In China, a Grass-Roots Rebellion

 "I was afraid, but I had already signed it hundreds of times in my heart," blogger Tang Xiaozhao said about deciding to sign Charter 08.

Rights Manifesto Slowly Gains Ground Despite Government Efforts to Quash It

By Ariana Eunjung Cha
Washington Post 
SHANGHAI -- When Tang Xiaozhao first saw a copy of the pro-democracy petition in her e-mail inbox, she silently acknowledged she agreed with everything in it but didn't want to get involved.

Tang, a pigtailed, 30-something cosmetology major, had never considered herself the activist type. Like many other Chinese citizens, she kept a blog where she wrote about current events and her life, but she wasn't political.

A few days later, however, Tang surprised herself. She logged on to her computer and signed the document by sending her full name, location and occupation to a special e-mail address.

"I was afraid, but I had already signed it hundreds of times in my heart," Tang said in an interview.

Hers is the 3,943rd signature on the list that has swelled to more than 8,100 from across China. Although their numbers are still small, those signing the document, and the broad spectrum from which they come, have made the human rights manifesto, known as Charter 08, a significant marker in the demands for democracy in China, one of the few sustained campaigns since the 1989 Tiananmen Square protests. 

Those who sign the charter risk arrest and punishment.

When the document first appeared online in mid-December, its impact was limited. 

Many of the original signers were lawyers, writers and other intellectuals who had long been known for their pro-democracy stance. 

The Chinese government moved quickly to censor the charter -- putting those suspected of having written it under surveillance, interrogating those who had signed, and deleting any mention of it from the Internet behind its great firewall.

Then something unusual happened. 

Ordinary people such as Tang with no history of challenging the government began to circulate the document and declare themselves supporters. 

The list now includes scholars, journalists, computer technicians, businessmen, teachers and students whose names had not been associated with such movements before, as well as some on the lower rungs of China's social hierarchy -- factory and construction workers and farmers.

"This is the first time that anyone other than the Communist Party has put in written form in a public document a political vision for China," said Xiao Qiang, an adjunct professor of journalism at the University of California at Berkeley, a human rights activist and director of the China Internet Project, which monitors conversation on China's vast network of electronic bulletin-board systems, blogs and Web sites. 

"It's dangerous to be associated with dissidents, so in the past, other, ordinary people have not signed such documents. But this time it is different. It has become a citizens' movement."

The party in China maintains a monopoly on power, but its authority is now being challenged in the charter and on a number of other philosophical fronts.

On Jan. 13, a group of more than 20 Chinese intellectuals signed an open letter calling for a boycott of state television news programs because of what they said is systematic bias and brainwashing, and separately, a Beijing newspaper ran a commentary that argued that freedom of speech is written into the constitution and that the authorities cannot solely decide whether something is "absurd versus not, or progressive versus reactionary."

On Jan. 7, a prominent Chinese lawyer, Yan Yiming, went to the Finance Ministry and filed an application demanding that it open to the public its 2008 and 2009 budget books, including information about its $586 billion economic stimulus plan. "Our government must exercise its power in the open sunlight," Yan wrote.

And early this month, the editors of the newspaper Southern Weekend echoed text from Charter 08 but did not directly refer to it when the paper expressed worry about the future of the state and said it supports "progress, democracy, freedom, human rights."

"The present situation of maintaining national security and social stability is grave," Public Security Minister Meng Jianzhu warned China's leaders this month, according to state media.

Charter 08 lays out a comprehensive overhaul of the current political system by ending one-party rule and introducing freedom of speech, an independent court system and direct elections. It is modeled after Charter 77, which was put together by scholars and demanded rights for Czechoslovakia in 1977, preceding the collapse of communism by 12 years.

"The Chinese government's approach to 'modernization' has proven disastrous," the document states. "It has stripped people of their rights, destroyed their dignity and corrupted normal human intercourse. So we ask: Where is China headed in the twenty-first century?"

At the heart of the document is a call for rewriting the country's constitution to emphasize freedom.

"Freedom is at the core of universal human values. Freedom of speech, freedom of the press, freedom of assembly, freedom of association, freedom in where to live and the freedoms to strike, to demonstrate and to protest, among others, are the forms that freedom takes. Without freedom, China will always remain far from civilized ideals," the document states.

The evolution of Charter 08 is being closely monitored outside China to see how far the government will go to squelch it.

China's No. 4 official, Jia Qinglin, warned in the party's theoretical journal Qiu Shi in mid-January that the country should "build a defensive line against interference by incorrect Western thinking." Jia dismissed the ideas of a multiparty system and separation of powers as erroneous.

At Beijing University's law school, students who are party members have been warned not to get involved with Charter 08, as have researchers at the country's top government-funded research group, the Chinese Academy of Social Sciences.

At least one man -- Liu Xiaobo, 53, a literary critic and dissident who spent 20 months in jail for joining student protesters in Tiananmen Square -- has been detained on suspicion of being one of Charter 08's organizers. His detention prompted an international outcry. Writers including Salman Rushdie and Margaret Atwood have called for Liu's release.

State Department spokesman Sean McCormack said the United States was "deeply concerned by reports that Chinese citizens have been detained, interrogated and harassed" since the document was posted. Chinese Foreign Ministry spokesman Liu Jianchao has responded that Washington should stop interfering in the domestic affairs of other countries.

Other prominent people who have signed the document include Ai Weiwei, son of Ai Qing, a famous pro-government poet well-known for his art and architecture. He Guanghu, a professor of religion at People's University who specializes in Christianity, also signed, as did Bao Tong, formerly a high-ranking party member.

Mao Yushi, 80, an economist who is credited with helping to keep the government on a path of market-oriented reforms, has publicly said that while he has not signed the document, he gave advice to its drafters and supports it.

"China is at a critical moment of transition. We must recognize the general values of the world and follow the trend of democracy," said Teng Biao, a Beijing-based lawyer. Teng was summoned by police after signing and was warned not to take further action related to Charter 08.

One significant aspect of Charter 08 is its less famous signatories, such as Tang.

By most measures, Tang is a model citizen. The spunky, 4-foot-10 Sichuan native who lives in Shanghai loves her country, pays her taxes, volunteers at a school for migrant workers' children and is a major fan of one form of traditional Chinese opera. She grew up the eldest of three girls in a rural area where she says the schooling was weak but she taught herself by reading everything she could get her hands on, from Japanese novels to political treatises about the Middle East.

She posted a blog entry in December titled "I signed my name after a good cry," which Chinese censors have repeatedly knocked offline. Nevertheless, it has been widely circulated via e-mail and on Web sites outside China.

"We all grew up by feeding on 'political melamine.' Fear has been consolidated into stones in our bodies," Tang wrote, according to a translation by China Digital Times, the news site edited by Xiao, the Berkeley journalism professor and human rights activist.

Tang was referring to the chemical that was illegally added to some infant formula and pet food manufactured in China, creating the appearance of higher nutritional content but sickening or even killing some who consumed it.

Tang said in an interview that her fear turned to anger after she noticed that her blog entries and other references to Charter 08 kept being deleted by censors. 

One night, she said, she was hit by a great sadness that she did not have freedom of expression. So she took action.

"If me, a little frightened person, signed it, then maybe others will feel inspired," she said.

Before her blog was shut down entirely Jan. 13, the comments section was filled by online friends who said they had signed Charter 08. Tang counted 17 so far.

"I also signed," one person wrote. "I cried when I knew Xiaozhao had cried. I wasn't moved to tears by her tears, but I cried out of frustration and helplessness." Another saw hope in the censorship: "They wouldn't have been deleting posts in such a crazy manner," he wrote, referring to Chinese authorities, " if they were not scared." A third person said he "prepared my clothes right after signing my name. I am ready. I don't want to go to jail, but I am not afraid of going to jail."

Tang said she, too, is ready to accept the consequences of signing: "I know exactly what may happen to me since I signed my name, but I am not afraid anymore. It is my right to express my choice to an idea by signature and I won't give up my rights."

Gates says US ready for any China "threat"

The Associated Press
WASHINGTON: Defense Secretary Robert Gates on Tuesday assured lawmakers that the United States is ready to handle any Chinese military threat, even as Secretary of State Hillary Rodham Clinton called for increased U.S. engagement with Beijing.

Gates, speaking at a Senate hearing, said that U.S. forces "have the capability in place to be able to deal with any foreseeable Chinese threat for some time to come."

Clinton, meanwhile, told reporters at the State Department that the Bush administration's dialogue with China "turned into an economic dialogue," referring to former Treasury Secretary Henry Paulson's Strategic Economic Dialogue, high-level discussions that have been held twice a year starting in late 2006.

"We need a comprehensive dialogue with China," Clinton said. Economic engagement, she added, is "a very important aspect of our relationship with China, but it's not the only aspect our relationship."

The Obama administration is "going to be working together in the government across our agencies to design a more comprehensive approach that will be more in keeping with the important role that China is playing and will be playing," Clinton said.

Trade ties between the United States and China often are tense. 

President Barack Obama's treasury secretary, Timothy Geithner, said recently that Obama believes China is manipulating its currency, which American manufacturers say Beijing does to make its goods cheaper for U.S. consumers and American products more expensive in China.

But while the United States has pushed China to live up to what the Bush administration considered its duties as an emerging global superpower and a veto-holding member of the U.N. Security Council, Washington and Beijing find themselves increasingly intertwined in a host of crucial economic, military and diplomatic efforts.

A key worry in U.S.-China ties is Taiwan. China and Taiwan split in 1949 during a civil war, but Beijing considers the self-governed island a part of its territory and is determined to get it back, by force if necessary. The United States supplies Taiwan with weapons.

Beijing has in past years lobbed missiles in an attempt to intimidate Taiwan. 

China also maintains double-digit annual percentage increases in the budget for the 2.3 million-member People's Liberation Army.

Gates said the Defense Department is making good progress on developing a "number of programs" meant to counter Chinese technological advances that could "put our carriers at risk."

He did not elaborate on those programs. 

But he said U.S. forces are well positioned in the region, mentioning the nuclear-powered USS George Washington — a floating air base with 67 aircraft and an armory carrying about 4 million pounds (1.8 million kilograms) of bombs, which has a new home port in Japan.

US-China currency war eclipses Davos, and threatens the world

By Ambrose Evans-Pritchard

Turning a corner in the labyrinthine corridors of the Davos nerve-centre, I ran smack into Chinese premier Wen Jiabao -- followed by a regiment of retainers and senior offices in full regalia.
They have not quite adapted to the "sport" dress code of capitalism in Alpine retreat. 

Jeroen van der Weer -- a Davos stalwart --  wears horrendous corduroy trousers (pink sometimes) with a 1950s-era Tyrolean woolly. 

I dread to think how they react to Swiss prices if they venture into the restaurants.

Mr Jiabao smiled at me benignly, but he is not in a good mood. Indeed, he is fuming over the remarks by US Treasury Secretary Tim Geithner that China was "manipulating" its currency to gain market share. 

Reports were circulating this afternoon in Davos that Mr Jiabao erupted into a tirade after lunch at the mere mention of Mr Geithner's name.

Mr Geithner -- the first US Treasury chief who can actually speak Chinese, and Japanese, nota bene -- is clearly operating under instructions from President Barack Obama. 

If his resolve fails, Hillary Clinton is there at Foggy Bottom (State Department) to renew the broadside against Beijing -- at least judging by her Sinophobe reflexes in the campaign.

This has the makings of an almighty superpower bust-up. 

It is fast becoming the theme of Davos 2009. It may soon be the burning issue of our times. 

We will all learn how to pronounce Renminbi.

The Bush Administration -- in its day -- deflected all attempts by Congress to crack down on China's currency policy. Perhaps sagely, perhaps not.

There is no question that Beijing has pursued a mercantilist strategy of conquering US and European markets by holding down the yuan/renminbi.  It has a monthly trade surplus of $40bn, the highest ever recorded by any country. 

Or put another way, China is exporting its surplus capacity to the rest of the world. It has become a global deflation machine.

Even so, Mr Geithner is playing with fire. 

Beijing has amassed reserves of $1.9 trillion. From what we know, most of this money is held in the form of US Treasuries and other bonds. Creditors exercise power. 

Don't be fooled by claims that China could not deploy this weapon without damaging its own interests. All kinds of things can and do happen when tempers flare, and they were flaring today.

The IMF's chief economist Olivier Blanchard said it was unwise to "obsess" over the exchange rate in this fragile climate. 

"It is probably not the right time to focus on the Chinese exchange rate, given that it is not a central element of the world crisis. There are many other things we should be thinking about. It is an item on the list, but it is not at the top of the list."

Stephen Roach, head of Morgan Stanley Asia, offered a harsher verdict, calling it pure folly to pick a fight with Beijing. 

"The Chinese economy most likely contracted in final quarter of 2008 and most likely in this quarter too. China has hit a wall," he said.

"A country that is contracting doesn't take kindly to its major trading partners saying you have to increase the value of its currency. What they are being told to do is tantamount to economic suicide," he said.

Quite. This conflict needs to be handled with extreme care. 

There is a battle going on within the Chinese Communist leadership over currency policy.  

A bloc within the central bank has long argued that China itself is the victim of a policy that fuels domestic inflation and leaves the country dangerously dependent on the goodwill of export markets.

Wen Jiabao,  speaking as I write, says that China's fiscal stimulus package of $600bn will be worth 16pc of GDP over two years. If so, that is huge. China is now doing its part to shore up the global system, even if he rather annoyingly continues to blame "low-savings" countries for the crisis -- skipping over the role of Asia in stoking a credit bubble (Takes two to tango).

Be that as it may, China's fiscal blitz is the beginning of a shift in strategy that should -- over time -- start to boost domestic demand enough to eat into the trade surplus.

Mr Jiabao said it was "imperative that China and the US step up their co-operation". 

He pleaded with the West not to retreat into protectionism. Washington -- and above all Capitol Hill -- would be well advised to listen.

Vladimir Putin speaks next. The autocrats are lining up. 

China detains 81 people in Tibet crackdown

Operation carried out two months before 50th anniversary of failed uprising against Chinese rule
By Tania Branigan in Beijing
Chinese authorities have launched a security operation in the Tibetan capital, Lhasa, running checks on almost 6,000 people and detaining 81, including two with "reactionary music" on their mobile phones, state media reported.

The Tibetan Daily said the "strike hard" campaign was targeting criminals.

However, campaigners for Tibetan autonomy said its timing – just two months before the 50th anniversary of the failed uprising against Chinese rule that resulted in the Dalai Lama's flight into exile – suggested it was meant to intimidate residents.

The centre of Lhasa has been under heavy paramilitary security since last year's violent riots, in which at least 18 people were killed.

The violence broke out following a clampdown on peaceful protests to mark the 10 March anniversary of the rebellion.

According to the Tibetan Daily, the public security bureau in Lhasa began its campaign on 18 January with raids on residential areas, hotels, guesthouses, internet cafes and bars.

By Saturday, officers had detained 30 people for robbery, prostitution, theft and having "reactionary music" – probably songs praising the Dalai Lama – on their phones.

Another 51 people were arrested for unspecified activities.

Calls to the Lhasa government office went unanswered and an employee at the public security bureau told the Associated Press the office was not authorised to speak to the media.

Tibet campaign groups quoted an earlier report in the Lhasa Evening News as saying that 5,766 people had been checked in a campaign focusing on high crime areas, those used by a floating population and places of "filth and iniquity".

It added: "Fugitives in crimes involving guns and explosives, murder, theft and robbery were arrested, with a total of 66 suspects detained on suspicion of theft, burglary, prostitution and having reactionary opinions."

The newspaper's website could not be accessed today.

China first introduced "strike hard" campaigns against crime and corruption in 1983, concerned that offences were soaring in the wake of economic reforms.

The authorities have used them periodically since, often in the run-up to major events, and punishments meted out can include lengthy jail sentences and the death penalty.

"With unprecedented levels of security already in place throughout Tibet, this latest campaign appears to be intended to intimidate Tibetans still further in the build-up to the Tibetan new year in late February, the 50th anniversary period of the March '59 uprising and the Dalai Lama's flight to India, when the authorities fear further unrest," the International Campaign for Tibet said in a statement.

In December, Chinese state media reported that the authorities in Tibet had detained 59 people suspected of disseminating rumours inciting ethnic tension and were cracking down on illegal downloads of "reactionary music".

China Tells Obama What to Do With His Yuan Views

By William Pesek
Jan. 28 (Bloomberg) -- China took Barack Obama’s views on the yuan seriously. So seriously that it is doing the exact opposite of what the U.S. president would like.

China let the yuan fall the most in a month on Jan. 23, right after Timothy Geithner, Obama’s pick for Treasury secretary, relayed Obama’s campaign position that China was “manipulating” its currency. The reaction was China’s way of telling the new U.S. leader what he can do with his foreign-exchange views.

What should currency traders do now? Is a trade war brewing between the world’s No. 1 and No. 3 economies? Is the yuan about to strengthen? Will Obama risk the ire of the most populous nation to make good on his protectionist campaign-trail rhetoric? Perhaps the answer is for everyone to relax.

Yes, China manipulates its currency. Arguably, so do Singapore, Argentina, Saudi Arabia and any nation that either pegs its currency, maintains a tight trading band or oversees a “managed float” system. Even Hong Kong, routinely ranked as the world’s freest economy by the Heritage Foundation, manipulates its currency. It has to maintain its link to the U.S. dollar.

“Manipulate” is a charged word, and it’s politically incorrect in financial circles. 

And yet it was hard to keep a straight face when a Commerce Ministry official argued on Jan. 24 that “China has never tried to gain advantage in international trade by manipulating its currency.”

Pre-2008 Thinking

That’s no longer the point and Obama’s China views seem very much of the pre-2008 variety. Before the U.S. dragged down the global economy, it was possible to give China grief about the yuan. It was fine to argue China’s policies contributed to global instability. Now, it’s about avoiding a Chinese meltdown.

With the exception of personal tax decisions, Geithner is smart. He’s an old Asia hand, having lived in China, India, Japan and Thailand and studied Mandarin and Japanese. There’s zero chance he hasn’t conveyed to Obama the importance that China puts on social stability and the yuan’s role in maintaining it.

It’s hard to believe that Geithner hasn’t stressed the dangers of a trade war with the largest holder of U.S. government debt. 

Federal Reserve Chairman Ben Bernanke, a Great Depression scholar, is sure to advise against policies that inhibit growth. Until further notice, consider the Obama administration’s trade ideas more rhetoric than a harbinger of provocative policy steps.

Currency Manipulator

“U.S. interests lie in an economically strong China,” says Marc Chandler, head of currency strategy at Brown Brothers Harriman & Co. in New York. 

“The U.S.’s and indeed the world’s problems would be aggravated by upsetting the proverbial apple cart and risking a recriminating trade war, beggar-thy-neighbor policies, and a sharper slowdown in the Chinese economy.”

The currency-manipulator label is rather toothless anyway. 

The administration of former President George W. Bush avoided it so as not to antagonize China. Yet China didn’t let the yuan gain 21% between July 2005 -- when China scrapped its dollar peg -- and July 2008 because the U.S. demanded it. China did it because it was best for China.

The global slowdown means the yuan will probably end 2009 weaker than it started the year. There’s also a be-careful-what-you-wish-for angle here: If China tomorrow let the yuan trade freely in markets, it’s more likely to drop in value than surge. So-called hot money may flee, global companies may repatriate profits and Chinese savers might buy overseas assets.

Asking Questions

One can hope Obama is employing a broader strategy with his yuan views: Sending a message that Asian countries whose rapid growth relies on weak exchange rates need to reconsider their economic models, as the U.S. needs to do with its own.

The argument’s thrust, says Ray Attrill, Sydney-based global research director at Forecast Ltd., is that “the ultimate resolution of the current financial and economic crisis requires a global rebalancing entailing much stronger internal demand dynamics.” The U.S., of course, needs to consume less.

U.S. officials should ask questions of China. It remains big on spin, small on transparency. China’s aggressive policing of the Internet and lack of respect for international property rights inhibit innovation, grass-roots job creation and economic growth. Corruption and pollution are clear dangers to the outlook.

Obama’s ideas remind one of a key argument in James Fallows’s recent book “Postcards From Tomorrow Square: Reports From China”: The U.S. obsession with the yuan underlines a failure of imagination. Yes, an undervalued currency helps China, but it’s not the only reason for the nation’s export prowess.

Lax labor, environmental and safety standards have as much to do with China being the so-called factory floor of the world as anything else. Now that the global economy is grinding to a halt, China will be spending unprecedented amounts of public money and doing all it can to stabilize things.

Anyone who thinks China is about to let its currency strengthen is dreaming. That goes for the U.S. president, too.

US Senators to await Obama lead on China currency

By Doug Palmer and Susan Cornwell
WASHINGTON(Reuters) - Two leading Senate critics of China's currency policy said they would give President Barack Obama time to persuade Beijing to move faster to a market-based exchange rate before pushing for legislation.

"If the countries can work out a voluntary program, that would be better than legislation, but if that doesn't work we'll have to do something, do legislation," Senator Lindsey Graham, a South Carolina Republican, told Reuters.

Graham and Senator Charles Schumer, a New York Democrat, were authors of a 2005 bill threatening China with a 27.5% tariff on its exports to the United States unless it raised the value of its currency against the dollar.

Although they eventually abandoned that effort, they have remained vocal on China currency issues which have been a sore spot in U.S.-Sino relations for years.

U.S. manufacturers, labor groups and lawmakers from both parties complain China deliberately undervalues it currency to give its goods a price advantage in world trade.

Schumer told Reuters in an e-mailed statement he was heartened when U.S. Treasury Secretary Timothy Geithner said last week that China was "manipulating" its currency -- using a term the Bush administration had deliberately avoided.

Geithner's comment raised expectation the Obama administration would formally label China a currency manipulator in a Treasury Department report in April.

"Because the administration came out of the box very quickly, we have real hope that they will do this on their own, which would be a lot easier and quicker than enacting legislation. So we will wait for them to issue their report this spring," Schumer said.

The White House has hedged Geithner's comments by noting it was not an official "determination," even though it echoed words Obama used during last year's campaign.

Senate Finance Committee Chairman Max Baucus, a Montana Democrat whose committee has jurisdiction over trade legislation, told Reuters in an e-mailed statement he looked forward to working with the Obama administration to craft a "plan of action" on China's currency.

"Given the precarious state of the global economy, both China and the United States must be thoughtful and prudent in how we address this issue. Failing to do so could create new economic problems that neither country can afford," he said.

Helen Popper, economics professor at Santa Clara University in California, said the wisest course for the Obama administration would be to focus on reviving global demand by encouraging China to move forward with plans to stimulate its economy while the United States does the same.

"Sure, you can say they're manipulating. But it's really a big falsehood to look at just that tiny piece of the picture because you're ignoring the fact that they are subsidizing our ability to continually borrow.

"And right now, our ability to continually borrow is all we have to support a fiscal stimulus," Popper said.

Last year, China overtook Japan as the largest foreign holder of U.S. government debt and held $681.9 billion in U.S. Treasuries as of November. With United States having to issue new debt to fund an expected $825 million economic stimulus package, China's holding could grow even further.

Demand by China and other foreign borrowers for U.S. debt keeps interest rates low, holding down long-term costs for the United States, Popper said.

Protecting the renminbi makes no economic sense

From Prof Arthur Waldron
Sir, Tim Geithner, the US Treasury secretary designate, is absolutely right to point out that China's manipulation of its currency creates a significant inequity in world trade. 

I encourage him to stand by what he has said, criticism notwithstanding, for it is no more than the simple truth.

I say this because China's economy is still majority state-owned. Most of the state sector is inefficient, depending for support on politically directed bank loans and state investments. (The private sector, which accounts disproportionately for growth and exports, is quite different.) Were capital competitively available to all Chinese enterprises, the private-owned would eventually drive the public-owned out of the market. 

Hence the unequal subsidies, lack of market for corporate control, large overhangs of non-traded government-held stock, regulatory caprice and other irregularities in the huge economic conglomerate that is owned by the Chinese state (with no intention to privatise).

Domestically, facing a crisis like today's, China's government does not hesitate to pour subsidies into failing enterprises, the only difference being that our expiring companies are private, while China's -- airlines are a good example -- are state-owned. The private sector fends for itself.

Bear in mind, however, that perhaps 40% of China's economy (statistics are notoriously unreliable) depends on exports (of which half are estimated to be produced by private and foreign-invested companies). 

Here is where currency manipulation comes in: goods that are inefficiently produced, and which would lose market share to private companies if China's domestic markets were fair, can be made competitive internationally if the exchange rate is kept low enough (this of course benefits efficient producers as well). This devaluation effect works only internationally, but China is over-reliant on foreign trade, so it is crucial.

Normally, internal and international markets would punish inefficient producers, but in the case of China discriminatory credit policy against the private sector at home keeps the state in business, while abroad currency manipulation conceals inefficiencies by lowering export prices to the point that they no longer matter.

An international conviction that China is so big and important that certain rules of the economic road, free exchange rates for example, should be waived in order to bring Beijing into the economic community has by now existed so long that special treatment has come to be expected by China and instinctively offered by its trading partners. 

Now, however, with every economy struggling to stay afloat, such discrimination no longer makes sense, if it ever did. 

Let us hope that Mr Geithner, his president and his colleagues will have the fortitude to see their policies through, in spite of the barrage of misguided criticism and rationalisation that has already begun.

China Is Susceptible To Currency Pressure

By Gordon G. Chang
On Saturday, Beijing expressed its displeasure with the Obama administration, calling its criticisms of China's currency policies "untrue and misleading."

"We should avoid any excuse that might lead to the revitalization of trade protectionism," said Su Ning of the People's Bank of China, the country's central bank. 

"Directing unsubstantiated criticism at China on the exchange-rate issue will only help U.S. protectionism and will not help toward a real solution to the issue," blasted the Ministry of Commerce.

Beijing's coordinated attacks were directed at U.S. Treasury Secretary Timothy Geithner. "China is manipulating its currency," he stated in written responses to the Senate Finance Committee during his confirmation proceedings, summarizing the new president's views. "President Obama has pledged as president to use aggressively all the diplomatic avenues open to him to seek change in China's currency practices."

As the The Economist pointed out, "Mr. Geithner's language suggests a change in Washington's tactics towards China." 

Former Treasury Secretary Henry Paulson and his predecessors had worked behind the scenes to persuade Beijing to change its currency practices, but they were not especially successful over the last eight years.

The Bush administration, however, never cited China as a currency manipulator in any of its twice-yearly reports to Congress mandated by the Trade Act of 1988. Doing so would have required Treasury to open formal negotiations with China on the issue.

Today, Beijing actively intervenes in its market so that the renminbi hits a target in the middle of a tight band, and it does so to give an advantage to its exporters. 

Western commentators, however, have criticized Geithner for complaining about China's currency practices, and the market reacted negatively to his comments on manipulation. 

In fact, news of his statement momentarily moved the market for U.S. Treasuries. 

"The stakes are extremely high," The Economist warned.

They are. 

Yet Geithner did the right thing. 

As an initial matter, China is indeed manipulating its currency. 

The Bush administration's failure to confront Beijing surely emboldened Chinese officials and made it harder to persuade them to take steps in everyone's interest. 

Worse, the Bush approach helped spur protectionist sentiment in Congress, which perceived the White House to be ineffective on this matter.

Nonetheless, Bush's policy still has many fans. For one thing, everyone seems to worry about the "prickly" Chinese and how they will react to Geithner's words. 

Yet Beijing's leaders are not little children. On the contrary, they are ruthlessly pragmatic. And despite what some in Washington may think, they respond to pressure just like Americans -- and like everyone else on the planet.

At this moment, Chinese leaders are especially vulnerable to outside influence. 

Last week, Beijing's National Bureau of Statistics announced that the Chinese economy grew 6.8% in the fourth quarter of last year. The number, however, was undoubtedly inflated. Growth was actually probably closer to 1%, and some analysts make the case that the economy actually contracted in December. 

No economy is decelerating at a faster pace (growth in 2007 was a spectacular 13% and fell every quarter last year).

A large reason for the precipitous decline in economic activity is that China's exports, a mainstay of the economy, are dropping rapidly as the global economy tumbles. Beijing's reaction has been to bolster its exporters; its major tool for accomplishing this goal was -- and remains --intervention in its domestic market to fix the value of the renminbi.

President Obama's insight is that now is the time to act on Chinese currency practices, as Beijing has never needed its trade partners more. 

The problem for American negotiators, however, is that China never promised to let its currency float. Beijing is entirely within its rights to influence, manipulate, rig or fix currency values, and it is unlikely that Washington can devise retaliatory measures that are not themselves violations of America's trade commitments, especially those spelled out in the rules of the World Trade Organization.

If President Obama is to get the Chinese to do the right thing, he will have to offer them something they want. Fortunately, there is a lot they need at this moment.

The real risk for the U.S., however, is that Beijing will take too long to bring its currency practices in line with those of its trading partners. 

Asian nations are already depressing the value of their currencies to make their exports more competitive with China's. 

In the Great Depression, nations engaged in a tariff war that prolonged the downturn and made it deeper. This time, the beggar-thy-neighbor competition looks like it will be over currency.

So all of us have a lot riding on this matter. And the first thing we have to do is learn that criticizing protectionism is not itself protectionism.

Clinton signals broader focus on Beijing

By Daniel Dombey and Alan Beattie in Washington
Hillary Clinton, secretary of state, yesterday highlighted a shift by the Obama administration from previous US policy on China as she endorsed a "comprehensive" approach to Beijing that would focus on more than just economic ties.

In comments that also indicated her interest in taking a leading role on relations with China, Mrs Clinton faulted the Bush administration for its approach, which was largely left in the hands of Hank Paulson, the former Treasury secretary.

"The strategic dialogue that was begun in the Bush administration turned into an economic dialogue and that's a very important aspect of our relationship with China, but it is not the only aspect of our relationship," she told journalists.

"So we're going to be working together in the government... to design a more comprehensive ap-proach that we think will be more in keeping with the important role that China is playing and will be playing."

Her comments came after Tim Geithner, the newly confirmed Treasury secretary, used a politically loaded word - "manipulating" -- to describe China's management of its exchange rate.

His remarks, in testimony to the US Senate, were widely seen as an early signal of the Obama administration's intention to increase pressure on Beijing over economic issues.

In her own testimony to the Senate, Mrs Clinton argued that US "economic policy towards China has to be co-ordinated with our foreign policy". 

She added that while the US wanted a relationship with Beijing "where we deepen and strengthen our ties... and manage our differences where they persist... this is not a one-way effort".

Her testimony listed both the US's desire to work with Beijing on "common challenges like climate change and nuclear proliferation" and its goals for China to become "a more open and market-based society".

Former Bush administration officials argue US diplomatic co-operation with China has intensified in recent years, particularly over the six-party talks on North Korea's nuclear programme. Mrs Clinton yesterday labelled those talks "essential" while stressing the importance of bilateral contacts with Pyongyang.

The White House has tried to calm speculation that it intends formally to name China as a currency manipulator in its twice-yearly report on exchange rates, due in the spring. 

Robert Gibbs, White House spokesman, said on Monday that Mr Geithner was merely repeating what Mr Obama had said in the election campaign and that no decision had yet been made about formally naming China.

In his confirmation hearings, Mr Geithner added the US needed to engage China on a range of economic issues and carefully choose the best means of doing so.

Taking a Stand: Jimmy Lai

By Fergal Keane 
BBC Radio 4's Taking a Stand profiles people who have taken risks and made sacrifices to stand up for what they believe in. Fergal Keane met Hong Kong-based tycoon Jimmy Lai to discuss his pro-democracy campaigning and criticism of the Chinese government.
It's a part of the world where, quite often, the wealthier you are the closer you are to those in power.

In China, and its special administrative region of Hong Kong, business tycoons don't make a habit of taking a stand for free speech and human rights. But there is one very loud exception.

Having made a fortune from his clothing empire, Jimmy Lai could have taken the traditional route for a local tycoon: expanding his businesses in China and winning favoured status in the offices of the powerful.

Instead he decided to confront China over human rights.

Now as the owner of a highly profitable newspaper business based in Hong Kong and Taiwan he remains a sharp critic of the Communist Party. His political coming of age happened during the pro-democracy protests in Tiananmen Square in 1989.

"I was very hopeful that China was going into political restructuring and I was very excited and I was very depressed and very hurt when they crashed into Tiananmen Square and killed those students.

"I was in Hong Kong but I was watching the news, I was participating, I was paying money. I was very involved. It was a very emotional moment. From then on I said, look, I'm going to fight".

Lai's response to Tiananmen was to level a notorious insult at the then Prime Minister, Li Peng, whom he described as a "turtle's egg" with zero IQ.

Li was seen at the time as the architect of the crackdown. The reference to a turtle's egg has a particularly unpleasant resonance for Chinese people.

"It's very insulting words for a Chinese to say but at that time I was 20 years younger -- I was more impulsive then.

"I don't regret what I did and what I said, but I paid a price for it," he recalls.

The student protests in Tiananmen Square in 1989 inspired Jimmy Lai

Forced to sell-up

He estimates that the resulting controversy cost him many millions in lost sales and business opportunities.

It began with him having to close a factory and sell his majority stake in the clothing firm he founded. But China wanted him out completely.

"We had shops in China, we already closed the factory and I already sold my share under 50%, so I thought I'm not the majority.

"One day I was in Paris, the CEO then called me and said 'look Jimmy, ultimatum, you have to sell your stock in three days otherwise they will close all the shops'.

"But if they close all the shops Giordano was dead because without China, as a public company we are dead. So I did nothing I said 'look, sell it' so I just authorised my CEO and in three days I was out."

These days the Chinese government tends to ignore Jimmy Lai.

He has been a beneficiary of the largely hands-off approach Beijing is taking towards Hong Kong. Although when China attempted to introduce strict security laws, Lai joined the many thousands who protested.

China ultimately backed down. He is convinced democracy will eventually come to Hong Kong.

"Yes, I'm sure. One day it will have to. China cannot be isolated with the world. If China has to trade with the world so closely, China has to be compatible.

"But China cannot be compatible if it doesn't share the same value of the world, and the dominant value of the world is democracy."

It doesn't involve any deep delving to discover what drives the pro-democracy passion of Jimmy Lai.

As it happens he wasn't born in Hong Kong but only arrived there when he was 12 years old, smuggled on a boat from China. His family escaping Chairman Mao's Cultural Revolution.

Lai worked in a local factory as a child labourer and worked his way gradually upwards until he established his clothing brand, Giordano.

The then British-ruled colony of Hong Kong, the boisterous capital of Asian capitalism, made Jimmy Lai rich but also politically aware.

"It's like a very heavy load has been laid from my heart. The moment you feel freedom, it's a high I never had again.

"I came to this place when I was 12 with one dollar, and this place has made me what I am and the only way to pay back is just to do what is right: to pursue democracy.

"I think it's something I should do to pay back to a society which has been so good to me."

Lai has been criticised by those who feel that engagement rather than criticism is the way to deal with China. And not all of his business ventures have succeeded, for example an online shopping site failed with substantial losses.

He also roused the ire of the Triad-organised crime gangs in Hong Kong and Taiwan when his newspapers started reporting on their activities. But Jimmy Lai is unrepentant.

"I'm very happy because, you know, I'm rich enough. I need some meaning to live and fight.

"You know, fighting for freedom, for democracy is a great thing for me to feel. I'm just 60, I still need a lot of meaning to live my life."

IMF chief turns up heat on China over yuan

By Gary Duncan
The head of the International Monetary Fund turned up the heat on China over its exchange rate policies yesterday, arguing that it was clear that the Chinese yuan was “significantly undervalued”.

Dominique Strauss-Kahn, the IMF’s managing director, said that it was in Beijing’s clear interest to allow the yuan to strengthen on foreign exchanges and insisted that the fund had been straightforward on the issue and had repeatedly spelled out this assessment.

Mr Strauss-Kahn’s intervention stepped up pressure on China over its currency only days after Tim Geithner, who was last night confirmed as President Obama’s Treasury Secretary by the US Senate, sent a tremor through markets as he signalled a potential shift to a harder line from Washington over the yuan.

In an unexpectedly tough swipe at Beijing, Mr Geithner said that Mr Obama believed that the Chinese authorities were manipulating their currency by intervening to artificially keep it cheap against the dollar, making China’s exports more competitive.

Robert Gibbs, the White House press secretary, confirmed yesterday that the US Treasury would reach a formal conclusion during the spring on whether to officially designate China as a currency manipulator — a verdict that it is required by law to give annually on America’s trading partners. 

No decision had yet been taken, the White House emphasised.

Although there is no question over the scale of Chinese intervention to prevent the yuan rising, the Bush Administration avoided branding Beijing in this way, for fear of inflaming the economic relationship with China.

The IMF has been criticised for failing to press China hard enough over the valuation of its currency in a way that might have encouraged Beijing to address the issue and help to avoid a confrontation with the United States.

After China hit back at Mr Geithner’s comments on Sunday, with its Xinhua news agency criticising the remarks as misplaced and unfair, Mr Strauss-Kahn said that it was not useful for America to be drawn into a squabble with China.

He said: “We need the Chinese to change their policy, try to have less export-led growth, shifting to more domestic-led growth. That is the result we want to achieve. The facts are clear, the [yuan] is undervalued and really significantly undervalued. And the point is, how do we move to attain something from China?”

White House Aims to Defuse Furor Over China's Yuan Policy

By TOM BARKLEY and HENRY PULIZZI
WASHINGTON -- The White House tried to play down criticism of China's currency policies by Timothy Geithner, President Barack Obama's nominee to be Treasury secretary.

The White House, noting it wants to establish a "comprehensive" economic relationship with China, said it won't make a determination about that country's currency until Treasury provides a report to Congress in the spring.

White House Spokesman Robert Gibbs avoided repeating the view of Timothy Geithner, who said in written testimony for his confirmation hearings that President Obama, "backed by the conclusions of a broad range of economists -- believes that China is manipulating its currency." Though the U.S. has long pushed China to move to a market-based system for managing the yuan, it has resisted officially branding Beijing a manipulator.

Over the weekend, a top official in China's central bank, alluding to Mr. Geithner's comments, said the charge that Beijing manipulates its currency was inaccurate and implied there were bigger issues to address in the global financial crisis.

"In recent days persons in a Western country have said 'China is manipulating the yuan exchange rate,'" People's Bank of China Vice Governor Su Ning said, according to a report Saturday by the state-controlled Xinhua news agency. "These remarks are not only inconsistent with the facts, but they are misleading about the reasons for the financial crisis."

On Monday, the International Monetary Fund's managing director said China's currency is "significantly undervalued" and the country's economy should become less driven by exports.

"We need that the Chinese change their policy, try to have less export-led growth, shifting to domestic-led growth," IMF chief Dominique Strauss-Kahn said.

During a panel discussion at Georgetown University, Mr. Strauss-Kahn said labels like currency manipulation aren't the point; rather, it is that China's economy become more balanced.

Many Chinese officials are convinced it's in their best interest to rebalance their economy, Mr. Strauss-Kahn said. But with the global economy "collapsing," the main concern is to support growth rather than deal with the longer-term imbalances, he added.

Mr. Strauss-Kahn said he is surprised the global financial crisis hasn't hurt the value of the dollar and noted that while stimulus is an important part of economic recovery, the main priority is to restore the global financial system.

Sino-American soundings

By Richard Halloran
Buried in Secretary of State Hillary Clinton's testimony in her confirmation hearing before Congress two weeks ago was a subtle challenge to China wrapped in an evident preface to President Barack Obama's emerging policy toward Beijing.

Shortly after, and almost as if on cue, China's leaders published a white paper on defense that pointed warily to what they saw as an increase in American power in Asia. The United States, the white paper said, has been "consolidating its military alliances, adjusting its military deployment, and enhancing its military capabilities" in the Asia-Pacific region.

Mrs. Clinton, who was confirmed as secretary the day after President Obama's Inauguration, told the Senate Foreign Relations Committee: "We want a positive and cooperative relationship with China." 

She added, however, that "this is not a one-way effort. Much of what we will do depends on the choices China makes about its future at home and abroad."

In a written report, Mrs. Clinton answered earlier questions from the committee and elaborated on what the United States expects: "We can encourage them to become a full and responsible participant in the international community -- to join the world in addressing common challengers like climate change and nuclear proliferation -- and to make greater progress toward a more open and market-based society. But it is ultimately up to them."

An interesting sequence here: On Jan. 8, Deputy Secretary of State John Negroponte was in Beijing to mark 30 years of Sino-U.S. diplomatic relations but evidently was not informed of the forthcoming white paper, which took months to prepare. 

On Jan. 13, Mrs. Clinton testified and her written report was made public. On Jan. 20, the Chinese released their white paper, the same day President Obama took office.

In substance, Mrs. Clinton's testimony suggested President Obama's policy toward China would continue that of President Bush. But the firm tone, challenging China to respond without ambiguity, was new.

Mrs. Clinton was noncommittal on dialogue with Beijing, saying in her written report: "We are looking carefully at the question of how to develop this important engagement with China. We expect high-level engagement to continue in some form." 

The new secretary, however, was clear on the issues of Taiwan, Tibet and human rights in China.

On Taiwan, the self-governing island off the coast of China, Mrs. Clinton followed precedents set earlier. "The administration's policy will be to help Taiwan and China resolve their differences peacefully while making clear that any unilateral change in the status quo is unacceptable."

China's leaders have insisted Taiwan is part of China and have threatened to use force to capture the island, particularly if it declared independence. 

The former government of President Chen Shui-bian nudged Taiwan toward independence while the current government of President Ma Yong-jeou has pledged to maintain the status quo.

Mrs. Clinton said the new administration "will speak out for the human rights and religious freedom of the people of Tibet. If Tibetans are to live in harmony with the rest of China's people, their religion and culture must be respected. Tibet should enjoy genuine and meaningful autonomy."

Beyond Tibet, Mrs. Clinton said, the administration will "press China on our concerns about human rights at every opportunity and at all levels, publicly and privately, both through our mission in China and in Washington."

In response, China's white paper asserted: "Separatist forces working for 'Taiwan independence,' 'East Turkistan independence' and 'Tibet independence' pose threats to China's unity." East Turkestan refers to Muslim Uighurs in Xinjiang in western China. They are related to other Muslims in neighboring central Asia.

China, the defense paper contended "faces strategic maneuvers and containment from the outside." 

American presidents, secretaries of state and defense, commanders of U.S. Pacific forces, and U.S. ambassadors in Beijing have sought for much of the last 30 years to persuade Chinese leaders that the United States poses no threat -- apparently without success.

The white paper contends: "In particular, the United States continues to sell arms to Taiwan in violation of the principles established in the three Sino-U.S. joint communiques, causing serious harm to Sino-U.S. relations as well as peace and stability across the Taiwan Straits."

The three communiques, of 1972, 1979 and 1982 were intended to define relations between the United States and China but they have been in dispute from the beginning as the United States and China disagree on what they mean. 

The United States, for instance, says they call on China and Taiwan to settle their differences peaceably; the Chinese say they retain the right to employ military force to settle the dispute.

China cuts off foes to spite its face

By Francesco Sisci 
BEIJING - It could be a risky year for China's leadership, as the global financial crisis, a series of politically sensitive anniversaries and growing dissent raise fears of destabilization. The government has already acted swiftly in 2009 with a series of crackdowns designed to nip the threats in the bud. 
This year's troublesome anniversaries will be high on Beijing's agenda. On March 10 there is the 50th anniversary of the Tibet uprising, on April 25th the 10th anniversary of the Falungong protests and May 4 is the 90th anniversary of the pro-democracy student movement that started the cultural rebirth of China. 
The 20th anniversary of the crackdown on the Tiananmen movement is June 4, and the 60th anniversary of the foundation of the People's Republic is on October 1. Each of the events could easily be marked by anti-government protests. 
The domestic and international economic situation is another factor. It has put many jobs at risk, and a real or feared rise in unemployment could provide aspiring revolutionaries with motives for stirring unrest. This could make the overall situation extremely unstable. 
For this reason, the government has been swift to intervene. According to several human-rights organizations, over 100 dissenters are currently under surveillance for signing "Charter 08", a high-profile signature campaign calling for more freedoms and political reform. 
Dissident Wang Rongqing, who persisted in attempts to organize of a new political party, the Democratic Party, despite it being forbidden, was on January 7 sentenced to six years in prison. This could be seen as a warning to anyone hoping to found organizations which defy the monopoly of the Chinese Communist Party. 
One of the most influential blogs in China, Bullog.cn, which hosted the writings of many intellectuals and some of the signatories of Charter 08, has been shut down. No official reason was given, but one can guess that the government wants to limit the space of incendiary arguments at this particular moment. 
In a further Internet crackdown the government also launched a campaign to control popular online portals and major search engines such as Google and MSN purportedly to check against vulgar or pornographic content. 
For years, "instant messenger" programs such as those available through MSN have been efficient and anonymous instruments for passing subversive messages. The government may want to curb them in these delicate times as they could be used to organize protests and demonstrations. 
Then there are the thousands of people trying to file petitions and denunciations which are regularly withheld and blocked by the police and the authorities. 
China appears Janus-faced, with the government on the one hand promising democratization but on the other arresting and cruelly punishing anyone wanting to take advantage of this. It may appear heavy-handed, but there is method in the madness. 
The existence of Bullog.cn, the widespread use of Internet messengers and the activity of dissident intellectuals reveals a complex and fragile reality in China. Here, differing opinions have grown and are becoming more tolerated. However, at this sensitive time the government fears any dangerous spiral of domestic and international events that could shake the country. 
The terrorist attack in November, 2008, by Pakistan-linked terrorists in the Indian city of Mumbai set off alarm bells in Beijing.
"If that attack, even on a lower scale, had taken place in China, for example in Shanghai, where for instance 10 terrorists had fired at a crowd in Pudong, resulting in 10 casualties, the world's media would have cried that China was falling apart, that the country was collapsing, that the government was about to finish. These comments could have started internal reactions that could have triggered a potentially destabilizing inner-party clash," said a frustrated Chinese official. 
"Conversely, in India there was an unprecedented attack," the official said, "with hundreds of terrorists, 200 fatalities, the complicity of foreign intelligence agencies, but no one doubts the solidity of the country or the government in New Delhi. This objectively helps India to overcome this dangerous moment. Why does India get this preferential treatment from the international press and China doesn't?" 
"Are we so sure that China would be really destabilized by an attack greater than that of Mumbai? The Mao [Zedong] regime survived the tragedy of 30 million starved to death during the Great Leap Forward at the end of the 1950s, and immediately after, in 1962, it won a brief but violent war against India. Besides, the Chinese government now, according to several opinions polls, enjoys great popular support, perhaps unprecedented in the history of China." 
The Chinese fear then is not the real danger of social destabilization as much as a "loss of face" for its leadership in the foreign press. This "loss of face" could be dangerous in the complex and dark party politics of Beijing. 
The leaders fear the foreign media because China is unarmed -- its media, not free and on a short party leash, do not have the firepower or the credibility to counter the accusations of the foreign outlets. Paradoxically, the party, to defend itself, needs a free Chinese media that at times can criticize, but at other times it could voice the leaders' opinions. 
However, no such media freedoms are in sight, leaving only the old option: arrests, and the closing of blogs until similar ones appear and multiply. Intellectuals will escape control and sooner or later someone in China will decide to break the Gordian knot that could strangle China and its leadership. 

U.S. claims victory in WTO complaint on China piracy

WASHINGTON (Reuters) - The United States claimed victory on Monday in a groundbreaking World Trade Organization case against China for failing to protect and enforce copyrights and trademarks on a wide range of goods.
"Today, a WTO panel found that a number of deficiencies in China's IPR (Intellectual Property Rights) regime are incompatible with its WTO obligations," U.S. Trade Representative Peter Allgeier said in a statement.

"We will engage vigorously with China on appropriate corrective actions to ensure that U.S. rights holders obtain the benefits of this decision," Allgeier said.

Washington launched the dispute in 2007 out of frustration at rip-offs of films, branded goods and other trademarked property openly available in Chinese cities.

The International Intellectual Property Alliance, a coalition of U.S. music, movie, book and software industry groups, conservatively estimates that piracy in China costs them more than $3.7 billion in lost sales.

The United States persuaded the dispute settlement panel that China violated WTO rules by barring copyright protection for movies, music and books that have not been approved by state censors for legitimate sale, Allgeier said.

The panel also said it was "impermissible" for China to allow public auction of counterfeit goods seized by Chinese customs authorities, with only the requirement that the fake brand or trademark be removed from the good, Allgeier said.

The United States failed to persuade the WTO panel on one main point of its case: that Chinese copyright pirates and counterfeiters have no fear of criminal prosecution because the government's threshold for bringing a case is too high.

That was "disappointing," but the panel established a market-based analytical approach that should help WTO members avoid or resolve future disputes over obstacles to criminal enforcement of counterfeiting and piracy, Allgeier said.

Both the United States and China can appeal the panel ruling, the results of which leaked when a confidential preliminary report was released in October.

China's Year of the Ox not so bullish

 Chinese performers prepare to take part in the entertainment at a temple fair on Chinese New Year in Beijing, China, Monday, Jan. 26, 2009. Temple fairs opened across the city as Chinese celebrate the year of the Ox.

 Chinese worshipers burn incense at the Dong Yue temple on Chinese New Year in Beijing Monday, Jan. 26, 2009

By TINI TRAN 

BEIJING (AP) — China welcomed the arrival Monday of the Year of the Ox with fireworks-filled celebrations, but the country's economic worries have already cast the new year in a more sober light.

Millions of Chinese gave a boisterous farewell to a tumultuous 2008 marked by a massive earthquake, the Olympics and a global economic crisis.

But in a somber Lunar New Year greeting, China's finance minister warned that balancing the budget this year would be increasingly difficult, the official Xinhua News Agency reported.

Xie Xuren described external and internal factors affecting China's development as "very severe" and said more difficulties had to be overcome to achieve steady and relatively fast economic growth, according to a statement posted on the ministry's Web site.

He urged officials to avoid unnecessary spending this year, with local governments ordered to curtail car purchases, catering, meetings and overseas travel.

The Chinese New Year, which marks the start of the Spring Festival, is the country's most important holiday. It is generally celebrated with lavish spending on elaborate meals and exchanges of "hong bao," or red envelopes stuffed with money.

But at the capital's legendary Quanjude Peking Duck Restaurant, marketing manager Yang Jing said the financial downturn is already having an effect on traditional feasting.

"People are feeling it's harder to make money in the economic crisis, so now the customers are more picky about details like food quality and prices. It's not that easy to take even one penny out of their pockets," Yang said.

The country's economic outlook for 2009 has been dampened by the deepening global financial crisis, with China's 2008 annual growth down to a seven-year low of 9%. Thousands of factories have closed in China's export-driven southeast, and estimates of job losses exceed 2 million.

Communist leaders have worried publicly about rising tensions and possible unrest as laid-off workers stream back to their hometowns. They have promised to create new jobs and are pressing employers to avoid more layoffs.

The State Council, China's Cabinet, announced measures Sunday to help college graduates find jobs, pledging to train 1 million unemployed graduates over the next three years to boost their qualifications.

Despite the grim forecast for the new year, merchants in the capital said fireworks sales were up 28% from last year, with some 230,000 fireworks packages sold by Sunday, Xinhua reported.

Meanwhile, a quirky challenge to state television's flashy Lunar New Year gala was dropped by Web sites and ended up only being broadcast by a satellite station with limited coverage in China, the show's organizer said.

Shi Mengqi had designed his show — which was to feature human beatbox rappers and bicycle stunts — as a grass-roots, laid-back alternative to its propaganda-laden competition.

Shi, a wedding planner who produces his own online TV shows, said he was in talks with eight or nine Chinese Web sites to broadcast his New Year show on Sunday night, but all of them backed out, claiming they were warned not to carry the program. 

He declined to identify the Web sites and said he didn't know who warned them.

China comments not a "determination" -- White House

WASHINGTON, Jan 26 (Reuters) - U.S. Treasury Secretary-designate Timothy Geithner was not making a formal finding last week when he told senators China was manipulating its currency, a White House official said on Monday.
"Mr. Geithner was restating what the president had said during the campaign, not making any determinations," White House spokesman Robert Gibbs told reporters.

Beijing has bristled at the suggestion it is manipulating its currency for a trade advantage and raised concern it could become a pretext for U.S. efforts to keep out its goods.

By using the term in written response to Senate Finance Committee question, Geithner broke a taboo of the Bush administration and increased expectations that the United States would formally cite China for currency manipulation in a semi-annual report due out in April.

But Gibbs indicated it was still an open question whether the Obama administration would cite China or not.

"Every administration since 1989 has had to make a determination about currency each spring... I think it's safe to say that this administration, like the others, will determine in the spring what that means," Gibbs said.

"We have to take a comprehensive approach to enhancing our economic relationship with China, including the currency issue," Gibbs said

No Growth In China?

By George Wehrfritz
At face value, China's latest GDP numbers look impressive. Official figures released last week show that the world's fastest-growing major economy expanded 6.8% last quarter and 9% during all of 2008. Not double digits, but hefty in the context of global recession.

But is that the true picture? 

China tabulates growth figures on a year-on-year basis, meaning that last quarter's output was 6.8% larger than over the final quarter of 2007. 

Yet in the world's two largest economies, the United States and Japan, growth is tallied sequentially by comparing one quarter's growth with that of the previous quarter. And by that measure, China's numbers fall hard. 

In sequential terms, Goldman Sachs calculates that China's economy expanded by just 2.6% in the last three months of 2008, and according to Morgan Stanley's math it actually shrank by 0.5%.

The competing methodologies matter very much going forward. 

Beijing has pledged to spend some $586 billion to prevent GDP growth from falling below 8% in 2009, but because "sequential [data] is closer to a real-time gauge of what is likely to happen in the future," as Stephen Roach, the head of Morgan Stanley Asia, puts it, "it ended last year in a big hole relative to that target." 

China's has passed a critical inflection point on its path to a hard landing — even if the official statistics don't say so yet.

China Rejects Currency Manipulation Charge

By EDWARD WONG
BEIJING — The central bank of China on Saturday rejected an accusation by President Obama’s nominee for Treasury secretary that China was manipulating its currency to give it an unfair advantage in exporting goods to the United States and other markets.

The assertion was made by the nominee, Timothy F. Geithner, in written remarks to the Senate Finance Committee as part of his confirmation hearing. The remarks were in documents made public on Thursday.

“President Obama — backed by the conclusions of a broad range of economists — believes that China is manipulating its currency,” Mr. Geithner said.

Xinhua, the state news agency, reported Saturday that Su Ning, the deputy governor of the People’s Bank of China, the country’s central bank, said that Mr. Geithner’s accusation would sidetrack efforts to determine the real cause of the global financial crisis.

“Also, we should avoid any excuse that might lead to the revitalization of trade protectionism, because it will do no good in the fight against the crisis, nor will it help the healthy and stable development of the global economy,” Mr. Su said, according to Xinhua.

In 2005, the Chinese government ended a strict peg between the Chinese currency, called the renminbi or the yuan, and the American dollar. Since then, the yuan has floated in a narrow band against the dollar. The value of the currency is now 6.84 yuan to the dollar.

In the article on Saturday, Xinhua also quoted Zuo Xiaolei, a senior analyst with China Galaxy Securities, a Beijing-based financial company, as saying that Mr. Geithner may have been using his comment to feel out the Chinese government’s response.

In addition, Ms. Zuo told Xinhua that “the price advantage of Chinese exports may not be a result of currency issues, but the country’s lower costs of labor, resources and land.”

The global financial crisis has resulted in foreign companies placing fewer orders with exporters in China, leading to a severe downturn in the export industry. Chinese leaders now say the nation must move away from an economy so dependent on exports.

Saint Laurent Qing Art Sale Spurs China Legal Threat

By Le-Min Lim

Jan. 21 (Bloomberg) -- A planned Paris sale of two Qing Dynasty bronzes from the late French designer Yves Saint Laurent’s art collection is raising the ire of patriots in China who say they may sue auction house Christie’s International.

Liu Yang, who heads 67 volunteer lawyers, said the group is preparing a lawsuit to block the February sale of two animal-head sculptures -- a rabbit and a rat. They are among 700 works in the Yves Saint Laurent and Pierre Berge Collection expected to raise as much as 300 million euros ($389 million), according to a Christie’s statement from September. The proceeds will help set up a foundation for AIDS research.

“For each and every item in this collection there is a clear legal title,” Christie’s said in a statement e-mailed today in response to inquiries from Bloomberg News. “We strictly adhere to any and all local and international laws.”

Any lawsuit would be filed in the French courts, Liu said. The lawyers seek to block the sale first and ultimately to repatriate the items. The auction will be held at the Grand Palais.

The 1995 United Nations Unidroit Convention limits claims on stolen cultural artifacts to within 50 years of their theft.

All the bronze heads are among 12 zodiac animals from a water-clock fountain in Yuanmingyuan, or the Imperial Summer Palace. The palace was set ablaze and its treasures plundered and scattered by British and French troops in October 1860.

Sale of a tiger head from the same fountain in 2000 by Christie’s rival Sotheby’s sparked protests in Hong Kong initiated by the city’s lawmakers. The horse head was offered by Sotheby’s in September 2007, privately bought by Macau billionaire Stanley Ho for $8.9 million and donated to China.

Boar, Monkey, Ox

In 2003, Ho bought the fountain’s boar head at a private sale and donated it to Beijing’s Poly Museum, an arm of the People’s Liberation Army. Poly Museum also has the monkey and ox. Whereabouts of the others are unknown.

“These items belong to China and should return to us,” said Liu, in a phone interview. “Prices of these items have soared beyond the reach of civilians and governments.”

The State Administration of Cultural Heritage declined to comment. In a November interview that ran on Xinhua News Service’s Web Site, Cultural Heritage Administration’s head of museums, Song Xinchao, said the sale of the two bronze heads violates international laws and China firmly opposes the auction.

China will try to repatriate lost treasures “through legal channels,” Song had said, without giving details.

Opium War

More than 1 million pieces of top-grade Chinese relics are scattered in more than 200 museums in 47 nations, according to a 2003 article by state-run Xinhua News. Looting was at its worst in the century after the first Opium War (1839-1842), when British, Russians and other foreign troops annexed parts of China.

The chances of repatriating items lost during foreign countries invasion of China are “a long, complicated legal process,” said He Shuzhong, founder of Beijing Cultural Heritage Protection Center, a nongovernment organization. He is also an official at the Cultural Heritage Administration.

“We could spend our time and energy pursuing these lost relics, with little promise of return,” He said in a telephone interview. “Or we could move forward and focus on protecting the treasures we still have.”

Writers call for China dissident's release

BEIJING (Reuters) - An international writers' organization has called for the release of Chinese dissident Liu Xiaobo, detained after he helped write a pro-democracy manifesto.

Writers including Salman Rushdie, Margaret Atwood, Chinese novelist Ha Jin and Jung Chang, whose family autobiography "Wild Swans" was followed by a critical biography of Mao Zedong, were among the 300 who signed the call for Liu's release, writers group International PEN said on Wednesday.

Liu has been in detention since shortly before the December release of Charter 08, which was signed by 300 Chinese dissidents and intellectuals. It called for greater rights for Chinese, direct elections and political and fiscal reforms.

He is being detained at an undisclosed location outside of Beijing, under conditions known as residential surveillance, that would allow him to be kept for up to six months.

That means Liu could be in detention past June 4, the 20th anniversary of a bloody crackdown on pro-democracy protesters in and around Tiananmen Square. Liu was jailed for several years previously for his involvement in the 1989 protests.

Mention of Charter 08 is sponged from Chinese websites and chatrooms, but thousands of people have nonetheless forwarded the text or signed it online.

Other original signatories say they have been questioned repeatedly by police regarding the manifesto, their signatures, and Liu's role in its preparation. Only Liu has been detained for an extended period of time.

The investigation has focused on who actually signed the manifesto, while offering an opportunity for others whose names appear but who deny signing to recant.

Liu was allowed a New Year's Day lunch with his wife and two policeman, but has not otherwise been allowed to meet his lawyer or family. In principle, the detention terms allow him to do so.

"He was unshaven, and to me he looked a little thinner," Liu's wife, Liu Xia, said last week. "We could only really discuss family matters during lunch."