American and Soviet hockey teams battled in 1980, not to mention the reciprocal boycotts of the Moscow and Los Angeles Games in 1980 and 1984.

By one Orwellian theory, authoritarian regimes, with their iron discipline, have a natural advantage in the Games. The 1988 Olympics in Seoul, the last of the cold war era, are instructive. The top five finishers were the Soviet Union, with 55 gold medals; East Germany with 37; the United States with 36; South Korea with 13, and West Germany with 12. The next three were Hungary, Bulgaria, Romania—all members of the Soviet bloc. China was eleventh.

To a large extent, China’s current success is attributable to the fact that it is the only significant survivor among the Communist countries that traditionally used the state planning system to produce Olympic medals.

Those obsessed with nationalist fervor might ask: Why, since the 1990s, have the combined forces of West and East Germany fallen into decline, as the unified Germany, in the medals table? And most of the old Soviet-bloc countries seem to have lost momentum in their drive for medals, though Russia did come in third in the gold count, and second in the overall medal tally.
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China’s Olympic strategy is not without its dissenters, the most vocal probably being Wu Shaozu, the former president of the Chinese Olympic Committee. After Wu was forced to step down for his rumored sympathy with the banned Falun Gong (which, ironically, had its rise as a mass fitness movement), he visited his impoverished hometown in Hunan Province, and to his surprise found that his modest physical stature of 1.7 meters made him one of the tallest people in the area. This led him to maintain that China’s Olympic medals had cost its young generation a gain in height. Average male height in Japan, he pointed out, had grown by 12 centimeters over the last decades, compared with 3 centimeters for China, despite China’s superior performance in the Olympic tables.

Indeed, on the surface China’s Olympic strategy seems so successful that it is being replicated in many other areas of Chinese life. Look at the booming economy. The government is striving to turn the coastal areas into the shining medals that allure foreign investments, while the vast hinterlands have been left to their own devices. (Is it just coincidence that the Chinese Olympic stars Liu Xiang and Yao Ming come from Shanghai, the boomtown that has received the lion’s share of investment from the central government?)

But the government should be careful. If the price China has to pay for its successful Olympic strategy is shorter youngsters, an economic Olympic leap forward is likely to cost livelihoods, spread discontent and, alas, eventually lead to a decline of Olympic medals that would accompany a more responsible government.

The article was originally published in International Herald Tribune on September 16, 2004

Link: http://www.iht.com/articles/538965.html

John Li is a New York based freelance writer on Sino-U.S. relations. His articles have been published in newspapers such as the Asian Wall Street Journal and the International Herald Tribune.

Due to the lack of corresponding words or concepts in English, some English words are phonetically translated from Chinese. For example, the Chinese words “Yin” and “Yang” are translated into “Yin-Yang.” When Bruce Li’s martial arts films were red hot in the 70s, the Chinese word “Wushu” (martial arts) became known in the West. When these words become a part of the American vocabulary, it is often a signal that the underlying culture has impacted or brought a new element to life in America.

“Kowtow” is another phonetically translated word from Chinese. When Westerners first saw officials in China kneeling down and kowtowing to the Emperor, it might have been a strange sight indeed, and perhaps even evoked feelings of disdain or disbelief. It might have seemed unlikely for this word to find its way into the American lexicon. Nevertheless, many multinational corporations today are “kowtowing” to the Chinese government for the sake of opening up the vast Chinese market.

I was disturbed to find that Google, the most popular online search engine in the world, has been assisting the Chinese government to censor and monitor its citizens’ Internet usage. It has removed web sites and articles that the Chinese government bans from its results. As one of my favorite web sites, Google has the best technology of all the search engines, but more importantly in my mind, it has the famous promise to “do no evil.”

According to sources from the Ministry of Information Industry (MII) of China, Jiang Mianheng, the son of the former President Jiang Zemin, visited the No. 502 Research Institute of MII right before the 16th National Congress of the Communist Party of China (CCP). He was there to see a demonstration of the second generation high-speed Internet, in particular, the high speed of Internet searches. To please the junior Jiang, an engineer typed into the Google search engine the name of his father, “Jiang Zemin.” To their surprise, three of the top ten pieces of news detailed unsavory acts committed by the senior Jiang during his reign. In addition, “Evil Jiang Zemin” was listed as the headline! Shocked and outraged, Jiang Mianheng ordered the website blocked.

The same search today in China through Google will indeed please the junior Jiang, since the results now are favorable for the most part.

Google once played a positive role in helping China’s users obtain a broader range of information. Its access to web sites banned by the Chinese government, including those related to human rights, the democracy movement, Falun Gong, among others, helped Internet users bypass the Chinese firewalls. A few days after Google was blocked in 2002, co-founder Sergey Brin promised that Google would not give in to censorship. It would, in fact, provide Mainland China users with dynamic web sites, changed daily, to bypass the government’s firewalls.
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In a Capitol Hill hearing last year, prominent human rights activist Harry Wu indicated that many large IT companies based in the U.S. have helped China become a digitally policed country in exchange for opening up the Chinese market. For example, Cisco helped China build a complete voice recognition system that can quickly recognize sensitive words spoken over the telephone. Anti-virus companies such as Symantec have helped the Chinese government impose censorship by classifying programs that help viewers see blocked websites as Trojan viruses. One example of this is the popular program Freegate, which is automatically removed from the user’s computer by the Norton anti-virus program upon detection. Yahoo and other free email providers reportedly searched their users’ emails and filtered what the CCP deemed to be “harmful information.” While major multinational corporations were kneeling down and “kowtowing” to the Chinese regime, Brin’s statement to hold fast to Google’s promise of “do no evil” was widely applauded.

When Google began its IPO efforts this year and tried to open up the Chinese market, however, I was concerned that it might be pressured to make compromises. Unfortunately, Google has already started self-censorship. According to a report by Business Week, Google voluntarily excluded several sites banned by the Chinese government. A spokesperson said, “In order to create the best possible search experience for our mainland China users, we will not include sites whose content is not accessible.” The same Business Week article points out that the content could be easily made available via Google’s caching technology, and the company is “taking the extra technical step of sniffing out a visitor’s location —something it doesn’t do with other regional news sites,” in order to determine which pages to show where.

By bowing down to the Chinese government’s wishes, Google is giving up its unique advantage and a key differentiator.

Many users use Google out of their trust in the presumably unbiased search results that it’s famous for. Indeed, for those in the U.S., when Google is sometimes required to remove content based on the Digital Millennium Act, it still lets the user know that they have removed content that would have otherwise appeared. Such disclosure is once again missing in the Chinese site. If it continues down this slippery slope, Google risks losing what distinguished it in the first place.

In this information age, the impact of Google on the Chinese will be far more profound than that of “Yin-Yang” and “Wushu” on America. While freedom of information is an elusive goal for the Chinese under the reign of a Communist government, bringing democracy to China through Western businesses will be no more than a pipe dream if even the “do no evil” Google can’t stand up for its loyal Chinese web surfers.

Thankfully, the Google Chinese portal is still in a test-launch period, so it’s possible that the company may decide to reverse course. One can only hope that the two founders of Google will remember the school motto of their Alma Mater, “The winds of freedom blow.”

Shijia Gong is a Ph.D. student of telecommunication at George Mason University. He regularly writes articles commenting on China issues. His first long novel, Out of the Mundane Dust, was published in 2003.