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Monday, November 27, 2006

MAINLAND ECONOMIC REFORM
Beware of foreign advice on the yuan


STEVEN SITAO XU
   
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   Many distinguished foreign commentators continue to argue that the world economy is suffering from major imbalances and that China, with its huge current-account surplus, holds the key to correcting them. For instance, the broad policy response recommended by many foreign pundits is a Chinese domestic spending surge characterised by an expansionary fiscal policy and a much stronger yuan. But such moves would do little to restore global payments imbalances, and would actually jeopardise China's economic reform.
The biggest imbalance most foreign observers refer to is the one between China and the US, which is a consequence of excessive American consumption and excessive Chinese saving. Indeed, they say it is not just Chinese consumers who save too much but also Chinese companies - and, indirectly, the government (as the owner of many of the country's largest firms).


Therefore, Beijing could easily dip into this pool of money by requiring dividend payouts from profitable state-owned enterprises (SOEs) and then spending it on, say, public-welfare programmes - to help spur consumption. Meanwhile, a dearer yuan would prompt consumers to open their wallets and increase their purchases of imported goods and services. And China could reduce its excessive savings, currently being exported to the tune of over US$100 billion a year.

Such seemingly sensible policy responses, however, may not work for several reasons. First, with both China and India integrating into the global economy, a deflationary trend has been unleashed with such powerful force that certain imbalances are here to stay for a long time. Second, Beijing's channelling of the massive pool of savings through banks into public works has sparked an investment boom. China has no choice but to rely on investment as a key driver of high growth until there is a genuine takeoff of private demand.

Third, it is politically easier to maintain a loose fiscal policy during a wrenching economic transition. However, a crucial objective of Beijing's economic reform is to increase the role of the private sector, so that the role of the state sector can be reduced.

The shift from public demand to private demand requires political compromises with vested interests, and continued financial-sector deregulation. Beijing has correctly identified banking reform as the catalyst for overall financial-sector liberalisation.

Now, China is about to face an even bigger Big Bang. Next month, full competition from foreign banks at home will be unleashed, as Beijing dismantles the last regulatory hurdles in accordance with its World Trade Organisation obligations. Successful banking reform must be accompanied by continued restructuring of SOEs - banks' biggest borrowers. That means the last thing the government wants to do is to siphon off large SOEs' profits and force them to take on excessive debt.

Meanwhile, it is true that China's widening income disparity is increasing the pressure on the government to deploy more resources into hitherto neglected areas, such as education and basic medical coverage for the poor. But it is not true that the government is saving too much. Anecdotal evidence suggests plenty of extravagant official spending.

In sum, China needs more fiscal discipline, not less. And a relatively undervalued yuan is necessary to help cushion the impact of China's sweeping financial-sector reform. The best foreign-exchange policy for China is not one that leads to arbitrary adjustments in the yuan's value, but one that accelerates the marketisation of its exchange-rate mechanism. In other words, Beijing should pursue precisely the opposite of the policy prescriptions being offered by some overseas pundits.

Steven Sitao Xu is the Economist Intelligence Unit Corporate Network's director of advisory services in China.



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Friday, December 1, 2006

EDITORIAL/LEADER
PCCW saga a blow for HK's credibility



  
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   Richard Li Tzar-kai's grand plan to retreat from the telecoms industry has hit the rocks, leaving behind a litany of questions about political interference, family discord and corporate governance. They cast a long shadow over Hong Kong's image as a credible centre of international finance.
Australian investment bank Macquarie and US buyout firm TPG Newbridge had proposed separate bids to acquire PCCW's key assets. China Netcom, PCCW's second-largest shareholder, decided against selling and enlisted Xinhua, the state-run news agency, to issue a press release to publicise its desire that PCCW should remain in local hands. The unusual arrangement speaks volumes about the nature of the opposition to the deal. Beijing was firmly against allowing what it considers to be a strategic asset of Hong Kong to fall into foreign hands.

  
Francis Leung Pak-to, an investment banker with strong ties to Li Ka-shing, Hong Kong's richest tycoon and father of Richard, then emerged as a white knight to block the foreign bids. In July, Mr Leung put together a deal to acquire Richard Li's 23 per cent stake in PCCW, held through his Singapore-listed vehicle Pacific Century Regional Development.

Quizzed at the time, Mr Leung denied that the elder Mr Li was among his backers. It turned out that this was a technical denial. The tycoon was not an investor at that stage, but he was the source of a HK$500 million loan that Mr Leung drew on to pay a deposit to PCRD. The Li Ka-shing Foundation, the tycoon's vehicle for charity work, has since taken a 10 per cent stake in Mr Leung's consortium.

Mr Leung appears to have been acting as the front man for the elder Mr Li. It looks as if the tycoon, with extensive connections in Beijing, engineered the deal to resolve the political problem his son had caused. Father and son, it seems, did not communicate over the matter. When Richard knew of his father's involvement in Mr Leung's bid, he was so angry he reportedly said last week that he would rather PCRD's minority shareholders vote it down. Now that the younger Mr Li's reported wishes have come true, following the vote in Singapore yesterday, Hong Kong's reputation for having a level playing field for business has suffered a severe beating.

It would be naive to think that politics never plays a role in business here. British interests once dominated key sectors in Hong Kong, relinquishing their firm grip only in the last years of colonial rule. Indeed, politics was believed to be behind the sale by Cable & Wireless HKT - renamed PCCW by Richard Li - in 2000, three years after Hong Kong's return to China.

Beijing was widely believed to have an influence over the choice of Richard Li as the buyer, in preference to a strong rival bid from Singapore Telecom. No wonder Beijing was taken aback when he decided to sell his stake to foreigners.

But the way in which the planned sale of PCCW's assets was handled in recent months, both in Beijing and Hong Kong, has dealt a heavy blow to our city's reputation. It has done so in two key areas. The first is the blatant interference by Beijing in a proposed business deal which was really not important enough to justify such attention. This was done in an underhand way and it has gravely damaged Hong Kong's image as a city that offers fair treatment to all businesses, wherever they may come from.

Since the handover, there have been few occasions when Beijing has so obviously interfered with Hong Kong affairs. We have had a pretty good nine years. But that record has now been seriously dented. The blocked PCCW deal is a signal moment that has been watched with consternation both here and around the world.

The second concern is the failure of Hong Kong's regulators to do anything about it. This has shown them to be ineffective when faced with a series of events that raises serious questions.

The vote in Singapore might bring the whole sorry affair to the end. Now, it is hoped, we can move on. But the damage has already been done.


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Monday, December 11, 2006

EDITORIAL/LEADER
China must now tackle its next WTO challenge



  
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   When China gained membership of the World Trade Organisation five years ago, some observers worried that the perceived benefits would be vastly outweighed by the potential disruptions to the nation's economic, political and social development. Such scepticism was unwarranted as the extraordinary success of accession to the global trading body has since shown.
The achievements are testament to the vision of the chief proponents of China joining of the WTO, former president Jiang Zemin and ex-premier Zhu Rongji . Their hopes that desperately needed reforms would be spurred have been proved right and a path unimaginable a decade ago has been forged.

  
This is not to say that all is rosy; serious failings remain, most notably when it comes to transparency and intellectual property rights. Nonetheless, a remarkable transition has taken place and China is moving forward in leaps and bounds.

Such an outcome was unthinkable in the 1990s when talk turned to the WTO and the benefits that might be gained from membership. Towards the end of the decade, the reform process to keep stimulating economic growth and usher in an era of modernisation was petering out; agricultural changes had been implemented and the Asian economic crisis in the latter quarter of 1997 had buffeted the financial and industrial sectors.

The WTO's promotion of lowering and eventually eliminating trade barriers among member nations fitted perfectly with plans by the mainland authorities. Membership rules meant that a strict process of reform would have to take place in all sectors to ensure that requirements were met.

Those goals were achieved and as a result the process of reforms has been taken to a new phase. There is no better evidence of the commitment by leaders to drag China from being a poverty-stricken backwater as it was when economic reforms were implemented in 1978 to a prosperous industrialised nation.

The ramifications of that decision have been stunning. China is now the world's third biggest trading nation and fourth largest economy, and a burgeoning middle class has emerged. As significantly, the mainland has arrived on the international diplomatic stage and carries great influence in determining global decisions.

While the commitment for reform is strong, though, the process has not always been as smooth as it should be. Today marks not only the fifth year of ascension to the WTO but also the end of a grace period during which most of its concessions were to have been implemented - and there are still glaring gaps.

Most pressingly for the WTO is the opening of the banking and financial services sectors to foreign firms. Some barriers are still in place and only with their removal will China have complied with its pledges of half a decade ago.

For the US and Europe, though, the large number of counterfeit goods being produced on the mainland violates any agreements signed. The problem is a global one but especially problematic for Chinese authorities, whose efforts to clamp down on infringements of intellectual property rights have so far made little dent on the problem.

Similarly, opening up all sectors to public scrutiny has been done so with obvious reluctance. Only with transparency can China truly move forward, and this cannot happen until steps are fully implemented to make the economic, judicial and political systems accountable.

Until such matters are resolved, other WTO nations will continue to raise objections over the mainland's trade imbalances, currency valuation and human rights violations. Tariffs will remain a weapon against perceived disadvantage.

Given the magnitude of China's difficulties and the challenges posed by the WTO's demands, the government has done extraordinarily well in meeting its pledges.

This is the end of only the first phase, though. For the success story to continue, China must make a concerted effort to fill the gaps to fully meet its WTO obligations.


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           Thx

Tuesday, December 12, 2006

EDITORIAL/LEADER
Election result sends important message



  
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   The success of pan-democratic candidates in the Election Committee poll on Sunday raises a real prospect of the first contested race for chief executive since the handover. That would be a welcome development.
But the significance of the results announced yesterday lies in the message they send about the aspirations of Hong Kong people. There is a very strong desire for democracy. This is now evident even in a poll that restricts voters to a tiny, privileged proportion of Hong Kong's population.

  
The target set by the pan-democrats is a modest one. Civic Party challenger Alan Leong Kah-kit has no realistic chance of winning the race. His aim is to secure the 100 nominations needed to stand against Chief Executive Donald Tsang Yam-kuen. He went a long way towards achieving that goal on Sunday. Of the candidates who won places on the committee that will pick the next chief executive, 114 were those who stood on a pan-democratic ticket. They have all indicated they intend to nominate Mr Leong. Add to this the 20 or so pan-democrat legislators who are guaranteed places on the committee, and the chances of Mr Leong securing the sufficient number of nominations look healthy.

In seven sub-sectors, all the pan-democrats' candidates were successful. This is the first time the camp has made such in-roads in this election. In the past, they have tended to shun it on principle, pointing out that it excludes the vast majority of Hong Kong people.

Even Sunday's record turnout was only 27 per cent of registered voters, much lower than that achieved in direct elections for district and legislative councillors. The 56,000 people who voted constitute about 1.2 per cent of Hong Kong's voting-age population.

Sunday's results, however, justify the decision of the pan-democrats who chose to contest this election. They build on the limited success the pro-democracy camp enjoyed in similarly constituted functional constituency elections for the Legislative Council in 2004. There is a point they can make by playing the game, even if the odds are stacked against them.

The election for chief executive early next year is now set to be a little more interesting than would otherwise be the case. Mr Tsang, expected to declare his intention to stand soon, need not fear defeat. But if he faces a challenger in the form of Mr Leong, or another candidate, there will be more reason for Mr Tsang to spell out his blueprint for the future and to tackle challenges to his platform. This will, it is hoped, lead to an informed and rational public debate about the issues facing Hong Kong.

More important, though, is the call for democracy that has been sounded through the success of the pan-democrats in Sunday's elections. Hong Kong people want more democracy. This is not just evident in Sunday's results; it has been shown in direct elections over the years, where the pro-democracy camp has consistently secured the majority of votes.

Beijing may be concerned to see the pan-democrats making headway in the Election Committee poll. But it need not be worried, as this is a natural development as Hong Kong matures politically and political awareness grows. Certainly, it would not be wise for the central government to react by seeking to further block democratic reform. Sunday's result shows that the desire for democracy in Hong Kong has not diminished. It will not do so in the future.

The best way of ensuring stability and prosperity in Hong Kong is to make real progress towards the Basic Law's "ultimate aim" of universal suffrage. Work to this end is going on in the government-appointed Commission for Strategic Development. A plan for democratic reform is due to be released by that committee early next year - hopefully to be followed by a timetable.

The gains made by the pan-democrats on Sunday are modest, but significant. They are the latest evidence of the need for progress in Hong Kong's long journey towards democracy.


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Wednesday, December 13, 2006

EDITORIAL/LEADER
Avert aged-care crisis with sound pension plan



  
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   The worldwide trend of ageing populations has generated a lot of debate about the economic problems they throw up. But it has so far failed to attract wide attention. Hong Kong's consultation on a goods and services tax was evidence of that. It fizzled out without too much concern about broadening the tax base to meet the future needs of a growing retired sector.
Pension scandals get more headlines than the question of where the money will come from in the years ahead to fund the needs of more retirees. An example is the ever-widening probe into misuse of pension funds by senior officials and others.

  
But Beijing is trying to focus attention on the real issue, and with good reason. Our report today on the State Council's white paper on care of the aged is a reminder that the ultimate welfare nightmare is to be found on the mainland. The mainland has already lost the race to become rich and modernised before it becomes an ageing society. It remains among low- to middle-income countries in terms of per-capita gross domestic product. But it expects the number of "elderly" - people over 60 - to rise from 144 million last year in a population of 1.3 billion to 248 million by 2020. It will grow at an increasing rate thereafter, peaking at 437 million, or 30 per cent of the population, by 2051.

Thanks in part to restrictive child-birth policies, the ratio of working people to retirees will drop sharply, leaving fewer younger people to finance the care of a growing number of older people. The ballooning welfare bill will not be cushioned by extraordinarily high savings, which the government wants to convert to higher consumer spending as an engine of economic growth and greater wealth. Thus, in the space of 25 years of reform, the mainland has gone from having a womb-to-tomb socio-economic regime to having a frightening welfare overhang.

Escaping the shadow of that overhang goes to the heart of Beijing's emphasis on the maintenance of social stability and harmony. The discontent of hundreds of millions of elderly people with little left to lose could prove more than a little troublesome. Therefore, the central government can well do without an aged-welfare black hole at the end of people's working lives. Just how hard it will be to avoid one without a crippling increase in financial provision for social security is graphically illustrated by the white paper.

The mainland's aged population accounts for one-fifth of the global total and half of Asia's. About 60 per cent of people over 60 are to be found in the countryside, where social welfare lags far behind. This is compounded by the migration of young workers to urban areas and an increasing trend of old people living on their own. There is a huge shortage of aged care, with only 1.49 million beds for old people in welfare institutions, or 10 beds per 1,000 old people. By 2010, the mainland wants to add 2.2 million beds for poor or disabled old people in rural areas.

The critical year, according to state officials, will be 2030, when less than half the population is expected to be in the workforce. The acknowledgment that providing a welfare system for the aged in line with the nation's socio-economic development will put a strain on government finances is an understatement.

The mainland needs to develop a coherent national pension plan under rigorous independent supervision that actually invests money across an appropriate range of securities and generates healthy but secure returns, rather than being looted by state officials. The national social security system is now forced to pursue super-conservative investment policies that won't generate the needed returns.

Meanwhile, the policy of stimulating private consumption could help strengthen government finances if it unlocks savings to help build a bigger domestic economy. Private consumption has been growing in real terms at about 10 per cent a year. But mainland households may need to be assured of affordable health care, education and housing before they will spend much more.


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Thursday, December 14, 2006

EDITORIAL/LEADER
Urgent action required to save the Yellow River



   
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   The Yellow River is dying. Despite exhortations by state leaders to put the environment first, the amount of untreated sewage dumped into China's "mother river" has increased instead of fallen in recent years.
In the 1990s, 40 per cent of the river's water was drinkable. Now, the figure has dropped to 33.3 per cent. Moreover, the river is also suffering from a dramatic decrease in water flow because of low precipitation and overuse. So much so that it has become a regular occurrence for parts of the river to dry up.

  
For the 5,464 km-long waterway that is known as the cradle of Chinese civilisation, that is a tragic development that illustrates what is so wrong about China's preoccupation with growth. Years of emphasis on getting rich first have blinded many cadres to the byproducts of industrial development.

While polluting factories that provide jobs and profits are given a licence to use the dirtiest production methods, they are not held responsible for the pollution they cause. Even in places where sewage treatment plants have been installed, they are not always turned on in order to save money. So many local governments have an interest in keeping afloat factories in their jurisdictions that they are held hostage by the plant operators.

To tackle the problem, the State Environmental Protection Administration has set up regional offices to strengthen its monitoring of local breaches. Hopefully, with backing from Beijing, these outposts will be able to turn things around over time. But more will need to be done to avert the environmental and human catastrophe that experts say a worsening shortage of clean water would do to the nation.

More intelligent and rational use of water should be a first priority. In China, as in many other countries, governments are loath to charge users the full costs of treating and piping water. In some cases, that is justified as a strict application of the user-pays principle would deprive many people of access to an essential necessity. However, it would be wrong to keep rates artificially low just to keep the masses happy, as is still the case in many parts of the country.

China is not richly endowed with water resources on a per capita basis. It is therefore important to set water rates at realistic levels that encourage conservation and investment. Rates should go up in line with economic growth, so users will think twice about letting their taps run and investors see a reason to put their money in building water supply facilities.

The present sorrows of the Yellow River are the result of millenniums of human interference. Deforestation along its course accounts for the heavy soil content of its water - and hence its colour. Over the past century, industrialisation has turned it into a giant sewer. It is time urgent and bold action was taken to avert its death and restore it as a source of life.


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Friday, December 15, 2006

EDITORIAL/LEADER
Iran using Holocaust conference in power play



   
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   Since Iranian President Mahmoud Ahmadinejad triggered international outrage more than a year ago by calling for Israel - a fellow member of the United Nations - to be "wiped off the map", the method in his rabid anti-semitism has become more apparent. Within months he expressed doubt that the Nazis murdered 6 million Jewish people, which soon hardened into denial of the Holocaust, seen as a myth concocted to help justify the founding of the Jewish nation of Israel on Muslim lands.
This week Iran has hosted a conference on the Holocaust that has provided a rare platform for deniers from nations afar. That includes champions of free speech, such as Germany, France and Austria, who have made Holocaust denial illegal, and others where deniers have been muzzled by popular revulsion.


Far from being worried about condemnation of his conference, Mr Ahmadinejad has relished the chance to point to what he sees as double standards. And he has not missed the apparent hypocrisy in the free-speech defence of cartoons lampooning the Prophet Mohammed published in Europe last year that caused deep offence in the Muslim world.

But that is a sideshow. The Iranian leader is not playing to a western audience. His high profile on the issue of Israel, the Jewish people and the homeless Palestinians and his defiance of the United States over his nuclear programme is aimed at the Muslim rank-and-file throughout the Middle East. This being an audience already warmed up for him by anger at the disastrous invasion and occupation of Iraq by Israel's superpower ally. It has played well in the streets and given him pan-Arab recognition that is the envy of other regional leaders.

Middle East observers fear the strategy behind the denial of Israel's right to exist is more about spreading Iran's influence than about the Palestinian cause. If it succeeds, Iran would be poised to exploit a post-Iraq regional power vacuum.

The same man who has promoted Holocaust denial to advance what he sees as a just cause expects the world to take him at his word when he says Iran's pursuit of advanced nuclear capabilities is for peaceful purposes only. Ironically, western nations presented him with an opening on Israel by outlawing Holocaust denial. Some of those laws raise serious free-speech concerns, but they were passed because denial of the genocide perpetrated by the Nazis has been promoted by racist groups and can easily be used as a form of anti-semitism.

Mr Ahmadinejad himself faces a moment of truth today when Iranians go to the polls to elect city councils. Reformist candidates hope it will be a referendum on his failure to keep the promises on which he was elected to tackle chronic poverty, unemployment and corruption. These are issues he should be focusing on, rather than devoting time to a distasteful conference on Holocaust denial.


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Monday, December 18, 2006

OUT OF THE BOX
Fighting the destruction of memory


KITTY POON
   
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   From the government's perspective, the protest against the demolition of the old Star Ferry pier last week emerged from nowhere. But, looked at closely, the incident reflects the rise of a new civil activism - a revolt against Hong Kong's uncharted and relentless modernisation.
This new movement aims to halt the city's rapid decline into a place without history, and underlies a deep-rooted, collective anxiety among Hongkongers over the loss of identity. It is new in the sense that its support base extends far beyond that of typical political activism. Also, its spontaneity and strength seriously challenge the conventional consultative and decision-making processes. The government seems ill-prepared for such movements.


The unfolding of the new civil activism began a few years ago. The protests against urban renewal in Wan Chai, rallies to oppose the government's Central reclamation project, and the call to preserve the old police station in Central are all examples of it. These efforts have drawn support from students, teachers, artists, lawyers, environmentalists, architects, urban planners and housewives - among others. There are no institutional channels in place to understand and accommodate their collective concern over the downside of modernity.

The landscape of a city is associated with residents' hardships, happiness, romances and other experiences. It breeds a sense of intimacy - and consequently a sense of security and identity. The buildings, streets and signposts provide a mental map that lets Hongkongers trace where they came from and who they are. The demolition of old buildings and streets is like erasing a spiritual path, sparking anxiety over the loss of identity and future direction.


Think about it: skyscrapers like Two IFC and steel constructions like Cyberport can only provide a sense of imprisonment, not intimacy. Shops inside Pacific Place and Festival Walk impart only the awareness of relative poverty rather than satisfaction. These modern constructions create a feeling of alienation because they make people feel like mere instruments of business and commerce.

Evidently, neither the Legislative Council, district councils nor the Antiquities Advisory Board is capable of sensing Hongkongers' collective anxiety. Architectural authenticity is not at the core of the concern, and many legislators themselves might also be insensitive to the issues caused by modernity. The government's consultation through the conventional channels, hence, is bound to result in wrong decisions regardless of the length of the process.

The rise of a new civil activism has to be understood in the context of the rapid socio-political transformation that has unfolded in the past few decades. Hong Kong's loss of competitive edge in the region has had an irreversible effect on Hongkongers' pattern of living. The handover introduced unsettling political disputes which, in turn, is reshaping the experience of human relations.

The continuing makeover of the city's landscape furthers the irritation and frustration. It accentuates the discontinuity and uncertainty in everyday life in Hong Kong, while undermining the sense of belonging.

In view of this, the government has to prepare itself for the rise of a new type of social activism, and to pay close attention to the preservation of social continuity in the community.

Kitty Poon, an assistant professor at the Hong Kong Polytechnic University, is a part-time member of the government's Central Policy Unit.



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You are hard-working...please keep going
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THz

Tuesday, December 19, 2006

OBSERVER
Living with borrowed characters


FRANK CHING
   
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   Young Japanese are finding it difficult to learn kanji - characters borrowed from Chinese - and Japan may eventually replace them with easier-to-learn syllabic characters, according to an article at the weekend. It blamed this trend partly on the increasing use of computers and mobile phone texting.
If so, it would be a major development in the evolution of Japanese writing. Japan will, no doubt, consider this very carefully before making any decisions, since such a drastic move would sever future generations of Japanese from their past, which is mostly recorded in Chinese characters.


About 1,600 years ago, Japanese began borrowing Chinese characters, as their own language had no written form. For well more than 1,000 years, those characters have served a useful purpose. Is that usefulness over?

Japan was not the only East Asian country to use Chinese characters. Others include Vietnam and Korea, but those nations, for various reasons, gave them up in favour of their own, invented written systems. But Japan has held on to kanji, and thinks of them as very much part of Japanese tradition and culture.

Even when relations with China were badly strained in recent years, there was no thought in Japan of giving up Chinese characters.

Vietnam and Korea took a different approach. Vietnam used Chinese characters until France invaded the country in the 19th century, and French replaced Chinese as the official language.

It wasn't until the 20th century that Vietnamese became the country's official language. The written language in use today is a version of the Latin alphabet developed by western missionaries. Chinese characters are no longer used.

Korea used Chinese characters until the 19th century but, after its colonisation, Japanese became the language of official documents. After Japan's defeat in the second world war, Hangul - a script created by a Korean king in the 15th century - became the official language.

Today, Hangul rather than Chinese characters is used in both North and South Korea. It is interesting to note that North Korea - which like China is run by a communist party and is supposedly its close comrade-in-arms - has gone to great lengths not only to eliminate Chinese characters, but has eradicated all signs of its Chinese cultural heritage.

South Korea, on the other hand, still teaches its schoolchildren some Chinese characters, and is proud of its traditional culture.

Unlike Vietnam and Korea, Japan has not tried to get rid of Chinese characters but, rather, has considered them part of its own cultural heritage, changing and simplifying them - and even inventing hundreds of new characters - to suit its needs.

Today, modern Japanese is written in a combination of kanji and two phonetic alphabets. Japan is the only country outside of China that still uses large numbers of Chinese characters.

Meanwhile, the use of characters in China itself has changed: communist authorities have tried to make literacy universal by simplifying characters and introducing the pinyin phonetic system. However, radical proposals such as eliminating characters entirely have won little support, since this would mean cutting off modern-day Chinese from their own history, which is all recorded in those characters.

That situation already confronts people in Vietnam and Korea, where ancient texts are written in Chinese characters - no longer accessible to most of their people.

And so, if Japan one day decides to take the plunge and get rid of Chinese characters, it must realise that it is not just distancing itself from China by no longer sharing a written language, but actually cutting itself off from its own past.

Actually, characters are not the exclusive possession of any country. It is the common heritage of the peoples of East Asia - just as English today is the heritage of people in North America, Australia and other countries rather than an exclusively British possession.

Languages grow and change - and should be seen as a tool to be used rather than as chains that bind us.

Frank Ching is a Hong Kong-based writer and commentator.

frank.ching@scmp.com



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Wednesday, December 20, 2006

EDITORIAL/LEADER
New defence chief must learn from US mistakes



   
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   New US Defence Secretary Robert Gates has ascended to a powerful role: America's annual military spending is more than China's entire budget, so he has the resources at his disposal to have a considerable impact on the world. Given the poor performance of his predecessor, Donald Rumsfeld, in waging war in Afghanistan and Iraq, he has to approach the job cautiously and with emphasis on consensus building.
While US President George W. Bush has the final say on military matters, his defence secretary has the important position of advising and formulating policy. That is where Mr Rumsfeld faltered; by ignoring the advice of those around him, particularly generals in the war zones, he missed the flaws in his nation's strategy.


Dr Gates has been quick to promise a change, saying at his inauguration that he will consult top military officers in Iraq at the earliest opportunity. Such an approach is welcome, although this has to be the rule, not the exception, in carrying out his duties.

The new defence chief fortunately has a reputation for consultation before reaching a decision, but it must be remembered that he is in a job where he is also required to be hawkish. The US military is, after all, dedicated to national defence and in the post-September 11 terrorism environment, a combative approach is deemed necessary to eliminate threats. Under Mr Rumsfeld, that stood the US in good stead, preventing further terrorist attacks on American soil. Beyond US borders, though, it has proved disastrous, creating global instability.

For the people of Afghanistan and Iraq, the Bush administration's deafness to criticism has meant that promised peace and stability has become a hope rather than reality. In both nations, the number of attacks on foreign soldiers, national security forces and civilians has been increasing, rolling back the achievements in building democracies and economies.

Achieving consensus amid such complications is not easy, as diverse views among politicians in the US, Iraq and Afghanistan toward finding solutions proves. If the threats are to be eliminated, majority opinion will have to hold sway.

Dr Gates faces significant challenges. He has to walk a tightrope of politics, military strategy and appeasement, all the while knowing that with the lives of American soldiers at risk, failure is not an option. As he pointed out on Monday, losing in Iraq would be "a calamity".

Many options have been put forward, some by a blue ribbon panel on Iraq that Dr Gates sat on before taking up his new post. He will be instrumental in helping Mr Bush reach a decision early next year on which way to proceed.

If a calamity is to be avoided, the US must adopt a measured defence policy involving consultation with as diverse a spectrum of partners as possible. Dr Gates, in the driving seat, must set the tone with Iraq.


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Thursday, December 21, 2006

DISCRIMINATION II
Migrant workers have rights, too


BILLY HUNG
   
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Migration has always been integral to the human condition; individuals and societies have moved in search of social, economic and cultural opportunity, or to escape conflict and persecution. Current estimates are that there are 175 million migrants - roughly 2.8 per cent of the world's population.
The daily reality for many migrants around the globe is bleak. Often subject to discrimination and human rights violations, many live at the margins of societies unwilling to recognise the economic contribution they make, and to give them the same basic human rights that their nationals enjoy.

Working conditions are poor for millions of migrants, with long hours, low wages and unacceptable circumstances. A 24-year-old Myanmese migrant described his work at a wool factory in Thailand, where he had been employed for two years: "I worked from 8am to 9pm - sometimes until midnight with no overtime pay ... Thirty of us men lived in a hall, about 30 feet by 10 feet [nine metres by three metres], sleeping side by side." He earned 3,000 baht (HK$658) per month.

Eight Thai women working at a Korean company, Donghwa Digital, suffered serious injuries as a result of prolonged exposure to the toxic chemical n-hexane, used in the manufacture of liquid crystal display monitors. Female migrants are particularly vulnerable. Many migrant women in Asia work as domestic helpers in private homes, where they are often invisible and isolated from the rest of society, and may be subject to sexual harassment or rape by their employers.

A large number of workers are "undocumented" or "irregular" migrants, who lack legal status in the country where they work. In June, out of a total of 360,000 migrant workers in South Korea, at least 189,000 were believed to be irregular workers. Such workers are especially vulnerable to abuse. Even when they lack legal status, migrants are still entitled to have their basic human rights protected.

Many countries detain irregular migrants, to deter others from coming. In South Korea, Amnesty International has received persistent reports of poor conditions and abuse by security personnel in detention facilities used to hold migrant workers. In Malaysia, severe overcrowding, poor hygiene and sanitation, outbreaks of contagious diseases, poor nutrition and verbal and physical abuse - including beatings - have been identified as serious problems. Immigration policies can make it difficult for migrant workers to collect pay that is owed, or to seek redress for human rights violations.

In South Korea, if workers are refused contract extensions and are unable to find other work, they are required to leave the country within one month. In Hong Kong, foreign domestic workers are required to leave within 14 days of the termination of their employment contract. In this situation, they may consider that they have no choice but to accept poor working conditions and rights abuses. Many incur large debts to employment agencies, which they cannot repay if they have to return early to their countries of origin.

Monday was International Migrants Day: the recognition that migrants' rights are human rights is long overdue. States have the right to manage migration, but the management policies and practices should not put migrants at risk of abuse.

National governments are entitled to determine immigration programmes and policies, and to take steps to minimise unauthorised migration. But they must ensure that the laws, policies and practices relevant to the entry, stay and return of all migrants to their homelands are consistent with the principles of international human rights law. Entry and removal procedures should conform with human rights standards. And the basic human rights of all migrant workers, regardless of their status, should be protected.

Billy Hung is campaign manager of Amnesty International Hong Kong Section.



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Friday, December 22, 2006

EDITORIAL/LEADER
Time to consider all options for airport



  
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   The Airport Authority has formally put a long anticipated issue on the public agenda - does Chek Lap Kok airport need a third runway? The question is one the community needs to consider because it is a vital issue that impinges on Hong Kong's future.
As the authority rightly points out in its 20-year plan, airports are as important to economic development today as highways were in the 20th century, railways in the 19th century and ocean ports in the 18th century. As an economy that depends on the free flows of people, goods, capital and information, Hong Kong needs an airport that facilitates their seamless passage.


Although Chek Lap Kok opened merely eight years ago, projections have already shown that its capacity may be stretched to the limit sooner rather than later. As originally envisioned, the airport was expected to handle 87 million passengers, 9 million tonnes of cargo and 380,000 aircraft movements by 2040. Current estimates are that it is likely to process 80 million passengers, 8 million tonnes of cargo and 490,000 aircraft movements by 2025. This year, the airport handled 45 million passengers, 3.5 million tonnes of cargo and 280,000 aircraft movements. Their growth rates have ranged between 7 and 10 per cent a year. If current trends continue, the authority's projections may be realised.

Hong Kong needs to start debating the need for a third runway now, not just because it would be a costly project with significant economic and environmental implications. More importantly, it would also be a cross-border issue central to this city's position in the Pearl River Delta, which has four other airports. Although Chek Lap Kok is currently the undisputed leader of the pack, the airports in Guangzhou, Shenzhen, Macau and Zhuhai all aim to expand their shares in the region's expanding aviation pie.

From Hong Kong's perspective, we would like Chek Lap Kok to maintain its hub status as it is a pillar of our competitiveness. Our continuing role as a gateway to the mainland must hinge on a strategy of boosting our international and national transport connections and linking the two networks. Hong Kong must remain a convenient stopover for traffic to and from the mainland.

That does not necessarily mean our airport will continue to overshadow the developments of other airports. Guangzhou's Baiyun airport has made no bones about its intention to rival Chek Lap Kok's status as the region's premier air cargo hub. As the international networks of Baiyun and Shenzhen's Baoan airports grow, Chek Lap Kok's ambition to expand its catchment to the whole delta might also be stymied. Indeed, how rivalry among the region's airports will develop is a big unknown.

A point to note is that the Airport Authority's initiative to engage the four other airports through the A5 Forum has met with a lukewarm response. So far, the authority has managed to secure the co-operation of only Zhuhai airport. That was achieved through a joint venture deal under which the authority would manage it for 20 years. It was made possible only because the moribund airport is heavily in debt and seriously underused.

Arguably, expanding Chek Lap Kok's capacity by building a third runway does not have to be the only option to meet surging demand. With the planned construction of the Hong Kong-Macau-Zhuhai bridge, the Zhuhai and Macau airports would be only half an hour away from Chek Lap Kok by bus. Airlines, travellers and even the Airport Authority may find it in their own separate interests to make complementary arrangements that would obviate the need for a third runway. With technological advances that could greatly increase the capacities of aircraft and existing runways, it is also possible that the need for a third runway may, over time, become not as urgent as it seems now.

Even so, these considerations are only reasons to keep an open mind on the issue, not ones to avoid doing the necessary forward planning.


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Wednesday, December 27, 2006

EDITORIAL/LEADER
Keep door open for a moderate Iranian leadership



   
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   The United Nations Security Council's unanimous vote at the weekend to apply sanctions to Iran follows two months of negotiations that failed to force Tehran to clarify its nuclear ambitions. The watered-down resolution bans the export of nuclear and missile- related materials and technology to Iran and freezes the assets of 10 Iranian officials and 12 companies linked to the nuclear programmes. Iran has been given 60 days to suspend its nuclear enrichment programme and reprocessing of spent nuclear fuel or face tougher economic sanctions.
It is thus essentially an interim measure that anticipates its own failure to influence Iran's policies. If anyone has emerged a winner it is Iran's ally Russia, which succeeded in getting an exemption for a nuclear reactor it is building for Iran and headed off a travel ban on officials with nuclear links. These concessions, and the haggling over sanctions, were a case of President Vladimir Putin putting his country's interests ahead of non-proliferation and international security.


Predictably, Tehran has ramped up its defiance, condemning the UN, vowing to accelerate enrichment and threatening to suspend International Atomic Energy Agency inspections. There are reports that Iran's 3,000 enrichment centrifuges have gone into full operation already.

Also worrying, however, are messages from the west that do nothing to ease the isolation of the ultra-conservatives, led by President Mahmoud Ahmadinejad, who hold the political reins in Iran. US President George W. Bush has ruled out talks with Iran over the dire security situation in neighbouring Iraq - one of the main recommendations of the influential, bipartisan Iraq Study Group that included his new secretary of defence. And British Prime Minister Tony Blair wound up a tour of the Middle East and the Gulf by denouncing Iran and calling for an alliance of moderate Arab states to confront the "threat" it poses.

The study group's report recognised the importance of including Iran in any attempt to address the region's troubles. This sentiment has been reinforced by elections held since in Iran. They were for municipal councils and the Assembly of Experts, which selects and oversees the nation's supreme leader. A swing to moderate and reformist candidates delivered a strong rebuke to Mr Ahmadinejad. Prominent among the winners was the president's predecessor, Hashemi Rafsanjani, who favoured talks to restore relations with the US, and former nuclear negotiator Hasan Rowhani, whom Mr Ahmadinejad has accused of making too many concessions to the Europeans.

The results reflect concern with domestic economic issues, a shift of opinion back towards the centre and rejection of international confrontation. The west should therefore be careful to leave an opening for more flexible, pragmatic leadership from Tehran over time.


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Thursday, December 28, 2006

EDITORIAL/LEADER
Crash reveals internet's vulnerabilities



  
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   Technological advances have made the internet such a ubiquitous presence that it has become a clich?to say it is hard to imagine life without it. But that scenario did almost come true yesterday, when e-mails arrived only intermittently, web connections were down and search engines failed to scour.
The disruption stemmed from an earthquake that hit Taiwan on Tuesday night, on the second anniversary of a far more powerful quake off Sumatra in Indonesia two years ago. Compared with the 2004 disaster that is believed to have killed 230,000 people around the coastline of the Indian Ocean, the quake this week fortunately caused only two deaths.


But in knocking out a number of cables that form the information super-highway that we have come to take for granted, Tuesday's quake unleashed a powerful impact of a different dimension. The breakdown in telecommunications that it caused was serious enough to create real problems to operations dependent on internet connections. And with no clear indication of when repairs may be finished, extensive hiccups to business and social life are likely to continue to be felt across the region.

Critically, financial data services provided by Reuters and Bloomberg were down in some countries. That brought many financial transactions, notably foreign currency dealings, to a halt. Companies that rely on dedicated cables to link their operations around the globe suddenly realised that their contingency plans were not as effective as imagined, as they had failed to factor in the simultaneous severing of multiple cable links.

The internet was first conceived in the 1960s as a means of linking up computers to allow computing power to be shared among researchers hundreds of kilometres apart. The cold war between the west and the former Soviet Union was still raging then. A distinctive feature of the internet is that it is designed to withstand the gravest physical attack, such as a nuclear strike. This has been achieved by linking each point in the network using multiple paths through different nodes. If any connecting nodes between two points fails, the transmitted data will automatically find an alternative route.

That was how it was supposed to work yesterday. Alas, that was not to be. As several cables that criss-cross the sea floor of the region were down at the same time, the capacities of ones that remained operational were fully stretched in no time. There was an insufficient number of alternative nodes to enable the smooth rerouting of internet traffic. As a result, serious congestion brought traffic to a standstill.

If nothing else, the turmoil should prompt us to think through the implications of a meltdown of the internet, the tool on which our so-called knowledge economy has come to depend. As we become ever more reliant on the internet, it is important for us to plan for the eventuality that we might have to do without it.

For example, many companies' contingency plans for dealing with a pandemic involve arranging for their employees to work from home, using computers with secure connections to their offices. But a physical breakdown of the internet would render such plans ineffective. On a broader scale, security of the world's telecommunications infrastructure is an issue that does not seem to have received adequate attention. Who will ensure the private companies that own and operate those cables have sufficient spare capacity to maintain vital international telecommunications links in an emergency?

One effect of the disintegration of cyberspace yesterday should be appreciated, however. With instant messaging systems down, offices came alive as workers actually had to walk and talk to one another, instead of tapping messages even to those sitting nearby. The burst of physical activity and old-fashioned verbal communication was a reminder that the internet has both the power to shrink physical distance as well as create virtual ones, with all their implications for human ties. The internet is a supreme communication tool; we should put it to good use but stop it from commandeering us.


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Friday, December 29, 2006

EDITORIAL/LEADER
New thinking needed on managing our waste



  
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   A clean harbour for just an extra 10 cents a day. That tantalising prospect has been put forward by the government as it tries to dig deeper into people's pockets to finance an expanded sewage treatment scheme.
Officials have obviously taken great care in packaging their proposal to make it acceptable. After all, who would oppose the application of the polluter-pays principle if charges are going to go up by just 10 cents a day for most households? That is until a careful scrutiny of the figures reveals that charges will actually rise by much more.


There will not be just a one-off increase but continuous upward adjustments for the next 10 years. At present, the average household pays about HK$11 a month, and about 90 per cent of households pay no more than HK$20. By 2016-17, the average household will pay about HK$27 a month. Households will see their sewage charges going up by between 7 and 29 per cent, depending on their amount of discharge.

The seemingly steep rates of increase should not blind us to the fact that Hong Kong's sewage charges will remain low by international standards and small in absolute terms. Even so, it is still important to get the principles right.

Officials have decided that the public purse should bear the HK$8 billion cost of building the sewage treatment facilities. We agree, as the facilities constitute an essential infrastructure.

A strict application of the user-pays principle in recovering the construction bill would have imposed an unbearable burden on the average household. But the decision to recover only 80 per cent of the facilities' operating costs is debatable. That is especially so because the government has maintained its adherence to the principle of recovering the full costs.

It is apparent that the decision is politically motivated. Under the current proposal, charges will go up by just over 9 per cent a year. Full recovery would have meant a double-digit rate of annual increase and made the package less palatable. Given the political circumstances, officials probably feel that the current package would stand a better chance of sailing through the Legislative Council.

In particular, the government is planning to introduce the increases by way of legislation. A bill setting out the yearly sewage charges over the next 10 years will be tabled for vetting. Legislators will no doubt query the accuracy of the government's projections about operating costs. Setting the recovery rate at 80 per cent would therefore seem prudent. At worst, if costs turn out to be not as high as expected, then 100 per cent cost recovery might be achieved without having to raise charges further.

What is disappointing is that the government has proposed no measures to reduce the amount of sewage through conservation. Statistics reveal that per capita domestic consumption of water has risen steadily over the past two decades. The annual rates of increases ranged from less than 1 per cent to almost 5 per cent. The cumulative increase was more than 30 per cent. Officials say that was because water and sewage charges had not been raised for so long. They hope that higher sewage charges will act like a virtual green tax to encourage conservation.

That may well be true. But a more aggressive approach should be adopted if we are really serious about conservation. Currently, Hong Kong releases about 340 billion litres of waste water into the sea each year.

In September, the Toilet Association estimated that amount could be reduced by 170 billion litres if old cisterns and pipe systems in buildings were altered and flushing habits changed. Elsewhere, bath water has been recycled for irrigation and even human consumption.

Hong Kong has been planning its water and sewage infrastructures according to demand - a strategy that means ever more resources being consumed to meet surging usage. It is time we introduced demand-management measures to reduce the wasteful consumption of a precious resource and thought about recycling it.


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thank you very much

Tuesday, January 2, 2007

EDITORIAL/LEADER
Vulnerability of telecoms links must be addressed



   
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   A week after an earthquake off the coast of Taiwan disrupted internet traffic in the region, life for users of cyberspace has not returned to normal, but nor has it been as unbearable as initially feared. Overseas calls to most places and instant messaging systems have largely been restored, although browsing of overseas websites and e-mails to foreign countries remain slow.
Luckily, the disruption came at a time when many parts of the developed world were closed for the Christmas and New Year holidays. However, its full impact will only be revealed today, when most people return to work and offices become fully functional again.


Repairs to undersea cables damaged in the earthquake have been delayed by technical problems and bad weather. The cables are now not expected to be back in service until the end of this month. Last night, the Office of the Telecommunications Authority disclosed that access to data services through the internet remained slow. The public are advised to cut down on non-essential use of the internet.

It is to be hoped that our usually efficient telecommunications links will be able to provide an acceptable level of service to keep us connected to the outside world. Even so, there is no question that the authorities should take serious steps to map out contingency plans to ensure our telecoms companies have sufficient back-up capabilities.

This major disruption has shown that the region's information infrastructure is highly vulnerable. Technically, internet traffic can be directed into various networks via terrestrial and submarine cables or by satellite. However, experts have noted that the region has fewer cables linking its power centres. Nor are alternative satellite links readily available.

In the wake of the disruption caused by the earthquake, a large share of traffic that cannot transit the damaged submarine cables has been rerouted as an emergency measure to servers in the United States. In practice, traffic is directed to the state of Virginia, which has a large concentration of root routers and whose maritime terminals account for about 50 per cent of the world traffic.

This is a highly unsatisfactory situation for Asia, where internet traffic is growing at a terrific rate. On the mainland, for example, the number of internet users already tops 123 million, but the growth potential remains huge for a country that has 1.3 billion people. Already, telecoms companies are laying more cables to meet projected demand. But they alone decide the provision of back-up capacities.

Many countries already regard their own information infrastructures as strategic. But their shared concern to remain connected with one another has not been complemented by a regional protocol to ensure the infrastructure's reliability. It is time governments in the region addressed such an important issue.


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Wednesday, January 3, 2007

SADDAM AND CASTRO
When dictators meet their deaths


JIM HOAGLAND
   
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   Dictators die harder than most of us. Having wielded unlimited power in life, they seem to be sustained by a stubborn belief in their ability to stare down death, too. But secret police, arbitrary executions and torture finally provide no lasting defence against their own date with the grim reaper.
That lends a particularly morbid, even pathetic, quality to the last days of Saddam Hussein and Fidel Castro, as it did to those of Francisco Franco and of many other tyrants-in-extremis before el rais Saddam and el jefe Fidel were confronted, respectively, with a hangman's rope and the withering ravages of disease.


Survival is the dictator's primary occupation - as well as his justification for ruthlessness. "His main contribution to life, finally, is fear; but fear such as thunder, cancer or madness may provoke," author William Kennedy wrote of the fictional caudillo that Gabriel Garcia Marquez created in The Autumn of the Patriarch. Facing death, the dictator is "the embodiment of egocentric evil unleashed", Kennedy continued in a masterful 1976 book review for The New York Times.

The year before, Garcia Marquez was in Madrid, as was I, for Franco's 40 days and nights of dying, centimetre by centimetre. Moreover, meetings I had with Hussein around the same time and later with Castro instantly gave me the impression that neither intended to go into the night quietly - or at all. They could not and would not let others pretend to command their people, or allow history to tamper with the image they willed for themselves.

When he ruled Iraq, Hussein left nothing to chance. A visitor who might greet him had to wash his or her hands with a mysterious blue liquid and pass through a maze of metal detectors in his vast palace.

For years after that encounter, I published open letters to Hussein urging him to get out of the dictator business, or at least quit slaughtering his nation's Kurds, Shiites and Sunni dissidents. I can stop. The approach of the hangman's rope finally focused his mind on my point.

Or so it seemed in the farewell letter that Hussein's lawyers claim the deposed tyrant wrote. Released one day after Iraq's highest court upheld his death sentence last week, the letter urges Iraqis "not to hate, because hatred does not leave space for a person to be fair ...." Even US troops should not be hated.

The lawyers would have us remember Hussein as a pious, forgiving ruler concerned about his people's welfare. They see this as a useful legal tactic. But I doubt it is the way Hussein wanted us to remember him. On the witness stand in his two trials, he remained generally fierce and defiant, refusing to be anything other than a man whom others must fear - or else.

Those who would blame all of Iraq's current evils on the American occupation are already busy airbrushing Hussein's image. But we cannot let death obscure his role in creating the inferno that is Iraq today. He leaves behind a country successfully recast in his own ferocious image to a degree far greater than I had imagined.

Before 2003, I believed that Iraqis were largely a people held hostage by Hussein, his murderous clan and the Baathist machine. But far more Iraqis turned out to be like Saddam - ready to use torture and assassination in the pursuit of wealth and power - than the world's best intelligence agencies had predicted. These Iraqis are Husssein's enduring legacy.


Cuba's situation after Castro will not be as traumatic or bloody as Iraq, in large part because Castro did not feel it necessary to rule as harshly and sadistically as did Hussein. As Marquez, Castro's friend, has written: "The Latin American reality is totally Rabelaisian." It misshapes Latin dictators in ways different than do the blood feuds of the Middle East.

But both dedicated their lives to what Garcia Marquez calls "the solitary vice of power". Their deaths will lighten their crimes and responsibilities not a whit.

Jim Hoagland is a Washington Post columnist.



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Thanks.

Thursday, January 4, 2007

MAINLAND CHINA IN 2007
Year of the three big headaches


LAURENCE BRAHM
   
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   This year may represent a crossroads for China. Last year's trade volume and foreign exchange reserves reached historic highs - US$1.4 trillion and US$1 trillion respectively - and presented China's newest generation of leaders with some new equations.
They face two economic problems with potentially explosive social impacts just a year before the Beijing Olympic Games. First, the income gap between the mainland's haves and have-nots is more than three times the average in other developing countries. Second, Beijing's inability to control the rate of growth shows that the macro-economic control mechanisms relied on by the previous administration no longer work.


Retooling the mainland's economic structure, so that it's driven by consumption rather than exports, may be the key challenge that Premier Wen Jiabao faces this year if he is to assure the sustainability of China's economic model.

People in the street take a raw, practical view, reflected by the popular saying: "People cannot [afford to] see a doctor or receive education, and we have no place to live." Those are the three basics than any government - socialist or otherwise - must provide if it is to retain power.

That popular saying suggests mainland society is far from harmonious. Since President Hu Jintao is promoting social harmony as mainland China's new economic and social ideology, he has his work cut out for 2007. That is because the Beijing Olympics will offer mainlanders an unprecedented opportunity to stage social theatrics for an international TV audience if they are not adequately harmonised by then.

Instead of former president Jiang Zemin's "three represents", people are talking about Mr Wen's "three big headaches": controlling an excessive property boom that provides no housing for the poor; establishing broad-based medical services for what will be a rapidly ageing population; and providing education for young people - who will have to compete with other regional economies that the mainland can no longer undercut with cheap labour.

While China's property prices continue to skyrocket, the provision of medical care and education are in free fall. The two problems are intricately linked. Waiting lines to see doctors in any hospital can be a day long. Doctors are overworked, overstressed and underpaid, making the profession undesirable.

China can deal with the impending pressures of its rapidly ageing population only by comprehensively restructuring its medical-care system - probably involving some return to socialism. Further, the greying population will leave the mainland without enough cheap labour in 20 years. That means it will have to compete with the world as a hi-tech - not low-cost - labour provider.

But the education system, still locked in both Confucian and communist models, is not up to the task. This adds weight to the view of South Asian economists that India will overtake China in the coming decade or two.

So 2007 will be the year when economists start asking whether the mainland's hyper-economic growth model, driven by exports and infrastructure projects, has peaked. For the first time, the think-tanks that feed ideas to top leaders have begun questioning the model's sustainability.

Driven by such concerns, the Communist Party's Central Committee Economic Working Group met late last year to discuss remedies. They managed to produce only the most obvious suggestions, such as that growth rates need not be so high and that the quality of life should improve.

Achieving it this year with slogans alone may prove difficult. Local governments are still fixated on high-growth targets: career promotions and the mechanics of corruption depend on rapid growth. It usually involves spending on property or the construction of infrastructure, perpetuating Beijing's headache of imbalanced growth.

Mr Hu ended last year with a demonstration of toughness: he sought to rein in local government excesses by purging Shanghai party secretary Chen Liangyu and weeding out his cohorts. But the effects of combating corruption may be limited, as local officials see it as a purely political purge.

One solid new programme planned for 2007 is the New Village Movement - xin nongcun yundong. Despite its retro- socialist name, this scheme simply involves basic infrastructure funding to connect remote villages with decent roads. Local road networks will offer income to villagers participating in the construction. The easier transport of goods will help improve rural lifestyles. But local corruption, invariably connected with such projects, may also be stimulated.

Will the New Village Movement promote rural social harmony? Or will people just use the new roads to leave the countryside - where corruption is even more intolerable than in cities - in their quest for urban employment?

Laurence Brahm is a political economist, author, filmmaker and founder of Shambhala Foundation.



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Friday, January 5, 2007

EDITORIAL/LEADER
Rising yuan has serious implications for HK



  
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   Retailers in Shenzhen have long regarded it as a fact. Now some Hong Kong banks have followed suit. With the yuan yesterday closing at 7.8090 to one US dollar, compared with the fixed rate of 7.8 for the Hong Kong dollar, the day when the two currencies reach parity is likely to come in weeks, if not days.
While the development has long been anticipated, Hong Kong people are still likely to feel more than a little jolted as the effects of the renminbi being a "more valuable" currency than the Hong Kong dollar begin to sink in.


For weeks, the yuan has been traded at slightly more than one Hong Kong dollar at money exchanges in Shenzhen. That has prompted shops there to stop accepting Hong Kong dollars for yuan-denominated trades, as they can no longer pocket a small exchange rate gain by doing so. Now that even some banks regard the Hong Kong dollar as "cheaper" than the yuan, the former's popularity on the mainland can only decline further.

The yuan reaching a higher exchange rate with the US dollar than that for the Hong Kong dollar is a significant landmark. In terms of economic well-being, however, Hong Kong is still far ahead of every part of the mainland.

In 2005, Hong Kong's per capita gross domestic product was US$25,500, which was still several times more than that for the most affluent mainland cities. The comparable figures for Beijing, Shanghai and Shenzhen were US$5,500, US$7,600 and US$7,300 respectively. For a long time to come, Hong Kong people will flaunt their wealth across the border. But they will now find it less easy to avoid the trouble of changing their Hong Kong dollars into renminbi notes. Previously, using Hong Kong dollars on the mainland meant accepting a small exchange rate loss. That difference has now all but disappeared - but the number of mainland traders willing to accept Hong Kong dollars is also diminishing.


What Hong Kong people really have to come to terms with are the economic repercussions of an appreciating yuan. According to Xinhua, a report compiled by 80 mainland economists says they expect the yuan to appreciate by about 5 per cent this year. As a result, the yuan's exchange rates with the greenback and Hong Kong dollar will certainly rise, although by how much is difficult to predict. Officially, the yuan's exchange rate is set in relation to a basket of currencies and the precise composition of each currency is a secret.

Because of the nature of our economy and currency system, the effects of a rising yuan and a falling US dollar are two trends that will impinge on us sharply. Theoretically, they should mean higher inflation here. As the value of the Hong Kong dollar declines relative to the yuan and other foreign currencies, it will cost more for this import-dependent economy to buy from overseas. In practice, the inflationary effects are not evenly distributed.

The falling dollar is one of the forces that have driven up the prices of blue-chip stocks and top-end properties as these assets become more attractive to overseas investors. For Hong Kong-based multinationals, this city has become cheaper as rents have fallen after adjusting for the exchange rate. The tourism and retail sectors are also benefiting from the weaker dollar as visitors find Hong Kong more affordable.

Ordinary people, however, have seen no rise in the value of their dwellings, whose prices remain way down from their peak in 1997. Even though their wages have gone up, the price of imported food and other daily necessities have risen even more. Overall, skilled professionals stand to gain more from a weaker dollar than less skilled members of the workforce, whose jobs are priced out by the forces of globalisation.

The polarising development is emerging as a serious social issue. Already, confrontation between business and labour over a minimum wage has intensified. As the wealth gap widens, social harmony - or the lack of it - will become more of a problem. Looking ahead, it is imperative that policymakers come up with innovative solutions to narrow that gap.


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Monday, January 8, 2007

EDITORIAL/LEADER
Swift action must follow new strategy on heritage



  
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   The government's answer to critics of its approach towards preserving Hong Kong's past will be unveiled today with the announcement of the new-look Antiquities Advisory Board and new proposals for public consultation on heritage conservation.
While these measures are, in part, aimed at appeasing the anger sparked by the demolition of the Star Ferry pier in Central, the government should not think that the matter will quietly go away.



Instead, as the discontent over the decision to remove without consultation yet another of our dwindling number of longstanding landmarks reveals, a better method than the piecemeal policy in place is needed - and quickly. The regrettable attitude of the past three decades in which heritage sites were preserved on a case-by-case basis - assuming there were public concerns raised in time - can no longer apply.

Promises that places of importance would be saved marked the coming into effect of the Antiquities and Monuments Ordinance and establishment of the Antiquities Advisory Board and Antiquities and Monuments Office in 1976. Evidence of their combined ineffectiveness is all around: The charm and memories of bygone eras have been torn down and replaced by modern buildings, shopping malls and roads.

One reason is that the government has no control over privately-owned buildings. Although it has declared 78 buildings, rock carvings, forts and archaeological sites as monuments - providing a measure of legal protection - more than 400 other structures put up before the second world war remain vulnerable.

There have been times when the government has not seemed to appreciate the need to protect Hong Kong's past. Kom Tong Hall, the Mid-Levels colonial mansion that was bought in the nick of time from its owners and is now the city's first museum to modern China's founding father, Sun Yat-sen, is the exception rather than the rule. A string of other sites have been destroyed, ranging from the Walled City in Kowloon to the Tiger Balm Gardens in Tai Hang.

With the disappearance of each memory, Hong Kong has matured. There is more to progress as a society than replacing the old with the new. Quality of life is as much about having a perspective on how we have arrived at where we are and being mindful of how that was achieved, as it is about modern amenities.

That was what the protests at the Star Ferry pier and adjoining Queen's Pier were about and the call was loud and clear: This must not happen again. Nor can it be allowed to, now that the matter has been so passionately debated and demands for action so unequivocally stated.

The decision to enlarge and revise the membership of the city's top body advising the government on conservation of important buildings and sites, the Antiquities Advisory Board, is a welcome step. So, too, is the beginning of another round of discussions to toughen the weak system that fails to protect the places that are important to this city. The revelation that officials are considering the establishment of a heritage trust to preserve sites shows that a fresh approach is being considered, and that is good.

These steps move Hong Kong in the right direction, but we are still waiting for the new policy on preservation to be put in place. Time is fast running out for the dwindling number of sites that remain, among them the Wan Chai and Central markets. With the consultation process already three years old, the time for defining which aspects of our cultural heritage should be preserved and how this can be done is long overdue.


As the vigils and outbursts of emotion at the Star Ferry pier last year showed, further delays should not be countenanced. Cities the world over have kept their past intact, so there is no shortage of approaches that could also be applied here.

The case of the Star Ferry pier has been the impetus for action. The proposals for a new strategy should set Hong Kong on the right track - and they need to be swiftly followed up with action.


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