Business and Politics in Muslim World

China Fareeha Sarwar 21st to 27th February 2010

Presentation Date: 3rd March 2010

REPORT No. 108:

Outline

National report

Political front • China keeps a watchful eye on officials with family members living abroad (21ST February) • China to improve audit to government-funded project (21ST February) • CPC stresses human capital as top resource (22nd February) • China to extend anti-corruption fight to non-public entities (22nd February) • Chinese Communist Party issues code of ethics to ensure clean governance (23rd February) • China's cabinet appoints senior officials (23rd February • Chinese public flood Premier Wen with ideas, suggestions as annual legislative, advisory sessions approach (23rd February) • China amends law to strengthen supervision on civil servants (24th February) • China defense product developers, manufacturers should be subsidized: defense law draft (24th February) • First volume of Jiang Zemin's selected works published in 5 foreign languages (24th February) • Chinese mainland plans to send more provincial heavyweights to visit Taiwan (24th February) • China legislature deliberates draft amendment to state secrets law (24th February) • Responding to Pentagon report, China stresses cross-Strait peaceful development (24th February) • Website of Supreme People's Court redesigned for better information disclosure (25th February) • CPC calls on its members to improve capabilities through continuous study (25th February) • China spirit is back to life in Taiwan student textbooks: Liberty Times (26th February)

1 • China's prosecutors investigate over 41,000 officials for work-related crimes last year (26th February) • China adopts law on national defense mobilization (26th February) • Senior members of nat'l advisory body discuss agenda of upcoming annual session (26th February) • Mainland willing to sacrifice some interests in economic pact with Taiwan: Wen (27th February)

Foreign relations

• China accuses US of online warfare in Iran • Despite China, U.S. says Taiwan air force needs help (21st February) • Zambian president sees relationship with China most honorable (21st February) • Frustrated US struggles to open dialogue with China (22 February) • Report: Google hacking traced to two Chinese universities (22nd February) • US 'Tracks Down' Chinese Google Hacker (22nd February) • S.Korea's chief nuclear negotiator to visit China this week (22nd February) • China, Pakistan agree to deepen partnership (22nd February) • Chinese Embassy donates 10,000 USD to Cambodian Red Cross (22nd February) • China says Google hacking claims "groundless" (23rd February) • China encourages US-North Korea to meet (23rd February) • China's position on East China Sea unchanged, FM Spokesman (23rd February) • China hopes for early restoration of Niger's constitutional order (23rd February) • China stresses friendly ties with DPRK as its "consistent policy" (23rd February) • Chinese vice premier urges deeper economic ties with Slovakia (23rd February) • Chinese Premier meets FMs of Pakistan, Kazakstan (23rd February) • Commentary: China cyber attacks against Google pure fabrication (24th February) • China denies government links to cyber attacks on Google (24th February) • China supports one-year extension of UN mission in Timor-Leste (24th February) • China welcomes cease fire between Sudanese government and Darfur rebels (24th February) • Expert warns Pentagon report a front for further arms sales to Taiwan (24th February) • China, Japan urged to properly handle sensitive bilateral issues (25th February) • China's position on suspending military visits with U.S. "unchanged": spokesman (25th February) • Interview: Fatah expects continued Chinese support for Palestinian cause: senior official (25th February) • China urges US to avoid further damage to bilateral ties (25th February) • Linking hackers' cyber attacks with Chinese government, military groundless: Defense spokesman (25th February) • China, Cambodia sign Consular Treaty to further strengthen cooperation ties (25th February) • China announces 20 mln yuan additional aid to Haiti (25th February)

2 • China calls for more diplomatic efforts to resolve Iran nuclear issue (25th February) • Chinese VP pledges closer ties with South Africa (25th February) • China urges Japan-U.S. military co-op not to target third party (25th February) • China welcomes India-Pakistan talks (25th February) • China denies violating UN sanction on DPRK (25th February) • Ambassador: high-level exchanges cornerstone of China-Africa relations (26th February) • Presidents of China, Zambia pledge to elevate relationship (26th February) • China pledges to advance relations with Zimbabwe (26th February) • China doesn't want 2010 to be "unpeaceful year" with U.S. (27th February) • China's Wen hopes for good Sino-U.S.trade relations (27th February)

Economic front

• China January inward FDI up 7.79% yoy; 6th straight monthly rise (21st February) • China to improve audit to government-funded project (21st February) • China Tightens Bank Lending Rules (21st February) • China's household appliance exports recover in second half of 2009 (21st February) • China tourism revenue up 26.9% during Spring Festival holiday period (21st February) • SCENARIOS-Is change coming to China's yuan policy? (22nd February) • ASEAN-China free trade may raise business profit in Indonesia (22nd February) • China expects 8% export growth in 2010: minister (22nd February) • Government foresight, economic growth pattern adjustment saved China from worst of financial crisis: scholars (22nd February) • China's market restrictions to end in 15 years: expert (22nd February) • Chinese shares close lower on 1st trading day in Year of Tiger (22nd February) • China's CPI to rise moderately in 2010: official (22nd February) • China's currency policy not to blame: Thai economist (22nd February) • Taiwan leader says economic pact with mainland "absolutely necessary" (22nd February) • The Chinese Are Selling Treasuries – So What Are They Buying? • Saudi Arabia Shifts its Focus to China as the United States Falls Out of Favor (23rd February) • Better access to finance for China's small businesses in 2009 (23rd February) • Interview: China's currency policy not to blame for trade surplus: economist (24th February) • Interview: Appreciation of Chinese yuan no solution to world trade imbalance: South African experts (24th February) • VP: China's labor unions play unique role (25th February) • China to further adjust and reinvigorate key industries: State Council (25th February)

3 • Blaming Chinese currency for global imbalance not right: official (25th February) • Chinese shares hit one-month high as gov't promises to further promote key industries (25th February) • Taiwan sees big jump in orders from mainland (25th February) • China's energy efficiency improved in 2009: report (26th February) • China's economic macro-control to be tested in 2010 (26th February) • China shares fall on policy uncertainty ahead of legislative meeting, up 2.1 pct for February (26th February) • Fourteenth negotiation talks of Sino-Australian FTA held in Canberra (26th February) • China to promote development of rural financial institutions: CBRC (27th February) • China's massive stimulus package effective, economy recovering: Premier (27th February) • Premier vows to tame "wild horse" of skyrocketing housing prices (27th February) • Backgrounder: Recent major trade disputes between China and the U.S. (27th February) • Wen urges U.S. to open exports of hi-tech products to China (27th February)

Social front • 64 mln people on China's roads Saturday (21st February) • China boosts auditors' power as stimulus package spending prompts corruption concerns (21ST February) • Festival gift-giving challenges China's anti-corruption efforts (21ST February) • China PLA officer urges new Internet control agency (22nd February) • Chinese lawmakers call for enhancing supervision of food safety (24th February) • China to step up supervision to key sectors, officials to curb corruption (26th • February) • Premier Wen stresses fair distribution of social wealth (27th February) • Premier: "dignity" of people lies in protection of Constitutional rights, freedom (27th February) • Chinese premier encourages university graduates to start own businesses (27th February)

Ethnic issues • Commentary: Facts speak louder than words (21ST February • Overseas Chinese slam Dalai Lama's attempt to split China by flaunting Western connections (21ST February) • Censorship at heart of Tibet/China issue: Dalai Lama (21st February)

Environmental front • Danish PM appreciates Chinese premier's role in Copenhagen conference: FM spokesman (24th February)

4 • Interview: China takes longer-term perspective to cope with climate change: experts (24th February) • China has "No intention" of capping emissions (25th February)

Regional report

North

Politics

• China police gear up security for upcoming NPC,CPPCC annual sessions (24th February) • Beijing plays potent dealmaker, blocker in China M&A (26th February)

Social front • Chinese capital plans for law on garbage sorting: report (27th February)

Economic front • China's labor unions play unique role: Vice President (26th February) • Beijing spends big to build world-class auto power assembly base (26th February)

Northwest Politics Social front

Economic front

Northeast Politics • Senior provincial legislator expelled from Party, office for corruption (23rd February) Social front Economic front

Southwest

Politics Social front • Gang boss, former police chief stand trial in SW China's mob crackdown (21ST February)

5 • "Hugely corrupt" official gets death sentence with reprieve in SW China (24th February) • More efforts needed to fight drought in SW China, says vice premier (27th February)

Economic front

South central Politics Social front

Economic front • Per capita GDP in south China's Pearl River Delta Region approaches $10,000 (24th February)

East

Politics Social front • Chinese netizens make fun of NYT Google hacking report (22nd February) • Chinese city becomes WIPO's pilot city for copyright protection (25th February)

Economic front

• Investors may start stock index futures account application Monday (21st February) • Shanghai World Expo to showcase latest fruits of world civilizations: Wen (27th February)

HONGKONG AND MACAU Politics • Hong Kong LegCo by-election set for May 16 (22nd February) • New U.S. Consul General in Hong Kong to take office (25th February) Social front Economic front

• Macao's forex reserves reach 18.43 bln USD in January (22nd February) • Macao's casino industry cashes in on Lunar New Year holiday: report (23rd February) • HK to raise stamp duty to prevent property bubble (24th February) • HK economy to grow by 4-5% in 2011: financial chief (24th February) • HK to ensure adequate fiscal reserves: financial chief (24th February) • Potential risks for asset bubble on the rise in HK: financial chief (24th February) • HK financial official forecasts 25.2 bln deficit for 2010 (24th February)

6 • HK to reinforce its global financial center position (24th February) • Hong Kong budget focuses on economic recovery (24th February) • HK sees 49.1 bln HK dollars surplus in January (26th January)

7

National report

Political front • China keeps a watchful eye on officials with family members living abroad (21ST February) The Chinese government is strengthening its effort to monitor officials whose wife and children live abroad, as such officials are prone to abuse power. The term "naked official" has been selected as one of China's top ten buzzwords of 2009 by Chinese linguists. It refers to the officials whose family members have moved overseas, while they themselves work in the country alone usually with the other country's visa in hand. The "naked official" phenomenon has attracted great attention in China, as there have been many cases where such officials have been found to be corrupt. Pang Jiayu, former vice chairman of the provincial committee of the Chinese People's Political Consultative Conference (CPPCC) in northwestern Shaanxi, had his wife and son emigrate to Canada in 2002, six years before he was sentenced to prison for 12 years for bribery and dereliction of duty. Zhou Jinhuo, former director of the Industry and Commerce Bureau of east China's Fujian Province, tried to flee overseas in June 2006 when he found himself being investigated by anti-corruption agencies. His wife had emigrated to the United States previously. "It is reasonable to cast suspicion over the uprightness and honesty of officials who have arranged their family relatives to live abroad," said Zhong Li, a lawyer of Beijing Maxpro Law Firm. Prof. Huang Zongliang of Peking University has recently expressed that an effective way to curb corruption was to create a personal assets reporting system for officials. Prof. Gong Weibin with the Chinese Academy of Governance, proposed that officials whose family relatives lived overseas should report the reasons why their family members went overseas, their financial sources and places where their family members live or work, so to better protect national interests and prevent cadres from corruption. A communique, issued by the fifth plenary session of the 17th Central Commission for Discipline Inspection (CCDI) of the Communist Party of China (CPC) this January, stipulates that officials should report their properties and investments as well as employment of their spouse and children, and authorities should particularly monitor those officials who had family members living overseas. The Shenzhen municipal government issued a regulation in November 2009, stipulating that "naked officials" were prohibited from serving as leading officials in major Party and governmental departments. As the "two sessions", or annual sessions of the National People's Congress (NPC), the top legislature, and the Chinese People's Political Consultative Conference (CPPCC), the top advisory body, are approaching, online surveys show that corruption remains the No. 1 concern among Chinese people.

• China to improve audit to government-funded project (21ST February)

8 China Saturday issued a regulation on the implementation of the Audit Law, which required close audit to government-funded projects, to make sure financial funds were properly used. The regulation, issued by the State Council, or China's Cabinet, asked auditing offices to conduct follow-up audit to organizations or projects, which were funded or partly funded by government. The regulation was revised and passed at an executive meeting of the State Council on Feb. 2 and will become effective on May 1 this year. Under the regulation, audit authorities are entitled to launch special investigation into government departments or organizations on budget management or the management and utilization of state assets. To ensure accurate and impartial auditing, the regulation provides that organizations are entitled to apply for government adjudication, administrative review or lodge a lawsuit if they disagree with the audit results. The current Audit Law was amended and passed in February 2006 by the Standing Committee of the Tenth National People's Congress.

• CPC stresses human capital as top resource (22nd February) (Xinhua) -- Senior officials of the Communist Party of China (CPC) on Monday urged Party organs and governments at all levels to prioritize talented individuals as the top resource for social and economic development. It was revealed in a meeting of the Political Bureau of the CPC Central Committee, which was presided over by General Secretary of the CPC Central Committee, Hu Jintao. According to a statement issued by the meeting, members of the Political Bureau deliberated the mid- and long-term plan for national talent development (2010-2020), saying that a more open policy for introducing and cultivating talents should be carried out. The Party should improve its leadership of talent management to cultivate talents, while all provincial-level governments and governmental departments in charge of important industries should also work out corresponding talent development plans, said the statement. During the meeting, members of the Political Bureau also discussed a government work draft report which will be submitted by the State Council to the top legislature's annual session next month. Under the leadership of the CPC Central Committee and with joint efforts by the country's people of all ethnic groups, China made "hard-won" achievements against the backdrop of the global economic downturn and international financial crisis in 2009, the statement said. The State Council and local governments at all levels had performed their duties well and done a lot to overcome the difficulties, it said. The year of 2010 will be vital to continue dealing with the impact of the global downturn and keeping steady economic growth as well as to transform the mode of economic development. The meeting also called for more efforts to fulfill the country's 11th Five-Year Plan (2006-2010), the statement said.

9 • China to extend anti-corruption fight to non-public entities (22nd February) (Xinhua) -- China's National Bureau of Corruption Prevention said in a circular posted on its website Monday that it would explore ways to fight corruption in non-public commercial entities and "new social organizations" in 2010. "New social organizations" refer to intermediaries, non-governmental organizations and private non-business groups. Statistics from the Ministry of Civil Affairs showed there are around 400,000 such organizations in China. Industry associations will also be monitored for corruption, according to the circular, which highlighted the bureau's work in 2010. The bureau promised that it would earnestly exchange and cooperate with the international community in the anti-corruption efforts. It said that authorities would continue working to prevent officials using public money to travel overseas and they would work on the implementation of regulations for supervising officials whose spouses and children have emigrated abroad. It also pledged to improve transparency of government affairs as well as factory and village management's dealing of local affairs. According to an survey carried out by People's Daily Online, corruption has remained one of the top three concerns of Chinese netizens since the survey was initiated in 2006. Chinese authorities' latest move in the fight against corruption took place on Saturday as the State Council issued a revised regulation on the implementation of the Audit Law, which aims at tightening supervision of areas highly prone to corruption, including the construction industry.

• Chinese Communist Party issues code of ethics to ensure clean governance (23rd February) (Xinhua) -- The Communist Party of China (CPC) Central Committee issued a code of ethics for CPC cadres to follow Tuesday to ensure clean practice in their work and prevent corruption. The guidelines specify 52 unacceptable practices of CPC leaders and cadres, including accepting cash or financial instruments as gifts, and using their influence to benefit their spouses or children with regards to their employment, stock trading or business. The guidelines also prohibit CPC officials from for-profit activities and abusing public fund for personal interests. The CPC Central Committee urged officials in a notice to earnestly follow the guidelines and warned of "strict" punishment to those who violate the regulations.

• China's cabinet appoints senior officials (23rd February China's State Council, or Cabinet, Tuesday appointed Zhang Yong as director of the executive office of a new national food safety commission. A circular issued by the State Council said Zhang's post is ministerial level. The State Council has set up a food safety commission consisting of Vice Premiers Li Keqiang, Hui Liangyu and Wang Qishan, as well as more than ten heads or vice heads of government departments in charge of health, finance, and agriculture, among others. The lineup of the commission's members was announced earlier this month, reflecting the Chinese leadership's determination to address food safety issues.

10 The State Council also appointed Yang Zhijin as the country's vice culture minister. Yang was former vice president of the China Federation of Literary and Art Circles, a nationwide non-governmental organization composed of associations of writers and artists. The State Council also ended Chen Xiaoguang's and Zhou Heping's term as vice culture minister, and Wang Jun's term as vice director of the General Administration of Sport. The State Council also ended Cui Jizhe's term as vice president of Xinhua News Agency.

• Chinese public flood Premier Wen with ideas, suggestions as annual legislative, advisory sessions approach (23rd February) (Xinhua) -- Chinese citizens are flooding Chinese Premier Wen Jiabao with suggestions and questions as the nation's top legislative and advisory sessions approach. An online survey to hear the voice of citizens at www.news.cn has received more than 5,300 responses within three days of going live, with house prices, personal income and medical reform being the hot topics. "(Skyrocketing) house prices are seriously challenging the central government," wrote one person from east China's Jiangsu Province. "The income gap is rapidly widening. I hope the government can discuss this issue seriously at the upcoming National People's Congress (NPC) and introduce countermeasures," said another from north China's Inner Mongolia. The public's expectations for policymakers is high as the NPC, China's top legislature, and the Chinese People's Political Consultative Conference (CPPCC), China's top advisory body, begin their annual sessions in Beijing next week. The NPC is expected to review the government's work report for last year, vote on the central and local governments' draft budgets for 2010 and map out this year's development blueprint. The 11th National Committee of the CPPCC will also open its third session next week, where its members can air their suggestions on what the government should focus on this year. Analysts said although China's gross domestic product (GDP) grew 8.7 percent year on year to 33.54 trillion yuan (about 4.91 trillion U.S. dollars) in 2009 on the back of the massive economic stimulus package, resolving the public's major concerns -- such as housing affordability and the gap between rich and poor -- remains an uphill battle for policymakers. "Before the global financial crisis, China's economy was mainly driven by massive investment and exports. Such an economic growth pattern was not sustainable, " said Jian Zhuang, senior economist at the Asian Development Bank's China mission. "In this post-crisis era, how can China optimize its economic structure will be closely monitored at this year's two annual sessions," he said. Zhuang's watchlist for the two sessions include: the reform of the income distribution system; the transformation of the economic growth pattern; the restructuring of industry; the Renminbi exchange rate; and measures to tackle inflation and asset price bubbles. "Many of these are old problems," Zhuang said, "but some are new. I want to see how China addresses these issues."

11 According to the latest figures by the National Bureau of Statistics (NBS), China's consumer price index (CPI), an indicator of inflation, rose 1.5 percent year on year in January. The NBS' statistics also showed the producer price index (PPI), an inflation indicator at the wholesale level, rose 4.3 percent in January from a year earlier, up from 1.7 percent in December 2009 when the figure ended 12 months of decline.

• China amends law to strengthen supervision on civil servants (24th February) (Xinhua) -- China's top legislature Wednesday began to deliberate the amendment to the Administrative Supervision Law, aiming to enhance supervision of the country's civil servants. The draft was submitted by the State Council to the three-day bimonthly session of the National People's Congress (NPC) Standing Committee, which started Wednesday, for its first reading. Supervision Minister Ma Wen said when briefing lawmakers about the draft amendment that it aimed to improve the supervisory and offence reporting system so as to fight corruption and work inefficiency. The draft states that its targets only people working in government departments, with lawmakers, political advisors and judicial staff excluded. It says supervision bodies should offer advice on removing government officials, suspending officials from duties and improving the anti-corruption mechanism. The current Administrative Supervision Law, which took effect in May 1997, has played an important role in "ensuring government decrees be implemented, safeguarding administrative disciplines, promoting clean governance and boosting governance efficiency," Ma said. The draft also provides details about the offence reporting system. It says supervision departments should apply real-name reporting and should not make public the reporting information so as to protect informants.

• China defense product developers, manufacturers should be subsidized: defense law draft (24th February) (Xinhua) -- Chinese enterprises and public entities that develop and manufacture products for national defense should receive subsidies and preferential treatment, a draft law on national defense mobilization says. The draft was tabled for its third reading at the National People's Congress (NPC) Standing Committee's bimonthly session that started Wednesday. The NPC Law Committee says the draft is ready to put to the vote at the three-day session after a final revision. The draft says the country should "build a national defense mobilization network in line with the needs of national security, economic and social development and emergency response." It sets out the principles and organizational mechanisms for national defense mobilization, personnel and strategic material storage and the prevention and relief of war-related disasters.

12 "The NPC Standing Committee will [declare] a national or regional mobilization in line with the Constitution and law if state sovereignty, unity, territorial integrity or security is threatened," it says. Drafting of the law started in September 2000.

• First volume of Jiang Zemin's selected works published in 5 foreign languages (24th February) (Xinhua) -- The first volume of the selected works by former Chinese President Jiang Zemin has recently been published in five foreign languages by China's Foreign Languages Press. Versions in English, French, Russian, Spanish and Japanese are available, translated by the Compilation and Translation Bureau of the CPC Central Committee. The work should help foreign readers better understand the progress of China's reform and opening up as well as its modernization drive. In it, Jiang writes about many topic including economy, politics, culture, environment and foreign policy, according to the press. The Chinese version, consisting of three volumes, has already been published by China's People's Publishing House.

• Chinese mainland plans to send more provincial heavyweights to visit Taiwan (24th February) (Xinhua) -- The Chinese mainland plans to send more senior provincial officials to visit Taiwan this year after sending three in 2009, a spokesperson said here Wednesday. Fan Liqing, spokeswoman for the State Council's Taiwan Affairs Office, told a regular press conference visits by provincial heavyweights last year have deepened economic cooperation, boosted cultural exchanges across the Strait and benefited local people. Two party chiefs and a government head from Guangxi Zhuang Autonomous Region, Jiangsu and Henan Provinces led delegations to Taiwan last year. Liang Baohua, chief of the Communist Party of China's (CPC) provincial committee in Jiangsu, was the first provincial-level party chief to visit Taiwan. Fan did not say how many officials or when they will visit the island, adding that the mainland will have discussions with Taiwan. In addition, she confirmed that the CPC and the Kuomintang will continue to sponsor the annual Cross-Strait Economic, Trade and Cultural Forum this year. The event has been an important platform for the two parties and for people from different walks of life, she said. "The two sides are still exchanging ideas about where and when to hold the event," Fan said. Last year's forum, held in Changsha, capital of central China's Hunan province, on July 11 and 12, focused on culture. Fan also told the press conference three mainland media groups have applied to send reporters to Taiwan and that she hopes they will be approved by the island as soon as possible. Currently, five central level mainland media groups and two media organizations from coastal Fujian Province have posted reporters on the island.

13

• China legislature deliberates draft amendment to state secrets law (24th February) (Xinhua) -- The Standing Committee of the 11th National People's Congress (NPC) on Wednesday deliberated a draft amendment to the state secrets law. The draft was submitted for its second reading during the NPC Standing Committee's bimonthly session that started Wednesday. The first reading was done last June. The draft specifies a definition for state secrets: information that concerns state security and interests and, if leaked, would damage state security and interests in the areas of politics, economy and national defense, among others. NPC Law Committee Vice Chairman Sun Anmin, who briefed lawmakers on the draft amendment, said secrets basically have three classifications: state, work and commercial. The existing law on guarding state secrets, which took effect in May 1989, stipulated information concerning major state policies and decisions, armed forces and diplomatic events, national economic and social development, science and technology, and acts safeguarding national security and criminal investigation, among other items, were state secrets. According to the NPC, the amendment aims to boost citizens' awareness of the importance of safeguarding state secrets, with the original stipulation of the range of state secrets being too wide and vague. The draft makes clear that state secrets should be protected by law and "any act threatening the security of a state secret must be punished by law." It also defines secrecy levels and authority limits in the definition, and makes clear time limits for different levels of confidentiality and conditions for declassification. "The time limits for keeping state secrets should be decided in line with its nature and the need to safeguard national security and interests," it says. The time limit for keeping top-level secrets should be no more than 30 years, no more than 20 years for low-level state secrets, and less than 10 years for ordinary state secrets, the draft says. It says public entities and companies whose work concerns state secrets, such as armaments research and manufacture, should be subject to security scrutiny. Enterprises and public entities entrusted to work with state secrets should sign confidentiality agreements, it says. The police and state security departments should play their role in handling cases concerning state secrets. Lawmakers will also review the draft law on mobilization for national defense for the third time at the three-day legislative session, which was chaired by top legislator Wu Bangguo. Amendments to the Administrative Supervision Law and the Copyright Law, which were submitted for first reading, will also be deliberated during the session. The legislative session will also make final preparations for the 11th NPC annual session which is scheduled to begin March 5.

• Responding to Pentagon report, China stresses cross-Strait peaceful development (24th February)

14 (Xinhua) -- A Chinese mainland spokesperson Wednesday stressed the peaceful development across the Taiwan Strait while commenting on a U.S. report on the weakness of Taiwan's air force.

"Compatriots across the Strait are of the same family and blood bond. We believe only the harmony among family members will benefit everyone," Fan Liqing, spokeswoman of the State Council's Taiwan Affairs Office, said at a regular press conference in Beijing.

The U.S. Defense Intelligence Agency report, cited by the U.S. media on Monday, said far fewer of Taiwan's 400 combat aircraft in service are operationally capable.

The report was speculated as a move of Pentagon to provide justification for Washington to grant the sale of relatively advanced F-16 jet fighters to Taiwan.

Asked to comment on the speculation, Fan said, "The deeper the peaceful development across the Strait goes, the more welfare and interests of Taiwan people will be protected and the stronger their confidence of the future will be."

"Chinese on both sides of the Strait are capable of handling the cross-Strait issues with their own wisdom," she added.

• Website of Supreme People's Court redesigned for better information disclosure (25th February) (Xinhua) -- China's Supreme People's Court (SPC) had redesigned the layout of its official website so users could better access its information, Shen Deyong, executive vice president of the SPC, said Thursday. Information disclosure, online services and public participation would be the website's primary functions, and it would aim to ensure easy access to judicial information for the public, Shen said. With better-arranged online services, the website was also expected to facilitate the legal procedures at the court for people and make journalists' interviews of the SPC easier, Shen said. Members of China's top legislative and advisory bodies and other ordinary Chinese people could submit their comments and suggestions regarding judiciary work much easier via the new website, which would strengthen supervision of courts, he said. The official website of the SPC should be taken as a "window" for the courts to keep in tune with the people, according to Shen. The official website of the SPC, www.court.gov.cn, was first launched in 2000.

• CPC calls on its members to improve capabilities through continuous study (25th February) (Xinhua) -- The Communist Party of China (CPC) has called for its members to keep studying so as to adapt to the needs of the era.

15 A spokesman for the Publicity Department of the CPC Central Committee said the current age is undergoing unprecedented development and changes and is an era featured by accelerated "knowledge innovation and update". "Party organizations and members would be left behind the era if they do not strengthen their learning," the spokesman said. The spokesman made the comments when elaborating the building of study-oriented Party organizations at various levels. Building study-oriented Party organizations is a "fundamental and significant project" for the building of a study-oriented Party, he said. He said as China has entered a new development stage, with new things and problems frequently emerging, and only by enhancing study can the Party improve its capabilities to promote development and social harmony.

• China spirit is back to life in Taiwan student textbooks: Liberty Times (26th February) A local scholar who serves as the curriculum commissioner yesterday voiced her anger that Chinese history will take up far more space in high school textbooks than Taiwan history in the latest course frame work set by the MOE, which may cause a loss of Taiwan identity, Liberty Times report said.

As an elected government, the Ma administration is unforgivable for this move. The truth is after the KMT regime fled to Taiwan after the World War II, it had tried hard to impose its own “great China” historical view on Taiwan people. Over decades of brainwashing in schools, exams and political propaganda, Taiwan’s national identity diminishes and its own history is regrettably embedded in the China context.

To facilitate the ideological remoulding, the KMT regime had done whatever it takes to nip anything subversive in the bud. For example, the Same-core circle theory proposed by former education minister Du Cheng-sheng is revered as rational theory conducive to the establishment of Taiwan identity, but blackmailed by KMT as a heresy.

It is widely known that to destroy a nation, destroying its history first. Taiwan’s national identity is on the verge of an unprecedented crisis following a series of economic and political tricks by KMT. Taiwan people should step out and blast the insane government with votes on their hands. http://www.etaiwannews.com/etn/news_content.php?id=1189878&lang=eng_news&cate _img=83.jpg&cate_rss=news_Politics_TAIWAN

• China's prosecutors investigate over 41,000 officials for work-related crimes last year (26th February)

16 (Xinhua) -- China's prosecutors investigated 41,531 officials in 32,439 cases of embezzlement, bribery, dereliction of duty and other work-related crimes last year, the top prosecutorial body said Friday. Among the investigated, 32,176 were implicated in cases of embezzlement and bribery, while 9,355 were in connection to dereliction of duty or infringement of people's rights, Qiu Xueqiang, deputy procurator general of the Supreme People's Procuratorate, told Xinhua.

• China adopts law on national defense mobilization (26th February) (Xinhua) -- China's top legislature approved the law on national defense mobilization Friday, after three readings since 2000. The law was approved at the National People's Congress (NPC) Standing Committee's three-day bimonthly session which ended Friday. Drafting of the law started in September 2000.

• Senior members of nat'l advisory body discuss agenda of upcoming annual session (26th February) The Standing Committee of the National Committee of the Chinese People's Political Consultative Conference (CPPCC), the country's top advisory body, held a meeting Friday to discuss the agenda for the upcoming CPPCC annual session in March. Jia Qinglin, chairman of the CPPCC National Committee and member of the Standing Committee of the Communist Party of China (CPC) Central Committee Political Bureau, presided over the opening ceremony of the three-day meeting. During the meeting, senior political advisors will set an agenda for the third session of the 11th CPPCC National Committee, discuss and approve a work report for the Standing Committee of the CPPCC National Committee and a namelist for the secretariat of the March session. Political advisors on Friday also heard annual work reports from the committees of the CPPCC National Committee. The CPPCC reflects China's "multi-party cooperation system" under the leadership of the CPC. The CPPCC committees at different levels have representatives from different political groups, ethnic groups, and people of all walks of life.

• Mainland willing to sacrifice some interests in economic pact with Taiwan: Wen (27th February) Premier Wen Jiabao said Saturday the mainland could sacrifice some of its interests in the negotiations of the cross-Strait Economic Cooperation Framework Agreement (ECFA). "The reason is very simple: Taiwan compatriots are our brothers," Wen said during an online chat with Internet users through the central government website www.gov.cn and www.xinhuanet.com, website of Xinhua News Agency. Wen said the mainland would take into full consideration the interests of Taiwan's medium and small-sized enterprises and the Taiwan public, especially those of Taiwan farmers. Advancing the ECFA conforms to the interests of people on the two sides, Wen said.

17 The ECFA, a wide-ranging economic pact between the Chinese mainland and Taiwan, is a current priority in work on deepening cross-Strait economic cooperation. The basic content of the agreement would cover major economic activities across the Strait, including market access for commodity trade and service trade, Rules of Origin, early harvest program, trade remedy, dispute settlement, investment and economic cooperation. On Jan. 26, 2010, experts from the mainland and Taiwan held the first round of talks on the ECFA in Beijing. Formal discussions would be held at the fifth round of talks this year between the mainland-based Association for Relations Across the Taiwan Straits (ARATS) and the island's Straits Exchange Foundation (SEF), two organizations authorized to handle cross-Strait issues.

Foreign relations

• China accuses US of online warfare in Iran

Iran election unrest an example of US 'naked political scheming' behind free speech facade, says Communist party editorial.

The United States used "online warfare" to stir up unrest in Iran after last year's elections, the Chinese Communist party newspaper claimed today, hitting back at Hillary Clinton's speech last week about internet freedom.

An editorial in the People's Daily accused the US of launching a "hacker brigade" and said it had used social media such as Twitter to spread rumours and create trouble.

"Behind what America calls free speech is naked political scheming. How did the unrest after the Iranian election come about?" said the editorial, signed by Wang Xiaoyang. "It was because online warfare launched by America, via YouTube video and Twitter microblogging, spread rumours, created splits, stirred up and sowed discord between the followers of conservative reformist factions."

Washington said at the time of the unrest that it had asked Twitter, which was embraced by Iranian anti-government protesters, to remain open. Several social media sites, including YouTube, Facebook and Twitter, have been blocked in China in the last year.

The editorial asked rhetorically whether obscenity or activities promoting terrorism would be allowed on the net in the US. "We're afraid that in the eyes of American politicians, only information controlled by America is free information, only news acknowledged by America is free news, only speech approved by America is free speech, and only information flow that suits American interests is free information flow," it added.

18 It attacked the decision to cut off of Microsoft's instant messaging services to nations covered by US sanctions, including Cuba, Iran, Syria, Sudan and North Korea, as violating America's stated desire for free information flow. Washington later said that such services fostered democracy and encouraged their restoration.

China initially gave a low-key response to Google's announcement that it was no longer willing to censor google.cn. The internet giant said it had reached its decision following a Chinese-originated cyber attack targeting the email accounts of human rights activists, and in light of increasing online censorship.

Clinton's direct challenge to China, in a speech that had echoes of the cold war with its references to the Berlin wall and an "information curtain", led Beijing to warn that US criticism could damage bilateral relations. Clinton called on China to hold a full and open investigation into the December attack on Google.

In an interview carried by several Chinese newspapers today, Zhou Yonglin, deputy operations director of the national computer network emergency response technical team, said: "Everyone with technical knowledge of computers knows that just because a hacker used an IP address in China, the attack was not necessarily launched by a Chinese hacker."

US diplomats sought to reach out to the Chinese public by briefing bloggers in China on Friday. They held a similar meeting during Barack Obama's visit in November.

http://www.guardian.co.uk/world/2010/jan/24/china-us-iran-online-warfare

• Despite China, U.S. says Taiwan air force needs help (21st February)

TAIPEI (Reuters) - Taiwan's fighter jets would fall short in combat against military rival China, the U.S. government said in a report on Monday that could lead to new weapons sales sure to anger Beijing.

Many of Taiwan's roughly 400 combat aircraft would not work in action due to age and maintenance problems, while protection of the island's airfields little more than 160 km (100 miles) from China was a major issue, the U.S. government's Defense Intelligence Agency said in the report, released in Taiwan.

The one-off report, ordered by Congress, says upgrades are needed as China gets stronger. The United States is Taiwan's top arms supplier but also wants to improve its ties with Beijing.

China reacted angrily last month after President Barack Obama's administration unveiled its first arms package for self-ruled Taiwan, which Beijing claims as its own, saying it would impose unspecified sanctions on the companies involved.

19 Another jolt in Sino-U.S. relations could shake markets in Asia further after their bout of nerves over the reaction to last month's $6.4 billion U.S. weapons proposal.

"Although Taiwan has nearly 400 combat aircraft in service, far fewer of these are operationally capable," the report says.

"In recent years, the Chinese People's Liberation Army has increased the quantity and sophistication of its ballistic and cruise missiles and fighter aircraft opposite Taiwan, which has diminished Taiwan's ability to deny PRC efforts to attain air superiority in a conflict," it says.

Taiwan is seeking 66 new U.S.-made F-16 fighter jets, but Washington officials wary of another China backlash have hedged on the request, saying they must evaluate Taiwan's overall defense needs.

Congress may use the report to pressure the Pentagon into approving the F-16s, said Wendell Minnick, Asia bureau chief with Defense News.

Beijing has claimed sovereignty over Taiwan since 1949, when Mao Zedong's forces won the Chinese civil war and Chiang Kai-shek's KMT fled to the island. China has threatened to attack if Taiwan tries to formalize its de facto independence.

The United States switched diplomatic recognition from Taipei to Beijing in 1979, recognizing "one China". But it remains Taiwan's biggest ally and is obliged by the 1979 Taiwan Relations Act to help the island defend itself. http://www.reuters.com/article/idUSTRE61L1JE20100222

• Zambian president sees relationship with China most honorable (21st February)

(Xinhua) -- Zambian President Rupiah Banda speaks highly of the efforts China has made in helping his country develop, describing relationship with China as most honorable.

The president made the remarks in an interview with Xinhua prior to his scheduled visit to China late February.

Banda said the visit will strengthen the bonds of friendship between the two countries which are based on mutual trust, transparency, South-South Cooperation and a win- win relationship.

He said that since Zambia and China established diplomatic relations 45 years ago, the two sides have been experiencing a cordial, warm and brotherly friendship through the whole period.

20 The president noted that China has been an all-weather friend to Zambia. During the current global crisis, while other investors were pulling out and laying off employees, the Chinese investors, instead, continued to invest in Zambia.

The China Non-Ferrous Metal Mining Cooperation even offered to run suspended Luanshya Copper Mine and reopened it, creating employment and assisting to secure the livelihood of local people in the mining area.

"As we all know, China is one of the biggest investors and source of financing. All the countries in the world are competing for Chinese investment. My delegation includes some Zambian business houses and therefore I expect that strategic partnerships and stronger ties will be developed between our peoples," said Banda.

Recalling the long history of China-Zambia friendship, Banda said that decades ago, Zambia was in many difficulties until China came to aid the country and constructed the Tanzania-Zambia Railway Line (TAZARA), which was at the time deemed impossible by the rest of the world.

The railway helped Zambia get rid of difficulties to a path of independence and development, the president said.

"Every time we think of TAZARA, we think about the lives of 64 young Chinese sacrificed to build that railway line and to keep Zambia alive through the critical time."

Meanwhile, Banda noted that the 1,700-km long oil pipeline that funnels fuel from Tanzania to Zambia, as well as roads, stadium, medical centers, textile plants, government buildings, which were constructed by Chinese workers from past to now, are considered the new milestones of China-Africa, China-Zambia friendship following TAZARA.

During the same period, Zambia has been benefitting from expert exchange projects and training programs provided by the Chinese government in the fields of health, agriculture and education, he said.

China as a major economy is now among those nations leading the world, the president said. "If the world is looking to China for economic chance, why shouldn't Zambia do the same?"

Commenting on the voice from a few Western media that China and other emerging economies are grabbing Africa's natural resources instead of helping develop African economies, Banda said it was just because of the enormous need on raw materials from such economies' industrial development, many African countries could eliminate poverty via cooperation with them on the basis of mutual benefit.

21 No one can deny the contribution and help Chinese investors have done in Africa, he said.

"Issues of climate change, underdeveloped financial markets, developing agriculture potential, improving the quality and access to medical care and education continue to remain a great challenge for most African countries," Banda said.

Zambia warmly welcomed the eight new measures announced by Chinese Premier Wen Jiabao at the fourth ministerial conference of the China-Africa Cooperation forum last November, the president said, calling for more countries to come up to help Africa develop.

• Frustrated US struggles to open dialogue with China (22 February)

It is sometimes said Democrats know nothing about Asia and prefer to swan around with Europeans. Yet less than six months after his trip to North-East Asia (and just as the White House announces that he will miss a forthcoming European summit) Barack Obama is returning to our neighbourhood. His visit tells us his rhetoric about being a "Pacific president" was no throwaway line.

Perhaps the most important issue Obama will discuss with Kevin Rudd will be relations with China.

The Rudd government has received a fair amount of criticism for its stewardship of the China relationship, but most of the problems that have cropped up – including the Stern Hu and Rebiya Kadeer imbroglios – originated on the Chinese side of the fence.

These kinds of stresses and strains are also finding expression in China's other international relationships, including its all-important connection with the United States.

It has been customary in the past couple of decades for US-China relations to get off to a rocky start under each new president, before finding their groove after a year or two. Bill Clinton came to office vowing to lead "an America that will not coddle tyrants, from Baghdad to Beijing" and promising to withhold China's most-favoured-nation trading status until it had improved its human rights record. Pretty soon, however, Clinton became a forceful advocate of engagement.

The hawks in George W. Bush's administration were intent on confronting Beijing until the spy plane drama in April 2001 demonstrated the limits of American influence. After the September 11 attacks later that year, the bilateral relationship went into a state of suspended animation: while the Americans were looking towards West Asia, the Chinese expanded their wealth and influence in East Asia.

This time, however, events seem to be moving in the opposite direction. During the 2008 election campaign, Obama seemed less concerned than his opponent, John McCain, about the regional distribution of power, less focused on allies and keener to engage Beijing on

22 the great global issues of the day. Once elected, he proposed to "deepen" the bilateral relationship and his officials spoke of "strategic reassurance".

After endless entreaties from the Chinese, he declined to meet the Dalai Lama before his first official visit to China last November. These steps made sense. After all, the US needs China on a range of questions, including the Iranian and North Korean nuclear programs, climate change and international economics. In light of their history, the Chinese are sensitive to slights and resistant to diktats, so it is worthwhile to try to get them on board as partners.

But rather than reaching out to Obama, China has pushed back. Beijing has refused to help out in meaningful ways on Iran. It stage-managed Obama's visit to China in a way that minimised Obama's effect on the Chinese audience and complicated things for him with the American audience.

In Copenhagen, China refused to give ground on the principle of international monitoring of emissions reductions, which helped prevent a meaningful agreement. It also actively undermined Obama, dodging meetings and sometimes sending a relatively junior official to represent the Premier, Wen Jiabao.

One wonders what would have been the Chinese reaction to such behaviour had the positions been reversed. China is not, in other words, nurturing the international system it aspires to help lead. And it is doing no favours for the most powerful man in the world.

These developments have caused a good deal of frustration in Washington and have made policy makers more sceptical of the benefits of such proactive engagement. The tone of US dealings with China appears to be toughening. Washington has announced that a long-planned $US6.4 billion ($7.12 billion) arms sale to Taiwan will proceed, although without some of the kit Taipei wanted.

The Secretary of State, Hillary Clinton, gave a strong speech in reaction to the brouhaha between Google and China. Last week, Obama met the Dalai Lama at the White House. After years of playing a skilled diplomatic game, China may have overreached a little.

Increased heat in the bilateral relationship between Washington and Beijing is not a good thing for the two parties, and certainly not for Australia. Tensions over trade and security disputes are not to be welcomed. A prosperous and secure China is in everyone's interest.

Yet harmonious relations require effort on both sides. Since the end of the Cold War, the world has looked to the US to solve global problems and provide public goods. With China's new-found power, however, comes greater responsibilities and increased scrutiny.

Increasingly, Australia and the rest of the world will look to Beijing as well as Washington to invest effort in their bilateral relationship, and to take decisions which protect the planet and the international system.

23 Michael Fullilove is the director of the global issues program at the Lowy Institute and a non-resident senior fellow at the Brookings Institution.

http://www.smh.com.au/opinion/politics/frustrated-us-struggles-to-open-dialogue-with- china-20100221-onu2.html

• Report: Google hacking traced to two Chinese universities (22nd February)

U.S. cyber experts believe they have traced the hacking attack on Google to two educational institutions in China, including one with close ties to the military, the Financial Times reports. Google has threatened to pull out of China over the hacking, which involved breaching the computers of more than 30 foreign companies and the e-mail accounts of Chinese human rights activists, the BBC reports. China has steadfastly denied any government involvement in the attacks. The FT says a freelance security consultant in his 30s wrote the section of the hacking program that was used to slip through a now-repaired security hole in the Internet Explorer web browser to insert spyware into computers. The FT says analysts believe the creator of the program, which discussed his work in a hacking forum, did not intend for it to be used for "offensive" purposes. But the FT says Chinese officials had special access to the author's work. Two educational institutions -- Shanghai Jiaotong University and the Lanxiang school, a large vocational training school in Jinan -- have been singled out as the source of the attacks. The FT quotes U.S. experts as saying that Jiaotong University has one of the best security departments in the country, with former government cyber commanders in residence. The state-run Xinhua news agency said officials at both schools denied involvement. http://content.usatoday.com/communities/ondeadline/post/2010/02/report-google- hacking-traced-to-two-chinese-universities/1

• US 'Tracks Down' Chinese Google Hacker (22nd February) American authorities have reportedly identified a Chinese computer hacker believed to be behind attacks on Google last year.

The Financial Times reported that the suspect was a security consultant in his 30s with government links.

He is understood to have written the key part of a spyware programme which tried to access the Gmail accounts of Chinese human rights activists.

According to the Financial Times, the hacker was working as a freelancer and would have preferred not to have contributed to the attack, but felt pressure from Chinese officials.

24 "If he wants to do the research he's good at, he has to toe the line now and again," the newspaper quoted an anonymous US government researcher as saying.

"He would rather not have uniformed guys looking over his shoulder, but there is no way anyone of his skill level can get away from that kind of thing.

"The state has privileged access to these researchers' work."

The claims put pressure on the Chinese government, which has said it opposes hacking, over its alleged role in the attack.

In January, Google said it would hold discussions with Chinese authorities about its concerns over online security.

The US government backed Google's move and urged Beijing to investigate the hacking complaints thoroughly and transparently.

The New York Times reported that analysts had traced the online spies to two Chinese colleges - the prestigious Shanghai Jiaotong University and the Lanxiang vocational school.

Both establishments have since denied the reports.

The vocational school trains hairdressers, chefs and car mechanics - but also has the world's biggest computer laboratory.

The allegation that it could take on one of the world's most powerful internet firms has been widely mocked online. http://news.sky.com/skynews/Home/Business/Google-Hacker-Chinese-Man-Who-Wrote- Code-To-Hack-Google-Is-Reportedly-Identified-By-The-US- Govt/Article/201002415556985?lpos=Business_First_Home_Article_Teaser_Region_3& lid=ARTICLE_15556985_Google_Hacker%3A_Chinese_Man_Who_Wrote_Code_To_ Hack_Google_Is_Reportedly_Identified_By_The_US_Govt

• S.Korea's chief nuclear negotiator to visit China this week (22nd February) (Xinhua) -- South Korea's chief nuclear negotiator Wi Sung-lac is expected to visit China this week, Seoul 's Yonhap News Agency reported Monday. During his two-day trip in Beijing, which will begin on Tuesday, Wi will meet with China's special representative for Korean Peninsula affairs Wu Dawei, Wi was quoted as saying. The two will discuss current conditions of the region, including the two countries' efforts to resume the stalled six- party talks on the denuclearization of the Democratic People's Republic of Korea (DPRK), and the recent visit by the DPRK's Deputy Foreign Minister Kim Gye-gwan to China, the official said.

25 Wu, the former Vice Foreign Minister, was appointed as special representative for Korean Peninsula affairs on Feb. 10. Beijing's Foreign Ministry said that he would be in charge of the six-party talks and related issues. Kim visited China earlier this month at the invitation of Wu. The two sides exchanged views on China-DPRK relations, the six- party talks and issues of common concern, according to the ministry. The six-party talks, launched in 2003 but stalled last April, involve the DPRK, South Korea, China, Japan, Russia and the United States.

• China, Pakistan agree to deepen partnership (22nd February) (Xinhua) -- Chinese Foreign Minister Yang Jiechi and his Pakistani counterpart Shah Mahmood Qureshi held talks here Monday, agreeing to deepen the two nations' strategic and cooperative partnership. The two sides also agreed to expand their pragmatic cooperation in various fields, and strengthen coordination and cooperation in international and regional affairs for a continuous development of bilateral ties. Qureshi is paying an official visit to China from Feb. 21 to 25 at the invitation of Yang.

• Chinese Embassy donates 10,000 USD to Cambodian Red Cross (22nd February) -- Chinese Embassy on Monday donated 10,000 U.S. dollars to Cambodian Red Cross to help its program to train young volunteers in the country. The hand-over ceremony was held on Monday at the headquarters of Cambodian Red Cross (CRC) with the attending of He Leping, political counselor of Chinese Embassy, and Pum Chantinie, secretary general of the CRC. Pum Chantinie said that in recent ten years, Chinese Embassy has always provided assistance to the CRC to support its relief and humanitarian activities. She, on behalf of the CRC, expressed sincere thanks to the Chinese Embassy. He Leping expressed admiration for the success achieved by the CRC under the leadership of CRC's President Bun Rany Hun Sen. The Cambodian Red Cross is the largest humanitarian organization in Cambodia. Today, the CRC delivers a plethora of programs including health care, and distributing information on the movement's fundamental principles and humanitarian values and disaster response and preparedness activities throughout Cambodia.

• China says Google hacking claims "groundless" (23rd February) BEIJING (Reuters) - Google's assertion that its computers were attacked by hackers based in China was "groundless", Beijing said on Tuesday, hardening its rhetoric in a spat with Washington over Internet freedom. The remarks from Foreign Ministry spokesman Qin Gang were the first direct rejection of the firm's allegations. China had previously defended its right to censor content on the Internet and brushed aside the hacking accusations, saying Google must abide by Chinese law. "Google's statement from January 12 is groundless, and we are firmly opposed to it," Qin told a regular news briefing in the Chinese capital, when asked if there had been any development in a dispute that is now more than a month old.

26 "China administers its internet according to law, and this position will not change. China prohibits hacking and will crack down on hacking according to law," he added. Google, the world's top search engine, said in January it had uncovered sophisticated China-based attacks on human rights activists using its Gmail service around the world. Google said other firms had also been affected, and after checks into the attacks, the firm had decided it was no longer willing to tolerate censorship on its Google.cn search engine. Google also threatened to shut its China offices. Washington backed Google and urged Beijing to investigate the hacking complaints thoroughly and transparently. The dispute about Internet censorship has added to tensions about issues ranging from trade and the Chinese currency, to a meeting last week between U.S. President Barack Obama and exiled Tibetan leader the Dalai Lama. The issue was pushed back into headlines by recent reports in the Western media that the attacks had been traced to two schools in China, and the writer of the spyware used had been identified as a Chinese security consultant in his 30s with government links. The prestigious Shanghai Jiaotong University and previously unknown Lanxiang vocational college, a high-school level institution, have both denied any role in the attacks. The foreign ministry's Qin said the schools' comments showed the reports were false, as were claims of a link with Beijing. "Reports that these attacks came from Chinese schools are totally groundless and the accusation of Chinese government involvement is also irresponsible and driven by ulterior motives," Qin said. GOOGLE-CHINA TALKS The official Xinhua news agency lashed out as well, with a commentary saying the stories were "arbitrary and full of bias". Chinese people know little about online security, and so their computers can easily be taken over by hackers to give the impression that the hackers are based in China, it said. Google's Chinese-language search engine is still censoring results, but talks between the firm and the Chinese government, on whether the firm might be able to run an unrestricted search service within Chinese law, have restarted, the Wall Street Journal reported on Tuesday. They had taken a break over Chinese New Year, the biggest holiday of the year when most of the country grinds to a halt. Qin declined to comment directly on any negotiations, saying he had no details but "relevant officials are having smooth communication with relevant internet companies". http://www.reuters.com/article/idUSTRE61M2FM20100223

• China encourages US-North Korea to meet (23rd February) BEIJING, Feb 23 (AFP) - China on Tuesday urged the United States and North Korea to step up efforts to restart stalled nuclear disarmament talks, as diplomats criss-crossed the region to try to get Pyongyang back to the table. The US and South Korean envoys to the six-party talks, which began in 2003 and have been on hold since the North stormed out 10 months ago, were both due in Beijing this week for meetings with their Chinese counterparts.

27 China, the host of the talks and the communist North's sole major diplomatic and economic ally, said efforts by Washington and Pyongyang would be the key to success. "We encourage multilateral and bilateral meetings and dialogue... on this issue, China adopts a supportive and positive attitude," foreign ministry spokesman Qin Gang told reporters. Such contact between the United States and North Korea "will be conducive to the early resumption of the six-party talks and ensure the peace and stability of northeast Asia and the Korean peninsula." he said. Qin said US special envoy Stephen Bosworth would hold talks with Chinese Vice Foreign Minister Wu Dawei in Beijing on Wednesday to discuss the North Korean disarmament issue. South Korea's chief negotiator Wi Sung-Lac was also expected in Beijing Tuesday and would hold talks with Wu. Meanwhile, a senior North Korean Communist Party official, Kim Yong-Il, met Tuesday with his Chinese counterpart Wang Jiarui and was scheduled to meet President Hu Jintao later in the day, the state Xinhua news agency said. South Korea's Yonhap news agency said the North Korean official could deliver a letter from leader Kim Jong-Il to Hu. On Monday, the US State Department said that Bosworth had no plans to stop in North Korea during a three-nation Asia tour, and there was no sign Pyongyang was ready to return to the six-nation disarmament forum. "We are looking for a signal from North Korea, and we’re still waiting for that signal," spokesman Philip Crowley said. Bosworth was travelling with the US chief nuclear negotiator Sung Kim. Media reports have said the North is sticking to its preconditions for returning to dialogue: the lifting of United Nations sanctions and a US commitment to discuss a formal peace treaty on the Korean peninsula. The United States, South Korea and Japan say the North must first return to dialogue and show it is serious about denuclearisation before other issues are dealt with. "The (Seoul) government maintains that discussions on a peace treaty will be possible only after we make progress in denuclearisation," Wi told reporters. Yun Duk-Min, professor at Seoul's Institute of Foreign Affairs and National Security, said China was trying to narrow the gap between North Korea and the other countries, notably the United States. "It remains to be seen how things will end up, as North Korea wants to extort as many gains as possible from others before returning to six-party talks while China plays good cop and the United States bad cop," he told AFP. But Yun said he believes Pyongyang would come back to the talks eventually. Under deals in 2005 and 2007 the North agreed to scrap its nuclear weapons in return for aid and major diplomatic and security benefits, including a formal peace pact. But the talks became bogged down by disputes over ways to verify disarmament and in April last year the North quit them altogether. Pyongyang, which tested atomic weapons in October 2006 and May 2009, says it developed nuclear weaponry because of a US threat of aggression, and it must have a peace pact before it considers giving them up.

28 The 1950-1953 Korean War ended only in an armistice. Seoul officials suspect talk of a peace treaty is an excuse to delay action on the nuclear programme. (By Robert Saiget/ AFP) http://www.mysinchew.com/node/35502

• China's position on East China Sea unchanged, FM Spokesman (23rd February) (Xinhua) -- China's position regarding the East China Sea issue remained consistent and unequivocal, Foreign Ministry spokesman Qin Gang said on Tuesday. Qin said, "China and Japan have reached a principled common understanding on the East China Sea issue. China upholds and maintains the common understanding. This position has never changed." Qin added that China hoped Japan could provide a more favorable environment to put the common understanding into practice. He made the remarks in response to a question that Japan would appeal to an international maritime court if China started using an East China Sea oil and gas field for gas production. According to the principled common understanding, the Japanese side could participate in the cooperative development of the Chunxiao oil and gas field in accordance with relevant laws of China, but the cooperative development is different from "joint development."

• China hopes for early restoration of Niger's constitutional order (23rd February) (Xinhua) -- China hoped the constitutional order in Niger could be restored as soon as possible, Foreign Ministry spokesman Qin Gang said here Tuesday. China was concerned about the situation in Niger and always maintained that disputes should be properly settled through negotiations and dialogues, he said at a regular press conference. A group of Nigerien soldiers launched a coup Thursday last week, seizing President Mamadou Tandja, suspending the constitution and dissolving the cabinet. A joint mission had been sent to Niger by the United Nations, African Union and Economic Community of West African States to mediate. Qin said China hoped involved parties in Niger could put the country and people's interests first and try to maintain national order and development. Noting China enjoyed long-standing friendly cooperation with the Nigerien people, Qin said China was willing to work with Niger to push forward bilateral ties and hoped the two countries could continue to progress cooperation for mutual benefit. He said the Chinese organizations and nationals were reportedly safe in Niger.

• China stresses friendly ties with DPRK as its "consistent policy" (23rd February) (Xinhua) -- President Hu Jintao on Tuesday pledged to push forward China's relations with the Democratic People's Republic of Korea (DPRK), saying cementing friendly ties between the two countries has been a consistent policy of China. "Under the current complicated and changeful international situation, it is in the fundamental interests of the two peoples and also benefits peace, stability and prosperity of the region and the world to further promote friendly exchanges and expand pragmatic

29 cooperation between the two countries," said Hu when meeting with a delegation from the Workers' Party of Korea (WPK) of the DPRK. Hailing Sino-DPRK relations over the past year, Hu said the leaders of the two countries and parties maintained frequent contacts on major issues of common concerns. The two sides celebrated the 60th anniversary of their diplomatic ties by holding the Year of Friendship, which renewed the traditional friendship and upgraded the relationship, he said. Kim Yong Il, director of the International Affairs Department of the WPK Central Committee, said the DPRK values friendship with China. He hoped to further exchanges between the two parties to contribute to Sino-DPRK relations. Wang Jiarui, head of the International Department of the CPC Central Committee, also met with the DPRK delegation early Tuesday.

• Chinese vice premier urges deeper economic ties with Slovakia (23rd February) (Xinhua) -- Chinese Vice Premier Li Keqiang Tuesday urged China and Slovakia to deepen their economic and trade ties by exploring new cooperative fields. "To deepen the economic and trade cooperation is a key part for developing China- Slovakia relations," said Li while holding talks with Slovak First Deputy Prime Minister Dusan Caplovic. Li said the two countries should expand trade and investment and further cooperate in areas like renewable energy, infrastructure, medicine and tourism. "This will not only bring benefits to people of the two countries, but also help promote relations between China and the European Union and give impetus to the healthy recovery and sustained development of global economy," said Li. Caplovic arrived in Beijing Monday for a six-day visit to China. It is Caplovic's first China visit since he took office in 2006. Besides Beijing, Caplovic will visit China's southernmost island province of Hainan. Caplovic described China as Slovakia's important partner, hoping that the two countries could step up cooperation in various fields so as to benefit the people of the two countries. China and Slovakia have enjoyed traditional friendship and maintained high-level contacts. Chinese President Hu Jintao paid a successful visit to Slovakia in June 2009 as the two countries marked the 60th anniversary of diplomatic ties. China is willing to work with Slovakia to implement the consensus reached by the heads of state and push forward bilateral ties in a better, faster manner, Li told Caplovic.

• Chinese Premier meets FMs of Pakistan, Kazakstan (23rd February) (Xinhua) -- Chinese Premier Wen Jiabao on Tuesday met with Pakistani Foreign Minister Shah Mahmood Qureshi and Kazakhstan's Secretary of State and Foreign Minister Kanat Saudabayev. In his meeting with Qureshi, Wen commented on the good neighborly-ties between China and Pakistan and recalled his visit to Islamabad back to 2005. Qureshi, who arrived in Beijing on Sunday, was the first foreign minister to visit China after the Lunar New Year holiday.

30 Qureshi started by giving his greeting to Wen for the new year, the Year of the Tiger. "The tiger symbolizes strength and I wish the Chinese people and government move from strength to strength this year," Qureshi said. "Wen and Qureshi exchanged views on the bilateral relationship and major international and regional issues," according to a press release issued by the Chinese Foreign Ministry. In another meeting with Kazakhstan's Saudabayev, Wen said it was significant for officials of both countries to map out their cooperation at the start of spring. Saudabayev conveyed the greetings of Kazakhstan's leaders to Wen. Both discussed the countries' bilateral relationship and major international and regional issues. Before meeting with Wen, Saudabayev held talks with Chinese Foreign Minister Yang Jiechi. Yang said China was ready to work with Kazakhstan to deepen bilateral cooperation in the fields of transportation, economy and trade, among others. Saudabayev said Kazakhstan would maintain its efforts to advance strategic cooperation with China and support China's stance on Taiwan and Tibet-related issues.

• Commentary: China cyber attacks against Google pure fabrication (24th February) (Xinhua) -- The New York Times, the Wall Street Journal, Financial Times and some other newspapers have published articles indicating that cyber attacks targeting Google and several other U.S. companies were from China. Such allegations are arbitrary and biased. These articles take as evidence that hackers' IP addresses could be traced back to two schools in China. However, it is common sense that hackers can attack by hijacking computers from anywhere in the world. This fact also explains why hackers are hard to be tracked down. Computers in China are easy to be hijacked by hackers as internet security technology and services are still underdeveloped in China. The majority of Chinese internet users also lack security awareness and adequate protection measures. The hackers' IP addresses could by no means vindicate the newspapers' allegations that the attacks were carried out by Chinese citizens or from within China. Certain newspapers went even further by indicating that the Chinese government and the military might have supported those cyber attacks. The New York Times says the Lanxiang vocational school in eastern Shandong province, one of the schools from which the cyber attacks were said to originate, has military support. Another school, the Shanghai Jiaotong University, "has received financing from a high-level government science and technology project." The New York Times went to great lengths to mention that "graduates of the (Lanxiang) school's computer science department are recruited by the local military garrison each year." The paper, however, did not care to tell its readers that a school in China does not need to have any special relationship with the military to have its graduates in uniform. It is also true in the United States, where the New York Times is based. China's attitude toward cyber attacks has been unequivocal and has adopted laws against such crimes, as China is one of the countries that bear the brunt of cyber attacks. It is way far-fetched to say that cyber attacks -- even if they were to originate from China or were

31 to be carried out by Chinese citizens -- would have the support of the Chinese government. The U.S. government, on the other hand, takes a dubious attitude toward cyber attacks. According to media reports, the U.S. Homeland Security and Defense departments have both openly recruited hackers. People with a "blackhat perspective" and know how to "do threat modelling" are the best choices, said Philip Reitinger, Department of Homeland Security deputy undersecretary, at an information security conference last October. Cyber crimes could cause immense losses for individuals, enterprises and nation-states. Effective supervision and closer international cooperation are ways to boost cyber security. Finger pointing is not.

• China denies government links to cyber attacks on Google (24th February) (Xinhua) -- China on Tuesday denied government links to cyber attacks against the search giant Google, saying such accusations were "irresponsible and calculating." "China resolutely opposes the groundless accusations from Google," China's Foreign Ministry spokesman Qin Gang said, referring to Google's statement last month that it might pull out of the Chinese market, citing it services had been hacked by sources originating in China. Chinese laws prohibit cyber attacks and China's government does not tolerate cyber crime, and China welcomes international Internet companies to conduct businesses in China in line with the law, Qin told a regular new briefing "These firms have unblocked access to relevant Chinese government departments in terms of communication," said Qin, who stressed China's unchanged stance in promoting the development of the Internet. "Foreign Internet enterprises, like foreign businesses of any other kind operating in China, shall abide by Chinese laws and respect its culture, "Qin said. Qin also said recent accusations of two Chinese schools carrying out cyber attacks against Google did not hold water. The New York Times has filed two reports recently claiming the cyber attacks on Google and other American firms last year have been traced to Shanghai Jiaotong University (SJTU) and Lanxiang Vocational School (Lanxiang) in east China's Shandong Province. Both Lanxiang and SJTU said the report was unfounded, and denied being behind the cyber attacks on Google and other American companies.

• China supports one-year extension of UN mission in Timor-Leste (24th February) (Xinhua) -- China supports the 12-month extension recommended by the UN chief of the UN mission in Timor-Leste, a senior Chinese diplomat said on Tuesday. The UN currently has a multidimensional and integrated peacekeeping mission in Timor- Leste known as UNMIT; its mandate ends later this month. Liu Zhenmin, China's deputy permanent representative to the UN, told a United Nations Security Council (UNSC) open debate on the issue of Timor-Leste that China was pleased to see the overall situation there had remained stable.

32 The Timor-Leste national police has improved its law enforcement capacity with the support of UNMIT and the international community and is gradually taking over security responsibility, the Chinese diplomat added. However, the country is facing formidable challenges in its economic development due to insufficient livelihoods and underemployment, as well as lack of resources. These factors combine to hamper reconstruction and overall development, Liu said. "China supports the extension of the mandate for another year, and hopes the special representative for Timor-Leste and the UNMIT can continue playing an active role in helping the government enhance its capacity and coordinating international assistance," Liu said. The diplomat said China continues to support the southeast Asian country, calling on the international community to step up its assistance to the Timorese in relevant fields. More than 20 speakers, including Deputy Prime Minister of Timor-Leste Jose Luis Guterres and Ban Ki-moon's special representative to Timor-Leste Ameerah Haq, took part in the debate on the UN chief's report, in which Ban called for UNMIT's mandate to be extended for another year. In 2006, after a dispute within the Timorese military caused havoc within the country, leaving dozens of people dead and displacing one-seventh of the population, the UNSC set up the UNMIT to tackle the political, humanitarian and security crisis.

• China welcomes cease fire between Sudanese government and Darfur rebels (24th February)

(Xinhua) -- China on Wednesday welcomed a ceasefire deal signed between the Sudanese government and the Justice and Equality Movement (JEM), a key rebel group in Darfur.

"The deal was an important achievement of the Doha negotiation and a key step towards peace in the region. It showed the determination and sincerity of the Sudanese government and relevant groups in Darfur to resolve the Darfur issue through negotiations," Foreign Ministry spokesman Qin Gang said.

Sudanese President Omar al-Bashir signed the long-awaited truce deal with representatives from JEM late Tuesday in the Qatari capital Doha.

Khalil Ibrahim, leader of the rebel group, said the truce would take effect midnight Tuesday.

Devastating fighting broke out in Darfur that borders Chad in 2003 between ethnic rebels and the Sudanese government forces leaving around 300,000 people dead and 2.7 million others homeless, the UN estimates.

According to documents setting out the terms of the deal, the Sudanese government would offer government positions for members of JEM, with the organization being transformed into a political party, the Qatar News Agency reported.

33 Qin also hailed the unremitting efforts made by the Qatari government, the Chadian government and the joint chief mediator of the United Nations and the African Union for Darfur peace Djibril Bassole in this regard.

He called on other parties in Darfur to actively join in the peace process in Darfur, and urged the international community to see the deal as an opportunity to further promote the political process to resolve the issue comprehensively and appropriately, and maintain peace, stability and development in the region and Sudan as a whole.

• Expert warns Pentagon report a front for further arms sales to Taiwan (24th February)

(Xinhua) -- Chinese military and international relations experts on Wednesday said that a recent Pentagon report playing down Taiwan's aerial combat capability was a front for more advanced arms sales to the island, which would seriously violate a Sino-U.S. agreement that Washington endorsed 28 years ago.

"Any further arms sales, especially if the U.S. sells F-16 fighters to Taiwan, would increase already strained tensions with China," Prof. Tan Kaijia with the National Defense University of the People's Liberation Army told Xinhua.

The report delivered by the Defense Intelligence Agency of the U.S. Department of Defense to the Congress has stressed that many of Taiwan's 400 active combat aircraft were not operationally capable due their age and maintenance problems.

It also specified that Taiwan's 60 U.S.-made F-5 fighters have reached the end of their operating life and some of the island's F-16 A/B jet fighters needed improvement to increase combat effectiveness.

The Pentagon's report came as Taiwan continued to voice its need for advanced U.S. weaponry such as 66 F-16 C/Ds, a substantial improvement model on Taiwan's current F- 16 A/Bs. But the U.S. side excluded the fighters from the latest arms sale package.

According to media reports, Taiwan currently operates 60 U.S.-made F-5 fighters, 148 F- 16 A/Bs, 56 French-made Mirage 2000-5 fighter jets and 126 locally produced Indigenous Defense Fighter (IDF) aircraft.

"If the U.S. equips Taiwan with new F-16s, replacing the second-generation F-5s, it would significantly increase the island's aerial combat effectiveness for F-16's compatibility to other U.S.-made weapon systems such as airborne early warning and control aircraft through Link-16 Multifunctional Information Distribution System," said Prof. Tan.

According to the Communique jointly issued by the Chinese and U.S. governments on Aug. 17, 1982, the U.S. side states that "its arms sales to Taiwan will not exceed, either in

34 qualitative or in quantitative terms, the level of those supplied in recent years since the establishment of diplomatic relations between the U.S. and China."

"Comprehensive performance of the F-16s is far beyond that of the F-5s and the qualitative parameters of the F-16 C/Ds also exceed those of the F-16 A/Bs," said Tan.

Selling such arms would "be an overt offense" against the Aug. 17 Communique, and promoting such a move by an elaborate report would not give any justification for the U.S. since the F-16 C/Ds would not be considered as a defensive weapon in any case, he said.

Guo Zhenyuan, a researcher with the prominent thinktank China Institute of International Studies, told Xinhua that previous U.S. arms sales to Taiwan were covered by the front of "providing Taiwan with arms of a defensive character" to ease the backlash to the bilateral relationship from the Chinese side.

"The U.S. side should know that the sooner it stops selling arms to Taiwan, the more willing China would be to work with it on global and regional issues," Prof. Jin Canrong with Renmin University of China said. Enditem

• China, Japan urged to properly handle sensitive bilateral issues (25th February)

(Xinhua) -- China and Japan should work together to enhance cooperation, properly handle sensitive bilateral issues and cope with global challenges to push forward their relations, Defense Minister Liang Guanglie said here Wednesday.

Liang made the remarks while meeting with visiting Japanese Ground Self-Defense Forces chief of staff, Yoshifumi Hibako.

Liang hailed the current relationship between the two countries, noting they have enjoyed active high-level contacts and a deepening in mutual trust since the new Yukio Hatoyama government took office.

Sino-Japanese cooperation has seen solid progress in all fields, including economy, trade, culture and defense affairs, Liang said, adding that he hoped the achievements will be cherished by both countries.

Echoing Liang's view, Hibako expressed Japan's hope for closer ties with China to safeguard regional and international peace and stability.

Hibako is the first foreign military officer to meet with Liang since China's Spring Festival, which fell on Feb. 14 this year. Earlier Wednesday afternoon, Hibako held talks with the People's Liberation Army's Deputy Chief of Staff Hou Shusen.

35 • China's position on suspending military visits with U.S. "unchanged": spokesman (25th February)

(Xinhua) -- China's position on suspending its military visits with the United States "remains unchanged" due to the U.S. arms sale to Taiwan, a Chinese military spokesman said Thursday.

China late last month decided to suspend scheduled visits between the Chinese and U.S. armed forces, in response to Washington's plan to sell a package of arms worth about 6.4 billion U.S. dollars to Taiwan.

"The U.S. side should bear full responsibility for the current difficult situation on China- U.S. military exchanges," Defense Ministry spokesman Huang Xueping said in a statement on Thursday.

China has slammed the U.S. move, pointing out it violated the three Sino-US joint communiques, especially the principles established in the Joint Communique on Aug. 17, 1982, which stated that the United States would not seek to carry out a long-term policy of arms sales to Taiwan, and intended to gradually reduce arms sale.

The two militaries had been expected to launch more exchanges in 2010, which include U.S. Defense Secretary Robert Gates' visit to China and mutual visits of warships.

Gates said this week that he still planned to visit China later this year.

But Huang said the U.S. arms sale to Taiwan "seriously endangers China's national security, damages China's core interests, greatly disturbs the relations between the two countries and the two militaries, and tremendously harms the overall China-U.S. cooperation and peace and stability across the Taiwan Strait."

"Therefore, China decided to suspend the planned mutual visits between the Chinese and U.S. militaries. Our position has not changed," said Huang.

"We demand the U.S. side to take concrete measures and fully respect China's core interests and security concerns," he said.

• Interview: Fatah expects continued Chinese support for Palestinian cause: senior official (25th February)

(Xinhua) -- A senior Palestinian official on Tuesday urged China to continue its support for the Palestinian cause.

"We hope that the Chinese support for the Palestinian cause, people and Fatah movement will continue until a (future) Palestinian state is established," spokesman for Fatah movement Ahmed Assaf said in an interview via phone with Xinhua.

36 A high-level delegation from Fatah movement is scheduled to visit China at the end of this month.

Assaf said that during the visit, "we can learn from China's rich experience and its diligence to score today's impressive achievements."

The delegation will brief the Chinese leadership on efforts exerted to revive the long- stalled Israeli-Palestinian peace process and reach inter-Palestinian reconciliation as well as the Israeli practices in the Palestinian territories, he added.

"China is one of the world's most important countries and it is a permanent member of the UN Security Council. It has well- established economic and political systems and has a say in the international arena.... We expect a bigger role equal to its rank. "

Meanwhile, Assaf said Fatah hopes Hamas could ink the Egyptian- brokered inter- Palestinian reconciliation pact which has been delayed for several times since September, 2009.

He accused Hamas of being controlled by external powers whom he did not name, saying that this is the cause behind the delay in signing the pact.

"We are convinced that Hamas can not make its own decision about this," he added.

Assaf also ruled out exiled Hamas leader Khaled Meshaal will attend the upcoming Arab League summit slated for late March in Libya.

"Only countries and official leaders are invited to attend the summit ... This is a summit of state leaders not a summit of party leaders. We do not expect him to be invited, because parties have never been and will never be invited to the summits," he added.

• China urges US to avoid further damage to bilateral ties (25th February) (Xinhua) -- China Thursday urged the United States to "speak and act cautiously" in a bid to avoid further damage to bilateral ties.

The statement was made by Huang Xueping, spokesman for China's Ministry of National Defense, when asked to comment on a report released recently by the U.S. Defense Intelligence Agency (DIA) claiming obsoleteness of fighter planes owned by the military in Taiwan.

DIA, which is affiliated to the Pentagon, also indicated in a January evaluation report to the Congress that the combat capability of the military in Taiwan has been adversely affected by the poor conditions of fighter jets the military has in Taiwan.

There were opinions saying that the U.S. Congress would in turn push the Pentagon to sell advanced C/D versions of the F16 fighter jets to Taiwan which has been seeking such a deal but has not yet succeeded.

37 "We are highly concerned about the report," said Huang,"because Taiwan issue is a matter of great significance to China's core benefits."

The recent U.S. arms sale to Taiwan has greatly harmed China's national security and core benefits, and caused setbacks in the relationship of China and the United States and of the militaries of both countries, said Huang.

"The American arms sale has also caused severe damages to the overall cooperation between China and the United States, and to peace and stability across the Taiwan Strait," said the spokesman.

China has protested the recent U.S.arms sales to Taiwan, and decided to suspend related military exchange programs thereafter, vowing to impose sanctions against those U.S. companies involved.

"Our stance with regard to the decision to suspend the related military exchange programs has remained unchanged," said Huang, who also emphasized the responsibility lies with the American side for a difficult situation in Sino-U.S. military exchanges.

Huang asked the U.S.side to take down-to-earth measures and to fully respect core benefits and safety concern of Chinese side.

"We demand the U.S. side speak and act cautiously in a bid to avoid further damage to the relationship between the two nations and militaries of the two countries, and to the peaceful development across the Taiwan Strait," said Huang.

• Linking hackers' cyber attacks with Chinese government, military groundless: Defense spokesman (25th February)

(Xinhua) -- The National Defense Ministry spokesman Thursday said associating hackers' cyber attacks with Chinese government and the military was groundless.

"The act to link up cyber attacks by hackers with the Chinese government and the military is both irresponsible and calculated to achieve hype out of ulterior motives," said Huang Xueping, spokesman of the Ministry of National Defense.

Huang made the remarks when asked to comment on media reports claiming the Chinese government and the military were involved in hackers' cyber attacks on Google.

"In the wake of the Google incident, Chinese Foreign Ministry spokespersons have time and again made clear China's stance, " said Huang, "China's information network, especially the part run by the military has always remained a victim of hackers' attacks from overseas."

Huang reiterated that China's law bans hackers' attacks of all forms.

38 "Chinese government attaches great attention to combating cyber crimes and is committed to improving cooperation in this regard with other countries and international organizations," Huang added.

• China, Cambodia sign Consular Treaty to further strengthen cooperation ties (25th February)

(Xinhua) -- China and Cambodia on Thursday signed here the Consular Treaty, aimed to further strengthen the cooperation relations between the two friendly countries.

Long Visalo, secretary of state of Cambodia's Foreign Ministry and Zhang Jinfeng, Chinese ambassador to the Kingdom, signed the treaty on behalf of their respective countries at the Ministry of Foreign Affairs. Cambodian Foreign Minister Hor Namhong and other government officials presented at the signing ceremony.

"Along with all-round development of the friendship relations between our two countries, personnel exchanges between the two countries are also increasing," Long Visalo said, and expressed his believe that the Consular Treaty will effectively protect the legitimate interest of citizens of the two countries.

Zhang Jinfeng said that China and Cambodia are good neighbors and have a good cooperation on many fields including consular, such as jointly combat illegal immigrant and transnational crimes.

She said that the Consular Treaty has established the framework of consular cooperation between the two countries, provided a legal basis for solving the problems that may arise in the consular affairs and also defined the responsibilities and obligations of both sides. She believed that the treaty will help promote the further development of bilateral consular relations.

Zhang also hoped that the two sides will exchange instruments of ratification as soon as possible, so that the treaty could come into effect as soon as possible.

At present, Cambodia has established six Consulate Generals in China, including China's Hong Kong, Guangzhou, Shanghai, Kunming, Chongqing and Nanning, while China has not yet set up the consulate in Cambodia.

• China announces 20 mln yuan additional aid to Haiti (25th February)

(Xinhua) -- China Thursday said it would provide tents worth 20 million yuan (2.92 million U.S. dollars) in additional aid to quake-ravaged Haiti, said the Ministry of Commerce (MOC).

China would try to deliver the tents to Haiti's capital Port-au-Prince in May before its rainy season, said MOC spokesman Yao Jian.

39 With the 20 million yuan of additional aid, China has so far altogether provided humanitarian aid worth 93 million yuan in cash, materials and other supplies to the Caribbean country, after it was hit by a 7.3-magnitude earthquake on Jan. 12, which had killed more than 222,500 people so far.

China also sent a medical team consisting of 40 military medical professionals to Haiti in January. The team returned to China on Feb. 10.

• China calls for more diplomatic efforts to resolve Iran nuclear issue (25th February)

(Xinhua) -- China believes diplomatic efforts have not yet been exhausted and calls for further dialogue and negotiation to resolve the Iran nuclear issue, Foreign Ministry spokesman Qin Gang said here Thursday afternoon.

At a routine press briefing, Qin said there is still room for dialogue and negotiation to resolve the Iran nuclear issue. He called on all parties to consider the overall situation, strengthen communication, and maintain the momentum of dialogue and negotiation to achieve a peaceful solution.

Qin's remarks came after the U.S. government Wednesday threatened to push for tougher sanctions on Iran in the UN Security Council.

U.S. Secretary of State Hillary Rodham Clinton on Wednesday said, "Iran has left the international community little choice but to impose greater costs for its provocative steps."

In response to a question, Qin said the key to easing the Iran nuclear issue lies in promptly settling the issue of fuel supply to Tehran's research nuclear reactor.

Moreover, Qin said, it is important the six relevant countries resume talks with Iran as soon as possible. The six countries are the five permanent members of the UN Security Council, namely the United States, Russia, Britain, France and China, and Germany.

Qin said China will maintain communication and coordination with all parties concerned and play its proper role in the process.

Iran announced earlier this week a plan to build two additional uranium enrichment plants in coming months. Iran insists on its right to developing nuclear technology for peaceful purposes.

Iranian President Mahmoud Ahmadinejad said in November Iran will build 10 new uranium enrichment plants to meet the nation's growing energy needs.

• Chinese VP pledges closer ties with South Africa (25th February)

40 Chinese Vice President Xi Jinping said here Thursday that China is willing to work closely with South Africa to deepen bilateral relations between the two developing countries.

Xi made the remarks while meeting with visiting South African Minister of International Relations and Cooperation Maite Nkoana-Mashabane.

China and South Africa have seen rapid and healthy development of bilateral ties featuring increasing mutual political trust, pragmatic trade cooperation and cultural exchanges since the establishment of diplomatic relationship in 1998, said Xi.

Xi said China attaches great importance to ties with South Africa and will make joint efforts with South Africa to push forward bilateral strategic partnership.

Xi also said that the two countries would implement the eight measures put forward by the Chinese government at the ministerial meeting of the Forum on China-Africa Cooperation (FOCAC) in Egypt late November.

The FOCAC is an important platform for collective dialogue with effective mechanisms for promoting pragmatic China-Africa cooperation.

Mashabane is paying an official visit to China from Feb. 24 to 27 at the invitation of Chinese Foreign Minister Yang Jiechi.

Besides Beijing, Mashabane will visit the venue of South Africa at the 2010 Shanghai World Expo.

Mashabane said her country would further promote mutually-beneficial cooperation with China to turn South Africa-China relations into the cooperative example between the developing countries.

• China urges Japan-U.S. military co-op not to target third party (25th February)

China's defence ministry said Thursday Japan's exaggeration of China's military power hurts bilateral ties.

Defense Ministry spokesman Huang Xueping made the remarks after a report said Japanese leaders may revise the country's defence policies to strengthen the Japan-U.S. alliance and confront China's increased military strength.

Japan-U.S. military cooperation should not target a third party, Huang added.

"China-Japan defense relations have developed rapidly. But irrespective of why the Japanese leaders made the comments, they have hurt the trust and sentiment that has built up," Huang said.

41 Calling the Japan-U.S. military alliance an "outcome of history," Huang urged the two countries to confine their military arrangements to a bilateral framework and to not target a third party.

"We hope the Japanese side will do more to promote the sound development of China- Japan relations. Japan's defense measures should be conducive to regional peace and stability," he said.

• China welcomes India-Pakistan talks (25th February)

(Xinhua) -- China on Thursday welcomed and supported foreign secretary level talks between India and Pakistan, hoping the momentum of dialogue and cooperation could be sustained.

"We are delighted to know that foreign secretary level consultations between India and Pakistan have taken place. We hope the talks can deliver substantial results," Chinese Foreign Ministry spokesman Qin Gang said.

The improvement and progress of India-Pakistan relations are conducive to the peace, stability and development not only in South Asia, but also in the Asian region as a whole.

The India-Pakistan foreign secretary level talks began in New Delhi on Thursday afternoon. This is the first secretary level meeting between the two countries since the 26/11 Mumbai terrorist attack.

The Indian delegation headed by Foreign Secretary Nirupama Rao met with the Pakistani delegation headed by Pakistani Foreign Secretary Salman Bashir at Hyderabad House in central Delhi.

• China denies violating UN sanction on DPRK (25th February)

China denied on Thursday that its economic and trade exchanges with the Democratic People's Republic of Korea (DPRK) has violated a United Nations (UN) resolution.

At a regular press conference, Chinese Foreign Ministry spokesman Qin Gang was asked to comment on a report by Yonhap news of the Republic of Korea quoted by China Daily saying Pyongyang announced two islets adjacent to China's northernmost port city Dandong would be developed by Chinese enterprises as a free trade area.

"This project is purely normal economic and trade contact between the two countries. It does not go against the UN relevant resolution of sanction on the DPRK," he said.

The UN Security Council last June adopted a resolution imposing tougher sanctions on the DPRK, including a tighter arms embargo and new financial restrictions, after the DPRK announced a successful nuclear test on May 25, the second since 2006.

42 The resolution also underlined that "measures imposed by this resolution are not intended to have adverse humanitarian consequences for the civilian population of the DPRK."

• Ambassador: high-level exchanges cornerstone of China-Africa relations (26th February)

Tanzanian Ambassador to China Omar Ramadhan Mapuri said Thursday that exchange of visits between Chinese and African leaders and officials is one of the cornerstones of China-Africa relations.

Mapuri told Xinhua in a written interview that these exchanges have played and will continue to play a crucial role in strengthening China-Africa relations, cooperation and friendship.

Mapuri said it has become a tradition for Chinese leaders to visit Africa at the beginning of a new year.

Chinese Foreign Minister Yang Jiechi visited five African nations early January, following a tradition that dates back 20 years. Commerce Minister Chen Deming traveled to Ethiopia and Mozambique from Jan. 12 to 14. And Wang Jiarui, head of the International Department of the Communist Party of China Central Committee, conducted his six-nation Africa tour from Jan. 15 to 26.

Shortly after China's Spring Festival holiday, Zambian President Rupiah Banda started his first state visit to China Wednesday. Both South African Minister of International Relations and Cooperation Maite Nkoana-Mashabane and Zimbabwean Foreign Minister Simbarashe Mumbengegwi are paying official visits to China now.

"I believe more visits are forthcoming and will be reciprocated by African leaders," said Mapuri, adding that these are signs of healthy relations that need to be enhanced and deepened.

China's active participation in the improvement of infrastructure in Africa since the mid 1990s, has helped stimulate Africa's economic growth, he said.

Since the year 2000, China-Africa trade has been developing at an annual growth rate of 33.5 percent, reaching 106.8 billion U.S. dollars in 2008. The target set at the 2006 Beijing Summit of China-Africa Cooperation Forum to push trade volume to 100 billion dollars by 2010 was met two years ahead of schedule.

During the fourth Ministerial Conference of the Forum on China-Africa Cooperation in Egypt last November, China announced eight new measures to push forward the new China-Africa strategic partnership, which include partnership on addressing climate change, enhancement of cooperation in science and technology and extension of 10 billion U.S. dollar concessional loans.

43 China has also pledged to further open up its market to African products, boost cooperation with Africa in agriculture, culture and health sectors, among others.

Mapuri said, Africa is in dire need of markets for its products as well as investments and technology to improve its infrastructure and economic production capacity. China is willing to provide all these and more without political strings attached.

Mapuri said, Tanzania now is in the process of identifying specific areas of cooperation to be undertaken within the framework of the eight new measures.

According to him, Chen Deming and Vice Minister of Agriculture Niu Dun visited Tanzania in January for consultation of cooperation.

"I am very confident that we shall soon finalize our new bilateral program and start implementation," he said.

• Presidents of China, Zambia pledge to elevate relationship (26th February)

(Xinhua) -- Presidents of China and Zambia on Thursday pledged joint efforts to bringing bilateral relationship to a new high.

The pledge came out of their hour-long summit talks in Beijing as China rolled out the red carpet for Rupiah Banda, who was on his first state visit to the country since becoming Zambian President in 2008.

Banda was welcomed by Chinese President Hu Jintao at the Great Hall of the People in downtown Beijing.

"I highly appreciate your commitment to promoting practical cooperation between China and Zambia since you assumed presidency," Hu said at the start of the talks.

"I believe your visit will turn a new page in the bilateral friendship and bring the relationship to a new high," Hu said.

Banda recalled "the historic relations that exist between our two countries that go back before our independence." China and Zambia forged diplomatic ties in October 1964.

Banda highlighted "the sacrifices many young Chinese made in order to construct the first railway line connecting Tanzania and Zambia."

The about-1,860-kilometer railway, one of the largest foreign-aid project undertaken by China, was financed and built by China in 1970s. More than 60 Chinese died in constructing the railway.

• China pledges to advance relations with Zimbabwe (26th February)

44 China on Friday pledged to work with Zimbabwe to expand political trust and economic cooperation, in a bid to advance bilateral ties to a higher level. "We value the traditional friendship with Zimbabwe," Vice President Xi Jinping told visiting Zimbabwean Foreign Minister Simbarashe Mumbengegwi. Hailing the 30-year diplomatic relations between the two nations, Xi said China and the African country had enjoyed fruitful cooperation in various sectors and profound friendship between the two peoples. "We applaud Zimbabwe's firm support in issues concerning our core and major interests," Xi said. Xi hoped the two nations would have more high level visits, increase coordination in international affairs, and jointly safeguard rights and interests of all developing countries. "We will continue to give help and support within our capacity to Zimbabwe for its economic and social progress," he noted. China attaches great importance to developing relations with African countries. At the fourth ministerial meeting of the Forum on China-Africa Cooperation (FOCAC) held in Egypt in November 2009, Chinese Premier Wen Jiabao announced eight new measures to strengthen pragmatic cooperation in the next three years. The eight measures include the fight against climate change, intensification of technical- scientific cooperation, reinforcement of Africa's financial capacities and increased accessibility of African products to the China market. "We will fulfill the eight measures and promote the China-Africa friendly cooperation to benefit the African people," Xi told the Zimbabwean foreign minister. Echoing Xi, Mumbengegwi said his country highly appreciated China's unselfish help for its national and economic development within the bilateral and the FOCAC framework. The minister also spoke highly of China's important role in recent years in promoting the settlement of Zimbabwe's political disputes through negotiation and the establishment of an inclusive government. Zimbabwe would firmly adhere to the one-China policy, and was ready to work with China to expand cooperation in various areas, Mumbengegwi noted. Mumbengegwi was here on an official visit from Feb. 23 to March 2, at the invitation of Chinese Foreign Minister Yang Jiechi.

• China doesn't want 2010 to be "unpeaceful year" with U.S. (27th February) Chinese Premier Wen Jiabao said here Saturday that China did not want 2010 to be "an unpeacful year" for trade and economic relations with the United States.

• China's Wen hopes for good Sino-U.S.trade relations (27th February) Good Sino-U.S. trade relations bring fundamental benefits to the peoples of both nations, Chinese Premier Wen Jiabao said here Saturday during an online chat with netizens. Bilateral trade should be balanced and sustainable, and trade disputes between the two countries should be resolved through "negotiation on an equal footing," not sanctions, he said. Wen hopes Sino-U.S. trade dispute will ease. China does not not want 2010 to be "an unpeaceful year" for trade and economic relations with the United States.

45 Sino-U.S. trade disputes have risen after the global financial crisis pressured both sides' economies from late 2008.

Economic front • China January inward FDI up 7.79% yoy; 6th straight monthly rise (21st February) Foreign direct investment (FDI) into China rose for the sixth consecutive month in January, up 7.79 percent year on year to 8.13 billion U.S. dollars, China's Ministry of Commerce (MOC) said Saturday. The government approved the establishment of 1,866 overseas-funded ventures in January, a year-on-year increase of 24.73 percent, the MOC said in a brief statement posted on its website. FDI in January mainly flowed into the manufacturing sector, despite an overall decrease in the sector of 11.57 percent year on year, according to the statement. The sector attracted 48.65 percent of total FDI. In January, China's non-financial investments in foreign markets stood at 2.36 billion U.S. dollars, the MOC said.

• China to improve audit to government-funded project (21st February) China Saturday issued a regulation on the implementation of the Audit Law, which required close audit to government-funded projects, to make sure financial funds were properly used. The regulation, issued by the State Council, or China's Cabinet, asked auditing offices to conduct follow-up audit to organizations or projects, which were funded or partly funded by government. The regulation was revised and passed at an executive meeting of the State Council on Feb. 2 and will become effective on May 1 this year. Under the regulation, audit authorities are entitled to launch special investigation into government departments or organizations on budget management or the management and utilization of state assets. To ensure accurate and impartial auditing, the regulation provides that organizations are entitled to apply for government adjudication, administrative review or lodge a lawsuit if they disagree with the audit results. The current Audit Law was amended and passed in February 2006 by the Standing Committee of the Tenth National People's Congress.

• China Tightens Bank Lending Rules (21st February) Banking regulators in China have ordered institutions to tighten controls on risk and carefully scrutinize borrowers' ability to pay their debts in a new step to rein in lending. The government's order comes as Beijing tries to prevent excessive lending that it says could lead to financial problems while ensuring adequate credit to keep the economic recovery on track. Chinese leaders worry that a stimulus-driven torrent of lending is fueling a dangerous bubble in stock and real estate prices. Beijing has ordered banks to set aside additional

46 reserves and to keep lending stable, but the central bank has avoided raising interest rates, which might slow down growth. The China Banking Regulatory Commission, or CBRC, said in a statement on its Web site Saturday that it issued two regulations to increase risk management on personal and working capital loans. The rules took effect Feb. 12. The regulation on working capital loans stated that banks must calculate borrowers' actual needs and also consider their cash flow, liabilities, repayment abilities and other factors when assessing loan applications. On personal lending, the regulation says that borrowers may not obtain loans if they do not specify what the money is to be used for. Chinese leaders have warned banks repeatedly to keep lending stable in 2010 and avoid financing unneeded real estate and industrial projects due to fears they might fuel inflation or leave banks burdened with bad debts if poorly planned projects fail. Banks were ordered Feb. 12 to increase reserves by half a percentage point — to 16.5 percent for large lenders and to 14.5 percent for smaller institutions. The government reported earlier this month that January bank lending rocketed to 1.4 trillion yuan ($200 billion) — nearly one-fifth of the planned 2010 total. That was despite a Jan. 12 order to banks to raise reserves, also by 0.5 percent, and repeated commands to keep lending at sensible levels. http://abcnews.go.com/Business/wireStory?id=9900229

• China's household appliance exports recover in second half of 2009 (21st February) (Xinhua) -- The rate of decline for China's household appliance exports by value narrowed by 7.55 percentage points in the second half of 2009 compared with the first half, said the Ministry of Industry and Information Technology (MIIT) Sunday. Despite the narrowing rate of decline, the country's household appliance exports by value still dropped to 31.32 billion U.S. dollars in 2009, down 13.27 percent year-on-year, MIIT said in a statement posted on its website. In specific, the declining rate for household water heater exports by value narrowed the most by 13.76 percent year-on-year, followed by air conditioner, refrigerator and washing machine exports, according to the statement. The ministry attributed the narrowing rate of decline to the global economic recovery. The ministry did not say which overseas market was leading the rebound in demand.

• China tourism revenue up 26.9% during Spring Festival holiday period (21st February) (Xinhua) -- China's tourism revenue rose 26.9 percent to 64.62 billion yuan (9.46 billion U.S. dollars) during the Spring Festival, the National Tourism Administration (NTA) said Sunday. China received 125 million tourists during the holiday period from Feb. 13 to 19, up 14.8 percent from the same period last year, a statement on the NTA website said. Of the tourism revenue, 4.6 billion yuan came from airlines while 2.83 billion yuan from railways. The tourists spent 26.51 billion yuan in China's 39 key tourism cities and 30.68 billion yuan in other areas. Among the tourists, 29.92 million stayed overnight and 95.13 million stayed for less than one day.

47

• SCENARIOS-Is change coming to China's yuan policy? (22nd February) BEIJING/SHANGHAI, Feb 22 (Reuters) - A few months after Beijing revalued the yuan by 2.1 percent in July 2005, Premier Wen Jiabao said, "there will be no more surprises". But now economists are again discussing the possibility of a one-off appreciation because China's inflation is picking up and its exports are recovering. The government has in effect re-pegged the yuan at about 6.83 to the dollar to cushion its exporters and shore up financial stability since mid-2008 when the global financial crisis worsened. In the process, it has grown increasingly hostile to foreign criticism of its controversial currency policy. China looks set to stay the course on the de facto peg for a while yet, but change is likely to come later this year. Here is a look at various scenarios of what might happen. For a graphic contrasting the yuan/dollar spot rate and one-year non-deliverable forwards, see: link.reuters.com/zab42j DE FACTO PEG MAINTAINED * Probability: Likely into the second quarter If the Chinese export lobby gets its way, the yuan will stay locked in place until external demand recovers strongly. The commerce ministry has repeatedly insisted that a stable yuan has benefited both China and the world during the global financial crisis. It again voiced this opinion on Monday. [ID:nTOE61L01O] Double-digit annual growth in exports is all but assured in coming months due to a low base of comparison in early 2009, but policymakers will be looking at month-on-month numbers for more solid evidence of recovery. Sequential growth momentum went into reverse in January, with exports down 16 percent from December. RESUMPTION OF GRADUAL APPRECIATION * Probability: Likely over the full year Many analysts expect Beijing to let the yuan start strengthening again sometime in the next few months, given growing inflationary pressures and the nascent recovery in exports, leaving it roughly 3-5 percent stronger a year from now. Offshore yuan forwards are currently pricing in 2.7 percent appreciation against the dollar over the next year CNY1YNDFOR=, while a Reuters poll conducted last month centred on a 3 percent rise by the end of this year. [ID:nTOE60603X] However, the exact form of such a gradual climb is subject to much debate. While the central bank may be most likely to resume gradual appreciation quietly, some economists say it could start with a small revaluation, as in July 2005, and could widen the band within which the yuan may rise or fall on any given day. Versus the dollar, that band is now plus or minus 0.5 percent. Such a move could be pushed back slightly by political considerations, as Beijing seeks to avoid giving the impression that it is yielding to pressure from the United States. Any such upward drift in the yuan would probably support Asian currencies, from the Singapore dollar SGD= to the Japanese yen JPY=, that are looked to as yuan proxies. The impact on commodities markets and commodities-linked currencies is more difficult to predict, as such a move would make imports cheaper but could also be seen as a tightening measure that would temper Chinese growth in the medium term. NEW EXCHANGE RATE REGIME * Probability: Less likely but garnering attention

48 Economists have suggested that China would benefit from a new model for determining the yuan's exchange rate. Although the exchange rate is theoretically set at present with reference to a basket of currencies, it has in practice been overwhelmingly centred on the dollar. The yuan rose nearly 20 percent in a roughly straight line against the U.S. currency from mid-2005 to mid-2008, giving speculators a one-way bet. Ting Lu, an economist with Merrill Lynch, has said that Beijing should follow Singapore's lead in targetting a basket of currencies, keeping the basket's composition a secret so as to create uncertainty about when the central bank might intervene. Jun Ma, an economist with Deutshe Bank, advocates a "flexible crawling peg against a basket" that would generate uncertainty, as in the Singaporean case, but with daily and monthly volatility limits against the dollar to avoid hurting companies. Researchers from the Chinese Academy of Social Sciences, a top government think-tank, have suggested a policy of making it clear the yuan will appreciate by 3-5 percent each year, but in an unpredictable pattern so speculators are wrong-footed. BIG ONE-TIME REVALUATION * Probability: Unlikely A substantial one-time revaluation would fly in the face of Beijing's promised policy continuity and might appear to domestic critics as if the government was caving in to foreign pressure. Moreover, given China's style of consensual decision making, any major policy shift would require agreement from hard-liners opposed to appreciation, limiting the scope for the yuan's rise. Still, some market heavyweights have begun to predict a sizeable one-off revaluation. The chief economist at Goldman Sachs said earlier this month that Beijing could be about to let the yuan strengthen by as much as 5 percent, while Societe Generale said in a note on Monday it expected a revaluation of 5 to 10 percent around April or May. A big enough revaluation would, in theory, deter hot money inflows by damping expectations of further major gains. But if it was deemed insufficient, investors might still pile into Chinese assets on expectations the yuan would have to climb further. Conversely, if the adjustment was big enough to deter speculators, it might batter the very exporters that Beijing has tried so hard to support. A major yuan revaluation could lead to sharp initial gains for other Asian currencies such as the yen and Australian dollar AUD=, which tend to have high correlations with Chinese growth. But the sharper the move, the greater the possibility that it would also set off worries about the world's third-largest economy slowing as a result of the impact on exporters, meaning equity and commodity markets might react negatively. Shares of companies geared towards Chinese final consumption, from luxury goods retailers to automakers, might rally on the hope that cheaper imports would drive China's demand. (Editing by Alan Wheatley) http://www.reuters.com/article/idUSTOE61L03U20100222?type=usDollarRpt

• ASEAN-China free trade may raise business profit in Indonesia (22nd February)

49 (Xinhua) -- The implementation of ASEAN-China free trade may reduce the cost in real sector which could raise the business profit to be taxed by the Indonesian government, an official with at the Finance Ministry said here Monday. Agung Kuswandono, technical director at the Directorate General of Customs and Excise of the ministry, said that the free trade implemented on Jan. 1 could reduce import duty, which will in turn reduce the cost on real sector. The finance ministry expects the directorate general can collect 19.57 trillion rupiah (some 2.09 billion U.S. dollars) in import duty this year, up 5.1 percent from that in 2009, the Jakarta Post said.

• Government foresight, economic growth pattern adjustment saved China from worst of financial crisis: scholars (22nd February) The Chinese government's insight and the adjustment of the economic pattern were the two major factors helping China ride out the global economic downturn, scholars said here Sunday. Zhuang Fuling, professor of Renmin University, said the Chinese government made a correct analysis of China's economic situation and took quick and resolute action. At the end of 2007, the central government called for vigilance against possible scenarios of various sorts. Moreover, in the Central Economic Work Conference held in December 2008, China drew up guidelines to cope with the global economic downturn through domestic consumption expansion, development pattern transformation, key sectors reforms, and continued effort to open up and improve people's livelihood. Ye Duchu, professor of Party School of the Central Committee of the Communist Party of China (CPC), attributed the success to China's systemic advantages. "We could employ the country's fullest strength to reduce or offset the negative implications of the crisis," Ye said. The National Bureau of Statistics revealed on Jan. 21 that China maintained a GDP growth rate of 8.7 percent in 2009 despite the global recession. The global financial crisis, by nature a challenge to China's development mode, prompted the country to quicken its drive to transform its economic pattern in a bid to realize sustainable development for the future, scholars say. Lu Zhongyuan, deputy director of Development Research Center under the State Council, said China should seize the opportunity to optimize the economic structure and promote the system and technological innovation. Jin Bei, president of Institute of Economy under Chinese Academy of Social Sciences, considered the crisis a good chance for competitive enterprises to carry out strategic adjustment. On Feb. 3, Chinese President Hu Jintao called for the whole nation's efforts to accelerate the adjustment of China's economic development pattern to promote sound and fast economic and social development. Wu Zongxin, counselor of Counselors' Office of the State Council, highlighted the building of the CPC in pulling through the global economic downturn. "China's good performance during crisis is attributed to its staunch and capable leadership," said Wu. The Fourth Plenary Session of the 17th CPC Central Committee urged all Party members to be prepared for dangers in times of peace and push forward Party building work to

50 ensure the Party's "backbone" position in people's minds when coping with various domestic and overseas challenges. Zhuang said the rapid and sustained economic growth called for strengthening and improving the Party building under the new circumstances. The cadres of the Party at county levels have been trained at the Party School of the CPC Central Committee since 2008 in a bid to better cope with the global financial crisis. "This is an endeavor rarely seen in the world, thus guaranteeing China's effective response in fight against the crisis," said Ye.

• China's market restrictions to end in 15 years: expert (22nd February) China's stock markets are likely to be fully open to foreign investors within 15 years, according to a leading investment expert. Direct foreign dealing in Chinese stocks is currently restricted through the government's Qualified Foreign Institutional Investor (QFII) scheme. The current annual quota for overseas funds is just $16 billion, a small fraction of the total investment in China's main exchanges in Shanghai and Shenzhen. Stuart Leckie, chairman of Stirling Finance, a leading Hong Kong-based pensions investment adviser, said all restrictions could be off by 2025. "All financial institutions will then be able to invest in the stock markets on the Chinese mainland, just as they do in Hong Kong, Japan or any other market," he said. "It is 30 years since China's opening up and it will take half as long again for this to happen." He said the Chinese mainland would gradually lift barriers in the same way Taiwan and India have done in recent years. Leckie, author of the book, 'Pensions in China', and who was speaking at the Trade Tech 2010 Investment Conference, was bullish about the outlook for the Chinese market. He said the Shanghai Composite Index could double within the next three years and that it was a matter of if, not when, it returned to its all-time high of 6,124 in October 2007. "I am sure the index will double over the next five years but there is a chance it will double in the next three years," he said. Other speakers at the conference were also optimistic about the outlook for investors in Chinese stocks. Michael Wang, head of dealing at the China International Fund Management said the Chinese market was full of opportunities. "It is a golden opportunity to invest in China. Blue chip companies are still very cheap," he said. "In the medium term there might be some correction but we won't go back to 2006 levels (when the market was just over the 1,000 level)." Kent Rossiter, head of trading, Asia Pacific, for fund manager RCM, based in Hong Kong and which is part of the Allianz Group, was also confident. "I am really bullish about opportunities. I am worried about volatility, however," he said. Rossiter said some of the volatility was down to the inexperience and lack of competence of some professional investors in the Chinese market. "The market needs to develop," he said. "Professional investors need to improve their performances. They have too much of the same mentality as the man on the street in that they just like to buy and sell without taking any view."

51 Leckie added that the Chinese market was not about to repeat the experience of the Nikkei Dow in Japan. "China is not about to become another Japan with the level of the index standing at a quarter of what it was 20 years ago." He was not concerned about the poor start to the Chinese markets in 2010 with the major index losing 8 per cent of its value in January and falling through the 3,000 barrier. It increased by 80 per cent in 2009. "Obviously China has got off to a weak start. It was the second worst performing market internationally in January after being the best performing in 2009. It is just living up to its reputation as a volatile index." He said he expected the market, however, to rise by up to 15 per cent in 2010 to a value somewhere between 3,600 and 3,800 from its January 1 level of 3,277. "I think this January decline is overdone." (Source: China Daily)

• Chinese shares close lower on 1st trading day in Year of Tiger (22nd February) Chinese equities closed lower Monday, the first trading day after the week-long traditional Spring Festival holiday. The benchmark Shanghai Composite Index lost 0.49 percent, or 14.74 points, to close at 3,003.4 points. The Shenzhen Component Index edged down 0.74 percent, or 91.24 points, to finish at 12,213.54 points. Chinese shares rose notably in the Year of the Ox, with the key Shanghai Composite Index advancing more than 50 percent to close at 3,018.13 points on Feb. 12, the last trading day of the Year of the Ox. Combined turnover expanded to 130.61 billion yuan (19.13 billion U.S. dollars) Monday, from 114.07 billion yuan the previous trading day. Losers outnumbered gainers by 445 to 413 in Shanghai and 466 to 396 in Shenzhen. The real estate sector fell across the board on the recent credit tightening move by China's central bank. The People's Bank of China, the country's central bank, announced on Feb. 12 after the market close it would raise the deposit reserve requirement ratio (RRR) for Chinese financial institutions by 0.5 percentage points from Feb. 25 this year. China Vanke Co. Ltd., the country's largest listed property developer, shed 1.17 percent to 9.26 yuan per share, while Poly Real Estate, China's second largest developer by market value, lost 1.69 percent to 19.14 yuan per share. Brokerage shares advanced, though, on hopes for future business income growth, as investors were able to apply for accounts to trade Chinese stock index futures from Monday, dealers said. CITIC Securities, the country's leading brokerage firm, added 0.73 percent to close at 27.52 yuan per share. Guangfa Securities continued its upward momentum and jumped by the daily limit of 10 percent to reach 55.06 yuan, after posting a strong debut on the previous trading day at the Shenzhen Stock Exchange.

• China's CPI to rise moderately in 2010: official (22nd February)

52 China's consumer price index (CPI), a main gauge of inflation, would probably only increase moderately in 2010, an official with China's National Bureau of Statistics (NBS) said here on Monday. Although China's CPI continued to climb in previous months, it was not likely to surge this year as supplies were abundant, Wei Guixiang, head of the Department of Urban Social and Economic Survey of the NBS, said Monday during an exclusive interview with xinhuanet.com, a website run by Xinhua. China's CPI rose 1.5 percent year-on-year in January, mainly boosted by food price increases due to the cold winter weather. The gauge in January was 0.6 percent up compared with last December, said the NBS. "China's housing demand continues its strong run, but the rate of increase may slow due to an array of government measures," Gui added. Official figures revealed that housing prices in China's 70 large and medium-sized cities rose 9.5 percent in January 2010 from a year earlier, and were up 1.3 percent compared to the previous month.

• China's currency policy not to blame: Thai economist (22nd February) China's current currency policy does not affect other countries' export and its stability is vital to world economy, a senior Thai economist said Monday. The Renminbi rate is not the main factor for China's trade surplus with the United States and the European Union, Associated Professor Dr. Sompop Manarungsan from Faculty of Economics, Bangkok-based Chulalongkorn University said in an interview with Xinhua. Instead, production cost, particularly low labor cost, is the real reason that China remains trade surplus with the United States, Sompop said, elaborating that the average U.S. annual income is 15 times higher than that of the Chinese people. Therefore, even the dollar exchange rate were reduced to half of its present level, the United States still can not solve the problem of trade deficit with China, he said. "The Japanese yen is a example. Since the Plaza Accord inked in 1985, the Japanese yen has been highly appreciated, but up to now, the United States still could not solve the trade deficit problem with Japan, even though now U.S. dollar values less than half against Japanese yen when compared with 20 years ago," Sompop said. The Plaza Accord was an agreement signed by the governments of France, West Germany, Japan, the United States, and the Britain on September 22, 1985 at the Plaza Hotel in New York City, to depreciate the U.S. dollar in relation to the Japanese yen and German Deutsche Mark by intervening in currency markets. The exchange rate value of the dollar versus the yen declined by 51 percent from 1985 to 1987. Commenting on the argument that developing countries or emerging market countries are the victims of China's currency policy, Sompop said that it is totally wrong, because the Renminbi exchange rate largely depends on the movement or direction of U.S. dollar "I don't think that emerging market countries or developing countries are highly affected by Renminbi rate, as you know that those countries have been gaining from trading with China, not facing heavy trade deficit," he said. He said the China's current currency policy does not affect emerging market countries' export, for example, in January alone, China's import value has risen over 80 percent when compared with the same time last year.

53 He also suggested the United States rethink its currency policy and work out ways to benefit both domestic and the global economy.

• Taiwan leader says economic pact with mainland "absolutely necessary" (22nd February) Taiwan leader Ma Ying-jeou said Monday that negotiating and signing a wide-ranging economic pact with the Chinese mainland was "absolutely necessary" and "needs to be done quickly." Ma made the remarks here when attending a gathering for Taiwan business people with business on the mainland. The gathering was held to mark Chinese Spring Festival by the island's Straits Exchange Foundation (SEF), an organization authorized to handle cross- Strait issues. The principle idea of the Economic Cooperation Framework Agreement (ECFA) was to "help people do business and raise Taiwan's competitiveness," Ma said in his 35-minutes- long speech. ECFA is a wide-ranging economic pact to further normalize trade and investment ties across the Taiwan Strait, which Ma hopes to sign with the mainland this year to help fuel Taiwan's economic revival. The Chinese mainland is Taiwan's biggest trade partner, with an annual trade volume exceeding 100 billion U.S. dollars for the last two years. Given the huge amount of trade, a systematic mechanism was needed to solve problems when they arose between the two sides, according to Ma. Signing ECFA would help create 260,000 jobs in Taiwan, Ma said citing a local research institution. He also urged efforts to help the general public to know more about ECFA, especially low-income residents, people who work in small and medium-sized enterprises and those living in central and southern Taiwan. ECFA negotiations have no fixed schedule. The only round of talks so far were held in Beijing on Jan. 26. The proposed agreement mainly includes reducing tariffs, guaranteeing investment and protecting intellectual property. Economic ties between the mainland and Taiwan have warmed in recent years, with direct air and sea transport links and postal services, as well as regular passenger charter flights connecting the island with the mainland.

• The Chinese Are Selling Treasuries – So What Are They Buying? By Martin Hutchinson, Contributing Writer, Money Morning In the monthly U.S. Treasury report this week, it was announced that China had sold $34.2 billion of Treasuries in December (or allowed short-term ones to run off), making Japan once again the largest holder of U.S. Treasuries.

The battle between China and Japan for the title of largest holder of this dubious asset is not very interesting. What's more interesting is the question of where China is instead opting to invest. After all, $34.2 billion is a fair chunk of change, and China's overall reserves are growing - not shrinking - and now total $2.4 trillion.

54 The People's Bank of China usually keeps its holdings a carefully guarded secret, much more so than for most central banks - our knowledge of its holdings of Treasuries comes from U.S. data, not from China. We do, however, have some evidence about the Chinese government's investment thinking, thanks to the holdings of China Investment Corp., the country's $200 billion sovereign wealth fund. CIC got heavily involved in the U.S. financial business in 2007, buying a $3 billion stake in The Blackstone Group LP (NYSE: BX) and a $5 billion stake in Morgan Stanley (NYSE: MS) - in both cases, 9.9% of the outstanding common. Neither of those investments turned out particularly well - Blackstone is down about 60% from CIC's buy price while Morgan Stanley is down about 40%.

More recently, CIC has turned toward natural resources, in 2009 buying 17% of Teck Resources Ltd. (NYSE: TCK) and 13% of Singapore-based Noble Group. Teck Resources is a major diversified mining company, while Noble is a global commodities trading/supply-chain manager with $36 billion in sales.

For CIC, the bad news is that because commodities companies have wimpy market valuations compared with the overstuffed titans of Wall Street, its investments in Teck and Noble were much smaller - $1.7 billion and $1.1 billion, respectively. Still, those investments have turned out a lot better - CIC's Teck investment is worth about 110% more than it cost and its Noble investment has risen about 60% - with both increases coming in less than a year.

So which do you think the Chinese government is motivated to invest in - the staggering titans of U.S. financial services or rapidly growing commodity producers? That's without taking into consideration the fact that China has an ever-increasing thirst for commodities, because of its rapid growth, whereas it has perfectly competent banks of its own.

Let's not get carried away. The People's Bank of China is a central bank, not a sovereign wealth fund, and it couldn't invest $2.4 trillion in Teck Resources shares if it wanted to (though the other Teck shareholders would doubtless enjoy the ride if it wanted to try!).

Still, look at the alternatives:

• It could buy more Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) bonds. However, those are effectively guaranteed by the U.S. government and are subject to the risk of U.S. inflation and rising rates. Probably not. • It could buy euro bonds and bills. It already has a fair chunk of these, and probably doesn't want to increase its exposure while it's still not clear what will happen to Greece. One possible solution to the Greek problem would be Bernanke-esque money printing by the European Central Bank (ECB), which would zap the value of euro bonds; alternatively, if no solution was found, further countries could follow Greece into default. • It could buy British gilts. If it doesn't like the U.S. risks, it will really hate the British ones, which are the same, but worse.

55 • It could buy Japan government bonds. With Japan running deflation at 2%-3%, the 2% yield on 10-year JGB represents a real yield of 4%-5%. So if you think Japan will sort itself out before defaulting, this is about the best deal in the market. But China is not big buddies with Japan. • It could buy Australian, Canadian or Swiss government bonds. All three are good deals in sound economies, but deploying $34.2 billion into any of them within a month is probably impossible. So given that central banks don't generally buy stocks (that's what sovereign wealth funds are for), or dabble in commodity futures, there are really only two decent alternatives into which China could sink that amount of money: gold and silver.

China already owns some gold, but not much, compared to the size of its reserves - 1,054 tons at March 2009, worth about $37 billion at today's prices. At 1.5% of its reserves, that's pathetic, though it's up 76% since 2003. On average, international central banks hold 10.2% of their reserves in gold. To get to that level, China would have to buy more than $200 billion worth - about two years' global mine output.

Nevertheless, it seems unlikely that China will be willing to retain above average confidence in the eternal value of Western fiat currencies, and so it's probable that considerable Chinese gold buying is taking place on a confidential basis.

Silver is not is a significant part of most countries' reserves, but China is historically an exception, since in Imperial times it was on a silver standard rather a gold standard, and so retained substantial reserves. Early in the 2000s it was a major seller, selling 50 million ounces in each of 2001 and 2002, at the then-prevailing prices of below $5 an ounce. After that it stopped selling.

Then, in September 2009, the Chinese government passed a decree encouraging Chinese savers to buy silver, issuing publicity explaining that buying silver was a good deal since the gold/silver price ratio at 70-to-1 was historically very high, offering them convenient small-value ingots with which to buy it, and prohibiting the export of silver from China.

This was almost certainly a move designed to dampen stock-market speculation and reduce money supply growth, since bank deposits converted into silver would effectively be sterilized. What's more, if the long-awaited Chinese banking crisis ever happened, the effect on the long-suffering Chinese public would be mitigated if people held substantial wealth in the form of readily negotiable silver ingots.

In any case, it's likely that China as a whole - whether the government or its people - is now a very substantial buyer of silver, indeed, possibly to a greater extent than gold. Thus, a rundown in People's Bank of China holdings of U.S. Treasuries could be readily accounted for by purchases of gold for its own account and of silver to supply to the Chinese public.

China is not a universal fount of investment wisdom. But with this information, I know

56 which way I'm betting. http://moneymorning.com/2010/02/19/china-investments/ • Banned Chinese day lily enters Taiwan from Vietnam: lawmakers (23rd February) Taipei, Feb. 23 (CNA) A large amount of dried day lily from China is entering Taiwan illegally by being passed off as a product of Vietnam, hurting local farmers' interests, opposition Democratic Progressive Party (DPP) lawmakers charged Tuesday. The lawmakers suggested that the large volume of the banned imports has violated President Ma Ying-jeou's promise to safeguard the rights and livelihoods of local farmers at a time when Taiwan is in talks with China over a proposed pact to expand trade. Taiwan currently bans the import of 830 Chinese agricultural products, including dried day lily, and the president has vowed that the restrictions would be maintained even if a proposed economic cooperation framework agreement with China is signed. But banned Chinese agricultural products have found their way into Taiwan either through smuggling or being represented as the product of a third country. Citing customs statistics, DPP Legislator Pan Men-an said Tuesday that 73,830 kilograms of dried day lily, purportedly from Vietnam, were imported into Taiwan in 2009, a 27 percent rise from the 58,108 kilograms that entered Taiwan's market in 2008. Last month alone, another 39,984 kilograms of dried day lily were imported into Taiwan to satisfy higher demand during the Lunar New Year holiday, Pan said. The shipments have invariably been accompanied by Vietnamese certificates of origin, but Pan said Vietnam does not produce a lot of day lily, and he contended that fake certificates of origin were used to get around the ban on importing the agricultural product from China. "A certificate of origin can be bought at the price of less than US$350," he said. One customs official familiar with the case told the Central News Agency, however, that the certificate of origin is not the only document checked when screening incoming shipments. Importers' transaction and transportation documents are also checked to ensure the origin of the imported goods. The official, who spoke on condition of anonymity because he was not authorized to speak on the record, said Vietnamese customs officials are also working with Taiwan to prevent their country from being blamed unfairly for helping other countries engage in illegal imports. But the DPP lawmakers are convinced the day lily invading Taiwan comes from China. DPP Legislator Lai Kun-cheng said a percentage of the imported dried day lily had been found to contain excessive amounts of sulfur dioxide, posing a threat to human health. Lee Wang-ting, a day lily farmer from Taitung County in eastern Taiwan, said that the low price of the Chinese day lily has had a serious impact on the livelihoods of local farmers. Taiwanese day lily is being sold at the wholesale price of about NT$500 per kilo, while the price of Chinese day lily is less than NT$170 per kilo, he said. Lee also pointed out that dried Chinese day lily often looks whiter than the Taiwanese product because it has been bleached. http://www.etaiwannews.com/etn/news_content.php?id=1187000&lang=eng _news

57 • Saudi Arabia Shifts its Focus to China as the United States Falls Out of Favor (23rd February)

Saudi Arabia, the world’s largest oil producer, last year shipped more oil to China than it did the United States for the first time ever – a shift that highlights China’s ascension to the ranks of the world’s economic elite, as well as its position as the new focal point for the world’s energy producers.

The flow of oil from Saudi Arabia to China rose to more than 1 million barrels per day (bpd) last year, just as demand in the United States fell below that level for the first time in more than two decades.

China in December alone imported a record-high 1.2 million bpd of Saudi oil, as its economy rode the momentum of Beijing’s $585 billion (2 trillion yuan) stimulus package. U.S. imports of Saudi oil, on the other hand, fell to a 22-year low of 998,000 bpd in the first 11 months of 2009, as the world’s largest oil consumer clawed its way back from its worst recession in 70 years.

"This is a reflection of the global economy," Jim Burkhard, managing director of global oil at IHS Cambridge Energy Research Associates, told The Financial Times. "China has been growing. The U.S. hasn't. We've seen that reflected in oil demand figures."

China's economy grew by 10.7% year-over-year in the fourth quarter of 2009, compared to 5.7% growth for the United States.

On top of that, China last year supplanted the United States as the world's largest auto market with 13.6 million vehicles sold. Roughly 10.4 million light vehicles were sold in the United States in 2009 - the lowest total since 1982 and a 21% decline from 2008.

China's purchases of Saudi Arabian oil rose about 14% last year, as a result. U.S. demand peaked above 10 million bpd in 2005 but has fallen 9% in the past two years. Saudi Arabia has reacted by striking new refining deals with Beijing and moving storage facilities from the Caribbean to Japan.

Saudi Arabian Oil Co. (Saudi Aramco), the world's biggest crude producer, already owns a 25% interest in a refinery in China's Fujian province, and is in talks with China Petroleum & Chemical Corp. (NYSE ADR: SNP) to take a stake in a 200,000 bpd plant in Shandong.

"We are already exporting more to China than to the U.S.," Saudi Arabian Oil Co. Chief Executive Officer Khalid A. Al-Falih said in an interview with BusinessWeek. "We are prudent and careful about where to invest but our eyes are focused on China and we will continue to look for all opportunities."

Many refiners have been forced to postpone expansion projects and idle plants in the past year as the global recession eroded fuel demand. But Al-Falih said his company is

58 investing in refining capacity even regardless of current poor returns.

"Long term there will be a lot of consolidation and retirement of old and inefficient refineries," he said. "We are building refineries that are going to be the most efficient, well-configured and able to deliver the products and we are comfortable that over their life cycle they will be very profitable. We are not designing them for the markets of 2008, 2009 but we are putting them in place for the next three to four decades."

China and Saudi Arabia aim to boost trade 50% to $60 billion by 2015, the state-owned Saudi Press Agency reported last month, citing Chinese Trade Minister Chen Deming. "China offers demand security, something that for a long time the oil-producing countries including Saudi Arabia have called for," John Sfakianakis, chief economist at Banque Saudi Fransi in Riyadh, told The FT. "As global demand has been picking up in the east... Saudi Arabia has been looking east." http://moneymorning.com/2010/02/23/saudi-arabia-china/

• Better access to finance for China's small businesses in 2009 (23rd February) Access to finance for China's small enterprises generally improved in 2009, but still was not good enough, said the country's top banking regulator on Tuesday. Outstanding loans to small Chinese enterprises added to 5.8 trillion yuan (849 billion U.S. dollars) as of the end of 2009, China Banking Regulatory Commission (CBRC) said in a statement posted on its website. The figure accounted for 22 percent of total corporate loans by the end of last year, 1 percentage point higher than a year ago, said the CBRC. The CBRC data showed that the growth rate of new loans to small enterprises in 2009 was 5.5 percentage points higher than that of the total corporate lendings and 0.61 percentages higher than all lendings. China has set a target of keeping the growth rate of new small business loans higher than that of all loans in 2010, and the amount of new loans should be bigger than the previous year, said the CBRC. "Small enterprises" in China refers to those with assets worth less than 10 million yuan or annual sales less than 30 million yuan, according to a CBRC document. Last December, China promised to help improve the financing mechanisms to help small and medium enterprises (SMEs), as they were worst hit by the financial crisis and have had difficulty securing loans as commercial lenders preferred state-owned enterprises and large key projects, as the risk was not as great. SMEs refers to enterprises whose annual business revenue is below 300 million yuan. But in retail and accommodation industry, the maximum annual business revenue is 150 million yuan for an SME.

• Interview: China's currency policy not to blame for trade surplus: economist (24th February) (Xinhua) -- China's trade surplus should not be simply attributed to the current exchange rate of the renminbi, said Stephen King, chief economist of the HSBC bank.

59 China's high levels of precautionary savings by households, rather than the exchange rate, is a more important factor for China's surplus, King said in a recent interview with Xinhua. He took the example of Japan. "Despite a massive yen appreciation over the last 40 years, Japan's current account surplus has risen," he said. Commenting on the argument that developing countries or emerging market countries are the victims of China's currency policy, King said the developing countries are trading a lot more with each other for their mutual benefit, instead of competing with each other to sell to the West. The impact of Chinese demand on global commodity prices has made substantial benefits to the emerging countries in the latest financial crisis, he said. Emerging markets led by China performed "extremely well" for the past years, and have been leading a global recovery, said King. As regards the renminbi exchange rate, King said: "It's quite possible that a renminbi adjustment on a large scale would either lead to lower wages and faster productivity growth in China or higher wages and lower productivity growth in the West." According to the economist, China, whose economy grows about three times as fast as the U.S. economy, contributes to global growth almost as much as the United States.

• Interview: Appreciation of Chinese yuan no solution to world trade imbalance: South African experts (24th February)

It is unfair to attribute the world trade imbalance to the role of the Chinese currency and appreciation of the yuan is no solution to the problem, South African economists said Wednesday.

It is unwise, too, to demand a sharp appreciation of the yuan amid world economic recovery, John Lowes, an economist with South Africa's First National Bank, said in an interview with Xinhua.

He said that such a move would compromise both the Chinese and the world economies.

If the Western countries ignore China's contribution to the world economy and force it to appreciate its currency, the Chinese economy could end in a downturn, and the Western countries are bound to suffer heavy losses, he added.

He applauded the contribution of yuan's stabilization to the global economic recovery during the international financial crisis.

Lowes said that even if China appreciates its yuan, it didn't mean the U.S. trade deficit would be lowered, and it was very likely the United States would buy from others instead of China.

He also denied links between China's current trade surpluses and the role of the yuan. Actually, there is no scientifically viable assessment on whether a currency is undervalued, he said.

60 According to Lowes, China's trade surplus since 2005 has been a result of over- consumption in the United States.

Meanwhile, South African economist David Rute said that the global trade imbalance has been caused by the unreasonable economic structures of the world's major developed countries.

He criticized what they have done in trying to influence China's long-term economic strategy, and blasts argument that "underestimation of yuan" is trade protectionism.

He spoke highly of China's measures in narrowing its currency exchange rate floating range, which has proved to be an effective way to overcome the crisis.

Ever since the international financial crisis broke out in 2008, China has dealt with it in a steady manner and revived its economy in a relatively short period, he said. The "China Engine" has made a crucial contribution to the world economic recovery, he said.

Rute said that the sustainable development of the Chinese economy would benefit the entire world, and he would like to see a stronger yuan in the future.

• VP: China's labor unions play unique role (25th February) (Xinhua) -- China's labor unions had played an irreplaceable and unique role in boosting stable economic development and employment stability, Chinese Vice President Xi Jinping said here Thursday. The Chinese government attached great importance to the role of labor unions in China's economic and political arenas and supported labor unions to better safeguard workers' legitimate rights and interests, Xi added. Xi made the remarks in his speech at the opening ceremony of an international forum on economic globalization and trade unions Thursday in Beijing. As a developing country with 1.3 billion people, China should take both its industrialization and creating enough jobs for people into consideration and make comprehensive and balanced plans, Xi said. Figures showed that China's gross domestic product (GDP) rose 8.7 percent year-on-year in 2009 to reach 33.53 trillion yuan (about 4.9 trillion U.S. dollars) and created 9.1 million new jobs for urban residents last year.

• China to further adjust and reinvigorate key industries: State Council (25th February) China should further step up efforts to implement the plan to adjust and reinvigorate some of the country's key industries, according to an executive meeting of the State Council held on Wednesday. The meeting was chaired by Premier Wen Jiabao. Progress has been made in 2009 for adjusting and promoting key industries, however the situation remained grave as weak global demand was still affecting China's economy and

61 more efforts were needed to curb overcapacity in some industries, according to a statement released after the meeting. To combat the global economic downturn, China in 2009 adopted a massive plan to adjust and reinvigorate the country's ten key industries covering cars, steel, information technology, logistics, textile, nonferrous metal, equipment manufacturing, petrochemicals, shipbuilding as well as light industry. The implementation of the plan was a long-term task which should focus on the structure adjustment and development mode transformation of the ten industries, said the statement. Vigorous efforts should be made to expand domestic demand, optimize industrial layout, curb overcapacity, eliminate retrograde productivity, push company merger and restructuring, promote technology innovation and deepen reform to facilitate development mode change, it said.

• Blaming Chinese currency for global imbalance not right: official (25th February) It was wrong to blame the foreign exchange rate of the renminbi (RMB), China's currency, for the global economic imbalance, Chinese commerce ministry spokesman Yao Jian said here Thursday. "RMB foreign exchange rate is neither the root of trade imbalance between China and the United States, nor the main cause of the world economic imbalance," Yao told a press conference. Such an accusation lacked basic judgement, he added. Yao stressed that maintaining a stable foreign exchange rate of RMB might be a support to stabilize the global financial market.

• Chinese shares hit one-month high as gov't promises to further promote key industries (25th February) Chinese shares rallied for the second day on Thursday, pushing up the benchmark index to a one-month high, after the State Council said Wednesday it would step up efforts to adjust and reinvigorate some of the country's key industries. The Shanghai Composite Index gained 1.27 percent, or 38.44 points, to close at 3,060.62 points. The Shenzhen Component Index picked up 1.73 percent, or 212.18 points, to finish at 12,494.27 points. Combined turnover Thursday increased to 239.9 billion yuan (35.12 billion U.S. dollars), from 185.2 billion yuan on Wednesday. Winners outnumbered losers by 826 to 49 in Shanghai and 809 to 59 in Shenzhen. Sinopec, Asia's largest refiner, rose 1.35 percent to 11.3 yuan as the petrochemical industry was one of the ten key industries China's State Council said it would continue to adjust and reinvigorate during Wednesday's executive meeting chaired by Premier Wen Jiabao. The other nine industries are auto, steel, information technology, logistics, textile, nonferrous metal, equipment manufacturing, shipbuilding as well as light industry, according to a statement issued after the meeting. The benchmark index was also driven up by investors' interest in the previously battered financial and property shares.

62 Banking shares advanced across the board by 2.24 percent despite the central bank's decision to raise the deposit reserve requirement ratio for Chinese financial institutions by 0.5 percentage points taking effect on Thursday. Shanghai Pudong Development Bank led the rally, up 5.49 percent to 20.74 yuan. Industrial and Commercial Bank of China, the country's largest commercial bank, rose 1.04 percent to 4.88 yuan, while Bank of China advanced 1.21 percent to 4.16 yuan. Property development shares surged 3.46 percent. China Vanke Co., the country's largest property developer by market value, was up 2.71 percent to 9.48 yuan. Poly Real Estate Group Co., the country's second largest developer, rose 3.1 percent to 19.96 yuan. Sichuan Changhong Electric Co., the country's second-biggest television maker, lost 1.46 percent to 7.41 yuan after rumors circulated it had falsified its financial reports, but were denied by the company's spokesman Li Haizhong Thursday afternoon.

• Taiwan sees big jump in orders from mainland (25th February) Taiwan received 8.59 billion yuan worth of orders from the Chinese mainland in January, up 134.99 percent year-on-year, according to the island's economic department. It received a total of 30.37 billion U.S. dollars of orders from outside the island in January, according to the department. Following the Chinese mainland, the U.S. provided 6.47 billion dollars of orders and Europe 5.16 billion dollars in January. The Chinese mainland is now Taiwan's biggest trade partner, with the annual trade volume exceeding 100 billion U.S. dollars for the last two years. The mainland's trade volume with Taiwan rose 103.7 percent year-on-year to 10.25 billion U.S. dollars in January, mainland statistics showed.

• China's energy efficiency improved in 2009: report (26th February) China's energy consumption per 10,000 yuan (about 1464.1 U.S.dollars) of gross domestic product (GDP) dropped 2.2 percent in 2009, China's National Bureau of Statistics (NBS) said here Thursday. Preliminary estimates indicate that the total amount of energy consumption last year stood at 3.1 billion tonnes of standard coal equivalent, up 6.3 percent compared to the 2008 level, according to a report released on the NBS website Thursday. The report did not reveal the exact amount of energy consumed per 10,000 yuan of GDP, but the figure for 2008 was 1.10 tonnes of standard coal, according to a previous NBS report. China's water consumption per 10,000 yuan of GDP totalled 209.3 cubic meters in 2009, down 7.6 percent from a year earlier. Water consumption per 10,000 yuan of industrial output was 116.4 cubic meters in the same period, down 8.2 percent from 2008, said the report. The report also showed that China consumed 3.02 billion tonnes of coal, 380 million tonnes of crude oil, 88.7 billion cubic meters of natural gas and 3,697.3 billion kilowatt hours of electric power in 2009, up 9.2 percent, 7.1 percent, 9.1 percent and 6.2 percent year-on-year, respectively. China has been making efforts to raise energy efficiency by eliminating high energy- consuming equipment and introducing energy-saving technologies, said the previous NBS report.

63 Energy consumption per 10,000 yuan of GDP was down 1.79 percent year-on-year in 2006, 4.04 percent in 2007, and 4.59 percent in 2008, according to NBS.

• China's economic macro-control to be tested in 2010 (26th February) China's macroeconomic management would be put to the test both by the domestic and international markets in 2010, said Chairman of National Development and Reform Commission (NDRC) Zhang Ping Friday. The country's fiscal and monetary policies would be tested given the uncertainties of 2010, Zhang said. "As to monetary policies, if the bank continues to provide easy loans,inflation may occur. But if the government tightens monetary policies too soon, the economy may relapse into recession." said Li Daokui, director of the Center for China in the World Economy, Tsinghua University. Last year, Chinese banks lent an unprecedented 9.6 trillion yuan (1.4 trillion U.S. dollars), nearly twice as much as 2008, and nearly half of 2009's gross domestic product (GDP). This year, for fear of asset bubbles and bad loans, the banking regulators have begun to put the brakes on bank lending. The People's Bank of China (PBOC), China's central bank, raised the reserve ratio by 0.5 of a percentage point earlier this month, hoping to reduce lending. According to the PBOC, new loans in January totalled 1.39 trillion yuan, down 230 billion yuan year-on-year, and China Banking Regulatory Commission Chairman Liu Mingkang said the Chinese government planned to restrict credit supply to 7.5 trillion yuan (about 1.1 trillion U.S.dollars) in 2010. Too much public investment caused weak private investment and overcapacity in some industries like steel, said Zhang Xiaoqiang, vice chairman of the NDRC. "There's uncertainties about economic growth restructuring and fiscal stimulus plans," said Tang Min, vice secretary-general of China Development Research Foundation. The central government allocated about 924.3 billion yuan for public spending last year, 503.8 billion yuan more than the 2008 budget, said Finance Minister Xie Xuren. To face the challenges, fiscal policies would focus on consumption stimulus and development of new economic sectors like new energy industries, said Xie at the Central Economic Work Conference held last month.

• China shares fall on policy uncertainty ahead of legislative meeting, up 2.1 pct for February (26th February)

SHANGHAI (AP) - Chinese shares fell Friday on uncertainty about the direction of government policy ahead of the national legislature's annual meeting next week but the main index ended February up 2.1 percent.

The benchmark Shanghai Composite Index slipped 8.67 points, or 0.3 percent, to close at 3,051.94. The Shenzhen Composite Index for China's smaller second exchange shed 0.1 percent to 1,172.33.

64 Investors are watching the National People's Congress, which opens March 5, to see which direction policy will go following government moves to cool housing prices and control bank lending, which investors worry might limit liquidity.

"Investors are expecting the second shoe to fall in March. It's still unclear what policies the meeting will come out," said Zhang Fan, an analyst for Debon Securities in Shanghai.

Bank shares fell on news reports that higher-than-expected lending in February might prompt regulators to raise minimum reserve requirements for a third time this year to control credit.

China Construction Bank Ltd. lost 0.7 percent to 5.64 yuan, while Bank of China Ltd. declined by 0.5 percent to 4.14 yuan. Industrial & Commercial Bank of China Ltd., China's biggest commercial lender, shrank 0.2 percent to 4.87 yuan.

Real estate shares retreated after rising for two sessions. China Vanke Ltd., the country's biggest developer, gave up 0.5 percent to 9.43 yuan, while rival Poly Real Estate Group fell 0.3 percent to 19.91 yuan.

Nonferrous metal producers lost ground on falling commodity prices. Jiangxi Copper Ltd., the country's biggest metal producer, declined 1.8 percent to 35.04 yuan, while Aluminum Corp. of China dropped 1.3 percent to 12.67 yuan.

In currency markets, the yuan strengthened to 6.8265 to the U.S. dollar, up from Thursday's close of 6.8266. http://www.canadianbusiness.com/markets/market_news/article.jsp?content=D9E3OI0O 0

• Fourteenth negotiation talks of Sino-Australian FTA held in Canberra (26th February) (Xinhua) -- The fourteenth negotiation talks of Sino-Australian Free Trade Agreement was held from Feb. 24 to 26 here. During the three-day talks, China and Australia discussed and exchanged opinions in areas like food product imports, trades of services, investment and others. Both agree to arrange another new rounds of talks soon. Australian Trade Minister Simon Crean said negotiations had stalled but both countries were now keen to deepen their interdependency. "That's why the talks are back on track," he said, adding that Australia is determined to try and see them through.

65 The first negotiation talks commenced in Sydney, and the last talk was on December, 2008. Australian exports to China are mainly iron ore, coal and wool, whereas Australia buys garments, telecommunication facilities and computers from China.

• China to promote development of rural financial institutions: CBRC (27th February) The China Banking Regulatory Commission (CBRC), the banking regulator, said Friday it would introduce four measures to facilitate the development of rural financial institutions. The CBRC would improve supervision of rural financial institutions, strengthen risk management, encourage their adopting effective corporate governance model, and evaluate the quality of their services, said Zang Jingfan, the supervision department director of the CBRC. China approved a total of 172 new-type rural financial institutions, including 148 rural banks, 8 lending firms and 16 rural mutual cooperatives by the end of 2009, according to Zang. Outstanding loans by these institutions totaled 18.1 billion yuan, of which 36 percent went to farmers and more than 50 percent to small businesses, he said. The government has been trying to boost lending to farmers and companies in the countryside, and the CBRC announced last year a plan to set up 1,293 rural financial institutions by 2011 to boost rural development.

• China's massive stimulus package effective, economy recovering: Premier (27th February) China's massive stimulus package has proved effective, with the Chinese economy having bottomed out and now in recovery mode, Chinese Premier Wen Jiabao said during an online chat Saturday. The stimulus package brought confidence and courage, and improvements have been gradually made during its implementation, Wen said while chatting online with Netizens at www.gov.cn and www.xinhuanet.com. Boosted by a raft of stimulus measures, China's economy expanded 8.7 percent in 2009, staging a speedy recovery after being hit by the worst global financial crisis in eight decades. The stimulus package included fiscal spending; tax cuts; adjustment and support policies for key industries; support systems for scientific development; and improvements in the social security system. The package has contributed to the nation's development and people's livelihood with both economic and social achievements, he added.

• Premier vows to tame "wild horse" of skyrocketing housing prices (27th February) Chinese Premier Wen Jiabao on Saturday said he was determined to tame the "wild horse" of the country's soaring housing market and to keep the prices at a reasonable level within his term as Premier. Wen made the pledge in response to netizens' complaints about soaring housing prices during his online chat with internet users around the country and abroad.

66 "I really understand the complaints", Wen said, "housing prices in some cities rise too fast." "Huge population with limited land made people's access to houses a problem", Wen said, adding it was key to increase supply to solve the problem. Wen said the government would step up efforts to increase house supplies to make the access easier. Chinese government will build five million affordable houses this year after two million were finished in 2009. Two million shanty houses would be reconstructed this year, in addition to the 1.8 million completed last year, he said. The government would also give support on land, finance and tax to help people buy homes for their own use, and use economic and legal methods to curb property speculation, Wen said. "It is the government's responsibility to guide the property market", Wen said, "I am confident that the government would ensure a healthy development of the property market."

• Backgrounder: Recent major trade disputes between China and the U.S. (27th February) -- Chinese Premier Wen Jiabao said Saturday that trade disputes between China and the United States must be solved via "equal negotiations" rather than sanctions. Below is a review of recent major trade disputes between the two countries: Feb. 24, 2010 -- The United States on Wednesday imposed preliminary duties ranging from 11 to 13 percent on steel pipes from China. Feb. 6, 2010 -- The United States slapped preliminary anti-dumping duties ranging up to 231.4 percent on gift box and other types of narrow woven ribbons from China it said were unfairly priced. Feb. 5, 2010 -- China imposed temporary anti-dumping measures against imports of U.S. chicken products, requiring importers of U.S. chicken products to place deposits, ranging from 43.1 percent to 105.4 percent, to Chinese customs from Feb.13. Feb. 1, 2010 -- China said protectionism of the United States has "seriously affected" their trade ties and urged it to stop abusing trade remedy measures. Jan. 31, 2010 -- China extended anti-dumping measures by five years on imports of phenol from the United States. Jan. 27, 2010 --U.S. imposed 175 percent of anti-dumping duties on electric blankets and wire trays from China, Jan. 21, 2010 -- U.S. started an anti-dumping and anti-subsidy probe into Chinese steel drill pipes. The petitioners have asked for anti-dumping duties ranging from 429 percent to 496 percent. Jan. 5, 2010 -- The U.S. government slapped preliminary anti-dumping duties on imports of more than 300 million dollars worth of wire decking from China. The tariffs of between 42.61 and 289 percent would be imposed and collected until a final determination is made. Dec. 30, 2009 -- The U.S. International Trade Commission slapped punitive penalties to imports of 2.6 billion dollar oil country tubular goods from China

67 Dec. 29, 2009 -- The U.S. Commerce Department said that it had set preliminary anti- dumping duties on imports of steel grating from China. The department said that it is currently scheduled to make its final determination in April 2010. Nov. 24, 2009 -- the United States made a decision to impose duties ranging from 10.36 percent to 15.78 percent on Chinese oil well pipes for alleged unfair subsidies. Nov. 15, 2009 -- Nobel economics laureate and New York Times columnist Paul Krugman pushed for a stronger yuan in an article entitled "World Out of Balance". He wrote, "China's weak-currency policy siphoned much-needed demand away from the rest of the world into the pockets of artificially competitive Chinese exporters." Appreciation of yuan could raise the cost of Chinese goods, hence weaken exports. Sept. 28, 2009 -- China announced it would maintain anti-dumping measures on some imported polyvinylchloride from Sept. 29. The anti-dumping measures target PVC, one of the most widely used materials in the chemical industry, imported from the United States, the Republic of Korea, Japan and Russia. Sept. 11, 2009 -- U.S. President Barack Obama made a decision to impose punitive tariffs on tires imported from China, setting punitive tariffs at 35 percent in the first year, 30 percent in the second and 25 percent in the third. Sept. 13, 2009 -- China launched anti-dumping and anti-subsidies investigations into some automobile and chicken products originally produced in the United States. Sept. 18, 2009 -- China's Ministry of Commerce organized industry experts to study possible anti-dumping investigations of its solar photovoltaic industry to be launched by the European Union and the United States. June 26, 2009 -- China required a security deposit on adipic acid from the United States as a temporary anti-dumping measure, tariff ranges from 5.7 percent to 35.4 percent. June 25, 2009 -- China announced to impose a temporary anti-dumping duty of 10.9 percent to 37.5 percent on polyamide-6 imported from the United States, Italy, Britain, France and Taiwan. June 1, 2009 -- China began an anti-dumping investigation into grain oriented flat-rolled electrical steel imported from the United States and Russia. The investigation would conclude before June 1, 2010, under normal circumstances, but it could extend until Dec. 1, 2010, under special circumstances. April 29, 2009 - China conducted anti-dumping investigations into imported nylon-6 chips originated from the U.S. and other countries and regions. The investigation will conclude before April 29, 2010 under normal circumstances, but it could extend until October 29, 2010 under special circumstances.

• Wen urges U.S. to open exports of hi-tech products to China (27th February) (Xinhua) -- Chinese Premier Wen Jiabao Saturday urged the United States to open the exports of hi-tech products to China and acknowledge China's market economy status. Wen made the call while having an online chat with netizens. He said China indeed has a trade surplus with the United States, but that is not the goal of China. "We hope the Sino-U.S. trade is balanced and sustainable. Our goal is to achieve a basic balance of international payments," he said.

68 "We expect both countries to open markets to each other. In particular, the Unites States should acknowledge China's market economy status and open the exports of hi-tech products to China," he said. Wen recalled a joke he had told in a speech during his visit to the United States, and said the United States actually exports two products to China -- soybeans and airplanes. "In fact, if the United States loosens restrictions over the exports of some hi-tech products to China, the bilateral trade surplus will narrow," he said. "You should not let Chinese always eat beans on airplanes," he added jokingly.

Social front • 64 mln people on China's roads Saturday (21st February) Some 64.15 million people travelled on China's roads on Saturday, the 22nd day of the Spring Festival traffic rush, the Ministry of Transport (MOT) said Sunday. This figure is a 7.8 percent increase compared to the corresponding day last year, as millions of people began to return to work as the one-week holiday neared its end, the MOT said in a statement on its website. The Spring Festival, or Chinese Lunar New Year, fell on Feb. 14 this year. It is the most important Chinese traditional festival for family reunions. Millions of Chinese journey across China during the 40-day rush period beginning Jan. 30. More than 29.6 million passengers travelled by train during the Spring Festival week from Feb. 13 to Feb. 19, up 11.9 percent from a year earlier, China's Ministry of Railways (MOR) said Sunday. China's railways also carried 68.64 million tonnes of freight during the period, an increase of 29.7 percent compared to the corresponding week last year, the MOR said.

• China boosts auditors' power as stimulus package spending prompts corruption concerns (21ST February) China plans to audit all fiscal funds and all government-related construction projects, according to a newly-revised regulation, in a bid to ensure sound use of public money and effective prevention of corruption. The regulation on the implementation of the Audit Law, issued Saturday by the State Council and to take effect on May 1, will help improve the country's auditing system, experts say. It will also boost supervision of areas with high incidences of corruption, such as construction projects. Apart from state-owned companies and projects, auditors will be entitled to track and supervise fiscal funds use by other companies and projects that use public money, according to the regulation. The regulation also makes it clear that construction projects whose government investment exceeds 50 percent, or those with less than 50 percent government investment but with construction and operation government controlled, must accept being audited. "The track audit will be good for the legitimate and efficient use of public funds and will also provide clues for anti-corruption campaigns," said Mao Shoulong, public policy professor at Beijing's Renmin University. In last year's government work report, Chinese Premier Wen Jiabao proposed auditing follow whenever public money is allocated.

69 Wen said auditors should be allowed to play a full role in detecting potential risks and guaranteeing economic security, as well as to fight against corruption. "Audit work is of much significance to construction projects, where power-for-money deals often happen," said Wang Yukai, a professor with the Chinese Academy of Governance. Over the past decade, a large amounts of public money has flowed into major construction projects nationwide, in the wake of the country's booming economy and rapid development. But frequent cases of bribery and corruption have caused wide public concern. He Guoqiang, head of the Communist Party of China (CPC) Central Commission for Discipline Inspection (CCDI), the Party's internal anti-graft body, said in January that one of major tasks for the CCDI this year is to "severely deal with violations of laws and regulations in the construction area." In the last two years, reconstruction funds for regions hit by the 2008 Sichuan earthquake and the 4 trillion yuan stimulus package to combat the global financial crisis have come under close public scrutiny, as both involve a large number of infrastructure and construction projects. Premier Wen and other senior leaders have urged auditors to work on any projects in the post-quake reconstruction and the stimulus package. China's National Audit Office (NAO) said in January 230 million yuan (33.7 million U.S. dollars) of reconstruction funds have been misused. A total of 88 cases involving 198 Party officials misspending stimulus package money have been dealt with one year after its launch, an official with the CCDI said in December. The anti-corruption issue has always ranked among the top three issues for Chinese netizens since People.com launched an online survey in 2006. This year, up to 44 percent of voters believed "malpractice and corruption is a serious problem in the construction area." Prof. Wang said regulation with explicit and detailed provisions will play a big role in containing and preventing corruption. "Auditors can take more initiative," Wang said. The regulation also specifies the extent of auditors' power and strengthens internal supervision among audit organs of various levels, which are well recognized by experts. "Good procedures are indispensable for a good auditing system," Prof. Mao said. The current Audit Law took effect in June 2006, after being passed by the Standing Committee of the 10th National People's Congress. The range of publicly published audits is also expanding, according to the regulation. But listed companies must be notified of audit results five days before public announcement. "It's good to see the regulation makes notable progress in normalizing operations, coordinating relations and many other details. I also expect further study and regulation on the self-evaluation of auditing work," Mao said. (Xinhua correspondents Zha Wenye and Niu Qi contributed to the story.)

• Festival gift-giving challenges China's anti-corruption efforts (21ST February)

70 At one of Beijing's famous tea stores, shop assistants easily sold beautifully wrapped packages of tea priced at 42,000 yuan (6,160 U.S. dollars) before the Chinese Lunar New Year, or the Spring Festival, which fell on Feb. 14. At department stores, customers buying shopping cards with money pre-charged on them had to wait in long queues. The Chinese tradition of presenting gifts to family members and friends during the Lunar New Year has now been extended to sending gifts to officials, which poses new challenges to the country's anti-corruption efforts. The Procuratorial Daily, official newspaper of the Supreme People's Procuratorate, recently reported that among the 30 bribery cases investigated by a district procuratorate in Jinan of east China's Shandong Province, bribes during the New Year period totalled 870,000 yuan (127,000 U.S. dollars). It also said that among the 100 bribery cases heard from 2005 to 2007 at the Beijing Dongcheng District People's Court, Beijing Haidian District People's Court and the Beijing No. 1 Intermediate People's Court, 78 officials had accepted bribes during the Lunar New Year period. Peking University professor Huang Zongliang attributed this phenomenon to bribers trying to "buy over" officials in a non-obvious way and make it easier if they ask for favors in the future. "Festival gifts are simply bribes in disguise, although bribers may not ask for favors immediately," Huang told Xinhua. However, nearly half of the officials who took bribes during the Lunar New Year believed the "gifts" should not be considered bribes, according to the Procuratorial Daily report. Shortly before this new year, a former high-rank official in southwest Chongqing Municipality defended himself at court by saying that the gifts he took for his birthday which coincided with Spring Festival celebrations, should not be considered as bribes. The official was Wen Qiang, former director of the Chongqing municipal bureau of justice and a key figure in the country's largest gang crackdown. He was found to be in possession of antiques, brand-name watches and an authentic painting worth several million yuan in total. Huang said the official's argument was just an excuse. "If he did not have power, many would not have bought him birthday gifts." China's Criminal Law defines bribes as cash or properties officials take in exchange for asked favors abusing their power. According to the law, bribes worth 5,000 yuan or less could send an official to two years in prison. Those taking more than 100,000 yuan could face more than 10 years in jail, or even life imprisonment. Traditionally, items such as fine wine, tobacco, tea and brand-name watches would be on officials' gift lists. New gift ideas in recent years have included pre-charged shopping cards and gifts covering officials' private travel costs. Corruption watchdogs in China have in the past repeatedly warned officials against taking gifts disguised as bribes during festivals, with some even explicitly listing what items to avoid.

71 In January, President Hu Jintao, also general secretary of the Communist Party of China (CPC) Central Committee, again called for stricter self-discipline among officials. In a speech delivered at the Third Plenary Session of the Central Commission for Discipline Inspection, Hu said CPC members must unremittingly improve their mastery of the "Party spirit," meaning that moral and discipline standards should be further raised. Besides self-discipline, experts believe supervision from both higher level departments and the public should be another tool used to curb corruption. Li Chengyan, another professor at Peking University, said the public should be allowed to participate in the appraisal of an official's performance. Li also believed information of an official's possessions should be made public and people should be encouraged to supervise and report irregularities in officials' private lives.

• China PLA officer urges new Internet control agency (22nd February) (Reuters) - A senior Chinese military officer has called for a new national body to enforce Internet controls, while China faced fresh claims on Monday about the source of hacking attacks that hit search giant Google. People's Liberation Army Major General Huang Yongyin said China needed to keep pace with the efforts of other big powers to fight online infiltration and attacks. "For national security, the Internet has already become a new battlefield without gunpowder," Huang wrote in the February issue of Chinese Cadres Tribune, a magazine published by the Communist Party's influential Central Party School. In January, the giant Internet search engine company, Google, threatened to pull back from China over complaints of censorship and sophisticated hacking from within China. Huang's comments appeared after Western media reports pinpointed a vocational school whose graduates include military recruits as one source of the hacker attack on Google. The reports said the author of spyware used in the assault had government ties. U.S. government analysts believe the programme's creator is a Chinese security consultant in his 30s who posted parts of the code on a hacker forum and described it as something he was "working on," the Financial Times reported on Monday. He works as a freelancer and did not launch the attack but Chinese officials had "special access" to his programing, the paper added, quoting a single, unnamed government researcher. "If he wants to do the research he's good at, he has to toe the line now and again," the researcher was quoted saying. The allegations over the spyware are the latest episode in a dispute that has pitted Google and the United States against China, with its wall of Internet controls and legions of hackers. Washington has backed Google's criticisms and urged Beijing to investigate hacking complaints thoroughly and transparently. Beijing has said it opposes hacking. "LAWLESS ELEMENTS" Huang's comments underscore the influential currents within the Chinese government that see the Internet as a key security concern. "Lawless elements and hostile forces at home and abroad have increasingly turned to the Internet to engage in crime, disruption, infiltration, reactionary propaganda and other

72 sabotage activities," wrote Huang, who appears to play no direct role in China's online policy. The magazine was dated February 6, but arrived with subscribers on Monday, after China's Lunar New Year holiday. The government needs to surmount the fragmented control of the Internet to confront these problems, preferably with a national administrative system, Huang said. Over a dozen ministries and agencies have a hand in enforcing the Chinese government's Internet policies. Huang called for China to reduce its reliance on foreign technology which is vulnerable to attacks by "hostile forces abroad." His concerns are matched by worries overseas about attacks from within China. The Financial Times report quoted unidentified sources backing an earlier claim that analysts had traced the online attacks to two Chinese colleges, the prestigious Shanghai Jiaotong University and the Lanxiang vocational school. The two establishments have denied the reports. Allegations that the latter, a high-school level institute that also trains hairdressers, chefs and car mechanics, could take on Google have been mocked widely in Chinese cyberspace. "How can these future cooks be such powerful hackers?" a web user from Zhejiang province said on the portal www.163.com. Lanxiang's website also boasts it has the "biggest" computer lab in the world. There was less online comment about the well-respected Jiaotong University, which attracts top graduates and has a School of Information Security Engineering. (Editing by Paul Tait) http://www.reuters.com/article/idUSTRE61L0OG20100222

• Chinese lawmakers call for enhancing supervision of food safety (24th February) (Xinhua) -- Chinese lawmakers Wednesday called for improving the country's food safety supervision network after a nationwide law enforcement inspection tour. National lawmakers started the inspection tour last September after the Food Safety Law took effect last June. Lu Yongxiang, vice chairman of the National People's Congress (NPC) Standing Committee, told lawmakers that many regions had not completed reform of the food safety supervision mechanism. Most of the cities and counties had not started the reform yet, Lu said at a three-day bimonthly session of the top legislature that started Wednesday, when presenting a report of the inspection tour. He called for stronger coordination led by health departments. The report suggested establishing a national food safety risk assessment center and a food safety standard management system. Earlier this month, the State Council set up a food safety commission consisting of three vice premiers and a dozen minister-level officials. The lineup of the commission's members includes Vice Premiers Li Keqiang, Hui Liangyu and Wang Qishan, as well as more than ten heads or vice heads of government departments in charge of health, finance, and agriculture among other portfolios. The establishment of the commission followed a string of nationwide crackdowns and arrests in the wake of new melamine-tainted milk products being found in Shanghai as well as Liaoning, Shandong and Shaanxi in recent months.

73

• China to step up supervision to key sectors, officials to curb corruption (26th February) (Xinhua) -- China's Ministry of Supervision said Thursday it would enhance supervision to key sectors and leading officials this year to ensure clean and efficient work in promoting the country's sound economic and social development. The supervision and examination would target corruption in project construction, real estate development and land management, as well as corruption behind major accidents, the ministry said in a circular outlining major works in 2010. The ministry would investigate officials who meddled in construction projects against relevant regulations to seek personal gains, staff of supervisory organs who were negligent of duty or took bribes, and those who involved in serious commercial bribery cases, the circular said. The ministry vowed "zero tolerance" for these cases, it said. The ministry promised to step up its efforts this year to ensure the implementation of the central government's major arrangements for accelerating the adjustment of economic growth mode and promoting steady and fast economic development. It would also strengthen supervision and examination to make sure local governments will take measures to check the rocketing real estate price in some cities to ensure the sector's healthy development, it said. "Lazy and incapable" officials would also be targeted in the supervision to ensure efficiency of government work, according to the circular. China has intensified its fight against corruption recently. In its latest effort, the Communist Party of China (CPC) Central Committee Tuesday listed 52 unacceptable practices in an ethics code for CPC cadres to follow. The code forbids conducts including accepting cash or financial instruments as gifts, and using their influence to benefit their spouses or children with regards to their employment, stock trading or business.

• Premier Wen stresses fair distribution of social wealth (27th February) (Xinhua) -- Chinese Premier Wen Jiabao compared a fair distribution of social wealth to the government's social conscience in an on-line chat with netizens Saturday. Wen said, "It must be unfair when a society's wealth is in hands of a few people, and in that case, the society must be unstable." He said it is the government's responsibility to "make the cake of social wealth as big as possible" and the government's conscience to "distribute the cake in a fair way." The fair distribution of social wealth concerns social justice, Wen said, adding it actually involves distribution of national income. However, "the proportion of residents' income is relatively low in the distribution of national income," he said. To "make the social wealth cake bigger," efforts should be made to concentrate on enhancing production capacity and take economic construction as a central task, he said. Wen said special attention should be paid to changing the development mode and "make our economic development really focus on the advancement of science and technology and the quality of labor force."

74

• Premier: "dignity" of people lies in protection of Constitutional rights, freedom (27th February) Chinese citizens shall enjoy full freedom and rights within the framework of the Constitution and laws, which is key to the promotion of "greater dignity" of the population, Chinese Premier Wen Jiabao said here on Saturday. Explaining his earlier comment on "letting the Chinese live with greater dignity", Wen said during an online chat with netizens that all people should enjoy equality before the laws. He said the ultimate purpose of a country's development should be none other than meeting the increasing material and cultural need of the people, and that the comprehensive development of the society should be based on the development of individuals. "We shall create favorable conditions for people's freedom and full development, in order to nurture their intelligence and talent," Wen said.

• Chinese premier encourages university graduates to start own businesses (27th February) Chinese Premier Wen Jiabao said Saturday the government encourages university graduates to start their own businesses, as the country is facing serious challenges in employment. He made the remarks during an online chat with netizens. Wen said the government can usually create job opportunities for 9 million people a year. However, more than 6 million people graduate from universities annually and need jobs. Statistics show that the number of Chinese university graduates will reach an all-time high of 6.3 million this year, posing a grave challenge for the country's employment. "It is a very important task for us to create job opportunities for them," Wen said. He said the government has called on university graduates to work in relatively underdeveloped central and western regions, border regions and rural areas. "We particularly hope they can start their own businesses, and we have stipulated many favorable policies in this regard," he said, citing a series of favorable loans. "The government has always attached great importance to the employment of university students," he added.

Ethnic issues

• Commentary: Facts speak louder than words (21ST February) The Dalai Lama group published an article, China's Claim that 'Old Tibet' was a Feudal Serfdom is Fiction, on Jan. 4, 2010. The article claimed that before 1949, "Tibet was neither an ideal society nor a feudal serf system", describing old Tibet as a beggar-free rule-of-law society without famine in which tenants were wealthy and the economy was self-sufficient. The article claimed that, compared with China at the same time -- and even China of today -- Tibet was a "far more civil society".

75 It has been unprecedented for the Dalai Lama group to ignore the historical facts and to openly hail its feudal serfdom past which was similar to Europe's Dark Ages. Such an audacious move was also thought-provoking. I. It was the consensus of the international community that old Tibet was ruled by the theocracy implementing feudal serfdom. Whether or not Tibet before 1959 was ruled with a feudal serfdom system by the theocracy should not to decided by those speaking on behalf of the interests of serf- owners. Chinese and foreign historical archives, as well as research by professional scholars, is what is most persuasive. OLD TIBET'S FEUDAL SERFDOM IN TIBETAN LANGUAGE WRITINGS Many Tibetan language archives have records that prove the existence of serfdom in old Tibet. A permanent residency license issued to local serfs and administered by the Common Assembly(Bla-spyi) of Drepung Monastery in Lhasa, which is held by the Tibet Historical Archives Anthology, said: "All male and female slaves, land, and meadows donated by serfs belong to the monastery's Losel-ling College. In addition, serfs are not allowed to lease their land to others before reporting it to the college, and slaves are not allowed to escape. Serfs are not allowed to marry those administered by other monasteries for fear of serf loss, and they should behave themselves and pay their corvee taxes to the monastery on time." This archive proves the following facts: Firstly, the license issued by the Drepung Monastery openly admitted that serfs existed in old Tibet and slaves in monasteries were property and did not have any individual freedoms. Secondly, serfs were confined within the monastery's territory and were not allowed to move out. Thirdly, serfs did not have the marriage freedom. Finally, serfs were merely talking tools that would only pay corvee taxes to the monastery. OLD TIBET'S FEUDAL SERFDOM IN CHINESE LANGUAGE WRITINGS There were also records on Tibet's social system in Chinese writings from the late Qing Dynasty (1644-1912) to 1949. They showed objectively the basic features of a feudal serfdom society. For instance, when author and scholar Chen Jianfu talked about "classes among Tibetan people" in his book "Tibetan Issues," published in 1937, he said: "Noble families extend their control over most parts of Tibet. They have the money and power, and rule the land hand in hand with the monasteries. They act like an exclusive class. ... The nobles are cruel to their tenants, who constantly suffer from beatings that leave them covered with cuts and bruises and afraid to revolt." Moreover, "tenants have no freedom as they are restrained by their landlords." According to "New History of Tibet," compiled by Xu Guangshi and Cai Jincheng in 1911, "some 41 articles of Tibet's criminal law were derived from the region's local customs, many of which are extremely brutal." "Criminals who commit robbery or homicide shall be sentenced to death, no matter whether they are the principal culprit or not. The culprit will be tied to a pillar and be shot to death with arrows, or he or she will be beheaded and the chopped-off head will be shown to the public. Or the culprit would be forced alive into a cave of scorpions. For those who commit theft, their family

76 members will be detained, and the suspects will be ordered to compensate a figure several times the value of the thievery. Then his or her eyes will be gouged out, the nose cut off, or hands and feet will be chopped off." These writings showed old Tibet was a theocracy comprised of the nobility and the leading monks. Extremely brutal criminal law was exercised in the region and tenants were deprived of personal freedom. All of these are evidence of the theocratic feudal serfdom society the old Tibet was. THE OLD TIBET'S FEUDAL SERFDOM IN EYES OF FOREIGNERS Many foreigners travelled in Tibet in the period from the late Qing Dynasty (1644-1911) to 1949. Some recorded what they saw and heard. The writings describe a backward, stagnant society based on feudal serfdom. Edmund Candler, a British national, wrote in his book, The Unveiling of Lhasa: "The people are medieval, not only in their system of government and their religion, their inquisition, their witchcraft, their incantations, their ordeals by fire and boiling oil, but in every aspect of their daily life." Another Briton, Charles Bell, who spent much time in Tibet in the 1920s, wrote in his book, Tibet Past and Present, that old Tibet was still in the feudal stage: "The nobles of Tibet exercise great power and influence... The nobility, side by side with the leading priests, rule the land. Like the monasteries, they own large landed estate." French explorer Alexander David-Neel said in his book, Old Tibet Faces A New China: "All the farmers in Tibet are serfs saddled with lifelong debts, and it is almost impossible to find any of them who have paid off their debts." An Indian scholar, R. Rahul said, "Peasants in (old) Tibet, particularly those on the estates belonging to the aristocracy and the monasteries, are in a sense serfs." An American scholar, Dorsch Marie de Voe, talked about how the serf owners conducted spiritual control by using religion in his article, The Donden Ling Case: An Essay on Tibetan Refugee Life With Proposals for Change. He wrote: "From a purely secular point of view, this doctrine must be seen as one of the most ingenious and pernicious forms of social control ever devised. To the ordinary Tibetan, the acceptance of this doctrine precluded the possibility of ever changing his or her fate in this life. If one were born a slave, so the doctrine of karma taught, it was not the fault of the slaveholder but rather the slaves themselves for having committed some misdeeds in a previous life. In turn, the slaveholder was simply being rewarded for good deeds in a previous life. For the slave to attempt to break the chains that bound him, or her, would be tantamount to a self- condemnation to a rebirth into a life worse than the one already being suffered." A large number of records show that old Tibet was a theocratic feudal serfdom society.

• Overseas Chinese slam Dalai Lama's attempt to split China by flaunting Western connections (21ST February) Some overseas Chinese criticized U.S. President Barack Obama's meeting with the Dalai Lama in Washington on Thursday, and pointed out the real intention of the Dalai Lama's hobnobbing with the West. Du Ping, a Singaporean expert on international relations, told Xinhua that the Dalai Lama has made a point of meeting Western political leaders. His real intention is to keep the so- called "Tibetan issue" in the news, raise funds and seek bigger space for maneuvering.

77 He noted that without the support from the West, the Dalai Lama's personal influence will be greatly weakened. That's why he has always assumed importance by flaunting his connections with Western politicians, and made troubles to sour China's relations with Western countries from time to time, said Du. The expert also pointed out that the meetings between successive U.S. presidents and the Dalai Lama lack international moral basis and common sense. In essence, he said, the Western countries are treating the Dalai Lama as a pawn on the chessboard. They are merely using each other. However, Obama's meeting with the Dalai Lama will not bring major change to the overall picture of Sino-U.S. relations, Du added. The sound development of their bilateral relations is in the interests of both China and the United States and the rest of the world. In an open letter to the U.S. Embassy in Madrid, representatives of more than 20 ethnic Chinese organizations in Spain said the Dalai Lama has never ceased his activities to split China since he fled abroad in 1959. The letter condemned the Dalai Lama's attempt to "internationalize" the so-called "Tibet issue," and his attempt to split China by having foreign forces put pressure on the Chinese government. The letter urged people in Western countries not to be misled by the "smiling face" of the Dalai Lama and fail to see through his real motive of splitting China and re-establishing the serfdom system and theocracy in Tibet. The Sino-U.S. relationship is one of the most important bilateral ties in the world and the friendly relations between the two nations will benefit not only the two peoples but the whole world as well, it added.

• Censorship at heart of Tibet/China issue: Dalai Lama (21st February) (Reuters) - The Dalai Lama, the exiled spiritual leader of Tibet, said the United States and other countries could help his campaign for a free Tibet by promoting an open society in China. "Censorship ... is the source of the problem," the Dalai Lama said in an interview with Reuters on Saturday in Beverly Hills. The Dalai Lama fled Tibet in 1959 after a failed uprising against Chinese rule. He now lives in exile in India and advocates "meaningful autonomy" for Tibet within China. "The Chinese people have no opportunity to know our issue," said the Buddhist monk, who Beijing has branded as a dangerous separatist for demanding Tibetan self- determination. "Once China becomes an open society -- freedom of speech, freedom of press, freedom of information -- all this unnecessary fear and doubt will reduce," he said. "That's the real answer for this problem. "American can help in this change," he said, adding that the lack of free information has helped the Chinese government portray him as a demon and a terrorist. "Do I look like a demon?" the winner of the 1989 Nobel Peace Prize joked, holding his fingers beside his head to make devil horns. The Dalai Lama, who was to speak on behalf of Whole Child International, an organization that works for orphans around the world, said Western search engines like Google Inc were important to the free flow of information within

78 China. He noted they had ceded to pressure from the Communist government there to limit what users can see. Google last month threatened to pull out of China if the government did not agree to stop censoring its Chinese-language service. The Dalai Lama's visit to the Los Angeles area came on the heels of his low-key meeting on Thursday with U.S. President Barack Obama, which upset Beijing. Obama used his first presidential meeting with the Dalai Lama to press China to preserve Tibetan identity and to respect human rights in the region, which has been under Chinese rule since 1950. Tibetans living near the Dalai Lama's birthplace in northwest China celebrated the meeting with a rare display of fireworks while China, the second-largest creditor to the United States, condemned the move. The Dalai Lama was reluctant to predict what impact the meeting would have. "We will have to wait ... it's very difficult to predict," he said. The Dalai Lama had no comment on golfer Tiger Woods' high-profile public apology on Friday. In the televised statement that riveted Americans and slowed trade on Wall Street, Woods said he had strayed from the teachings of Buddhism, a religion he practiced in his youth, when he carried on extra-marital affairs with multiple women. The Dalai Lama said he did not know of Woods and that his own lack of knowledge about sports of all kinds was "my disgrace."

Environmental front • Danish PM appreciates Chinese premier's role in Copenhagen conference: FM spokesman (24th February) (Xinhua) -- Danish Prime Minister Lars Loekke Rasmussen earlier this month expressed his appreciation for Chinese Premier Wen Jiabao's important and constructive role in the Copenhagen conference, a Chinese Foreign Ministry spokesman said Tuesday. Rasmussen made the remarks in a letter to Wen on Feb. 12, said spokesman Qin Gang at a regular press conference. Premier Wen on Jan. 29 wrote a letter in reply to Rasmussen concerning the Copenhagen Accord, reiterating China's support for the Accord and the country's climate change commitments. Wen said in the letter that the Copenhagen Accord which resulted from the UN climate change conference in the Danish capital last year laid the foundation for advancing international cooperation on climate change and enabled future negotiations to take place. Rasmussen replied on Feb. 12 that he fully agreed with Wen on his evaluation, saying that he was inspired by China's support for the Accord, Qin said. The Chinese government had reported its emission cuts progress to the Secretariat of the UN Framework Convention on Climate Change (UNFCCC), reaffirming a reduction of carbon dioxide emission intensity per unit of GDP by 40 to 45 percent by 2020 against 2005 levels. Rasmussen welcomed the China's emission cuts progress. He also agreed with Wen on adhering to the main role of the UNFCCC in future negotiations, Qin said.

79 China hoped Denmark, as chair of the Conference of UNFCCC Parties, would continue to play a positive role, Qin said, noting that the country would maintain contacts with Denmark. In Tuesday's press conference, Qin also responded to a question related to UN climate chief's announcement of resignation. Yvo de Boer has announced last week that he will resign his position as Executive Secretary of the UNFCCC as of July 1 this year. Qin said de Boer had contributed positively in organizing and serving the international negotiations on climate change since assuming his current post in 2006. China had cooperated well with the UNFCCC secretariat, and supported de Boer's efforts, Qin said. He said he hoped that de Boer would continue his contribution to tackling climate change in his new job. De Boer would be joining the consultancy group KPMG as Global Adviser on Climate and Sustainability, as well as working with a number of universities, according to a statement by the United Nations. • Interview: China takes longer-term perspective to cope with climate change: experts (24th February) "As China is now increasingly becoming an important role in the world, China has taken a longer-term perspective and view to the development and efforts to cope with climate change," Hannah Reid, Senior Researcher at the London-based International Institute for Environment and Development, told Xinhua on Wednesday. Reid made the remarks in an exclusive interview with Xinhua at the sidelines of the 4th International Conference on Community- based Adaptation (CBA) to Climate Change held in Dar es Salaam. "As we need short-term efforts in dealing with climate change issues, we also need longer-term perspectives. No country can do much better than China in this respect," Reid said. She said as China's pace of development is so fast that there is a need to reduce the emission of carbon dioxide. Developed countries also need to reduce their emission and help the less developed countries as the latter are more vulnerable to disasters such as floods, droughts and sea level rises. Meanwhile, Catherine Zanev, Climate Change Coordination officer of the United Nations World Food Programme, told Xinhua that the impacts of climate change would result in less food available and higher food prices both in international and local markets. She expected that China, as a big economy, will play a big role in dealing with climate change. Hans Vikoler, Deputy Head of Programme of the United Nations World Food Programme said African countries which are facing the food security problem partly resulting from climate change, need to develop strategy to cope with the situation. He said coping with climate change is a "shared responsibility" for both developed and developing countries. James Hardcastle from Australia, who worked in China for three years as a senior adviser for nature conservancy, also highlighted China's efforts to empower local community for environmental protection, noting that different resources and diversities need to come together to confront climate change.

80 He added that Non-governmental Organizations (NGOs) can play a role of communication and bridge between communities and governments to deliver advises on government policies. The three-day conference was attended by representatives of governmental and inter- governmental agencies, research institutions and NGOs, including the World Bank, and the World Food Programme. The meeting includes special sessions to focus on how communities in urban areas or rural drylands can adapt to climate change impacts such as heat-waves, floods and droughts. It also aims to map out strategies for sharing information within and between vulnerable communities, and to promote the integration of community-based adaptation into national policies and international development programs.

• China has "No intention" of capping emissions (25th February)

China has no intention of capping its greenhouse gas emissions even as authorities are committed to realizing the nation's target to reduce carbon intensity through new policies and measures, the country's top climate change negotiators said Wednesday.

The negotiators also warned that rich and developing countries have little hope of overcoming key disagreements over how to fight global warming.

China "could not and should not" set an upper limit on greenhouse gas emissions at the current phase, said Su Wei, the chief negotiator of China for climate change talks in Copenhagen, at a meeting in Beijing on China's climate change policies in the post- Copenhagen era.

Su, who is also director of the department of combating climate change under the National Development and Reform Commission, said that China's greenhouse gas emissions have to grow correspondingly as the country still has a long way to go in improving people's livelihoods and eradicating poverty.

The country's carbon dioxide emissions per capita is also relatively low compared to developed countries and China has not contributed much to climate change because of its short history as an industrial nation, he said.

However, China will spare no effort to adopt proactive measures to fight the negative effects caused by global warming and achieve the country's ambitious goal of cutting carbon intensity per GDP unit by 40 to 45 percent by 2020, a voluntary target China pledged last November, he said.

"The targets for carbon intensity reduction will be included in the 12th and 13th five-year plans (2011-15; 2016-20) as a binding index," he said.

81 The targets remain a very challenging task for China, as its secondary industry comprises a large part of the country's industrial structure, said Ma Zhong, a professor at the Renmin University of China.

The secondary industry accounted for 46.8 percent of China's 2009 general domestic income, official statistics showed.

Carbon emissions caused by manufacturing sectors account for about two-thirds of total emissions in developing countries, while emissions of the service sector have the same ratio in developed countries, researchers have said.

China will introduce a carbon emissions check system for the steel industry and a fuel efficiency management system for automotive products, as well as initiate demonstration projects in the petrochemical industry, Premier Wen Jiabao said at an executive meeting of the State Council, China's Cabinet, yesterday.

Similarly, fighting climate change was highlighted as a major national strategy as well as an important opportunity for economic structure adjustment by the country's top leadership at a meeting on Tuesday.

Many hope a legally binding climate change treaty, which failed to be signed at the Copenhagen conference, will be finalized at a UN meeting in Mexico in December.

Yu Qingtai, China's special representative for climate change negotiations, said yesterday that players could face hard times in this year's climate negotiations.

Developed countries are unlikely to change their tune and will continue to be reluctant in promising emission cuts and utilizing green funds, he said. They will also pressure developing countries into shouldering unreasonable responsibilities and the so-called new emerging big countries will remain their main targets, he said.

Yu said China will stick to the principle of "common but differentiated responsibilities" and work together with international communities, though a divergence of views on vital issues will be a long-standing problem.

A vast majority of developing countries are in the initial or middle stage of industrialization, which is characterized by high carbon intensity, while rich countries have completed industrialization and transferred a large part of manufacturing functions to developing countries, said Qi Ye, a professor of Tsinghua University.

"Both developed and developing countries are facing heavy costs in efforts of cutting emissions. Developed countries are striving to sustain their vested interests while developing countries are seeking the rights for development," said Pan Jiahua, a senior researcher with the Chinese Academy of Social Sciences.

82 Developing countries will lose their future edge in terms of development speed, scale and level if they have no space for emissions, Pan said.

(Source: China Daily)

83 Regional report

North

Politics • China police gear up security for upcoming NPC,CPPCC annual sessions (24th February) (Xinhua) -- The Ministry of Public Security urged police nationwide to ensure security for the upcoming annual sessions of China's top legislature and top political advisory body. Police should safeguard people's livelihood, strengthen the safety supervision of hazardous materials and large-scale events, and tighten security checks on traffic going into Beijing, vice minister Huang Ming said at a security meeting in Beijing Tuesday. The Third Session of 11th National People's Congress (NPC) and the Third Session of the 11th National Committee of the Chinese People's Political Consultative Conference (CPPCC) are scheduled to open on March 5 and 3, respectively, in Beijing. Police are asked to visit communities to check for problems, help relevant authorities settle disputes, and crack down heavily on illegal activities and crime. Huang said police should clamp down and prohibit illegal use, storage, transport and sale of hazardous materials such as fireworks and crackers. Huang also urged efforts to tighten security checks at large-scale events, such as trade fairs and garden parties, adding police should ensure the implementation of safety regulations, maintain order in traffic and security around events, and get fully prepared to prevent stampedes and other accidents of high casualties. Police in Beijing's seven neighboring provincial-level regions have been asked to maintain social stability and reinforce checks on vehicles, flights and trains entering the city from March 1 to March 15.

• Beijing plays potent dealmaker, blocker in China M&A (26th February) HONG KONG (Reuters) - Beijing is taking a father-knows-best approach to mergers and acquisitions, weighing not only commercial considerations but also political and other factors as it chooses which deals to approve. The country's paternalistic approach to M&A was on display this week, as failure to win the government's blessing sank a bid by Tengzhong, an obscure Chinese maker of heavy equipment, to buy General Motors' GM.UL gas-guzzling Hummer brand. In the aftermath of the collapse, Chinese media were awash in commentary on the deal's many faults, signaling Beijing may continue to exercise a hands-on approach to foster deals in line with its policies and with a good chance for success. "The Chinese government, when it decides on these deals, is making them on a policy basis and not just purely on the grounds of an objective regulatory standard," said Antony Dapiran, an M&A specialist at the law firm Freshfields Bruckhaus Deringer in Beijing. "It's much more than in other countries like the U.S., where you have issues like national security. The scope for subjective review in China seems much broader," he said.

84 The official Xinhua news agency, often seen as a government mouthpiece, questioned Tengzhong for pursuing a deal that flew in the face of global trends to promote green technology. "For anyone who is concerned about the environment and the development of the auto industry, the death of Tengzhong's Hummer bid is only a good thing," Xinhua said in a Chinese-language analysis published on Friday. OTHER DEALS FALTER The deal is just the latest in a series of high profile cases that have failed to win the government's support. Last year, two of China's biggest privately held media companies, Sina Corp (SINA.O) and Focus Media (FMCN.O) called off their merger after repeated stonewalling by the regulator over their application. In another case that made global headlines, Coca-Cola (KO.N) had to cancel its plans to buy Huiyuan Juice (1886.HK) after the commerce ministry blocked the deal on anti-trust grounds. In addition to environmental concerns, many observers believed Tengzhong Heavy Industrial Machinery's inability to win government backing was due to its lack of international experience and high chance of failure. In contrast, Zhejiang Geely Holding, parent of Hong Kong-listed Geely Auto (0175.HK), has said it has the support of Beijing in its efforts to buy Ford Motor Co's (F.N) Volvo car unit. Geely, China's largest non-state auto firm, will gain Volvo's highly regarded brand and technology in a deal more in line with China's goals. Mei Xinyu, a researcher with a think-tank under China's Ministry of Commerce, wrote in a commentary that the Tengzhong case was "clouded with doubts" from the beginning, and that government supervision was necessary for other future deals. "Even if these dishonest speculators can gain short-lived fame, they will pay a price at the end of the day," Mei said. Observers noted that while Tengzhong and the other two deals had their own circumstances, each involved a case of Beijing exercising its better judgment against the applicants' wishes. Policy issues aside, Tengzhong's failure may also have reflected government wariness of buying big foreign brands, after unsuccessful deals such as Lenovo's (0992.HK) purchase of IBM's (IBM.N) PC assets and SAIC Motor's (600104.SS) purchase of Korean carmaker Ssangyong Motor (003620.KS), which later filed for bankruptcy. "The Chinese have come to see the reality that every time the Chinese touch a well known brand it turns bad immediately," said Li Qiang, an M&A lawyer at O'Melveny & Myers in Shanghai. "There's also the realization that these brands, if they don't come with the technology, they don't mean that much." SUPPORT FOR RESOURCE BUYS By comparison, the government has been much more supportive of recent overseas acquisitions by energy and resource companies, as such deals are in line with government policy aimed at procuring the materials China needs to feed its economic growth. "So long as the government is involved, it's not left solely to the market for the parties to decide on the merit of the deal," said Allen Wong, an M&A lawyer at Simmons & Simmons in Hong Kong. "I believe the government is trying to set the direction for outbound investments or acquisitions."

85 The Coke-Huiyuan and Sina-Focus rejections may also reflect different government priorities from those parties involved. In the Coke case, many believe nationalistic concerns about a famous local brand being acquired by a foreign firm may have played into the government decision, on top of the anti-trust reasons cited. Some analysts believe the Sina-Focus deal may have met with resistance because it would have created a new giant in the sensitive media sector, traditionally dominated by state-run firms that take their orders from the government. "Generally speaking, there's been a theme of what they call 'The state advances and the private sector retreats,'" said Freshfields' Dapiran. "At the policy level there's been more support for state-owned companies." Others pointed out that China is not the only country that weighs non-commercial factors, citing the case of China's CNOOC (0883.HK) withdrawal of its bid to buy U.S. oil firm Unocal after it became apparent the United States would block the deal. "China is not the only country that has blocked acquisitions," said Simmons & Simmons' Wong. "In other places there are similar procedures ... Similar considerations exist in every jurisdiction." http://www.reuters.com/article/idUSTRE61P1G120100226

Social front

• Chinese capital plans for law on garbage sorting: report (27th February) Legislators in the Chinese capital plan to draft a regulation on garbage disposal, which is expected to enforce garbage sorting system while regulating controversial garbage incineration plants. Saturday's Beijing News quoted a document of the Standing Committee of the Beijing Municipal People's Congress as saying that the regulation would be drafted this year and submitted for review next year. The planned legislation would likely make garbage sorting an obligation of waste treatment departments and residents, said Zhao Yi, director of the city legislature's environmental protection office. It is estimated that Beijing's 17.55 million residents produce almost 18,400 tonnes of household garbage every day, 90 percent of which are landfilled, mainly because it is difficult to recycle unsorted garbage. The city government has been working to have daily garbage sorted into three categories -- recyclable garbage, kitchen garbage and others. But most of the garbage stations and landfills have not conducted the sorting work. In 2009, garbage sorting was only carried out among 10 percent of Beijing residents, according to the government statistics. The government plans to realize garbage sorting in all schools and government departments this year, said a government statement in mid February. The regulation will also stipulate on garbage incineration plants, with a plan to enforce the monitoring and daily reporting of emissions from the plants, Zhao told the newspaper.

86 As the capital city is running short of landfills, the government resorts to more garbage incineration plants. The city planned to increase the incineration percentage from current 5 percent to 20 percent by 2012. But many residents have voiced concerns out of fears of potential health risks caused by emissions from the plants. Zhao said the legislation should be able to help ease the public concerns as the law would ensure transparent management of the incineration plants.

Economic front • China's labor unions play unique role: Vice President (26th February) (Xinhua) -- China's labor unions had played an irreplaceable and unique role in boosting stable economic development and employment stability, Chinese Vice President Xi Jinping said here Thursday. The Chinese government attached great importance to the role of labor unions in China's economic and political arenas and supported labor unions to better safeguard workers' legitimate rights and interests, Xi said. Xi made the remarks in his speech at the opening ceremony of an international forum on economic globalization and trade unions in Beijing. As a developing country with 1.3 billion people, China should take both its industrialization and creating enough jobs for people into consideration and make comprehensive and balanced plans, Xi said.

• Beijing spends big to build world-class auto power assembly base (26th February) Work began Friday to build an automotive power assembly base in China's capital, according to company sources. The base, located at the Tongzhou district economic development zone, would cost 10 billion yuan (1.47 billion U.S. dollars), Beijing Automotive Industry Holding Corp. (BAIC) announced. The base would become a world-class assembly base integrating research and development with design and manufacturing, according to BAIC. The base would eventually produce 400,000 auto engines, 300,000 CVT (continuously variable transmission) gearboxes and 30,000 MT (manual transmission) gearboxes annually in 2015. To localize the state-of-the-art auto engine and gearbox technologies, BAIC established an auto power assembly company in 2009, bought related technologies and intellectual property rights from SAAB of Sweden and acquired CVT gearbox technologies of the Bosch on the basis of a cooperative project with the German company. The first-phase project of the power assembly base will cost 3.9 billion yuan and begin operation in June 2011.

Northwest Politics

87 Social front

Economic front

Northeast Politics • Senior provincial legislator expelled from Party, office for corruption (23rd February) (Xinhua) -- Song Yong, former vice chairman of the Liaoning Provincial People's Congress Standing Committee in northeast China, has been dismissed from the Communist Party of China (CPC) and his post for "serious violations of discipline and laws." The decision was announced Tuesday by the CPC Central Commission for Discipline Inspection (CCDI), which said that Song had taken large bribes and abused his official position. The CCDI said Song's behaviors had severely violated the disciplines of the CPC and the government and was suspected to having broken the law in some cases. Song's illegal gains would be confiscated, the CCDI said. His case had been referred for prosecution. The CCDI did not say exactly how much money Song had illegally taken.

Social front Economic front

Southwest

Politics • "Hugely corrupt" official gets death sentence with reprieve in SW China (24th February) (Xinhua) -- A former senior official found to have taken the largest amount of bribes in terms of value in Chongqing's history, was sentenced to death Wednesday with a two- year reprieve. Liu Xinyong, former vice general-manager of the development and management company of Chongqing bonded area, was convicted of gambling, participation in a criminal gang and taking bribes. The verdict was handed down by the No. 1 Intermediate People's Court of Chongqing, in southwest China. According to the court, Liu took bribes valued at more than 31.6 million yuan (4.63 million U.S. dollars) when he was in charge of land-use rights transfer in the municipality. Since he had given back 20 million yuan to related departments and bribers before the prosecution, his sentence was lighter than it would have been. Liu was also deprived of his political rights for life and had all of his personal assets confiscated, according to the court.

88

Social front • Gang boss, former police chief stand trial in SW China's mob crackdown (21ST February) An alleged ringleader and his protector, a former police chief, stood trial Sunday on gang-related charges in southwest China's Chongqing Municipality. Wang Xiaojun, the alleged ringleader, faces eight charges, including organizing and leading a criminal gang, organizing prostitution, running casinos, intentionally injuring people, bribery, detaining people under false pretenses, destroying accounting vouchers and account books and tax evasion. Li Hanbin, a former policeman responsible for the mob crackdown by the Chongqing Municipal Police Bureau, was charged with taking bribes worth 260,000 yuan (38,067 U.S. dollars) and protecting the gang, said the prosecutors. The trial would last four days in Chongqing's No. 5 Intermediate People's Court. Wang and his 22 gang members allegedly gained 59 million yuan from organizing prostitution rings between 2004 and 2009 and 23 million yuan from running casinos between 2001 and 2008, said the prosecutors. Prosecutors accused Wang of offering bribes worth 1.28 million yuan to officials including Wen Qiang, a municipal justice official, and others between May, 2004 and 2009. Wen, 55, was charged with bribery, rape and gang affiliations. He stood trial at the Chongqing No. 5 Intermediate People's Court between Feb. 2 and 7. The court spokesman said a verdict would be announced at a later date.

• More efforts needed to fight drought in SW China, says vice premier (27th February) Chinese Vice Premier Hui Liangyu has called for more efforts to fight Yunnan's worst drought in 60 years when visiting the province in southwestern China. He urged local authorities to ensure water supply for urban and rural residents and for agricultural uses. He also asked local authorities to take more measures to limit the spread of forest fires. Hui visited several rural households to know if they had enough water. He also inspected affected crops, reservoirs and forests during his visit to Yunnan from Wednesday to Friday. Yunnan's drought has resulted in water shortages for locals, livestock and crops. The dry spell started in the autumn 2009 and has also hit neighboring Guizhou Province and Guangxi Zhuang Autonomous Region. The seriousness, duration, areas affected and losses are rarely seen in history, the Ministry of Civil Affairs (MCA) said late Friday in a statement on its website. The ministry urged all affected regions to "take all possible means" to minimize the damages of the drought. The ministry also asked local civil affairs authorities of the four hardest-hit regions to report, on a 10-day basis, the number of people affected by the drought, people suffering from drinking water shortage, and people in need of government aid.

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Economic front

South central Politics Social front

Economic front • Per capita GDP in south China's Pearl River Delta Region approaches $10,000 (24th February) The per capita gross domestic product of south China's Pearl River Delta Region reached 67,321 yuan (9,855.2 U.S.dollars) in 2009, a statement from Guangdong Province's Statistics Bureau said Wednesday. The figure, approaching 10,000 U.S.dollars, is a sign the region has entered the late stage of industrialization and is one step closer to modernization, experts said. The region, which includes the major cities of Guangzhou, Shenzhen and Dongguan in south China's Guangdong Province, is one of China's most important export bases.

East

Politics Social front • Chinese netizens make fun of NYT Google hacking report (22nd February) (Xinhua) -- A report claiming cyber attacks on Google and other firms originated from two Chinese educational institutions is being jeered at by Chinese netizens. "The report is sheer nonsense. Is it April Fools' Day?" netizen sdh13814021912 commented at the www.tianya.cn forum. The New York Times reported that unidentified security investigators traced the attacks to computers at Shanghai Jiaotong University (SJTU) and Lanxiang Vocational School, which the report alleged has ties to the Chinese military. The report attracted great attention from Chinese netizens. Many laughed at the suggestion that a simple vocational school, which mainly offers courses like cooking, auto repair, hairdressing and basic computer skills classes, had the capacity to stage the cyber attacks. "The news is doomed to be a joke," netizen Jinse Xueguang said. "A vocational school being used as camouflage for military-sponsored hacker training camp. Am I reading a science fiction?" said another netizen azydn. Many also joked that the report was like a free advertisement and helped Lanxiang, the vocational school, gain international fame. "Computer science majors should go to Lanxiang for master degree," netizen Black said at the forum of www.renren.com.

90 "I believe more and more young Americans will come to learn computer science in Lanxiang soon," joked netizen Guchen Cangren. While netizens are making fun of the report, the unexpected spotlight has troubled the schools. "We don't want such fame, because the report is groundless," said Li Zixiang, Party chief of the vocational school. Both Lanxiang and SJTU said the NYT report was unfounded, and denied being behind the cyber attacks on Google and other American companies. "We computer students do not have to demonstrate our talent through hacking attacks," said a student surnamed Xu at SJTU's Department of Computer Science and Engineering. "Hacking goes against the law, and we have been taught to abide by the law while studying cyber knowledge and using the Internet," he said. Another student surnamed Kong said he felt indignant as the New York Times report lacks evidence. "It is not at all convincing to identify an attacker just by his IP address alone, as the real hacker can use Trojan horse techniques to remotely control a computer and launch attacks on a specified target," he said. Google said last month that it might pull out of the Chinese market, citing disagreement with government policies and unidentified attacks targeting Google's services in China.

• Chinese city becomes WIPO's pilot city for copyright protection (25th February)

(Xinhua) -- The World Intellectual Property Organization (WIPO) is expected to publish a copyright protection report on home textile by east China's Nantong City before the end of March, said a senior intellectual property official here on Wednesday.

Xu Yiying, director of the Jiangsu Provincial Intellectual Property Bureau, said this would be the first time that WIPO published an industry report to showcase a regional copyright protection example.

Nantong, seated on the northern bank of China's Yangtze River, has become the world's third largest home textile production center. Two major home textile markets in the city achieved a revenue of over 100 billion yuan (14.6 billion U.S. dollars) in 2009.

Dimiter Gantchev, head of Creation Development at WIPO, said Nantong's home textile market was a good example of China's copyright protection.

Gantchev represented WIPO in signing an accord recognizing Nantong's home textile copyright protection as a pilot investigation program of WIPO's outstanding copyright case in March 26.

He said in the process of developing a home textile industry, all levels of local governments had paid a great deal of attention to ensure copyright protection.

91 Nantong now has over 50 private pattern design offices, developing thousands of new textile patterns each year.

Economic front

• Investors may start stock index futures account application Monday (21st February) (Xinhua) -- Investors can apply for accounts to trade stock index futures from 9:00 a.m. Monday, the Shanghai-based China Financial Futures Exchange (CFFE) said Sunday in a statement on its website. Investors who want to trade stock index futures must have a minimum 500,000 yuan (73,206 U.S. dollars) to open an account, according to the CFFE. The CFFE released specific trading rules for index futures Saturday on its website. China's securities regulator on Jan. 12 approved the CFFE to trade stock index futures. Stock index futures are an agreement to buy or sell an index at a certain price on an agreed date. Index futures will give investors a mechanism to profit from declines in stock prices, allow them to hedge risks and help ease market fluctuations. China's A-share stock bourses in Shanghai and Shenzhen will resume trade Monday. They stayed closed during the one-week Spring Festival, the most important Chinese traditional festival for family reunions.

• Shanghai World Expo to showcase latest fruits of world civilizations: Wen (27th February) Chinese Premier Wen Jiabao said the upcoming Shanghai World Expo will be a platform to demonstrate the latest achievements of civilizations around the globe. Wen made the remark in a live web chat at the official websites of the Chinese central government and Xinhua News Agency on Saturday. He said the Shanghai World Expo will also be expected to be an opportunity to enhance the friendship and cooperation between China and the rest of the world.

HONGKONG AND MACAU Politics • Hong Kong LegCo by-election set for May 16 (22nd February) (Xinhua) -- A Legislative Council by-election will be held on May 16 to fill one vacant office in each of the five geographical constituencies, the Electoral Affairs Commission of the Hong Kong Special Administrative Region announced Monday. The five geographical constituencies are Hong Kong Island, Kowloon West, Kowloon East, New Territories West and New Territories East, said the commission in a statement. In accordance with electoral laws, the nomination period must not be less than 14 days or more than 21 days. It must end not less than 28 days and not more than 42 days before the polling day.

92 The nomination period will be announced soon. Both the polling date and the nomination period will be gazetted in accordance with the electoral regulation, said the commission.

• New U.S. Consul General in Hong Kong to take office (25th February)

Ambassador Stephen M. Young will assume his responsibilities as U.S. Consul General in Hong Kong beginning in March, the U.S. Consulate General in Hong Kong announced Thursday.

As Consul General, he will be responsible for the Hong Kong and Macao special administrative regions, said the consulate in a press statement.

Young was born in Washington, D.C. and educated at Wesleyan University, where he received a B.A. (1973), and the University of Chicago, where he received an M.A. (1974) and a Ph.D (1980) in history.

Young joined the State Department in 1980. Most recently, he was a member of the faculty at National Defense University's Industrial College of the Armed Forces, located at Fort McNair in Washington, D.C.

Within the State Department, he was the Director of the Office of Chinese and Mongolian Affairs. Young speaks fluent Mandarin Chinese and Russian.

Young is married to Barbara A. Finamore, an attorney who heads the China Program at the Natural Resources Defense Council. They have three children.

Social front Economic front

• Macao's forex reserves reach 18.43 bln USD in January (22nd February)

-- Macao's foreign exchange reserves amounted to 18.43 billion U.S. dollars at the end of January 2010, according to the preliminarily-estimated figures released on Monday by the Monetary Authority of Macao Special Administrative Region (SAR).

The reserves rose by 0.7 percent from the revised value for the previous month, and when compared with the same period last year, the reserves increased by 14.2 percent, the Monetary Authority said.

Macao SAR's foreign exchange reserves at the end of January 2010 represented 30 times the currency in circulation.

93 Meanwhile, the trade-weighted effective exchange rate index for the pataca, a gauge of the domestic currency's exchange rates against the currencies of Macao's major trading partners, fell by 2.71 points year-on-year to 89.42 in January 2010.

• Macao's casino industry cashes in on Lunar New Year holiday: report (23rd February)

As Chinese mainland tourists flocked into Macao during the seven-day Lunar New Year holiday, local casinos reaped some nine billion patacas (1.13 billion U.S. dollars) in table game revenues from February 1 to 21, a local newspaper said Tuesday.

Of the table game revenues in the past 21 days, one third were recorded during the Lunar New Year holiday, lasting from Feb. 13 to 19, the Macao Post Daily reported, quoting unnamed sources.

Total casino revenues for January reached 8.6 billion patacas, according to official figures.

The highest daily table game revenues during the first 21 days of February amounted to at least 900 million patacas, breaking the highest single day record of 800 million patacas last month, the daily said.

• HK to raise stamp duty to prevent property bubble (24th February)

Hong Kong will raise the rate of stamp duty on transactions of luxury properties to avoid property bubble, Hong Kong's top financial official said here Wednesday. "We will increase the transaction cost of property speculation with appropriate tax measures so as to reduce the risk of creating a property bubble," said John Tsang, financial secretary of the Hong Kong Special Administrative Region (HKSAR) government. "I propose that with effect from April 1 this year the rate of stamp duty on transactions of properties valued more than 20 million HK dollars be increased from 3.75 percent to 4.25 percent, and buyers will no longer be allowed to defer payment of stamp duty on such transactions," he said when delivering his annual budget speech at the Legislative Council. In parallel, the Government will closely monitor the trading of properties valued at or below 20 million HK dollars, he said. "If there is excessive speculation in the trading of these properties, we will consider extending the measures to these transactions," said the financial secretary.

• HK economy to grow by 4-5% in 2011: financial chief (24th February)

Hong Kong's economy is expected to grow by 4-5 percent in 2010, John Tsang, Financial Secretary of the Hong Kong Special Administrative Region (HKSAR) government, said on Wednesday.

94 Delivering the budget proposals for the fiscal year 2010-11 at a Legislative Council meeting, Tsang said the Hong Kong economy grew by 2.6 percent in the fourth quarter of 2009, but still contracted by 2.7 percent for the year as a whole. "I am cautiously optimistic about Hong Kong's economic prospects for 2010," he said. Tsang said that he expected the employment situation to further improve, and that the underlying inflation rate for 2010 as a whole will be about 1.5 percent while the average rate of headline inflation is expected to be 2.3 percent. There remained uncertainties and potential pitfalls in the external environment. It remains uncertain whether some of the economies can grow robustly after the effects of the huge stimulus measures have subsided, he said. Nevertheless, the return to a stronger growth in the mainland economy may help offset the fragile recovery in overseas markets, he added.

• HK to ensure adequate fiscal reserves: financial chief (24th February) Hong Kong's financial chief said here on Wednesday that Hong Kong will ensure adequate fiscal reserves which was prerequisite to the city's social and economic stability. Hong Kong needs to prepare for the future by increasing the reserves to meet challenges like aging population and shrinking working population, John Tsang said when delivering his annual budget speech at the Legislative Council. "After the financial tsunami, we should appreciate more deeply the importance of adequate fiscal reserves," he said. According to John Tsang, Hong Kong introduced since 2008 rounds of stimulus measures with a worth of an unprecedented 87.6 billion HK dollars in recovery from the financial tsunami. Where necessary, he said he will draw on the fiscal reserves to implement measures for economic and social stability. "However, I must act with prudence and replenish our reserves as and when appropriate."

• Potential risks for asset bubble on the rise in HK: financial chief (24th February)

Large amount of fund inflow into Hong Kong has helped to bring asset prices higher and increased the potential risk of creating bubbles in the property market, Hong Kong's financial chief John Tsang said Wednesday. In delivering the 2010-2011 budget proposals to the Legislative Council, Tsang said that since the fourth quarter of 2008, the amount of inflow of funds has exceeded 640 billion HK dollars ( about 82.5 billion U.S. dollars). The surge of liquidity has fueled an increase in the prices of luxury flats and to some extent has affected the prices of small and medium-sized flats. In January this year, the prices of some luxury flats returned to the peaks of the 1997 property boom, while prices of small and medium-sized flats were about 23 percent lower. Overall, property prices are 8 percent above their peaks before the financial tsunami. He noted the rise in property prices and a relatively low supply of flats in the past two years have caused many to worry that their plans to buy a home may be frustrated.

95 Knowing that the Hong Kong property market may fluctuate wildly if any imprudent measures were taken, the HKSAR government has been closely monitoring the situation in the property market, he added. "While the local property market is still reasonably healthy, we must not lose sight of the increasing risk of a property bubble developing with the global economic recovery and the abundant liquidity in the international financial markets." Tsang said.

• HK financial official forecasts 25.2 bln deficit for 2010 (24th February) Hong Kong's top financial official on Wednesday forecast a 25.2 billion HK dollars deficit in the Consolidated Account for 2010-11 in the city, expecting it to fall gradually in the next few years and achieve a balance by 2013-14. At this early stage of recovery, the Government should maintain expenditure at a certain level to fortify the momentum of the city 's domestic economy, said John Tsang, financial secretary of the Hong Kong Special Administrative Region government, when delivering his Budget speech at the Legislative Council. "Where affordable and without compromising our long-term financial integrity, I consider it necessary to continue to run a budget deficit in the next financial year so as to ensure a solid economic recovery without exerting excessive pressure on inflation, " he said. "In 2010-11 I will continue to invest in infrastructure, promote the development of our industries and adopt various measures to achieve the objectives of consolidating the recovery, developing our economy and building a caring society," he said. SPENDING GROWTH Tsang forecast total government expenditure to reach 317.2 billion HK dollars, up 8.9 percent on 2009-10. Public expenditure will be equivalent to 19.8 percent of the city's GDP. Total government revenue for 2010-11 will be 292 billion HK dollars, with earnings and profits tax, estimated at 123 billion HK dollars, as the major source of revenue, he said. "Taking all these into account, I forecast a deficit of 3.8 billion HK dollars in the Operating Account and a deficit of 21.4 billion HK dollars in the Capital Account. This will result in a deficit of 25.2 billion HK dollars in the Consolidated Account, equivalent to 1.5 percent of our GDP," he noted. Fiscal reserves are estimated at 483 billion HK dollars by end- March 2011, representing approximately 28 percent of Hong Kong's GDP and equivalent to 18 months of government expenditure, he said. BETTER-THAN-EXPECTED REVENUE Revising the estimates for 2009-10, Tsang said the economy showed signs of gradual improvement from the second quarter of 2009, leading to better-than-expected revenue. The huge inflow of funds resulting from the global low-interest environment and the quantitative easing policy adopted by many countries has given rise to hectic trading in both the stock and the property markets. As a result, revenue from stamp duties reaches 40.5 billion HK dollar, which is higher than the original estimate by 15.5 billion HK dollars, he said. The revised total revenue is 308.5 billion HK dollars, 46.8 billion higher than the original estimate, said Tsang. By March 31, Hong Kong fiscal reserves will have increased to 508.2 billion, he said.

96 MEDIUM-TERM OUTLOOK For the medium term, with the gradual recovery of the global economy, Tsang estimated the annual trend growth rate will return to 4 percent in real terms for the period 2011-14, while the underlying inflation rate forecast will average 3 percent. "I forecast a surplus in the Operating Account for the period between 2011-2012 and 2014-15, which will help meet the capital deficit arising from our enormous expenditure on infrastructure in these few years," he said. The fiscal reserves will be around 470 billion HK dollars by end-March 2015, representing approximately 22 percent of the city' s GDP and equivalent to 15 months of government expenditure. The total deficit for the financial years between 2010-11 and 2014-15 is estimated to reach around 40 billion HK dollars.

• HK to reinforce its global financial center position (24th February)

Hong Kong will take measures to reinforce its position as a global financial center and asset management center in the current legislative year, according to the Appropriation Bill 2010 released here on Wednesday. Financial Secretary John Tsang outlined the main measures in his budget speech, including developing offshore RMB business, promoting asset management business and improving the financial regulatory system. Tsang noted that Hong Kong would like to be the first testing ground for all new measures relating to the liberalization of China's capital account and the regionalization and internationalization of RMB, and the Special Administrative Region (SAR) government would continue to take forward work in this regard. Referring to the asset management business, Tsang proposed to introduce a number of measures to strengthen the competitiveness of the industry and attract more talent, capital and products to HK. These measures included extending the stamp duty concession in respect of the trading of exchange traded funds (ETFs), extending the profits tax concession to all qualifying debt instruments with a maturity of less than seven years, and attracting more fund managers to manage overseas funds in HK by further clarifying the definition of "central management and control". Tsang pointed out that the current financial crisis did not cause systemic problems to HK's financial system, whereas the authorities would still take steps to further improve HK's financial regulatory system so as to strengthen investor protection. The measures in the first phase, which focus on improving the sales practices for investment products, the professional conduct of intermediaries and investor education, have been implemented. For the longer-term measures, Tsang said the government was consulting the public on proposals to establish an "Investor Education Council" and a "Financial Dispute Resolution Center", aiming at strengthening investor protection in every aspect. Additionally, the SAR government is preparing for public consultation on a proposal to amend the Securities and Futures Ordinance to require timely disclosure of certain price- sensitive information by listed companies.

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• Hong Kong budget focuses on economic recovery (24th February) Hong Kong's financial chief John Tsang on Wednesday proposed in a budget speech measures to build on the economic recovery while preventing asset bubbles, in addition to relief measures worth some 20 billion HK dollars (2.56 billion U.S. dollars). Delivering the budget proposals for the fiscal year 2010-11 at a meeting of the Legislative Council, Tsang pledged to carefully adjust exceptional measures and put in place measures to prevent asset bubbles in the local real estate market, including adjusting land supply and raising the stamp duty rate on high-end transactions. The Financial Secretary of the Hong Kong Special Administrative Region (HKSAR) government said that he expected Hong Kong's economy to grow by 4-5 percent in 2010, with employment to further improve and the underlying inflation to be 1.5 percent. "I am cautiously optimistic about Hong Kong's economic prospects for 2010," he said. Tsang said the latest financial crisis was much more severe than the 1997 financial storm, but the Hong Kong economy recovered more quickly, growing by 2.6 percent in the second quarter of 2009 and contracted by only 2.7 percent for the full year. There remained uncertainties and potential pitfalls in the external environment given that the labor markets in the developed economies have yet to improve, and it remained uncertain whether some of the economies can grow robustly after the effects of the stimulus measures subsided, he said. Nevertheless, the strength of the mainland economy is expected to offset the fragile recovery of overseas markets, he added. Tsang said Hong Kong is in its early stage of economic recovery, but the exceptional measures put in place by the HKSAR government should not, and could not, be sustained for long. "Governments around the world are now making plans to exit from their exceptional measures. Some have already begun to progressively execute these plans. We should also prepare to adjust our exceptional measures at a suitable time," he said. Tsang pledged to, among others, adjust land supply and raise the stamp duty rate on transactions of properties valued over 20 million HK dollars (2.56 million U.S. dollars) from 3.75 percent to 4.25 percent, with effect on April 1. "The increased risk of a bubble forming in the property market has also aroused public concern about the difficulty in buying homes," he said. Tsang said the three objectives for the 2010-11 budget were " consolidating the recovery, developing our economy and building a caring society. Tsang pledged to continue investing in infrastructure, build on the strength of Hong Kong as a financial center and diversify the local economic growth into new industries such as medical services, education services, environmental industries, testing and certification, innovation and technology, and cultural and creative industries. Tsang also pledged to further regional cooperation, saying that Hong Kong should make use of its strengths to support the development strategy of the mainland economy and seek an important role in developing the national 12th five-year plan. Exchange and cooperation between Hong Kong and Taiwan in economy and culture and at the corporate level will also be enhanced.

98 Tsang also pledged support for developing a green economy by improving the water quality of Victoria Harbor and encouraging the transport sector to test environment- friendly vehicles. Tsang proposed to spend heavily in housing, health care and social welfare, with the relief measures in the new budget, including tax rebates, rates concessions and public housing rental waivers, worth nearly 20 billion HK dollars (2.56 billion U.S. dollars). To support anti-drug efforts, the Financial Secretary proposed injecting 3 billion HK dollars (384 million U.S. dollars) into the Beat Drugs Fund. Tsang forecast a 13.8 billion HK dollar (1.77 billion U.S. dollars) surplus for 2009-10, a deficit of 25.2 billion HK dollars (3.23 billion U.S. dollars) for 2010-2011, and a return to fiscal balance by 2013-14.

• HK sees 49.1 bln HK dollars surplus in January (26th January) A 49.1 billion HK dollars surplus was recorded in Hong Kong government's financial results for January, resulting in a 47.9 billion HK dollars surplus for the financial year's first 10 months, said the Financial Services & the Treasury Bureau on Friday. The surplus was mainly due to the receipt of land premiums, and salaries and profits taxes. Taking into account the projected revenue and expenditure towards year's end, the revised estimate for the 2009-10 financial year, as announced in the Budget on Feb. 24, is a 13.8 billion HK dollars surplus. Spending for the 10-month period ending Jan. 31 was 227.8 billion HK dollars and revenue was 275.7 billion HK dollars. Fiscal reserves stood at 542.2 billion HK dollars at the end of January. (One U.S. dollars equals 7.76 HK dollars)

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