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---"Focused Coverage Informed Perspectives"---Wed, Jan 7, 1998 edition

Anticipating Change considering social security, and political matrix in Guangdong to transform?

Also in this edition . . . 1: unrelenting market forces push Hang Seng down and down 2: seminar to address Fujian, Taiwan and Hongkong cooperation 3: Social Security Ministry under consideration 4: Beijing moves to reassert control, southern province to see mix up of political ranks 5: 'expert' says devaluation of renminbi not necessary 6: will the currency be devalued? 7: PRC cautions neighbors against island province bearing gifts 8: delegates say they will be permitted to visit Tibet 9: changes in logging operations designed to protect of primeval forests 10: Wang Xuexin appointed ambassador 11: President Lee leads delegation thru Hsinchu science park 12: Mayor Chen tells officials not to attend Council Q&A's 13: Taiwan's construction firms hope for piece of huge sub-contracting pie 14: NT dollar falls sharply 15: News Links galore on Bird Flu, Provisional Legislature, Pol Pot, floating Population and more . . .

HONGKONG

Economies: unrelenting market forces push Hang Seng down and down ( Regional woes hit HK ) As the South China Morning Post tells it: " . . . Hong Kong's stock market was caught in the maelstrom with the Hang Seng Index plunging 596.9 points, or 5.89 per cent, to 9,538.61. It was the biggest slump since the October crash last year. . . . " And as Simon Ogus, Head of Asian economics at SBC Warburg Dillon Reed, explains it: "This is no longer about hedging, but outright capital flight. In Indonesia and Malaysia people are selling the family house, business and car and simply getting out." Mainland shares also took a beating, and the falling Singapore dollar only drives Hongkong's currency down. . . . Integration: seminar to address Fujian, Taiwan and Hongkong cooperation ( SAR talks to boost regional ties ) One theme in Tung Chi-hwa's administration has been the strengthening of regional ties among Chinese communities. Shanghai has been one example; and now Fujian and Taiwan will be the topic of a seminar to be held in the SAR within the first half of the year. Sponsored by the Committee to Promote Economic Co-operation between Hongkong and Fujian, the seminar will consider how to promote cooperation and will discuss on-going economic turmoil in Asia. Fujian has been especially affected by it. "Apart from the seminar, another key task for the committee this year is to study six chosen topics to promote co-operation between the three areas and to formulate a development strategy for Fujian," writes the South China Morning Post.

CHINA

Society: Social Security Ministry under consideration ( Social security ministry planned ) Economic restructuring of state-owned enterprises will create unemployment and tough economic conditions for many. But equally profound will be the structural changes such reforms will force onto a society in which the role of an enterprise unit went far beyond providing a mere 'job' by offering health care, housing, and identities to its workers. A key task in restructuring the state-owned system will be to find substitutes for the various services these enterprises provided to their workers. According to the South China Morning Post the National People's Congress will take up debate in March on establishing a Social Security Ministry. The paper quotes a Beijing source: "Vice-Premier Zhu Rongji is strongly backing the proposal and determined to consolidate all the social security resources which are now scattered among the various ministries." "The task is spread between the Labour, Public Health and Civil Affairs ministries, the State Economic and Trade Commission, the State Planning Commission, State Commission for Restructuring Economy and mass organizations such as the All-China Women's Federation." "Under the plan, officials from relevant ministries would be transferred to the new body and social security funds would be centralised." "Social security is available in 275 mainland cities which are allocated funds to help more than two million residents." Guangdong: Beijing moves to reassert control, southern province to see mix up of political ranks ( Beijing to tighten grip on Guangdong ) Political power in China seems to move in an elliptical orbit fixed by two foci, one in Beijing and in Guangdong. Bordering on Hongkong the wealthy southern province has enjoyed the political power and leeway that money creates. Now, the central government is preparing to mix up the province's political matrix, substituting loyal Northerners into key cells. The South China Morning Post reports. . . Economics: 'expert' says devaluation of renminbi not necessary ( Renminbi worth world confidence despite turmoil: expert ) A piece in today's China Daily quotes an unnamed expert in financial matters who cautions against devaluing the renminbi, China's currency, despite the economic maladies spreading through Asia's markets. The article comes at a time when Beijing must decide how to face stiffening competition, as Southeast Asian currency devluations make their markets more competitive relative to China's market. China has built its economic boom on inexpensive exports to the US and other markets. According to the unnamed expert, price constitutes one aspect of China's competitive mix, because firms have 'sharpened' non-price competitivene elements. See also ( China Dismisses Charges its Currency Policy is Responsible for Asia's Monetary Woes ) Renminbi: will the currency be devalued? (source: Agence France-Presse) While mainland China has consistently ruled out a devaluation of the yuan despite the financial crisis gripping Asia, signs of depreciation are appearing as the currency hovers around a record high. While most Asian nations have reeled from savage attacks on their currencies, mainland China has stood firm, protected by a tightly controlled currency which can be converted only for trade and repatriation of profits. Three rounds of interest rate cuts since May 1996 have failed to rein in the yuan which soared to a 30-month high of 8.2788 to the dollar on Nov. 15 as demand for local currency to settle year-end accounts surged. It closed the year at 8.2796. The yuan was last devalued four years ago when mainland China unified its two-tiered currency exchange system, and the country's acknowledged "economic czar." Vice Premier Zhu Rongji, has said there would be no devaluation in the next two years. A prime argument for devaluation is to help mainland China's exports remain competitive while other currencies in the region nose-dive to record lows. But there are strong arguments against devaluation. Mainland China would not risk swelling its already huge trade surplus with the United States, which stood at US$45 billion in September, by flooding the US market with cheaper exports. Devaluation would also fuel inflation which the government has managed to check over the past three years and it would undermine Hong Kong's prosperity. "The present problem is not to devalue the renminbi (yuan) to stimulate exports but to maintain a stable exchange rate to control the high trade surplus," said Lian Ping, head of the Far East International Finance Institute of East China Normal University. Taiwan Aid: PRC cautions neighbors against island province bearing gifts (source: Reuters) Mainland China warned economically troubled Southeast Asia on Tuesday not to let wealthy Taiwan make political capital out of the region's distress. A foreign ministry spokesman issued the warning at a news briefing in response to a question about a visit this month to Singapore by ROC Vice President Lien Chan. The visit angered Beijing, which has sought to isolate Taiwan which it regards as part of its territory. Beijing fears Taipei will use financial assistance to the region as leverage to extract diplomatic gains. "Taiwan has been capitalizing on the temporary financial and economic difficulties of Southeast Asian countries to create activities," Shen Guofang said. "We warn some countries to be especially vigilant during their economic and financial difficulties to prevent Taiwan from taking advantage of this problem to create "two Chinas[base ']" or "one China, one Taiwan," sabotaging the relationship between China and those countries," he said. Taiwan's robust economy has emerged relatively unscathed from Asia's financial meltdown and is now in a good position to help its beleaguered neighbors, including Thailand, Malaysia and Indonesia. None of these countries has diplomatic relations with Taipei. ROC Foreign Minister Jason Hu on Monday formally extended a helping hand to the region. Taiwan media have reported the island's central bank had decided to dip into foreign exchange reserves worth US$83 billion and offer US$1.22 billion in low interest loans to Taiwan businessmen investing in Southeast Asia. The central bank has not confirmed the reports. Tibet: delegates say they will be permitted to visit Tibet ( US Delegates Say They'll Visit Tibet ) One agreement finalized during the Jiang-Clinton Summit gave permission for a delegation of religious leaders to investigate issues of religious freedom and persecution in China. According to the New York Times the delegation is gearing up for its February 8 departure, and as reported today part of the three week trip will be spent in Tibet. The White House said it has not received official confirmation from Beijing on this aspect of the itinerary, but it welcomed the decision to permit the delegates to inspect a region troubled by religious persecution. The decision also apparently reflects a new tact in China's government in dealing with the contentious human-rights issue. Permitting the delegates some sort of access to Tibet could provide a rather simple means to start a dialogue on an even keel. Over the years Beijing has permitted organizations into Tibet to investigate specific issues, including its policies toward Tibetans and non-Han ethnic groups; and the strategy has in some instances fostered positive impressions from people expecting to confirm their long-standing suspicions. Economic growth has been flourishing there, pumped up by substantial government investments in construction and commerce. Religious sites have been rebuilt, and religious activity permitted. But exactly how economic benefits are distributed, and political power shared between Han and non-Han peoples are important questions for evaluating change there. . . . Environment: changes in logging operations designed to protect of primeval forests ( Workers' jobs changing Logging quotas cut down ) Job descriptions for forestry workers will change as workers are beginning to "plant trees and develop diversified businesses," reports the China Daily. "The announcement was made during the closing ceremony of the National Forestry Planning Working Conference in Beijing. The project's main focus is to slash annual logging quotas, preserve natural resources, channel surplus workers into afforestation and other trades, and enhance the sector's efficiency," reports the paper. South Africa: Wang Xuexin appointed ambassador (source: Agence France-Presse) Mainland Chinese President Jiang Zemin Tuesday formally appointed Wang Xuexian as the country's first ambassador to South Africa, the official Xinhua news agency reported. Wang is a former director of the Chinese Center for South African Studies based in Johannesburg and a former diplomat at the United Nations in New York. The appointment follows the establishment of diplomatic ties between the two countries on Jan. 1, after South Africa switched its recognition of mainland China to Beijing from Taipei. politics: ( Activists demand right to seek office ) Should we be surprised? Political activists are not necessarily welcome to stand in elections for local and national legislatures. . . .

TAIWAN DESK

Technology: President Lee leads delegation thru Hsinchu science park (source: Central News Agency) President Lee Teng-hui lauded Taiwan's high-technology industries on Tuesday, saying that he expects to see sustainable prosperity in the sector continue through into the next century. A confident Lee even challenged leading manufacturers in the Hsinchu Science based Industrial Park, saying that Taiwan makers should have enough confidence in their own capabilities to consider buying out some of their South Korean counterparts at a time when that country's currency is facing the most trying period in its history, and some major industries there, including the high-tech sector, have been forced to freeze their expansion projects. Lee made the remarks while leading a group of 38 media executives on a fact-finding visit to the Hsinchu Science based Industrial Park to see a number of Taiwan's cutting-edge high-technology firms. Lee, flanked by Vice Premier Liu Chao-shuan, Economic Affairs Minister Wang Chih-kang and Hsinchu Science Park Administrator Wang Kung, first toured Mustek Ssytems Inc., a major scanner maker which has in recent years expanded its research and development to digital cameras. According to Mustek CEO Chen Wen-tsung, most of the company's products are made for export, with 80 percent of the total carrying Mustek's own brand names. The depreciation of the New Taiwan dollar, which dropped to some NT$33.7 to one US dollar on Tuesday, can only benefit export-oriented companies like Mustek, he said. Mustek and other Taiwan optical electronics firms stand a good chance of enjoying increasingly brisk growth on speculation that digital cameras will replace conventional cameras once and for all by the turn of the century, Chen told Lee. The president and his group then visited the Taiwan Semiconductor Manufacturing Corp. (TSMC), the largest silicon wafer foundry in the world, to familiarize themselves with the technology for making silicon wafers and microchips. At TSMC, the visitors were briefed on the firm's operations. Lee was interested in learning whether TSMC or other Taiwan silicon wafer manufacturers are targeting South Korea's DRAM makers for cross-border mergers, but was told such moves are unlikely, at least for the time being. After visiting TSMC, Lee and the media leaders turned to a third company in the Hsinchu Park, Accton Technology Corp., which is currently Asia's largest supplier of network system products. According to Accton President Doo Yi-min, the company, founded only 10 years ago, has been growing at an average of 35 percent annually over the last few years. With its annual turnover of network system products- including switches, hubs and adapter cards-shooting up from US$20 million in 1991 to over US$100 million in 1996, the company even posted an 80-percent growth in production and sales in 1997, scoring an annual turnover of nearly US$200 million. The proud Doo told Lee that he is confident that Accton will further show its prowess in its field by doubling its annual transactions in 1998. After visiting the Hsinchu Park, Lee and his group proceeded to Miaoli in central Taiwan, where they visited Giant Enterprise Co., one of the world's leading high-end bicycle manufacturers. Taipei Council: Mayor Chen tells officials not to attend Council Q&A's Taipei Mayor Chen Shui-bian has ordered municipal government officials not to attend City Council question-and-answer sessions in the wake of Monday's violent attack on transport officials by a council deputy. Mayor Chen's decision, announced yesterday by the city government's deputy secretary-general, Ma Yung-cheng, was expected to generate controversy in the Council, where none of the country's three major political parties enjoys a majority. The move came after independent Council deputy Li Cheng- lung punched, kicked and tossed objects at Bureau of Transportation Director Ho Chen-tan, four other transport officials and a fellow councilor during Monday's question-and-answer session. Li later got into a fist fight with another Council deputy, Chen Yung-teh, of the Kuomintang. Yesterday, Li's peers from all three parties continued criticizing his actions and referred him to the Council's Discipline Committee for punishment. KMT deputies advocated barring Li from attending Council meetings for three months, while the New Party wanted him barred fro a month. Deputies from Mayor Chen's Democratic Progresive Party wanted him ejected permanently. The Discipline Committee was set to discuss the issue and hand down a decision today. Three Gorges Dam: Taiwan's construction firms hope for piece of huge sub-contracting pie (source: Reuters) Taiwan construction firms, barred by their government from strategic projects in mainland China, nevertheless hope to win subcontracts on the world's biggest infrastructure project-the Three Gorges Dam. Tuesday's Economic Daily News quoted Pan Chun-lung, chairman of Taiwan's construction association, as saying that if all went to plan Taiwan and Singapore firms would sign a US$904-million Three Gorges subcontract sometime in 1998. Taipei has banned direct investment and trade with communist China since a civil war split both sides in 1949. Since the late 80s, Taipei has allowed a growing range of "indirect" mainland investments that must be routed through Hong Kong or other third places-but has resisted pressure to permit major strategic and infrastructure investments. Taipei explicitly bans even indirect investments in mainland China's energy sector as well as dams, harbors, airports and railways. Pan was quoted by the Economic Daily News as saying despite the restrictions he saw no problem for Taiwan firms to offer construction equipment, management technology and funds via firms in a third place. Taipei's Investment Commission, which supervises such mainland projects, said there was nothing illegal about Pan's plan to seek subcontractors for mainland infrastructure projects. Currency: NT dollar falls sharply The New Taiwan dollar, a pillar of strength through Asia's currency turmoil, yesterday again fell sharply yesterday to levels not seen in a decade, prompting an angry central bank governor to draw a new line in the sand. Central Bank of China Governor Sheu Yuan-dong insisted the currency would not fall to 35 against the US dollar and scorned market speculation it would do so. "Of course the NT will not fall to such a level," Sheu said when asked by reporters whether the US dollar/NT exchange rate would fall to 35 after touching 33.999 early yesterday. "This is just a malicious rumor," Sheu added. Local media reports quoted domestic and foreign bankers as saying that the currency could fall below 35 because of the US dollar's dramatic across-the-board surge in Asia. The NT dollar fell through 33 on Monday to a decade-low 33.226, a dramatic single-day fall of nearly half a Taiwan dollar. The unit has not been lower since April 1987. After Sheu's comments, the unit firmed somewhat from its morning lows but and was trading at 33.723-still well below Monday's decade-low benchmark. Dealers said they expected the unit to breach the 34 mark and test the 34.5 bottom line before stabilizing between 32-33 in the first quarter. Some dealers, declining to be quoted by name, said Sheu's exchange rate reassurances no longer carried much weight. One dealer recalled how Sheu had pledged in mid-October to defend the NT at 28.5 to the US dollar and burned speculators[base '] fingers by pushing the local currency sharply higher-only to abandon the defense a few days later. The NT dollar has weathered Asia's currency turmoil, sliding about 16 percent against the US dollar in 1997-enough to keep Taiwan competitive in exports without creating damaging debt service and import burdens.

OP-ED

South Africa: (5/1/98) ( China Informed Op-Ed: 'Mandela, I see as no one special anymore' by Ms TKG) Ms TKG writes on Nelson Mandela, whose government switched formal recognition from Taiwan to the PRC. The author laments Mr Mandela's failure to maintain moral and ethical coherence---to maintaining one's integrity---in discharging the affairs of government. . . . .

NEWS LINKS

Bird Flu SCMP ( Poultry slaughter payouts increased ) Inside China ( Government Boosts Pay-Outs for Slaughtered Fowl ) Inside China ( Chief Secretary in Beijing to Discuss Bird Flu ) Inside China ( Rickshaws May Be Next Victim of Bird Flu ) Hongkong SCMP ( Rent bill block 'shows power' ) SCMP ( Catering kickbacks ) ( Caution over tax cut calls ) SCMP ( English-teaching ban hits school rolls ) Inside China ( Britain's Cook Praises China's Record in Hong Kong ) China Daily ( HK official greeted here ) Regional NYT ( News Can Be 'Rumor' in South Korea, and Lead to Jail ) NYT ( Aid Programs for Thailand, Indonesia Show Signs of Faltering ) NYT ( Khmer Rouge Still Holding Pol Pot, Reporter Finds ) NYT ( Indonesia's Budget Seen as Unrealistic ) China Daily ( ROK likely to enhance food support ) China SCMP ( Transport braces for migrating millions ) SCMP ( Daily turns new social page ) SCMP ( 100 years of Zhou business ) SCMP ( Media blitz to combat graft ) China Daily ( Qian, Iraqi legislator reinforce positions ) China Daily ( Mao's memorial hall re-opens ) Inside China ( Tiny Dissident Movement Finds New Courage ) Inside China ( Ex-U.N Rep. Named as South Africa Envoy ) China Daily ( Taiwan using crisis, FM warns )

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