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10/12/2000

China Update, Part II

*IMPORTANT...with events in the Middle East such as they are, you
may want to check the archives, specifically, pieces I did on OPEC
(9/14) as well as the fate of Jerusalem (8/3 & 8/10). I will provide
more of an update next week, as well as in my usual commentary in
the 10/14 edition of Week in Review.
--Brian Trumbore. Noon, 10/12

As a follow-up to my piece of last week, on Tuesday, President
Clinton signed into law the legislation granting China permanent
normal trade relations (PNTR). Said Clinton:

"I guess I ought to point out that our work is not over when I
sign this bill. For China still must complete its W.T.O. accession
negotiations and live up to the agreements it has negotiated with
us and our partners."

In other words, China is already waffling on some of the trade
concessions it made to secure PNTR with the U.S. Charlene
Barshefsky, America''s trade representative, is now back in
Beijing to attempt to get the Chinese to see the light and go
through with their promises.

But, as we discussed last week, China is scared that an overhaul
of its industry as well as agriculture, inevitable byproducts of
PNTR and W.T.O. membership, would have a far greater impact
on the workers in China than originally estimated.

Senator Max Baucus commented on the sudden roadblock.

"The reality seems to be sinking in in China of what it is they
agreed to. This will be a test of their leadership, to go the next
step and persuade the powers that be there to implement this."

Talks are continuing to take place in Geneva, where the final
issues for W.T.O. admittance are being hammered out, including
the protocol for reducing tariffs, removing trade barriers,
rewriting regulations and adjudicating disputes. All of this, in the
words of the New York Times'' David Sanger, is for the purposes
of "translating China''s paper promises into reality before it
receives the prize of membership."

Yes, it''s cold feet time. Unrest in rural areas has long been a fact
of life and, now, as the population continues to shift into the
major cities, many of which are already dealing with massive
unemployment, the Communist government is unlikely to accept a
total restructuring of its archaic economy.

So, in the meantime, they will cheat and stall, hoping to still win
final W.T.O. membership. If they gain that, the W.T.O.
bureaucracy will undoubtedly enable them to obfuscate the
individual charges of unfair trade that will spring forth from the
international community. The government knows they have to
continue with their modernization program. But it''s all about that
thing called "rising expectations" that scares the hell out of them.

In Taiwan, newly elected President Chen Shui-bian has his own
problems. In office less than 5 months after his historic defeat of
the Nationalists, Chen saw his premier resign amidst a political
firestorm.

For more than five decades the Nationalist Party ruled Taiwan,
often with an iron fist, and it still has a majority in today''s
legislature.

Chen Shui-bian was elected, in part, because of his promise to
break the grip of "black gold;" the corrupt money politics that had
been the practice under the Nationalists.

But efforts to attack corruption while reforming the economy
have been continually blocked by the old guard and the business
elite. Chen has been unable to form alliances with opposition
lawmakers and he has seen his approval rating plummet from
77%, just after taking office, to 37% today.

The premier, Tang Fei, was forced to step down amid a fight over
the construction of a $5.5 billion nuclear power plant which is a
third complete. Chen and his party, the DPP, want the plant
dismantled. Tang, a Nationalist, insisted the project go ahead.
The whole debate has seriously impacted the stock market which
has been plunging to the tune of 30 percent.

As for the relationship between China and Taiwan, Chen has
failed to bring the two sides closer together. He had been a
stalwart for an independent Taiwan and the majority of the
electorate had assumed that because of this tough stance, Chen
would be the one to negotiate a peace treaty that respected the
independence of both. But China has used Taiwan''s new political
turmoil to drive a wedge between the hardliner Chen and the old
guard. Beijing''s leaders refuse to talk to Chen. Yet Communist
Party leaders welcome Taipei''s opposition party figures, thereby
hurting Chen''s credibility.

So Chen Shui-bian is, in essence, a lame duck after less than half a
year in office, though his term is safe for the full four years.
However, it could be a tumultuous period.

So here is how I see this situation evolving. China does not want
to get involved militarily if it can help it. While Beijing''s
leadership probably doesn''t think the U.S. would come to
Taiwan''s aid in the event of an attack, they may decide to wait
out Chen''s term in office, all the while building alliances with the
Nationalists and business leaders. Then, they can help ensure a
Nationalist comeback at the next election, cut a deal with the
businessmen which protects their interests...you know, expensive
houses, lavish staffs, and lots of girls...while Beijing takes a cut
of all business conducted on the island and doesn''t have to worry
about a bloody war. A silent coup. Or, score another triumph for
corruption.

Next week, the Balkans or the Middle East. Survey says? The
Middle East.

Sources: See Part I

Brian Trumbore


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-10/12/2000-      
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10/12/2000

China Update, Part II

*IMPORTANT...with events in the Middle East such as they are, you
may want to check the archives, specifically, pieces I did on OPEC
(9/14) as well as the fate of Jerusalem (8/3 & 8/10). I will provide
more of an update next week, as well as in my usual commentary in
the 10/14 edition of Week in Review.
--Brian Trumbore. Noon, 10/12

As a follow-up to my piece of last week, on Tuesday, President
Clinton signed into law the legislation granting China permanent
normal trade relations (PNTR). Said Clinton:

"I guess I ought to point out that our work is not over when I
sign this bill. For China still must complete its W.T.O. accession
negotiations and live up to the agreements it has negotiated with
us and our partners."

In other words, China is already waffling on some of the trade
concessions it made to secure PNTR with the U.S. Charlene
Barshefsky, America''s trade representative, is now back in
Beijing to attempt to get the Chinese to see the light and go
through with their promises.

But, as we discussed last week, China is scared that an overhaul
of its industry as well as agriculture, inevitable byproducts of
PNTR and W.T.O. membership, would have a far greater impact
on the workers in China than originally estimated.

Senator Max Baucus commented on the sudden roadblock.

"The reality seems to be sinking in in China of what it is they
agreed to. This will be a test of their leadership, to go the next
step and persuade the powers that be there to implement this."

Talks are continuing to take place in Geneva, where the final
issues for W.T.O. admittance are being hammered out, including
the protocol for reducing tariffs, removing trade barriers,
rewriting regulations and adjudicating disputes. All of this, in the
words of the New York Times'' David Sanger, is for the purposes
of "translating China''s paper promises into reality before it
receives the prize of membership."

Yes, it''s cold feet time. Unrest in rural areas has long been a fact
of life and, now, as the population continues to shift into the
major cities, many of which are already dealing with massive
unemployment, the Communist government is unlikely to accept a
total restructuring of its archaic economy.

So, in the meantime, they will cheat and stall, hoping to still win
final W.T.O. membership. If they gain that, the W.T.O.
bureaucracy will undoubtedly enable them to obfuscate the
individual charges of unfair trade that will spring forth from the
international community. The government knows they have to
continue with their modernization program. But it''s all about that
thing called "rising expectations" that scares the hell out of them.

In Taiwan, newly elected President Chen Shui-bian has his own
problems. In office less than 5 months after his historic defeat of
the Nationalists, Chen saw his premier resign amidst a political
firestorm.

For more than five decades the Nationalist Party ruled Taiwan,
often with an iron fist, and it still has a majority in today''s
legislature.

Chen Shui-bian was elected, in part, because of his promise to
break the grip of "black gold;" the corrupt money politics that had
been the practice under the Nationalists.

But efforts to attack corruption while reforming the economy
have been continually blocked by the old guard and the business
elite. Chen has been unable to form alliances with opposition
lawmakers and he has seen his approval rating plummet from
77%, just after taking office, to 37% today.

The premier, Tang Fei, was forced to step down amid a fight over
the construction of a $5.5 billion nuclear power plant which is a
third complete. Chen and his party, the DPP, want the plant
dismantled. Tang, a Nationalist, insisted the project go ahead.
The whole debate has seriously impacted the stock market which
has been plunging to the tune of 30 percent.

As for the relationship between China and Taiwan, Chen has
failed to bring the two sides closer together. He had been a
stalwart for an independent Taiwan and the majority of the
electorate had assumed that because of this tough stance, Chen
would be the one to negotiate a peace treaty that respected the
independence of both. But China has used Taiwan''s new political
turmoil to drive a wedge between the hardliner Chen and the old
guard. Beijing''s leaders refuse to talk to Chen. Yet Communist
Party leaders welcome Taipei''s opposition party figures, thereby
hurting Chen''s credibility.

So Chen Shui-bian is, in essence, a lame duck after less than half a
year in office, though his term is safe for the full four years.
However, it could be a tumultuous period.

So here is how I see this situation evolving. China does not want
to get involved militarily if it can help it. While Beijing''s
leadership probably doesn''t think the U.S. would come to
Taiwan''s aid in the event of an attack, they may decide to wait
out Chen''s term in office, all the while building alliances with the
Nationalists and business leaders. Then, they can help ensure a
Nationalist comeback at the next election, cut a deal with the
businessmen which protects their interests...you know, expensive
houses, lavish staffs, and lots of girls...while Beijing takes a cut
of all business conducted on the island and doesn''t have to worry
about a bloody war. A silent coup. Or, score another triumph for
corruption.

Next week, the Balkans or the Middle East. Survey says? The
Middle East.

Sources: See Part I

Brian Trumbore