A dream or a nightmare? It's up to Beijing


OBSERVER
Chris Yeung
Apr 23, 2008           
     
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Hopes were high among the Chinese government and people that the Olympic Games would showcase their commitment to turn the event's slogan - "One World, One Dream" - into reality, as part of the nation's peaceful rise. But events that have unfolded since the Tibetan riots last month raise fears that the Olympic dream could become a nightmare.

Last weekend saw the French supermarket chain Carrefour targeted by protesters in major Chinese cities as they vented their anger at the disruption to the Olympic torch relay in Paris. They were also infuriated at French President Nicolas Sarkozy's call for dialogue between Beijing and the Dalai Lama as a de facto precondition for Mr  Sarkozy to attend the opening ceremony.

Meanwhile, overseas Chinese protested outside the Austrian Parliament against what they called biased reporting about the Tibetan unrest. In Los Angeles, thousands of Chinese rallied outside CNN's Hollywood office to demand that commentator Jack Cafferty be fired for calling Chinese goods "junk" and its leaders "goons and thugs". At present, there seems no sign of an end to the political tussles between Beijing and western countries over such issues as human rights and Tibet, ahead of the Games. Indeed, there are amber warning signals that the outburst of nationalist feelings among Chinese people towards what they deem the "China-bashing mood" in the west could spoil the sporting event.

Scenes of Chinese people making Carrefour a scapegoat are likely to add to the bad press against China in France and other western nations. Pressure on Mr Sarkozy from human rights activists and his people to shun the opening ceremony will grow, thus limiting the room for compromise through quiet diplomacy.

A boycott of the opening ceremony by Mr Sarkozy would raise the political temperature in China. Nationalistic feelings could turn xenophobic as more Chinese become convinced that western countries are bent on impeding their nation's progress  towards prosperity and stability.

An air of unease might permeate the Games, creating a vicious cycle of tension between Chinese and western societies. If this happens, it would play into the hands of those in the west who talk of a "China threat" and subscribers to the theory of "western encroachment".

In view of the differences between Chinese and western societies, and the increasingly complex and volatile international politics, it is unrealistic to expect the Beijing Olympics to be free from controversy.

The exiled Tibetan spiritual leader might be a convenient target for the Chinese leadership to blame for the outbreak of the Tibetan riots. With hindsight, however, the seeds of unrest have been sown both inside and outside Tibet over the past decades.

The Olympic Games provides an opportunity for activists supporting Tibetan independence, and an overall improvement in human rights in China, to further their cause.

A range of hiccups in the handling of the Tibetan riots, including the expulsion of foreign and Hong Kong journalists from Lhasa and the high-profile reprimand of  CNN by the foreign ministry, has damaged Beijing's public relations battle.

Leaders in Beijing are confronted by a western media with a deep-rooted bias and governments constrained by their own political agendas. Yet, they also face an increasingly sophisticated populace, many of whom are highly sceptical and critical of foreign governments' political manoeuvrings on China's human rights.

Recent events have shown that the price of playing hardball with foreign governments on human rights is a backlash of extreme nationalism. Cool-headed crisis management must prevail in Beijing to ensure the Games succeeds as a sporting event, and the political fallout is contained.

Chris Yeung is the Post's editor-at-large

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Beijing's tough choices amid market slump


Steven Sitao Xu
Apr 24, 2008           
     
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Once-sizzling mainland stocks are suddenly under massive selling pressure. After hitting a peak of 6,092 on October 16, the Shanghai Composite Index has fallen by more than 40 per cent. The sharp correction of A-shares underscores the fact that mainland China's stock market is not immune from the negative sentiment in global financial markets.

The Year of the Rat has seen two clear trends emerge in the mainland's financial markets - an increasingly bearish stock market outlook and an accelerated pace of the yuan's appreciation against the US dollar.

On the surface, this seems odd. The conventional wisdom has been that expectations of a more substantial currency revaluation would fuel the inflow of more hot money, in turn keeping the market buoyant.

But, in the end, share prices are reflecting discounted future cash flows of listed companies. By this measure, things look bad indeed for financial assets. High commodity prices, rising food prices and falling US demand for Chinese goods imply lower economic growth and higher inflation.

The rapid decline of share prices has left almost 100 million retail investors resentful of the government, which has been raising interest rates to combat inflation. And Chinese policymakers cannot afford to ignore so many discontented citizens. The State Council has frozen red-chip listings on the Shanghai stock exchange and the China Securities Regulatory Commission plans to restrict the sale of previously non-tradable shares, to avoid a flooding of the market, further driving down prices.

Still, as long as headline inflation remains high, policymakers cannot significantly loosen their tight monetary stance. The People's Bank of China will continue to raise commercial banks' reserve-requirement ratio and allow a faster pace of yuan appreciation to drain excess liquidity.

Meanwhile, the pick-up in inflation is deterring the government from pursuing price reforms for water, electricity and petrol. It may seem like a worthy cause for the government to try to shield low-income earners and others who are more vulnerable to inflation, such as retirees, with price controls on basic items. But the government seems determined to stabilise prices, whatever the cost. Price controls mean shortages and profit squeezes - bad news for affected companies' share prices.

If share prices keep diving, Beijing is likely to follow the lead of its regional neighbours. Most Asian central banks have slowed the pace of their currency appreciation. It is conceivable that the People's Bank, too, may decide to slow the pace of yuan appreciation, especially in the second half of this year, since it has allowed the currency to strengthen at a 17 per cent annualised rate in the first quarter. The government may also ease its lending quotas imposed on banks at the end of last year. The only option out of the question is cutting interest rates, given the spike in inflation.

However, any reversal of the current macroeconomic policy to rein in growth will rule out holding inflation under the announced target of 4.8 per cent for the year.

Even so, it is unlikely that China will witness another period of runaway inflation, as in the months preceding the 1989 demonstrations in Tiananmen Square. Today, it is food prices that are responsible for most of the jump in headline inflation. Unlike in 1989, China does not suffer from rapidly increasing "core" inflation, which strips out the highly cyclical food (and energy) prices.

If Beijing finds itself caught between high inflation and low economic growth (therefore, low share prices), it is likely to exhibit the same bias as many foreign governments in favour of the latter. The good news is that it has ample fiscal resources to protect the poor from the ravages of high inflation. The bad news is that, instead of revamping its social welfare policy, the government has so far opted for the easiest way out - by dragging its feet on price reforms.

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


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Pirates in deep water as shipping nations urge new curbs


BEHIND THE NEWS
Elizabeth Kennedy
Apr 25, 2008           
     
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The spoils of a career as a pirate off Somalia's high seas were simply too good for Abdi Muse to pass up. He bought two Land Cruisers and a new home, then married two women in one passionate week.

"I was giving away money to everyone I met," said Muse, 38, who said he made US$90,000 hijacking ships. "After two months, I had no money left."

For years, Somali pirates like Muse have found lucrative work stalking the country's lawless coast, seizing boats and negotiating ransoms. But these brazen assailants could soon face stern opposition as the US and France are drafting a UN resolution that would allow countries to chase and arrest pirates after a spate of recent attacks.

These include a Spanish tuna boat hijacked this week by pirates firing rocket-propelled grenades and a Dubai-flagged cargo ship seized while carrying food to the desperately poor country.

The cargo ship was rescued on Tuesday by Somali forces, who arrested seven pirates, but the Spanish boat and its crew remain in the hands of hijackers.

The US has been leading international patrols to combat piracy along Somalia's unruly 3,000km coast - the longest in Africa and near key shipping routes. And French officials say they are  pushing for a resolution that would make it easier for armies to swoop into other countries' waters and nab pirates.

The push comes after French commandos freed hostages on a French tourist yacht seized earlier this month off the coast of Somalia, and then chased the pirates on land and arrested them.

"The international community must respond and set up a rotating mechanism to control and keep watch with our naval forces so as to guarantee the security and protection of all those who fish or sail through that zone," Spanish Foreign Minister Miguel Angel Moratinos said as his country awaited word on its hijacked tuna boat.

Many Somali pirates are trained fighters linked to politically  powerful clans that have carved the country into armed fiefdoms; others are young thugs enlisted to do the dirty work for older, more powerful criminals, who turn a profit by taking a cut of the ransom money and selling the ship's cargo.

Pirates often dress in military fatigues, using speedboats equipped with satellite phones and global positioning system equipment.  They are typically armed with automatic weapons, anti-tank rocket launchers and grenades, according to the UN Monitoring Group on Somalia.

Somalia's already overstretched government welcomed the initiative to involve international forces in patrolling its pirate-infested coastal waters.

Racked by more than a decade of violence and anarchy, Somalia does not have a navy, and the transitional government formed in 2004 with UN help has struggled to contain a deadly insurgency.

"These forces could come inside the country if it is needed," said government spokesman Abdi Hagi Gobdon.

To some pirates, however, the prospect of international force is not particularly daunting. "We are not scared of the US troops or any other troops stationed off our waters.

"Why should we be scared?" said Siyad, a Somali pirate who asked that his full name not be used for fear of reprisals.

"They have weapons, but so do we. And we are the ones with the human shields," he said, noting that troops are loath to use force because it risks harming hostages.

The International Maritime Bureau said piracy worldwide was on the rise, with seafarers suffering 49 attacks between January and March - up 20 per cent from the same period last year.

Nigeria ranked as the No 1 trouble spot. India and the Gulf of Aden off Somalia's northern coast tied for second, with each reporting five incidents.

Somalia had 31 attacks involving pirates last year alone, according to the bureau.

Noel Choong, head of the agency's piracy reporting centre in Kuala Lumpur, said simple economics could explain much of Somalia's burgeoning piracy.

"At the end of the day, you hijack a ship, you get paid ransom," Mr Choong said.

"These pirates aren't frightened because the returns are so big."  The pirates frequently travel in  open skiffs with outboard  motors, often working with larger mother ships that tow them far out to sea.

With an intimate knowledge of local waters, they clamber aboard commercial vessels with ladders and grappling hooks.

The attackers generally treat their hostages well in anticipation of a big payday. Shipping companies and foreign governments rarely acknowledge paying ransom, but recent demands have soared into the millions of dollars.

"Our motivation is money, so it is not our plan to harm the hostages we take," Siyad said.

"We never agree to release the hostages or the ship before the ransom is paid in cash."

Andrew Mwangura of the Kenya-based Seafarers Assistance Programme estimates that Somali pirates have received more than US$3 million in ransom this year alone, an astronomical sum even considering it would be split among dozens or even hundreds of criminals.

International terrorism, always a concern in the volatile Horn of Africa, and particularly in lawless Somalia, does not appear to have a role in the country's piracy, according to observers.

"I don't know that there has been a tie. We're not necessarily looking for one," said Commander Lydia Robertson, a US Navy spokeswoman.

Siyad said his decision to become a pirate was a matter of survival. Impoverished and with no job prospects, he saw two options: risk his life by fleeing Somalia in a leaky boat to the more prosperous countries across the Gulf of Aden, or join up with pirates who were flush with cash.

Now, US$35,000 richer after hijacking two vessels - including a Japanese tanker seized in December - Siyad said the best, most profitable choice was clear. He plans to use his spoils to try to escape the poverty and instability of Somalia.

"I [plan]to go abroad using a safe route, using my money," he said.

But Muse had second thoughts a few years ago, blaming the easy money for the loss of his wives and other personal misfortunes.

"I had to sell the house and the cars," Muse said. "I divorced my wives. I stopped this job after thinking about how it affects our Islamic religion and our Somali culture."

"Now I work at a private company, I am no longer a pirate," he said. "I am happy to get a small monthly salary."

Associated Press


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Our other sister city


REGINA IP

Apr 28, 2008           
     
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Whether in lecture rooms or the elegant salons of posh hotels, speakers in this part of the world never tire of making comparisons between Hong Kong and Singapore, in speeches often dubbed "a tale of two cities". More recently, attention is turning to the pairing of Hong Kong with another rising regional star - Shenzhen. Talk of building a mega metropolis in the "twin cities" of Shenzhen and Hong Kong has sparked both excitement and cynicism. Yet few have focused on a less obvious, but equally compelling, comparison of two cities with similar natural advantages and a common imperialist historical background: Tianjin and Hong Kong.

Although the history of Tianjin dates back to the Sui dynasty (581-618AD), like Hong Kong, Tianjin only came into prominence following the invasion of China by the western world in the 19th century. After Hong Kong was ceded to Britain in 1842, Tianjin was added to the list of treaty ports opened to western commerce by the First Convention of Peking, by which Kowloon and Stonecutters Island also came to be ceded permanently to Britain. In common with other treaty ports, since 1860, Tianjin entered a new era characterised by western commercial exploitation and semi-colonial status, which was not terminated until the second world war.

Against this background, modern Tianjin retains indelible reminders of its imperialist past and some of the most dramatic episodes of modern Chinese history. Its old city centre is strewn with thousands of old European buildings built in the legations of nine imperialist powers. Haughty mandarins of the moribund Qing dynasty, fugitive revolutionaries and reformist Chinese scholars, feuding warlords and rapacious imperialists, former US president Herbert Hoover and Premier Wen Jiabao , in their youth, all left their footprints on this coastal city strategically located on the Bohai Gulf. Like colonial Hong Kong, the extraterritoriality of its legations provided many a sanctuary for renegade Chinese intellectuals before their escape overseas. A hotbed for revolutionaries, a playground for deposed Chinese emperor Pu Yi and Republican presidents, imperialist adventurers and mercenaries alike, both Hong Kong and Tianjin were, and remain, at the forefront of China's interaction with the west.

Yet modern Tianjin represents a significant contrast to Hong Kong in its aspirations for its future and its protection of its past. As can be expected of a city aspiring to play a leading role in a resurgent nation, Tianjin fought hard, and finally won, a crucial position in China's 11th five-year framework, as the Bohai region's financial, logistics, shipping, commercial, trading and technological centre. The city has developed its deep-water container port, rich gas and oil fields, express rail and highway links with Beijing, hi-tech parks and diversified industrial base. In an effort to emulate Hong Kong as an international financial centre, Tianjin almost grabbed a first as the sole conduit through which the yuan could be channelled to Hong Kong's financial markets, under the much-hyped but probably now defunct investment scheme.

Hong Kong has much to learn from Tianjin about the preservation of its historical and cultural heritage. Undeniably benefiting from sporadic - as opposed to turbocharged - economic development, tens of thousands of historic buildings have been ring-fenced and carefully marked to highlight their historical significance. Not only buildings, but also swathes of the old city - such as bank buildings which must have constituted Tianjin's Wall Street in its heyday as a northern financial centre - have been preserved.

Here lie the lessons for our conservationists: to do a good job in conservation, you need to know from early days what you want to preserve, and move fast, before the bulldozers move in. If only our city had paid much earlier attention to our distinct history and character, much more meaningful areas of old Hong Kong, not just the odd clock tower, would have been saved.

Regina Ip Lau Suk-yee is chairperson of the Savantas Policy Institute

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Iraqi factions wage war against women


Zeina Zaatari
Apr 29, 2008           
     
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Iraqi women's organisations and international observers point to an escalating war against women in Iraq, aided by the widespread chaos and lawlessness under the US occupation. In addition to violence by US troops inside and outside prisons, women in Iraq face daily violence from militants under the guise of religion and "liberation".

In Iraq's second-largest city, Basra, a stronghold of conservative Shiite groups, as many as 133 women were killed last year for violating "Islamic teachings" and in so-called "honour killings", according to the UN Office for the Co-ordination of Humanitarian Affairs. The methods are brutal evidence of a backlash by previously subdued tribal forces that have been unleashed by the occupation.

With US forces in Iraq now funding both Sunni and Shiite tribal leaders in an effort to stabilise the country, conditions for women grow deadlier by the day. Islamist leaders have imposed new restrictions on women, including prohibitions on work, bans on travel without a muhram (male guardian) and compulsory veiling.

According to the Organisation of Women's Freedom in Iraq, women are harassed if they appear in the streets of most cities and towns, educational institutions or work places. There are even "no woman zones" in some southern cities.

Honour killings are justified by alleged promiscuity or adultery. In fact, this practice targets holders of PhDs, professionals, political activists and office workers. "Politically active women, those who did not follow a strict dress code, and women human rights defenders were increasingly at risk of abuse, including by armed groups and religious extremists," Amnesty International said in its 2007 report.

Ironically, the forces leading this assault on women had little or no power under Saddam Hussein. But, following the US-led invasion in 2003, southern Iraq was opened to forces dedicated to "propagation of virtue and prevention of vice" - militant gangs and individuals committed to archaic Islamic rule and suppression of women's rights.

Some members of these groups now serve in government, others in militias or as self-appointed vigilantes or hired guns. Their goal is to confine women to the domestic realm and end their participation in public and political life.

Iraqi officials have not been willing to deal with rising violence against women, or even to discuss it. But, as elected representatives, they are obligated to address these crimes. So must the US.

Two measures are urgently needed. First, the Iraqi government must immediately establish "protection of women" security patrols in Iraq's southern cities. These patrols must receive gender-sensitive training and prioritise women's security over tribal or fundamentalist religious values.

Second, pursuant to its obligations under the Geneva Convention, the US must protect the lives and freedoms of Iraqi civilians. The timetable for action is not open to debate. It must begin today.

Zeina Zaatari is senior programme officer for the Middle East and North Africa for the Global Fund for Women. Copyright: Project Syndicate


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Defeating malaria, the ally of poverty


Ban Ki-moon
Apr 30, 2008           
     
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As far as security details go, mine is pretty unflappable. They are seldom fazed by unruly crowds or post-conflict hot spots. But, travelling in East Africa one day last year, I stepped into a swarm of mosquitoes. From the expressions on my guards' faces, I realised that close protection was no match for this unarmed threat the size of a speck.

Malaria is a relentless killer. Each year, as many as half a billion people catch malaria. More than a million die.

Malaria slows economic growth in Africa by up to 1.3 per cent a year, holding back development and costing tens of billions of dollars in lost productivity. In countries where the disease is particularly acute, it's not unusual for malaria to consume as much as 40 per cent of government health budgets. This has a crippling effect on social health, welfare and development.

This is unacceptable - all the more so because malaria is preventable and treatable. We may not be able to wipe out malaria right away. But we can control it and dramatically reduce its toll, if we act together.

Last Friday, the international community marked the first World Malaria Day, when the UN family and its partners launched an all-out international initiative to expand our fight against the disease.

This is the first time the international community is considering a control effort at full scale. While past efforts have yielded some successes, the lack of resources for universal coverage forced us to largely restrict our focus to young children and pregnant women - the two groups most at risk of dying. We saved lives, but we also left a large reservoir of people unprotected against the disease, which served only to keep it alive to spread within the population. As a result, malaria remains endemic throughout sub-Saharan Africa, Asia, Latin America and the Caribbean.

Success in the fight against malaria requires only the widespread distribution of bed nets and medication, coupled with appropriate indoor residual spraying. It costs less than US$10 to purchase and distribute insecticide-treated bed nets that last for up to five years. With that simple investment, governments provide a five-year shield. Recipients can go to school, work and contribute productively to society. It's hard to imagine US$10 better spent.

Now we need to step up action in all affected countries. That is why, together with Roll Back Malaria and my new Special Envoy for Malaria, Ray Chambers, I have put forward a bold but achievable vision - to stop malaria deaths by ensuring universal coverage in Africa by the end of 2010.

Africa is the region where most malaria deaths occur, but we can't stop there. Malaria mosquitoes, like other problems in our globalised world, recognise no borders.

Resources have to be consistent so that countries can not only plan anti-malaria activities but sustain them over the years. Traditional partners such as the World Bank, the Global Fund to Fight Aids, Tuberculosis and Malaria and donor nations must come up with funding, supported by the private sector. Endemic countries need to put in place plans to achieve universal coverage, and donors must respond with timely and predictable funding in the next few months.

Ending malaria deaths can breathe new life into our broader campaign to stamp out poverty, once and for all.

Ban Ki-moon is secretary general of the United Nations


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Games no panacea


PETER KAMMERER

May 02, 2008           
     
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Staging the Olympic Games is a decision not to be taken lightly. No city leader wakes up one day and says what a wonderful idea it would be; there has to be a good reason to want to host the world's greatest event.

For Barcelona in 1992, the Olympics was an opportunity to foster investment and transform the city. Sydney saw it as a confidence-building exercise for a nation sometimes unsure of its place in the world. Beijing's reasoning is similarly political: the games will announce to all and sundry China's arrival on the international stage - and in doing so, demonstrate worthiness as a global player and bring the nation together.

There would seem to be no better vehicle to achieve these aims. Television viewership during the last summer Olympics, in Athens, was a record 3.9 billion people, a figure 30 per cent higher than that for the next closest event, the World Cup soccer tournament. If there is to be an occasion to make a grandiose statement, this is it.

The billions of dollars being thrown at ensuring the Beijing games are the grandest yet speak volumes about just how important the occasion is for China. We have been given a foretaste in the torch relay, which has gone far beyond any previously held in terms of scale and ambition. This is in keeping with the misguided belief that to be successful, each Olympic Games has to be bigger and better than the one before.

Beijing has adopted such thinking in the name of its objectives. But it has given little consideration to the reality that, for all the expense and effort, grandiose ideas can backfire. There is evidence enough in the international legs of the torch relay, either disrupted by protesters or curtailed due to security concerns.

If Beijing believes that the Olympics alone will achieve its agenda, it is misguided. With every Olympics, there are pluses and minuses, sometimes more of one than the other.

Olympics researcher Richard Cashman well knows the potential pitfalls, having examined some in his book, The Bitter-Sweet Awakening: the Legacy of the Sydney 2000 Olympic Games. Sydney struggled to come to terms with its situation after the euphoria had died down, caught between nostalgia and moving on.

Australia had counted on the games significantly boosting tourist numbers, but an international tourism downturn due to Sars and fears about terrorism put paid to that. Olympics infrastructure projects aimed at resolving Sydney's traffic flow problems were not as effective as planned; when the city returned to normal, the snarls resumed.

Dr Cashman, the director of the Australian Centre for Olympic Studies at the University of Technology Sydney, told me on Wednesday that the games had boosted the pride and confidence of Australians. Before, there had been doubts about whether they could pull it off; but they did it in their own style, relaxed, with much humour and in a party atmosphere. The success was such that the Sydney Olympics have become a milestone for Australians - one that is looked back to fondly for being "a hell of a party at a time when everyone felt good about themselves".

There were some surprising ramifications. The sports historian refers to one as the "Australian sports caravan" - a roving band of Australians with a reputation for expertise in event management. They won that for the manner in which the games were staged.

But Dr Cashman rightly points out that it is wrong to believe that the Olympics are going to be a catalyst for change. They were to a large degree in Barcelona, but the circumstances were quite specific to the city. In Beijing's case, any contention that they will be cause to fix environmental and traffic problems are misplaced. In 10 or 15 years after such matters have been integrated into the city's wider development, perhaps, but not any time soon. There is a measure of hope, though, in the success of the subway system.

As for those more profound aims - international acceptance top of the list - we will have to wait a year or two to see if they have been achieved. For now, if the torch relay is any guide, that would seem to hinge on Beijing not letting its ego get in the way. Pride, as the saying goes, cometh before a fall.

Peter Kammerer is the Post's foreign editor

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China's Australian farm plan doesn't hold water


Greg Barns
May 05, 2008           
     
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The average Australian farmer has had it tough in recent decades. What scientists describe as a one-in-1,000-year drought has driven many off the land and, for those who remain, the long-term prospect of less rain because of climate change appears to herald a decidedly gloomy future.

Enter China. Just as the insatiable Chinese demand for Australia's vast reserves of iron ore, coal and other minerals has proved a godsend for mining companies and their employees and contractors, is it now the turn of Australia's farmers to be similarly enriched?

According to a report on April 29, in the Beijing Morning Post, a senior official in the Agriculture Ministry, Xie Guoli, says China is looking at leasing farmland in Russia, South America and Australia to ensure the nation has a greater chance of long-term food security.

Just how dire is China's agricultural crisis was made clear by a story last month from the news agency Reuters. It said that China's rapidly dwindling agricultural land is reducing its capacity to produce enough grain to feed its population.

What is also driving the looming crisis is changing taste buds. As people become wealthier, they are eating more dairy and meat products - both of which Australia produces in vast quantities and already exports to China.

So, how realistic is Beijing in thinking that it might be able to replicate the strategy it has adopted in the Australian resources sector of investing directly in projects? Over the next few years, can the Australian farming sector expect to see Chinese agricultural companies on their doorstep asking to buy or lease millions of hectares of farmland to produce meat, grain and dairy products that will be exported back to China?

For the Australian government, the prospect of large-scale Chinese investment in its agricultural sector is highly problematic for a number of reasons. As a consequence, Beijing is likely to find it much more difficult to achieve than has been the case with mining.

First, the Australian farming lobby is politically very powerful - there are about 130,000 farms in Australia and 99 per cent are family owned and run.

The idea that Chinese companies would buy Australian farms or even lease them for long periods to feed China is likely to meet stiff political opposition. Leaving aside the question of the imagery of an iconic Australian way of life being sold off, there is also the question of what such a strategy would do to Australian domestic food demand.

Australia's most important agricultural water system, the Murray-Darling basin, has been devastated by long-term drought and neglect, and this is having a direct impact on the capacity of agricultural production in the medium and long term.

China needs to understand that Australia's available farmland is also shrinking because of climate change and drought. Unlike mining, where Australia is rightly viewed as a long-term reliable supplier, the situation with agriculture is much less certain.

Greg Barns is a political commentator in Australia and a former Australian government adviser


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In soft focus


LAURENCE BRAHM

May 06, 2008           
     
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The importance of relations between the Middle East and China underscored the 4th Al-Jazeera International Documentary Film Festival, held last month in Doha, Qatar. The festival's opening ceremony featured not one - but two - documentary films by Chinese directors, sidelining films from throughout the Middle East. Why?

Clearly China, the central player, can tip the scales in the Middle East and Africa. It offers alternative approaches to development aid with no strings or conditions attached. On this front, it has the potential to challenge the Washington Consensus, if it chooses. So far, it has not. A card not yet played increases in value.

China is also the biggest potential consumer of resources, with the largest stash of foreign exchange reserves to pay for them. So, a little cultural priority at the region's prominent film festival is the least that is due. But something seemed strange about the films from China, when contrasted with those from the Middle East and elsewhere. The following random sample of titles, and their published summaries, is revealing: Deadly Playground - about the deadly landmines left behind after the Israeli war in 2006 on Lebanon. Shadow in the Darkness - the film shows the daily life of the Gazan people under Israeli aggression and its destruction, as well as its effect, on children in particular. Pictures - a young girl, Rasha, tells the story of the massacres committed by Israel during its war on Lebanon in 2006. American Games - the film shows examples of random killings by the US army in Vietnam, and how history is repeated in Iraq. Clearly, these are all controversial subjects, and penetrating explorations of tragedy.

Contrast these with the Chinese films presented: Xian - a story of 90-year-old Cheng En who spent his life fixing bridges. Lei Fei's Summer Vacation - about a 10-year-old girl from the countryside who works during the summer vacation to pay her school fees. The Flowers of Cole - a story of a little girl who lives in a remote village. She waits every day for a train that brings her pickles. She sells them to buy medicine for her grandmother. All these avoid any form of controversy or in-depth exploration of human emotion. Why the stark contrast?

Many Chinese directors are frustrated. They complain that there is little they can do to explore or express social problems, agonies or emotions without the agony of having official censors edit their art into artlessness. Limited, they channel their artistic flair into beautiful cinematography while skipping controversial social explorations entirely. They have no choice.

However, the National Bureau of Radio Film and Television begs to differ. In 2006, in a clear statement of intent, it officially put forward parameters: "As long as [a film] does not attack the socialist system or the Communist Party of China, or propagandise pornography or violence, or the whole movie is about [the] mafia, then it will be approved. If there are too many bedroom scenes, [or people are killed] with too savage or bloody methods, these will need to be edited ... China is concerned with [the] exposure of genitals, [as well as] violence, but mainly politics."

The direct message is that, if censors see in any film complaints about the system, then it will be banned.

This may be so, but many point out that, in the realm of sexuality at least, China's media is enjoying its most liberal epoch since the start of the People's Republic. Just a few years ago, nudity in any form was banned from publications amid countless anti-pornography campaigns.

Browse any magazine shop today, and you will be overwhelmed with publications filled with photos of models displaying acres of flesh, some of near-artistic quality, and all justified within the framework of "fashion magazines".

I once asked an "artistic fashion photographer" how his photographs of nudes qualified as fashion when the models weren't wearing any clothes. With great political correctness, he pointed out that the women's shoes were "very fashionable".

Laurence Brahm is a political economist, author, film maker and founder of Shambhala

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Iranian reactor could be next on US-Israeli hit list


Michael Richardson
May 07, 2008           
     
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Eight months after the Israeli Air Force bombed a mystery target in a remote part of Syria, the United States recently released intelligence claiming that it was a nuclear reactor for a secret military programme, built with the help of North Korea. US officials said the reactor was almost operational. The claims, which included detailed photos, are denied by Syria and North Korea, and disputed by some western analysts.

However, it highlights the risk that North Korea will use its nuclear know-how and materials to aid the weapons ambitions of Iran and other states if the tentative nuclear disarmament deal with the US, brokered by China, collapses. In return, the regime in Pyongyang would demand from nuclear partners oil, money and other things it needs to stay in power.

The alleged North Korea-Syria nuclear connection also points to a troubling pattern of plutonium proliferation. Today's nuclear weapons derive their terrible destructive power and radioactive fallout from fissile cores of either highly enriched uranium or plutonium. The latter produces more explosive yield in smaller, lighter warheads than weapons based on highly enriched uranium. These make it easier to arm ballistic and cruise missiles.

The Syrian reactor Israel says it destroyed was reportedly based on the design of the Yongbyon reactor that North Korea used to produce an estimated 40kg to 50kg of weapons-grade plutonium, sufficient for six to eight bombs, before its nuclear explosive test in October 2006. In response, the UN Security Council banned nuclear or missile co-operation with North Korea.

Much of the international concern about Iran's nuclear ambitions has focused on its efforts to enrich uranium on an industrial scale. Tehran insists it simply wants to make fuel for reactors that will generate electricity. But, if the project is successful, Iran will also be able to enrich uranium to a high level, for weapons.

Less well publicised is Iran's project to develop the plutonium path to nuclear arms. It is building a 40-megawatt "research" reactor at Arak that will be fuelled with natural uranium and moderated, or controlled, with heavy water. The adjacent plant to produce heavy water at Arak is already operating.

Iran says the reactor is scheduled for completion next year. The UN nuclear watchdog, the International Atomic Energy Agency, is concerned by this activity and the Security Council, which has passed three sets of limited sanctions on Iran, wants uranium enrichment and plutonium production suspended.

North Korea, and before it, Israel, India and Pakistan, all used similar reactors to make plutonium for bombs in defiance of the international Non-Proliferation Treaty.

When reprocessed, fuel rods irradiated in heavy-water reactors yield weapons-grade plutonium. Before it was shut down last year, North Korea's 5MW reactor at Yongbyon, while moderated with graphite instead of heavy water, was also fuelled with natural uranium.

Iran has told the IAEA that it does not intend to build reprocessing facilities to separate plutonium from the spent fuel in its Arak reactor. It claims the reactor will be used to produce isotopes for medical, agricultural and industrial purposes.

The facility could, indeed, do this. But it would make more sense to use a much smaller, light-water research reactor to make isotopes. Iran's planned civil nuclear power programme is based on light-water technology. Its first reactor, built by Russia, is nearing completion at Bushehr on the Persian Gulf. Moscow is also supplying the low-enriched uranium for the reactor - and insisting that all spent fuel be returned to Russia.

With the US and Israel evidently determined not to allow Iran to achieve nuclear weapons capability, the Arak plant may be the next highly controversial strategic target.

Michael Richardson is an energy and security specialist at the Institute of Southeast Asian Studies in Singapore. This is a personal comment

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Winds of change


PETER KAMMERER

May 09, 2008           
     
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Natural disasters always have environmental, economic and social implications but, down the ages, they have also frequently had political consequences. Those of us wishing for the demise of Myanmar's brutal military regime have high hopes that out of the devastation of last week's cyclone will come the concerted civilian uprising that finally brings the generals crashing down.

There are any number of examples to raise the spirits. The earthquake and tsunami that devastated the Portuguese capital of Lisbon in 1755 contributed to a shake-up of European intellectual thinking that led to the Enlightenment and the French revolution. Nicaraguans, outraged by dictator Anastasio Somoza, his relatives and cronies stealing international aid money meant for the victims of an earthquake in 1972, backed a revolt by Sandanista rebels; the Somozas were ousted seven years later. Acrimonious relations between Greece and Turkey were soothed as a result of the outpouring of aid and goodwill that followed quakes that struck the countries a month apart in 1999.

But the tragedy that gives greatest hope for change in Myanmar is the 2004 Indian Ocean tsunami. The pounding of the Indonesian province of Aceh by the giant waves left 170,000 Acehnese dead and led to a breakthrough in talks between Jakarta and separatist rebels. Calls for independence gave way to a pact guaranteeing partial autonomy. Former Free Aceh Movement guerilla Irwandi Yusuf, who escaped from the prison he was in when the tsunami struck, is now the province's governor.

To suggest that Asia's most destructive storm since 1991 could bring down the junta in Myanmar may seem pie-in-the-sky dreaming, given that the military has kept a firm grip on power for 46 years. Uprisings have been ruthlessly crushed.

So protective are the generals of their positions that political opponents are routinely imprisoned or, in the case of the most prominent pro-democracy leaders like Aung San Suu Kyi, kept under house arrest. Foreigners are closely watched during visits, lest they sow the seeds of democracy. Even in the aftermath of Cyclone Nargis, those offering assistance are being treated with utmost suspicion; tens of thousands of people have been killed, hundreds of thousands injured, maybe 1 million are homeless, and still the junta procrastinates about who it should and should not let in to help. Anger is growing in the country. State-run media gave just one day's warning of the storm and put wind speeds at a quarter of what they turned out to be. The military, despite being all-pervasive in society, was slow to respond to the disaster, seemingly proving that the generals care little about the people they rule. The area affected is known as Myanmar's rice belt, and food prices nationwide are skyrocketing; rising costs were the reason for protests last year.

Not all natural disasters change the political landscape. For each that does, another does not. The tsunami brought peace to Aceh, but not the similarly affected northeast of Sri Lanka, still wracked by fighting between the government and separatist Tamil Tiger rebels. Pakistani aid to India following the Gujarat quake in 2003 brought the leaders of the rival nations together for the first time within six months, although a year later the sides were again on the brink of war. Ilan Kelman, a researcher with the Centre for International Climate and Environmental Research - Oslo, told me yesterday that the only viable response to the devastation wrought by Hurricane Katrina in the US in 2005 was a national one, given the scale of the damage. President George W. Bush failed to act promptly, yet suffered minimal political backlash.

Cyclone Nargis has dealt misery to a nation already suffering under an oppressive regime. A referendum on a new constitution aimed at reinstating democracy will change nothing; the process will only tighten the military's grip. The best hope for change lies in anger swelling under an international humanitarian presence to the point that the junta has no choice but to step aside.

This may seem fanciful, but the record of political shifts from nature's fickle ways means the wish may not be that far-fetched.

Peter Kammerer is the Post's foreign editor

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West attacks Islam from behind veil of ignorance


Jonathan Power
May 12, 2008           
     
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Once again, the CIA and MI6 are publishing dire warnings of the vitality of al-Qaeda. Once again, the Islamic world as a whole is being tarnished by association. US presidential contender John McCain is saying that America needs a leadership "to confront the transcendent challenge of our time: the threat of radical Islamic terrorism". The words still ring in our ears from Samuel Huntington's The Clash of Civilisations, the book that in many ways triggered this paranoia that infects the politicians, the press and the public discourse. "The underlying problem for the west is not Islamic fundamentalism, it is Islam," he wrote.

Few, if any, in the western leadership seem to make the point that al-Qaeda is a deviant phenomenon within the Islamic world, just as Hitler was a deviant phenomenon within the Christian world. But Islam has a much better record, over the ages, of dealing with its deviants who take violence to excess. Islamic culture has never been tolerant of Nazism, fascism or communism. Christianity has spawned all three.

Of course, there have been many incidents in the long history of Islam when there have been large-scale losses of life. The massacres and starvation of the Armenians in 1915 still stir the waters of contemporary debate. But Islam has never spawned anything comparable with Hitler's systematic genocide of the Jews - indeed throughout its history Islam has been protective of Jews. Nor has it settled in other parts of the world and systematically obliterated other civilisations, as did Christian Spain with the Aztecs and Incas. Nor have Islamic societies created anything like South Africa's apartheid or the racist culture of the old American South. Unlike many Christian churches, the mosque has never separated people by race.

Christianity has always been led or dominated by people of European descent. But the leadership of the Muslim world has been much more fragmented.

Despite their relative poverty today, in great teaming cities like Cairo, Dhaka and Jakarta, criminal violence is much, much lower than in Christian-influenced societies. Muslim countries, according to the UN's annual Human Development report, have the world's lowest murder and rape rates.

In Tehran, which according to the CIA is the most important single source of terrorism today, you can go out at 11pm or midnight and find families with children picnicking in city parks. When my daughters' friends ask me where they can safely travel alone in an interesting developing-world city, I say Cairo. Certainly not Catholic Rio or Protestant Cape Town. Not only are murders and assaults comparatively rare, there is less prostitution, hard drugs and Aids.

The western debate about Islam is, frankly, infantile. Even Barack Obama, with his own personal experience, is either ignorant or just scared of going into battle on these issues. I have not read a single speech by a western politician which seriously attempts to educate public opinion. We live in a slough of ignorance.

Jonathan Power is a London-based journalist


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Prisoner truce could earn China a pardon


OBSERVER
Frank Ching
May 13, 2008           
     
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The Olympic torch relay over the past few weeks has done the opposite of what was intended. Instead of focusing attention on China's achievements over the past three decades, and its return to its rightful place in the world, the publicity has been largely negative and has damaged Beijing's international image.

This has also affected companies that do business with China, including the Olympic sponsors. In fact, while Beijing continues to insist that sports and politics should not mix, it is evident that business has become increasingly politicised.

French retailer Carrefour, for example, was the subject of a boycott in China supposedly because of its support for the  Tibetan independent movement. Its chairman, Jose Luis Duran, has denied giving support to the Dalai Lama, and his statements have been welcomed by the central government. Other companies, too, have been forced to take a political stand.

Undeniably, there is an urgent need to salvage China's reputation, that of the Beijing Olympics and its corporate sponsors, too. The central government needs to do something dramatic that will seize the imagination of the whole world, much as the ascent of the Olympic torch to the top of Mount Everest was supposed to do.

And there is something that China can do, that would result in a dramatic improvement not only to its own image but also to that of the Games, as well - and to all the companies that are corporate sponsors.

In 2000, the International Olympic Committee decided to revive the ancient concept of the Olympic Truce: in 9BC, three kings signed a treaty to guarantee safe passage to athletes, artists and their families to and from the Games. In reviving the Olympic Truce, the IOC hoped, among other things, to raise awareness and encourage political leaders to act in favour of peace, as well as mobilise young people for the promotion of the Olympic ideals.

Now China has an opportunity, if it  wishes, to start a new tradition by declaring an Olympic pardon or an Olympic amnesty for long-serving prisoners who are no longer a danger to society.

This has been proposed by John Kamm, executive director and founder of the Dui Hua Foundation in San Francisco, who has written to Wu Bangguo , chairman of the Standing Committee of the National People's Congress.

"China has an historic opportunity to be the first Olympics host to do so," Mr Kamm wrote, "thereby leaving an important humanitarian legacy for future hosts." An Olympic pardon would be a natural expression of the Olympic Truce ideal.

A similar idea was suggested last December by a Chinese scholar, Liu Renwen , of the Institute of Law at the Chinese Academy of Social Sciences. In an  article in the Southern Weekend newspaper in Guangzhou, Mr Liu suggested that 2008 could become "China's Pardon Year".

The Dui Hua Foundation's proposal is that the Olympic pardon would apply to "long-serving prisoners who no longer pose a threat to society and are nearing the end of their sentences".

If the central government likes this idea, it would have to decide how to apply the pardon and who would benefit. The Hong Kong government, too, should back this suggestion. With over 1,000 Hong Kong residents in prison on the mainland, several hundred may well benefit if Beijing were to accept the proposal.

This is a novel idea that deserves serious consideration by China. In one stroke, it would help change the world's image of the country from that of a hardline government to one that has the best interests of its people at heart, including those serving prison terms. It is possible that such a gesture would so capture the public imagination that it would become a tradition for each host nation to declare an Olympic pardon.

Frank Ching is a Hong Kong-based writer and commentator

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Psychedelic journey into the spiritual world


OBSERVER
Alex Lo
May 15, 2008           
     
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Despite the draconian view that most contemporary societies have on mind-altering drugs, whether natural or synthetic, there has always been a religious undercurrent around the world that takes them seriously as a conduit to deep spiritual insight and encounters with the holy.

This is the religious - and highly ambiguous - legacy left by two LSD pioneers who died within the past two weeks. Swiss chemist Albert Hofmann - who discovered LSD in 1938 - died on April 29, at the age of 102; US psycho-pharmacologist Murray Jarvik - one of the first to study the drug's chemical properties and their mind-altering effects - passed away last Thursday.

Both experimented with the drug and vouched for its religious significance. Having lost or severed any connections with natural psychoactive plants, it is not surprising that it took a synthetic drug for the modern industrialised world to retrieve a psychoactive connection with the holy.

In her popular book A History of God, the historian of religion Karen Armstrong characterises a pivotal moment in the great religious transformation of the west as that in Judaism when the Jews and their prophets realised a growing unbridgeable chasm had arisen between an increasingly remote God and themselves. This experience of being forsaken was at the root of a predominately western religious view and would find its way into Christianity. It is, however, one that is totally foreign to native religions among indigenous people around the world. For them, the holy spirits are always close by.

For many natives, plants with psycho- active properties have always been associated with gods or special spirits. Communal rites and shamanism enable participants to take these psychoactive substances and communicate on intimate terms with these spiritual beings.

Centuries of western colonisation have wiped out most of these native communities and their religions, yet some survive on the fringes of modern societies. Today, an entire tourist industry, recounted by Daniel Pinchbeck in his 2002 book, Breaking Open the Head: A Psychedelic Journey into the Heart of Contemporary Shamanism, ferries eager spiritual seekers from the developed world to such places.

The common effects of LSD, such as psychological insights into self, philosophical reflections and religious or spiritual sentiments, most closely resemble accounts of writers who have taken psychedelic plants in shamanistic practices.

Certainly, many serious writers and thinkers rallied around the synthetic drug LSD during the first decades following its synthesis by Hofmann. Sadly, western drug propaganda has come to equate these psychoactive substances with the same category of dangerous and highly addictive drugs such as heroin and cocaine.

The British novelist Aldous Huxley, the comparative religions writer Alan Watts, and Gordon Wasson, an investment banker and amateur ethnobotanist who studied psychedelic mushroom cults in Mexico and elsewhere, all favoured a "shamanistic" approach. This meant the use of LSD should be guided by knowledgeable people with experience and wisdom. Certainly, the drug was not for recreation or "tripping".

Their idea was that only influential and "important" people in business, government, academia, science and the arts should be given the drug with which to experiment. The drug's effects needed to be better understood before it could be passed on to the rest of society. The 1960s' flower children and western rock stars hijacked the drug, which was soon outlawed by governments. The drug slowly fell out of fashion, and has now been overtaken by party drugs.

The search for spiritual meaning by the use of psychoactive substances will always be riddled with danger, including society's prejudices. It is, therefore, remarkable that both Hofmann and Jarvik died as respected scientists and cult heros, not crackpots.

Alex Lo is a senior writer at the Post


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Six steps to saving millions, and billions


Dean Jamison and Bjorn Lomborg
May 16, 2008           
     
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Large parts of the world have not enjoyed the remarkable global progress in health conditions that have taken place over the past century. Indeed, 10 million children in low- and middle-income countries will die this year. If child death rates were the same as those in developed countries, this figure would be lower than 1 million. Conversely, if child death rates were those of rich countries just 100 years ago, the figure would be 30 million.

The key difference between now and then is not income but technical knowledge about the causes of disease, and interventions to prevent disease. Today's tools for improving health are so powerful and inexpensive that health conditions could be reasonably good even in poor countries if policymakers would spend even relatively little in the right places.

Recent research for the Copenhagen Consensus identifies six highly cost-effective options that would tackle some of the planet's most urgent health problems.

The most promising investment is in tuberculosis treatment. The cornerstone of control is prompt treatment using first-line drugs, which doesn't need a sophisticated health system. Spending US$1 billion a year would save 1 million lives, creating economic benefits worth US$30 billion.

The second most cost-effective investment is tackling heart disease. Spending US$200 million to treat acute heart attacks with inexpensive drugs could avert several hundred thousand deaths, yielding benefits 25 times higher than the costs.

The third option is prevention and treatment of malaria: US$1 billion would provide enough insecticide-treated bed nets to save more than 1 million child deaths and produce economic benefits worth US$20 billion.

The fourth alternative for policymakers is child health initiatives. The best measures are expanding immunisation coverage, promoting breastfeeding, and increasing the use of simple and cheap treatments for diarrhoea and childhood pneumonia. Spending US$1 billion annually could save  1 million lives and create economic benefits worth US$20 billion a year.

The next option is to reduce the number of tobacco-related deaths. A multifaceted approach to smoking control is one of the few proven approaches to prevention of heart disease and cancer. A tobacco tax is particularly effective.

Arresting the spread of HIV/Aids is the sixth option. For dozens of countries around the world, the Aids epidemic threatens every aspect of development. Preventing  2 million HIV infections a year - through such measures as condom distribution, male circumcision, and peer interventions among sex workers - would be relatively expensive, at US$2.5 billion, but would yield benefits 12 times higher.

Even if the costs of these initiatives were two or three times higher than we estimate, they would still go a long way in reducing health inequality in the world.

Dean Jamison is an economist and professor in the School of Medicine at the University of California. Bjorn Lomborg is head of the Copenhagen Consensus Centre. Copyright: Project Syndicate


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A tall order
Despite a rosy start, there is no shortage of risks in the new cross-strait relationship

Steven Xu
May 19, 2008           
     
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Taiwan's presidential election in March turned out exactly as mainland Chinese leaders had hoped. The opposition Kuomintang party's candidate, Ma Ying-jeou, who is from a mainland family and was born in Hong Kong, won in a landslide victory, with more than 58 per cent of the vote. As Mr Ma prepares for his inauguration tomorrow, the consensus view is that cross-strait tensions will be largely eliminated during his term.

Don't bet on it. There is no shortage of risks in this relationship, and the one most optimists overlook right now is how well Beijing will respond to Mr Ma's not-so-secret view that the mainland needs to accelerate its political reform to reassure Taiwanese.

To be sure, the Communist Party and the KMT see eye to eye on many more things than the party and outgoing Taiwanese president Chen Shui-bian's Democratic Progressive Party (DPP). For one, both the Communist Party and the KMT adhere to the so-called "1992 consensus" that affirmed the principle of "one China" but allowed different interpretations of what that means in practice.

Most mainland Chinese also believe the civil war between the communists and the KMT during the first half of the 20th century was really a quarrel between brothers. In contrast, the distrust between Beijing and the pro-Taiwan independence DPP has become so entrenched that any compromise, much less a consensus, is unthinkable for either side.

After Mr Ma's victory, Beijing immediately made a goodwill gesture. Vincent Siew, Mr Ma's running mate and a KMT veteran, was invited to the Boao Forum, mainland China's version of the World Economic Forum's annual powwow in Davos, Switzerland. He was greeted by President Hu Jintao , who also invited Wu Poh-hsiung, the current KMT chairman, to visit Beijing. But how long will the cordiality last after Mr Ma assumes office? Will everything be plain sailing, or are there unexpected storm clouds ahead?

Take economics, for starters. Despite the on-and-off tensions between the two sides, economic integration is deepening. The mainland is Taiwan's largest trading partner. More importantly, Taiwan is increasingly reliant on mainland demand. Based on mainland statistics, Taiwan derived about US$78 billion in trade surplus from the mainland last year (although much trade flows through Hong Kong and does not show up on bilateral statistics). Today, more than half a million Taiwanese live and work on the mainland.

And the cross-strait human traffic may be about to get a lot heavier. The two sides have already opened a discussion about making direct flights between the mainland and Taiwan a regular occurrence. After that, Taiwan may open doors to mainland tourists who want to indulge their emotional and romantic sentiment towards their brotherly island, which has been coveted by so many foreign powers (including the Dutch and Japanese).

However, plenty of existing barriers continue to obstruct further economic integration. For example, Taiwan does not recognise education certificates from the mainland, even though more and more Taiwanese are being admitted to a wide range of mainland schools, from kindergartens to MBA programmes. Taiwan's official policy also bans large direct investment in the mainland, forcing its businessmen to set up offshore entities. (But again, in a sign of impending change, Taiwan is moving to allow mainland Chinese banks to set up a presence on the island on the assumption that the mainland will reciprocate.)

If Taipei remains nervous about too fast a rapprochement, the biggest problem with Beijing may be its belief that Taiwan needs the mainland more than the other way around. This is why it is unlikely to make any other significant concessions beyond more frequent cross-strait flights. That said, given the long history of interaction between the communists and the KMT, the mainland government is less likely to be provoked by any unfriendly noises Taipei makes under Mr Ma.

Indeed, Mr Ma will hardly be a compliant partner for Beijing. Because of the deep-rooted doubts many islanders have about the KMT's loyalty to Taiwan, he will not silence a lively debate about independence. Mr Ma, who is arguably Taiwan's cleanest politician, will also not shy away from challenging Beijing on democracy. He has even said that a redefinition of the 1989 student movement in Tiananmen Square should be a precondition for any talks on unification. What Beijing might not realise is that a key aspect of Mr Ma's cross-strait strategy will be to try to occupy the moral high ground.

Beijing, therefore, had better be prepared to deal with a self-righteous Ma administration - for perhaps as long as eight years. Unfortunately, judging by their reaction to the recent Tibet controversy, neither the mainland government nor its people seem very attuned to external views and expectations about their country.

To win back Taiwan, as well as a big segment of the international community, the mainland must be willing to take a more critical look at its recent past and pursue a more enlightened nationalism.

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


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The right to know


FRANK CHING

May 21, 2008           
     
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A year ago, the State Council promulgated nationwide information regulations that accepted the need for the government to be transparent and for the right of the public to have access to official information. These regulations came into effect on May 1 and mark a major step forward for human rights in China.

As Jamie Horsley, deputy director of the China Law Centre at Yale Law School, wrote when the regulations were promulgated, they mark "a turning point away from the deeply ingrained culture of government secrecy".

This is not a freedom of information law. State Council regulations have a lower status than legislation adopted by the National People's Congress, but they do provide a legal basis for the country's first nationwide information disclosure system.

The regulations reflect awareness by the government of the public's demand for accountability. They call for disclosure of information through communiques, websites or the press.

Although the regulations do not use the term "right to know", those words were used by Zhang Qiong , deputy director of the Legislative Office of the State Council, when he unveiled the regulations at a press conference, saying they will "safeguard the public's right to know, right to participate and right to supervise".

Some parts of the country have had information disclosure systems for years, some more liberal than the regulations that have just come into effect. But those apply only to specific areas, such as Shanghai, a trailblazer where access to information is concerned.

Mayor Han Zheng , in a live webcast on April 30, said 35,000 requests for information were received between 2004 and last year, of which more than 75 per cent were met. "The more public our government information becomes, the better supervision people can have of us," Mr Han said. He said that, starting this month, more information would be made available, including the salary levels of city officials.

Interestingly, it is official salaries that many people are interested in knowing. According to the China Youth Daily, since the new regulations came into effect, 77.5 per cent of requests for information concerned "assets of government officials".

While Shanghai's information regime is ahead of the national regulations, the central government might catch up by the time it drafts legislation. The regulations call on various levels of government to proactively disclose a wide range of information. But they also provide that information released by the government "should not harm state security, economic security or social stability".

Moreover, they specifically exclude anything involving state secrets, commercial secrets and individual privacy. Given China's broad - and vague - concept of state secrets, officials can often exercise discretion in deciding what information to disclose.

If China is serious about transparency and access to official information, it will have to define state secrets much more narrowly. The regulations - or a future law - should also specify that disclosure is the norm and nondisclosure the exception.

Although the new regulations are far from perfect, they do mark a significant step as China moves towards more open government and empowerment of its citizens.

The first lawsuit citing the new regulations has already been filed. On May 2, five citizens in Rucheng county, Hunan province , asked for the result of a government investigation last year into their complaint about the lawfulness of a contract signed by the construction bureau with a private investor six years ago.

The government immediately rejected their request and the five then began legal action. This shows that many Chinese citizens believe they have the right to official information and that the government has a responsibility to provide it upon request.

The implications of these regulations may well extend beyond China's borders. Many developing countries look to China, rather than the west, for an economic model and may follow in Beijing's footsteps where disclosure of information is concerned.

Frank Ching is a Hong Kong-based writer and commentator

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Governments find legitimacy in crises


OBSERVER
Alex Lo
May 22, 2008           
     
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Natural disasters cause all kinds of trouble for governments, but the deepest challenge is political. The most devastating ones reduce people to a state of raw nature, the "ground zero" of human existence when normal institutions stop functioning, and the civil protection we take for granted ceases to exist. These chaotic conditions resemble those in a civil war, the most dangerous threat to governments anywhere.

But if disasters pose an obvious threat, governments can also enhance their popularity and prestige if they restore order quickly and respond effectively. This, for now, appears to be the case in Beijing's response to the Sichuan earthquake.

Commentators have observed how great disasters can transform political landscapes and overthrow governments; some political theorists and economists believe only democratic governments can respond effectively. This is often true, but not always. Legitimate governments, even if non-democratic, can and do react responsibly in times of such crises. Indeed, their very acting in a responsible manner legitimises them. This is something we are witnessing in Beijing.

The chaos of natural disasters or civil wars into which civil society can descend has been called the "state of nature" by political philosophers. One striking and most enduring version has been that of Thomas Hobbes, the 17th-century English philosopher. Out of this notion, he painstakingly constructed political legitimacy, sovereignty and government by consent as foundations for the state. Those who defend democracy and human rights would do well to refer to his famous work, Leviathan.

Hobbes makes conditions in the natural state so extreme, deadly and chaotic that you wonder how anyone, even as a thought experiment, could create order and institutions out of it. Anything is possible; any action, however murderous, is allowed. Right and wrong, and rules and laws, have no meaning in this state. Despite being centuries-old, the Hobbesian notion of the state of nature is strangely illuminating on contemporary events, from the fall of former Yugoslavia to the aftermath of the Iraq invasion and dozens of civil wars in the past decade.

Hobbes, in effect, specifies the conditions for civil chaos, when authorities and institutions - and the very bonds that hold peoples together - fall apart. It is not a historical, mythological or theoretical condition prior to the rise of government; it is the terrible state in which citizens find themselves when governments collapse or when the state contributes to the chaos, as in Robert Mugabe's Zimbabwe. It is the darkness lurking around the corners of every civilisation, an ever-present threat to every society.

The first responsibility of a state, therefore, is to keep chaos at bay - to restore and enforce peace, and to guarantee the safety of people and property. Political legitimacy arises out of this duty. "The first duty of statesmen is to guarantee stability and prosperity." This statement is taken from A. J. P. Taylor's The Origins of the Second World War, not a press release from Beijing. He was referring to Hitler's induced collapse of an international system of diplomacy, the result of which pulled the great nations into a universal war of all against all.

Democracy, freedom and human rights can emerge at the end of a very long road, if at all, when prior conditions are met. Democracy may be the end result of peace and prosperity, but not the other way round. If you can't guarantee a man's physical safety, it is pointless to talk about giving him liberty and the right to vote. Iraq, anyone?

US politicians make out as if legitimacy can only be justified through democratic elections. It is the same reason why they assume only democratically elected governments can act responsibly in a natural disaster. The rise of authoritarian states in Asia, such as Singapore and China, shows that legitimacy can be achieved by other means. Beijing's response to the earthquake poses interesting fundamental political questions.

Alex Lo is a senior writer at the Post


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Beijing's openness has raised expectations


OBSERVER
Bernard Chan
May 23, 2008           
     
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Like many people, I have been shedding quite a few tears watching reports from the Sichuan earthquake of May 12. The scenes of devastation, dead children, grieving families and desperate rescue workers have touched hearts throughout China, including Hong Kong, and across the world.

The images themselves have been shocking, but it is also astonishing that we are seeing them at all. When riots broke out in Tibet in March, the central government's first instinct was to keep the media out. That response almost certainly harmed the country's image just as the Olympic torch relay was about to begin. It also probably reduced world sympathy for China's views on the historic status of Tibet.

Now we are seeing unprecedented openness. Hong Kong television crews are travelling with troops in helicopters to disaster zones. They are interviewing and filming whatever they wish. We are watching survivors of the disaster complain about the relief efforts, and we are hearing allegations of corruption behind the building of substandard schools that collapsed. Mainland media have been running similar stories with relatively little of the traditional top-down guidance or censorship. Senior officials have gone online to discuss issues openly with citizens on the internet.

This openness has been an amazing success. Most people seem to be trusting the mainland media. Premier Wen Jiabao's photo opportunities from wrecked neighbourhoods have shown the leadership in a new light - personally seeing and sharing ordinary people's tragedies.

The heart-wrenching reports and stories have united the whole nation and inspired citizens to donate cash or blood, or even take direct action and deliver aid to victims themselves. It has brought Hong Kong people closer to the mainland in a way never seen before.

It is one of those times when you think things are not going to be the same again. China's people and the world have seen Beijing act in a deliberately open way, and they will expect more of it in future. This is likely to be the case in two particular areas directly related to the earthquake.

The first is the local corruption that must have contributed to the poor construction of public buildings in the earthquake zone (and elsewhere). For years, people have been persecuted by local governments for complaining about corruption to higher authorities. Officials higher up, meanwhile, have preferred to cover up such problems.

The death toll could reach 70,000. Some of those victims would have died anyway from such a powerful earthquake. But the photos of those little bodies in the rubble of schools, next door to buildings that stayed up, have exposed the true cost of corruption to the whole nation. There is real anger. People expect the culprits to be punished, and better accountability for the future.

The same goes for the money being raised. Mainland people and companies had donated 16 billion yuan (HK$17.92 billion) by Wednesday, with another 1 billion yuan coming from Hong Kong and more on the way from across the world. About one-tenth of the cash has been allocated to specific purposes so far. As with the Indian Ocean Tsunami of 2004, funds will continue to be spent for years to come.

I am deputy chairman of the council of Oxfam Hong Kong, and I know that people who make donations to charity want to see proof that their gifts are having an effect. Mainland people will be no different. Having joined together to give generously to the Sichuan victims, they will expect to see millions of homeless rehoused, with new schools and hospitals in the years ahead.

The openness surrounding this huge tragedy has united the country in giving and sharing, but also in expecting a new level of accountability. Continued openness will enable Beijing to meet that expectation.

Bernard Chan is a member of the Executive Council and a legislator representing the insurance functional constituency


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Race to the Pole is just a rush for fool's black gold


Gwynne Dyer
May 27, 2008           
     
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What connects oil at US$135 a barrel with last month's discovery of huge cracks in the Ward Hunt ice shelf off Ellesmere Island at the top of Canada's Arctic archipelago? And what might connect those two things with a new, even colder, war?

The cracks in the ice, further evidence that the ice cover on the Arctic Ocean is melting fast, were discovered by scientists tagging along with a Canadian army snowmobile expedition that was officially called a "sovereignty patrol". The army was showing the flag because Canada, like the other Arctic countries, suspects that valuable resources - notably oil and gas - will become accessible there once the ice melts.

If we are heading for an Arctic Ocean that is mostly ice-free in the summer, then drilling for gas and oil can soon begin. Hardly a week goes by without somebody pointing to the US Geological Survey's report that the Arctic basin contains a quarter of the world's undiscovered oil and gas. But the event that did most to trigger this new concern about sovereignty was Artur Chilingarov's publicity stunt last summer.

Mr Chilingarov is a polar explorer of the old school (he was made a Hero of the Soviet Union in the old days for saving an ice-bound ship in Antarctica), but he is now deputy speaker of the Russian parliament and was Vladimir Putin's personal "envoy" to the Arctic: last summer, he took a three-man submarine to plant a Russian flag on the seabed precisely beneath the North Pole.

"The Arctic is Russian. We must prove the North Pole is an extension of the Russian landmass," he said afterwards, and affected surprise at the fact that other countries with an Arctic coastline saw this as a challenge to their sovereignty. Canada's Prime Minister Stephen Harper, for example, flew to the Arctic the following week, and subsequently announced that Canada would built six to eight new "ice-strengthened" warships for Arctic patrols.

Moscow claims that the Lomonosov Ridge, a subsea mountain range that goes straight across the middle of the Arctic Ocean, is an extension of the Russian territorial shelf, so it belongs to Russia all the way to the North Pole. Alternatively, if the Law of the Sea tribunal does not ultimately accept that claim, Moscow may have an even broader claim in reserve.

In the early 20th century, seven countries laid claim to parts of Antarctica on the basis of "sectors": pie-shaped slices running along lines of longitude (which converge at the poles). The width of those slices depended on where the various claimants owned territories near Antarctica, mostly islands in the Southern Ocean. Those claims are dormant because of a treaty banning economic development in Antarctica, but the precedent has not been forgotten.

By that precedent, Russia could lay claim to about half the Arctic Ocean on the basis of lines of longitude running from the far eastern and western ends of the country up to the North Pole - and, in 1924, the old Soviet Union did precisely that. Nobody else accepted that claim then, and they wouldn't now if Russia raised it again. But Russia has the big Arctic ports and the nuclear-powered ice-breakers to make its claim stick, and nobody else does.

That is where the current panic comes from. It probably won't end up in a new cold war, but it has certainly got the hens in the chicken coop all stirred up. And, as is often the case with hens, they are overreacting. Russia is more assertive than it was a decade ago, but there are no signs it intends to pursue its claims by force.

Nor is there any serious basis for the claim that a quarter of the world's undiscovered oil and gas reserves lie under the Arctic Ocean, given that it only accounts for 3 per cent of the Earth's surface. In fact, the US Geological Survey, or any other authoritive source, never said anything of the sort. Yet this factoid has gained such currency that it influences government policy. People will believe anything when they really want to.

Gwynne Dyer is a London-based independent journalist whose articles are published in 45 countries


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The wealth effect
The toll from the Sichuan quake is a legacy of the old China. A rapid recovery will be a sign of the new one

Andy Xie
May 28, 2008           
     
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The Sichuan earthquake has brought horror and pain to so many. The images of their suffering have saddened us all. This catastrophe is the biggest test for China in recent times, but the response to the crisis has reaffirmed the nation's traditional strengths and also revealed many positive, some unexpected, social developments.

Economic development has strengthened China's capacity for handling a crisis. Gross domestic product may top US$4 trillion this year. The big economy has made vast resources available to deal with the aftermath of the quake. The availability of heavy machinery and China's logistics capacity, when compared to what was available during the Tangshan earthquake in 1976, have made a huge difference to the relief efforts; thousands have been rescued because of these new capabilities. Economic development doesn't just make people rich. It saves lives.

The vast economy will be equally important for reconstruction. To build housing and support facilities for 5 million homeless could cost 300 billion yuan (HK$338 billion). The total rebuilding cost could top 1 trillion yuan. Such a sum would have overwhelmed China only a decade ago. Now, its fiscal revenue will increase by this much in 2008 alone. It will be sufficient for China to allocate 5 per cent of its fiscal revenue for reconstruction. Of course, that is a big figure, and will put pressure on expenditure in many areas.

The Chinese government has responded to the disaster as effectively as any government could, and deserves top marks for its efficiency and resource commitment. More importantly, it has demonstrated an unequivocal commitment to the sanctity of life in its rescue effort. Not putting a price tag on a life is the hallmark of a modern society. It has given substance to the slogan "Putting People First".

While the government's rescue efforts deserve our praise, the extent of the devastation raises some old issues about China's development model. The rescue effectiveness has been first world; the death toll is very much third world. Development strategy seems to focus on quantity rather than quality. Local cadres are rewarded for increasing GDP. But this encourages growth at the expense of the future. The environment, education and health care, for example, have suffered. Buildings and infrastructure projects are often rushed, to allow government officials to cut ribbons on important national holidays.

Corruption may have played a role; virtually all the school buildings collapsed, suggesting that builders may have used insufficient and low-quality steel and cement. The government should investigate this matter, and punish guilty officials and contractors to deter future violations. The dead children deserve justice. More importantly, the government must ensure that corruption doesn't dominate the reconstruction process.

The disaster has also exposed problems in China's urbanisation. Parents working in coastal cities had to trek back to their villages to look for their children, highlighting the dark side of the migrant worker phenomenon. Cheap labour from rural areas has fuelled China's export-led boom. Such people can't take their children with them due to a lack of access to education and high housing costs. If the deaths of the children are not to be in vain, China should build sufficient low-cost housing for these migrants, and give their children access to public schools.

The most inspiring aspect of the disaster relief is seeing how those affected have helped each other, and how people all over the country have donated their money and devoted their time to help. It suggests that Chinese people possess a strong civic spirit. Many experts hold the view that Chinese people are unable to act collectively, and the country therefore needs an all-powerful government. What is occurring seems to prove otherwise.

The media's thorough coverage has contributed to the blossoming of the civic spirit. It shows that the Chinese media, when given enough room, can do a superb job in disseminating accurate information. It also shows that, when given the truth, Chinese people are eager to fulfil their social responsibility.

In the past three years, greed and vanity have surged in Chinese society. It led to the stock market bubble. After the market collapse, many have called for a government bailout. But how can one justify spending money to bail out gamblers when there are hundreds of thousands injured and millions of homeless who need help? While the Beijing Olympics is a glorious event for China, some have focused too much on superficial aspects. Public money has been spent to create too many overpriced buildings and edifices just to show off. When so many children still cannot afford to go to school, should China have spent billions on these grand designs? The Olympics is about the spirit of friendly competition. As long as the people of the host nation are welcoming, and the sports facilities are adequate, the Games will be great. To honour the people who died during the quake, China should spend as little as possible on ceremonial events and use the money saved for reconstruction.

When we look back, in two decades' time, how the government and the people handled this disaster will be seen as a turning point in China's development. The relationship between the government and the people has changed. How people view each other has changed. A people can find their identity through compassion for each other or hatred towards others. Only the former can take a country to true glory. Chinese people have been tested. Compassion has won out.

Andy Xie is an independent economist


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Heart of the matter


LAURENCE BRAHM

Jun 03, 2008           
     
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In Chinese, the word "crisis", weiji, is made up of two characters: wei (meaning "danger") and ji (meaning "opportunity"). So, in each crisis, one simultaneously faces both danger and opportunity. China faces a crisis over Tibet; its fundamental policies towards this region and its people are being called into question. This has also accentuated the sharp juxtaposition between Chinese pragmatic, dialectic materialism and Tibetan idealistic, abstract spirituality. While these two opposite world views may clash, there is no reason for them to be in conflict. Actually, both are needed.

The Tibetan crisis has brought both danger and opportunity. As with all things in China, one extreme must give way to another before a "middle" way can be reached. For all its hypergrowth, China now faces its worst crises since the commencement of its reforms: open and violent ethnic conflict; deadly children's epidemics; Olympic protests; and the worst earthquake in a generation. What may be next?

Meanwhile, the Dalai Lama is sitting in Dharamsala waiting for China to signal a breakthrough. That is precisely what China needs at this time - the world's most prominent morally persuasive leader, the Dalai Lama, to give it a spiritual lift in this sensitive and difficult Olympic year.

Breaking the ice, Beijing did invite the Dalai Lama to send a personal envoy for talks and, on May 4, his envoys, Lodi Gyari and Kelsang Gyaltsen, met two Chinese vice-ministers in Shenzhen. Both sides agreed to disagree on many circumstances and events. But it is better to disagree than not talk at all. Then, on May 9, Lodi Gyari gave a press conference in Dharamsala, outlining some ideas: open Tibet to journalists and tourists to restore economic normality, and stop criticising, moreover demonising, the Dalai Lama. From this we can see an emerging road map of what needs to be done by both sides. If Beijing can loosen its tight security grip over the Tibetan regions, people will feel more relaxed, tourism will revive business fortunes, and income will return.

Moreover, if it can stop criticising the Dalai Lama as part of its "patriotic education", China can begin winning the hearts and minds of Tibetans. In turn, if the Dalai Lama can use his influence to tone down global protests before the Beijing Olympics, he will be giving the Chinese government the support it so badly craves.

Surprisingly, on May 22, foreign journalists reiterated the Dalai Lama's recent statement in London that he would be willing to attend the Olympic opening ceremony in Beijing if China issued an invitation.

A Foreign Ministry spokesman responded: "If the Dalai Lama wants to do something meaningful for the motherland and the Olympics, then he must take practical action." That was followed by a list of rhetorical, separatist accusations. Regardless, this was still quite a new tone.

The Sichuan earthquake struck a region that is home to many ethnic groups, notably Han and Tibetans. It is a propitious time for the Dalai Lama to once again publicly offer prayers to all.

While he has already prayed for those killed and left devastated by the quake, his message of compassion was not heard by Beijing. If the meaning of his sincerity was understood in Beijing, that might change the atmosphere.

If China can respond with even a cordial meeting between President Hu Jintao and the Dalai Lama, this would give China more face than any gold medals its athletes could win, while giving hope to Tibetans and the world. It would change history.

The entire environment would improve, paving the way for a more grounded policy rethink. Yes, Tibet needs the economic means that China can provide - specifically education, medical facilities and equal opportunities.

China, in turn, needs what its own policies of material hypergrowth have failed to deliver - spirituality and a new-age national ideology. The Olympics can stir nationalism, but it cannot deliver either of those.

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

laurence@shambhala-ngo.org


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Strait talking


FRANK CHING

Jun 04, 2008           
     
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The pace at which cross-strait relations are improving is breathtaking and illustrates the desire on the part of both the mainland and Taiwan to make use of the opportunity presented by the Kuomintang's return to power. As President Hu Jintao said during his meeting with Wu Poh-hsiung, chairman of the KMT, the two sides "should cherish this hard-earned situation".
There are commentators and scholars on the mainland who say that the new Taiwan leader, Ma Ying-jeou, needs Beijing's help and the mainland should not treat him too generously. But, it appears, Mr Hu and other mainland leaders have taken a more enlightened position, realising that their interests and those of the Taiwan leadership coincide.

Both want to see closer economic ties, and less fear and suspicion in the way each side views the other. It is important to take the long-term view rather than seek short-term gain.

And so, the day after Mr Hu's meeting with Mr Wu, the mainland's "non-governmental" body, the Association for Relations Across the Taiwan Strait, agreed to resume "contacts and negotiations" and invited its Taiwan counterpart, the Straits Exchange Foundation, to talks in Beijing, beginning next Wednesday.

The two topics to be discussed are the beginning of non-stop weekend charter flights between Taiwan and the mainland and an accord to allow about 3,000 mainland tourists to visit Taiwan every day. Beijing's alacrity in offering negotiations means that Mr Ma should be able to carry out his campaign promise and bring these things about by July.

Beijing suspended dialogue with Taiwan in 1999 after then president Lee Teng-hui declared that relations between Taiwan and the mainland were "special state-to-state relations" and that the two sides of the Taiwan Strait were not part of one country.

The dialogue remained suspended for the eight years of Chen Shui-bian's presidency, when the Democratic Progressive Party leader was pushing the pro-independence envelope.

Beijing no doubt understands that if it pressures the KMT to be more accommodating politically, it could weaken the party and help the DPP return to power four years from now.

In fact, Mr Hu was, if anything, even more forthcoming than expected. After Mr Wu raised the issue of Taiwan's need for international space, Mr Hu responded: "I believe that, with joint efforts, the conditions can be created to find a solution to this issue through cross-strait consultations."

He went so far as to say that, after negotiations begin, priority would be given "to discussing the issue of attending World Health Organisation activities".

This is striking because, each year, Beijing has rebuffed Taiwan's attempt to join the WHO and its executive arm, the World Health Assembly, even as an observer. The latest rebuff was in Geneva, on May 19, the day before Mr Ma's inauguration.

Now, it seems, Beijing is willing to reconsider its position. This is only right because the issue involves not just international diplomatic space for Taiwan but also the health and welfare of its 23 million people, whom the mainland regards as compatriots.

One noticeable change since Mr Chen left office is the new administration's apparent willingness to accept two giant pandas offered by Beijing - an offer that had been turned down by the Chen administration, ostensibly because the climate in Taiwan is not considered suitable for them.

In his meeting with Mr Hu, Mr Wu expressed the hope that the pandas would arrive soon. Mr Hu promised to send them as soon as possible. But the gift comes with political implications. Under the terms of an international treaty on trade in endangered species, giant pandas can only be given as gifts to zoos that are within China. If they are sent outside the country, they are to be on loan, or for scientific research. No doubt, the KMT knows that accepting the pandas as a gift can be seen as acknowledgement that Taiwan is part of China.

Frank Ching is a Hong Kong-based writer and commentator

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America's blatant oil currency hypocrisy


Kenneth Rogoff
Jun 05, 2008           
     
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Does it make sense for US Treasury Secretary Henry Paulson to tour the Middle East supporting the region's hard dollar-exchange-rate pegs, while the Bush administration simultaneously blasts Asian countries for not letting their currencies appreciate faster against the US dollar?

Unfortunately, this blatant inconsistency stems from America's continuing economic and financial vulnerability rather than reflecting any compelling economic logic. Instead of promoting dollar pegs, the US should be supporting the International Monetary Fund's behind-the-scenes efforts to promote de-linking of oil currencies and the US dollar.

Perhaps the Bush administration worries that, if oil countries abandoned the US dollar standard, today's dollar weakness would turn into a rout. But the US should be far more worried about promoting faster adjustment of its still-gaping trade deficit.

Of course, a strengthening of the oil currencies (including not only the Gulf states, but also other Middle East countries and Russia) would not turn around the US trade balance overnight. But oil countries do account for a large share of the world's trade surpluses, and a weaker dollar would help promote US exports to some degree.

More importantly, it is important for US policies to be consistent across regions. How can the US Treasury, on the one hand, periodically flirt with labelling China a "currency manipulator" and, on the other, condone a similar strategy in oil-exporting countries?

Of course, one can imagine other reasons for US supplication to the oil states. Perhaps it worries that it cannot simultaneously beg for lower US dollar oil prices and help promote a weaker dollar. But, the two actually have little to do with each other.

What about the interests of the oil countries themselves? Are they right to fear potentially catastrophic results from abandoning the US dollar? As with China, these concerns are overblown. Even with the prevalence of US dollar indexation across the region, exchange-rate appreciation would still help promote cheaper imports and higher living standards.

More immediately, inflation across the oil states is soaring today. If this is allowed to continue, it is likely to have effects as pernicious as the exchange-rate appreciation the region's leaders are striving so hard to avoid.

To be sure, there are important differences between the oil exporters and the Asian economies. With world energy prices at record highs, it makes sense for oil economies to run surpluses, saving for when oil supplies eventually peter out. But flexible exchange rates are still the right way for the region to develop a more balanced economic and financial base.

As for the US, the world's biggest debtor, this is hardly the time to be promoting a shortsighted policy of maintaining US dollar currency pegs in any emerging market.

Kenneth Rogoff is professor of economics and public policy at Harvard University, and was formerly chief economist at the IMF. Copyright: Project Syndicate


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Japanese lessons for yuan's 'true' value


Mark DeWeaver
Jun 06, 2008           
     
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The question of how much China's currency should appreciate, to rebalance its trade, has become a global hot-button issue. But the answers have been all over the map, with some finding that the yuan is not undervalued at all, while others argue that it should appreciate against the US dollar by more than 30 per cent.

Clearly, there must be major differences in the macroeconomic models used for these estimates. But the one thing about which everyone seems to agree is the theoretically and empirically unjustified assumption that an equilibrium exchange rate actually exists.

The theoretical problem is simple: a country's trade balance depends on a lot more than the value of its currency in the foreign exchange markets. Interest rates, employment, aggregate demand, and technological and institutional innovation all play a role. As the economist Joan Robinson pointed out in 1947, just about any exchange rate will be the equilibrium value for some combination of these variables. The equilibrium exchange rate, she argued, is a chimera.

Not surprisingly, the empirical evidence that trade imbalances can be resolved through exchange rate changes alone is unconvincing. In the case of China, the most useful precedent is probably that of Japan in the period from the end of the Bretton Woods fixed exchange-rate regime in August 1971, to the collapse of its "bubble economy" in 1990. During that period, the yen's value more than doubled against the US dollar. Yet, even as Japan's exports became much more expensive in US dollar terms, and its imports much cheaper in yen, its trade surplus rose from US$6 billion in 1971 to US$80 billion in 1989.

For two decades, expectations that an appreciating yen would restore external balance were repeatedly disappointed. At the time of the December 1971 Smithsonian Agreement, 308 yen to the US dollar was supposed to do the trick. Fourteen years later, during the Plaza Accord negotiations, the Japanese argued for an eventual level of 200-210. At the end of the 1980s, some analysts thought rates as high as 120 might finally produce the long-sought equilibrium. Yet, its trade surplus peaked only in 1994, at US$144 billion, just a few months before the yen's April 1995 all-time high of 79.75.

It is easy to see why none of the supposed equilibrium exchange rates delivered external balance. As the yen appreciated, Japan responded not by exporting less but by improving productivity and quality control, making possible rapid growth in exports of high-value-added products. Exchange-rate equilibrium calculations from the 1970s and 1980s, which could only have been drawn from contemporary exports, would have little relevance subsequently.

In China, changes in the export sector's structure similar to those observed in Japan are now taking place. These changes are likely to make today's attempts to find an equilibrium yuan-US-dollar exchange rate seem just as chimerical in hindsight.

Mark A. DeWeaver manages the hedge fund Quantrarian Asia Hedge. Copyright: Project Syndicate


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