Basic Political Developments s21

SUMMARIES

Basic Political Developments  China and Japan tout progress on East China Sea gas feud- but no concrete outcomes other than vow to have regular high-level visits.  Vice Premier Hui Liangyu on Costa-Rican leg of Latam tour, economics and agriculture top the bill as well as water resources, judicial cooperation and visa issues.  Deputy head of Taiwan administrative authority to be sued over PNG diplomatic funds scandal.  While in Japan, Hu Jintao tells Dalai Lama to show ‘sincerity’  China offers Japan a pair of pandas for joint research during Hu’s Japan visit.  Ministry of Railways spokesperson denies that MoR chief Liu Zhihui is being reassigned to NDRC  Illegal securities consulting case receives court support for the first time (more to come on the exact meaning of ‘first’)

National economic trends  Tibet- negative economic effects arising from March disturbance already being felt  NDRC: International food price hikes will not have a big influence on China.  Big 5 electric companies all report Q1 losses.

Business, energy or environmental regulations/discussions  China to set up ‘super-sized’ jet JV in Shanghai on Sunday  BEA has become first overseas bank to issue RMB-backed debit cards on the mainland- no date yet.  CSRC issues rules on listed companies’ incentive plans to prevent improper trading.  13 tons of concentrated sulphuric acid leak on to Zhejiang highway.

Labour activity, strikes, protests, terrorism

Balance between centre and local/regional regulations

Developments in oil/gas (including regulatory)

Olympic security and political risk (in or outside of China)  MFA spokesperson indicates China's stricter visa requirements will continue for a while longer

CNPC/Sinopec  Japan’s Nippon Oil and CNPC have agreed to consider a JV oil refinery- would be first Japan/China venture of its kind.

Honghua drilling

Misc  EV71 death toll climbs to 28, warning of mass outbreak

FULL TEXT ARTICLES

Basic Political Developments -Japan, China tout progress on gas feud, deeper trust

TOKYO (Reuters) - The leaders of Japan and China touted progress towards settling a feud over energy rights in the East China Sea on Wednesday, and agreed that "cooperation for peace and friendship is the only option for Japan and China".

Japanese Prime Minister Yasuo Fukuda also nudged Chinese President Hu Jintao to continue dialogue with representatives of the Dalai Lama, Tibet's exiled spiritual leader, following the unrest in Tibet that prompted protests around the world.

"I have high expectations that the dialogue will be held patiently and through that, for the situation to improve and the international community's concerns to be dispelled," Fukuda told a joint news conference with Hu after their summit talks.

Hu said China's recent talks with the Dalai Lama's representatives had been "conscientious and serious" and that the two sides had agreed to continue contacts.

But he urged the Dalai Lama and his supporters to show "sincerity" and blamed them for the unrest across Tibet and trying to wreck the Beijing Olympics in August. Tibet was just one of the sticky topics at a summit aimed at building mutual trust between the two Asian powers, whose ties have often been marred by their bitter wartime past, and to ease feuding over matters from energy resources to military ambitions.

"We both believe relations between China and Japan are at a new starting point," Hu Jintao told the news conference one day after offering to loan a pair of pandas to Japan as a gesture of goodwill.

Fukuda, long a proponent of warmer ties with Japan's Asian neighbors, said good two-way ties were vital for the region and the world.

EAST CHINA SEA

"Japan and China both need to create a good future for Asia and the world together by recognizing their responsibility in the international community and by constantly deepening mutual understanding and mutual trust," Fukuda said.

The two leaders said they had made progress to resolve a dispute over rights to gas beneath the East China Sea.

"Prospects for settling the dispute are already in view and I'm happy about this," Hu said. "We have decided to continue consultations and reach an agreement as soon as possible."

Fukuda echoed the positive note, but declined to give a date for clinching a deal. "There are prospects for a resolution to this long- unresolved problem. I can say that clearly," he said.

The two leaders signed a joint document on future relations between the two Asian economic giants, who are increasingly linked by trade and investment. China replaced the United States as Japan's biggest trade partner in 2007.

"The results of trade ties have contributed significantly to our countries' growth," Hu told Japanese business leaders later.

"Mutual compatibility in our economies is strong and there is great potential for our trade cooperation partnership."

Sino-Japanese ties chilled during Junichiro Koizumi's 2001-2006 term as Japan's prime minister over his visits to Tokyo's Yasukuni war shrine, seen by critics as an offensive symbol of wartime misdeeds, but improved after he stepped down. During Hu's visit until May 10, both sides are keen to avoid a rerun of the last state visit by a Chinese leader in 1998, when then-President Jiang Zemin delivered a series of sharp rebukes to Japan over its wartime actions, leaving both sides bitter.

BEIJING OLYMPICS

The past took a back seat to present matters this time and in a joint document on bilateral ties the two sides said they would "look squarely at history, to turn towards the future".

Fukuda said that Japan was praying for the success of the Beijing Olympics but that he had not yet decided whether to attend the opening ceremony in August. "If the situation permits, I will consider it positively," he said.

The two leaders also signed an agreement on global warming in which Beijing said it would take an active part in fighting climate change and would study the sectoral approach proposed by Japan as a way to reduce emissions.

Tokyo had sought Chinese backing for a permanent seat on the United Nations Security Council, an issue that fuelled anti-Japanese protests in China in 2005.

In the joint document, however, China stated only that Beijing hoped to see Japan play a bigger and more constructive role in international society.

China had pressed Japan to declare again its stance on Taiwan, the self-ruled island that Beijing says must accept reunification. Tokyo has said it supports "one China" that includes Taiwan, which was a Japanese colony for 50 years until 1945 and still has close ties with Japan. In the joint document, Japan reiterated that position.

-Chinese Vice Premier in Costa Rica to boost ties http://www.channelnewsasia.com/stories/afp_asiapacific/view/346047/1/.html

SAN JOSE : Chinese Vice Premier Hui Liangyu arrived here Tuesday on a three-day visit to expand relations with Costa Rica less than a year after San Jose broke with Taiwan to establish ties with Beijing, officials said.

Hui is the highest-level Chinese official ever to visit the Latin American country and was due to meet with President Oscar Arias later Tuesday as well as Vice President Laura Chinchilla and other top leaders. Economic and agricultural cooperation tops the agenda during Hui's visit along with water resources, judicial cooperation and visa issues, and he was due to sign cooperation accords broadening the bilateral relationship.

The two sides "will also share opinions on other common interests including China-Latin America relations, United Nations reform, the environment and climate change, the (UN) Security Council, as well as the situations in Taiwan and Tibet," Costa Rica's foreign ministry said in a statement.

China has also promised to finance the construction of a new 60-million-dollar stadium in Costa Rica after the country switched allegiance to Beijing in June 2007, ending 63 years of relations with Taiwan.

The 35,000-capacity stadium will replace the National Stadium, which will be demolished.

Taiwan has seen its number of allies dwindle over the years as competition for supporters with rival China heats up. The two have been accused of using so-called "dollar diplomacy" to get nations to ally with them.

Arias, who won the Nobel peace prize in 1987, came out against calls for a boycott of this year's Beijing Olympics prompted by human rights concerns.

Hui and Arias were also to discuss the possibility of an eventual visit by Chinese President Hu Jintao to Costa Rica, a country which Beijing could see as a platform from which to broaden ties with the rest of Central America.

Of the 24 nations that maintain official ties with Taiwan, half of them are in the Americas.

-Deputy head of Taiwan administrative authority to be sued over diplomatic funds scandal

Deputy head of Taiwan administrative authority Chiou I-jen will be sued for his involvement in a diplomatic scandal and has been restricted from going abroad by order of local prosecutors, according to Taiwan-based media reports.

In a related development, Taiwan's "executive yuan" accepted the resignation of Chiou and "foreign minister" James Huang on Tuesday.

Several of outgoing Taiwan leader Chen Shui-bian's associates -- including Chiou, Huang and "vice defense minister" Ko Chen-heng-- have been implicated in the scandal. According to local media reports, funds of 29.8 million U.S. dollars were appropriated in 2006 by Taiwan to secure ties with Papua New Guinea. The funds were to be given to the country as economic aid once diplomatic relations were established.

The funds, however, were allegedly taken by Taiwanese businessman Ching Chi-ju and Singaporean Wu Shih-tsai, who acted as intermediaries in the abandoned deal.

Ching was recommended by Chiou, then head of the "national security bureau," to "foreign minister" Huang in 2006.

During March and April of 2008, the Taiwan authority sued the two businessmen in an attempt to recover the missing money. At the same time, it requested Singapore's high court to freeze their joint bank account.

The scandal surfaced last week with a story in a Singaporean newspaper.

In recent days, Chiou, Huang and Ko have been questioned by prosecutors over the case.

Both Chiou and Huang acknowledged the diplomatic deal and said they would take the largest share of political responsibility.

The scandal has shocked the island. Some media reports pointed out that Chen was finding it difficult to escape responsibility for the scandal.

Chiou is the highest-ranking official during the past eight years of Chen's tenure to be sued by local prosecutors. A member of the Democratic Progressive Party (DPP) demanded that Chen give an explanation of the case; otherwise, the member said, the DPP might be damaged. All wanted to know what role Chen had played, he said.

China's Hu tells Dalai Lama to show "sincerity" http://www.reuters.com/article/topNews/idUSPEK6857020080507

TOKYO (Reuters) - Chinese President Hu Jintao on Wednesday urged the Dalai Lama and his supporters to show "sincerity" and blamed them for unrest across Tibet and trying to wreck the Beijing Olympics.

Hu, speaking after a summit with Japanese Prime Minister Yasuo Fukuda, said that China's recent talks with representatives of Tibet's exiled Buddhist leader, the Dalai Lama, had been "conscientious and serious" and that the two sides had agreed to continue contacts.

But Hu also blamed the Dalai's supporters for recent unrest across Tibet, saying they were trying to wreck Beijing's showcase Olympic Games in August.

"We hope that the Dalai's side will use its actions to show its sincerity," Hu told a press conference in Tokyo, urging the Dalai Lama's side to stop the trouble-making and efforts to split Tibet from China.

The Dalai Lama has said he wants autonomy, not full independence, for Tibet, supports the Beijing Games and rejects violence. China says he is not sincere.

"We hope that the Dalai's side will use actions to show its sincerity, and truly stop activities to split the motherland, stop planning and instigating violent activities, and stop activities to wreck the Beijing Olympic Games, creating conditions for the next discussions," Hu said. "We hope that the contacts will achieve positive results."

Earlier on Wednesday, a Chinese state newspaper said the Dalai Lama was trying to blacken its name by internationalizing the Tibet problem.

Japan's Fukuda told the same news conference he appreciated China's decision to hold talks with Tibet, and called for the dialogue to continue.

"I rate highly the president's decision to have a dialogue and the fact that talks were held," Fukuda said.

"I have high expectations that the dialogue will be held patiently and through that, for the situation to improve and the international community's concerns to be dispelled," he added. Last month Fukuda told China's visiting foreign minister Yang Jiechi that he must face the fact that Tibet had become an international problem, contradicting the oft-stated Chinese view that it is a domestic dispute.

*Hu Jintao: China offers Japan a pair of pandas http://news.sina.com.cn/c/2008-05-06/220615488382.shtml During an evening meal that Hu Jintao attended at Japanese Prime Minister Fukuda's house, the Chinese President said China will provide two pandas to China for use in joint research.

Ministry of Railways spokesperson denies that MoR chief Liu Zhihui is being reassigned to NDRC http://china.huanqiu.com/roll/2008-05/105022.html On May 7, People's Daily reported that on the morning of May 6, a netizrn left a message on MoR spokesperson Wang Yongping's blog saying, 'I've heard that Minister Liu Zhihui is being reassigned to the NDRC- can I get confirmation? Wang Yongping lete a message in reply, clearly negating the rumour.

National economic trends

-Qiangba Puncong: Negative effects of March 14th incident already visible on Tibet's economy. http://china.huanqiu.com/roll/2008-05/104976.html Althought Tibet's economy maintained stable growth, the negative effects of the 'March 14th' incident are already being felt. Statistics show growth has dropped to 6.6%. President of Tibet Autonomous Region, Qiangba Puncong said, 'We will implement strong measures in order to eliminate this negative influence as soon as possible, in order to attain our annual target'

NDRC: International rises in food prices do not have a big influence on China. http://news.xinhuanet.com/fortune/2008-05/07/content_8118340.htm (AP- Seems like this comment is doing the rounds- MoA insited the same thing a couple of days ago. Is the government making a bit too much noise about how little the price increases are affecting China? DK - Agree it's doing the rounds. Not too much noise, they're plugging the PR machine to ease the public's fears and avoid activities like hoarding which worsens the situation)

Big 5 electric companies all report Q1 losses http://finance.sina.com.cn/chanjing/b/20080507/05454838431.shtml

Business, energy or environmental regulations/discussions -Shanghai to unveil giant jet company on Sunday http://www.shanghaidaily.com/article/?id=358632

CHINA will set up a joint venture company in Shanghai on Sunday to build a "super-sized" aircraft, a local newspaper reported today.

China Commercial Plane Co Ltd plans to develop the country's first super-sized plane, Shanghai Securities News said.

Super-sized is defined as a plane with more than 150 seats or with a payload of more than 100 tons, including military and civilian jets. Only six countries now have the capacity to manufacture such aircraft.

The project is expected to have a total investment budget of between 50 billion yuan (US$6.99 billion) and 60 billion yuan, previous reports said.

The State-Owned Assets Supervision and Administration Commission will inject cash into the company and become its largest shareholder, previous news reports said.

AVIC I will invest assets and cash in exchange for a stake to become the second-largest shareholder in the planned company.

AVIC II and other state-owned companies including Baosteel will also invest, a Beijing News report said.

Governments, including Shanghai, are expected to invest 5 billion yuan in the company, a previous report from Shanghai Securities News said.

The company will recruit about 2,000 researchers, including 700 from the Shanghai branch of AVIC I, for the project, the report said.

The company may choose to be based in Lingang Industry Zone in Nanhui District, another report from Shanghai Business.com has said, citing "insiders."

The Lingang Zone is at the mouth of the Yangtze River, so large aircraft components can be transferred on ships, the Shanghai Business report said.

The zone is also near Pudong International Airport, the report added.

AVIC I built the country's first regional jet, ARJ21, in December. The jet will make its maiden flight this month. The 6-billion-yuan project is seen as a precursor to building jumbo jets.

-BEA gets OK for debit cards http://www.shanghaidaily.com/sp/article/2008/200805/20080507/article_358581. htm

THE Bank of East Asia said yesterday it has become the first overseas lender to receive government approval to issue yuan-backed debit cards on the Chinese mainland.

The Hong Kong-based bank said that its debit card system has passed an evaluation by the People's Bank of China and it is working with China UnionPay to join its network soon, according to an e-mailed statement.

The bank didn't say when it will start to issue the yuan debit cards but that it will finish preparations for the launch as soon as possible, according to the statement.

Industry sources said earlier that BEA has outsourced card issuing to UnionPay's subsidiary, China UnionPay Data, an e-payment outsourcing firm. UnionPay is the mainland's sole bank card system operator.

In June 2007, BEA became one of the first overseas banks to apply to issue debit cards on the mainland. It obtained approval in September from the China Banking Regulatory Commission.

BEA has set up a bank card data center in Shenzhen, Guangdong Province, and said earlier that it hoped to launch its debit cards this year.

Overseas lenders including HSBC, Citigroup and Standard Chartered have applied to issue yuan bank cards as they step up efforts to compete with domestic rivals.

The mainland authorities have yet to give a timetable over when foreign lenders can issue credit cards. Domestic banks can issue credit cards three years after they launch debit cards.

-Rules on incentive plans issued http://www.shanghaidaily.com/sp/article/2008/200805/20080507/article_358582. htm

CHINA'S securities regulator has issued rules on listed companies' incentive plans in an effort to prevent management officials from making improper gains arising from favorable timing.

Companies should not introduce share option schemes shortly before announcing major decisions, according to two notices issued by the China Securities Regulatory Commission. A listed company should not carry out major actions such as new stock issues, asset injection or bond offerings within 30 days after having announced an incentive plan and obtained shareholder approval, the regulator said.

Likewise, companies shouldn't introduce an incentive plan during and or within a 30-day period after the announcement and execution of major decisions, it said.

The rules also prohibit shareholders from directly awarding or transferring shares to management officials as some companies have done to avoid regulatory scrutiny.

Controlling and major shareholders who hold 5 percent or more of a company's shares may not be offered incentive plans, except with the approval of shareholders, CSRC said.

Media reports said that the regulator's action was taken in response to recent attempts by several companies to introduce incentive plans immediately before disclosing positive information.

"This action (the rule) would benefit both listed companies and their shareholders, as it improves regulation of the market," said Li Feng, a Galaxy Securities analyst.

Zhang Qi, an analyst with Haitong Securities Co, said that giving away shares can be a sensitive issue.

''The terms in the notice are straight forward and clear, making supervision easier," Zhang said.

-Crash causes acid leak on highway http://www.shanghaidaily.com/article/?id=358628

A LARGE amount of acid leaked onto a Zhejiang Province highway after two trucks crashed into one another yesterday, China News Service reported.The accident happened near the Shengzhou- Huangze section of Yongjin Highway about 4am when a truck carrying 13 tons of concentrated sulfuric acid, nine tons more than capacity, lost control and hit the vehicle ahead of it.

The acid was being transported in 325 plastic barrels, many of which leaked after the collision. Shards of glass were strewn about the site, the report said.

To prevent further damage, an emergency response team hosed down the road to dilute the acid and dumped sand on the road, the report said. The team also checked and removed the remaining acid barrels on the truck. After two hours, the road was clear, the report said.

The truck was transporting the acid to Ningbo in Zhejiang. It operated without a permit and attempted to avoid being caught by delivering its load at night, the report said, citing a policeman at the scene.

An investigation is underway.

Illegal securities consulting case receives court support for the first time http://finance.sina.com.cn/stock/y/20080507/06564838463.shtml According to CRSC, the case of Kong Ying engaging in illegal securities consulting was being looked into at Shanghai regional court- this is the first time that a illegal securities consulting case is receiving court support. DK - by receiving court support, do you mean financial support or it's won the case in court already? Is this "first" a meaningful first, or just a rhetorical "first"?

Labour activity, strikes, protests, terrorism

Balance between centre and local/regional regulations

Developments in oil/gas (including regulatory)

Olympic security and political risk (in or outside of China)

*Qin Gang indicates China's stricter visa requirements will continue for a while longer http://china.huanqiu.com/roll/2008-05/104895.html On May 6, MFA spokesman Qin Gang said during a press conference, that China's recent tightening of visa restrictions were in accordance with international conventions and as such the adjustments in Chinse visa policy will continue for some time. (AP- No specific dates given, of course)

CNPC/Sinopec

-Nippon Oil, China Nat'l Petroleum to consider joint oil refinery http://home.kyodo.co.jp/modules/fstStory/index.php?storyid=377069 Jiang Jiemin (L), president of China National Petroleum Corp., and Fumiaki Watari, chairma... Nippon Oil Corp. said Wednesday it and China National Petroleum Corp. have agreed to consider creating a joint venture to run the Japanese firm's Osaka oil refinery. It will be the first oil refining joint venture between Japanese and Chinese oil companies.

Honghua drilling

China virus death toll climbs to 28 amid warning of mass outbreak http://www.channelnewsasia.com/stories/afp_asiapacific/view/346137/1/.html BEIJING : The number of children confirmed to have died from a highly contagious virus in China rose to 28 on Wednesday as authorities warned a "mass outbreak" across the country was looming.

Hand, foot and mouth disease claimed the lives of a two-year-old girl and a three-year-old boy on Tuesday, lifting the total number of fatalities to 28, the official Xinhua news agency reported.

The children died in the central province of Hunan and the neighbouring Guanxi region, the first time fatalities had been reported in those areas.

Xinhua reported the number of people infected, the vast majority of them believed to be children, also rose by around 4,000 to 15,799, as authorities scrambled to distribute information to parents over how to prevent the disease.

"The country is gearing up for a nationwide war against a mass outbreak of hand, foot and mouth disease with the number of cases this year continuing to surge," the state-run China Daily newspaper said.

Most of the deaths had begun as the intestinal ailment enterovirus 71, which can lead to hand, foot and mouth disease.

The Chinese government declared a national alert on the weekend over the virus, which has spread throughout eastern, central and southern China as well as Olympic host city Beijing.

Beijing also has set up a high-level task force headed by Health Minister Chen Zhu to coordinate nationwide control efforts.

The virus first appeared in large numbers in eastern China in early March but was not made public until last week, prompting state press to accuse local officials of being too slow in reporting the outbreak.

Chen met the World Health Organisation's China representative, Hans Troedsson, on Monday, with the two sides agreeing to cooperate on keeping the virus in check, the China Daily reported.

Troedsson said at the weekend that the outbreak of hand, foot and mouth - a common virus in China - posed no health threat to the Beijing Olympics in August.

Hand, foot and mouth disease is spread through direct contact with the mucus, saliva or faeces of an infected person.

Symptoms include fever, malaise and sores or blisters on the buttocks and elsewhere.

It can be fatal in small children, whose immune systems are still developing.

However practising good hygiene, such as washing hands regularly and not sharing food, can prevent the disease.

Eastern Anhui province has been hardest hit.

Twenty-two of the deaths have occurred in one Anhui city, Fuyang, and the province has seen more than 5,000 cases. - AFP/ms