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---"Focused Coverage Informed Perspectives"---Sat, Jan 10, 1998 edition

Regional Market Turmoil 11/1/98 Sunday update; and China faces pitfalls ahead

Also in this edition . . . 1: Sunday Update: earthquake hits Northern China, and calls for Suharto to step down in Indonesia 2: private investment bank goes under 3: laid off workers take the streets in Wuhan 4: tied to exports China's periphery faces challenges ahead 5: SEF chair calls for 'golden triangle' of Chinese cooperation 6: in Indonesia, hoarding and Suharto's health 7: China gets set to join US and Japan in regional security dialogue 8: Beijing's affluent receive tips on being consumers 9: 'Strange' journeys 10: SCMP: focus on Kunming 11: Holiday in the Sun, revisited 12: tensions evident between Lee and Soong 13: Siew dismisses rumors of cabinet reshuffle 14: foreign students to be tapped for their English 15: Prosecutor Liu nabs heads of Lily Group 16: trading surges to record high 17: Hongkong leads world in exports of toys 18: don't count Hongkong's cinema out 19: Op-Ed: 'Mandela, I see as no one special anymore' by Ms TKG 20: News Links galore: China business and economy; diplomatic news; AIDS; Taiwan's semiconductors; and KMT chief's visit to US

SUNDAY UPDATE

Sunday Update: earthquake hits Northern China, and calls for Suharto to step down in Indonesia As an update on events unfolding in Asia we have two stories pertaining to China and Indonesia. If events should warrant it we will add further updates. Earthquake: ( Earthquake Near Great Wall Kills 47 ) An earthquake measuring 6.2 on the Richter scale hit northern China, killing 47 people and injuring 2000. Hundreds of mud-and-brick houses were damaged or toppled by the quake. "The quake damaged farming villages across two counties in the Yan Mountains and shook buildings 150 miles to the south in Beijing," reports the Associated Press. Indonesia: ( Indonesia Opposition Chief Calls on President to Resign ) "Indonesia's leading opposition figure, Megawati Sukarnoputri, called on President Suharto Saturday to step down when his term ends in March and told a chanting crowd she was ready to succeed him. . . . ." reports the New York Times.

ASIA'S ECONOMICS

Peregrine Bank: private investment bank goes under ( Last-ditch bid to rescue sinking Peregrine bank ) An attempt to save Asia's largest private investment bank, Peregrine Holdings, collapsed last night. The Zurich Group pulled out of an agreement to inject massive funding into the ailing bank. Workers were told the bad news last night, some three weeks from the annual bonus. See also ( 'Shell-shocked' staff in fear of marching orders ) ( Tose: strongman who went for broke ) Labour: laid off workers take the streets in Wuhan ( Street sit-in as 1,000 fume over factory closures ) In the industrial city of Wuhan, located on the middle reaches of the Yangzi River, some 1000 workers protested on Thursday. The workers had been workers in a local furniture factory and at a water treatment plant, both of which had been sold to private concerns. As part of cost cutting the workers lost their jobs. As the South China Morning Post reports, "The Wuhan demonstrators sat in the middle of the road and were dispersed peacefully by police at the end of the day, the witnesses said." In September the government marched ahead on a new, ambitious program to speed up its divestiture of thousands of state owned enterprises. Restructuring these money loosing concerns will result in an estimated 11 million laid off workers and a profound change in the society. Thursday's protest highlights the dangers in store for the mainland over the next few years. As an indicator of the level of redundancy in China's firms, a World Bank study entitled "China 2020" estimates 15 to 20 per cent of China's workers could be laid off without affecting output. See also SCMP ( Poorly paid farmers a threat to stability, says Jiang ) Asia's economics: tied to exports China's periphery faces challenges ahead ( Fujian exports hit by financial crisis ) We reported last week on an upcoming conference to discuss ways to enhance cooperation between Hongkong and Fujian province, as well as Taiwan. Also on the agenda was the effects of the currency crisis in Asia on Fujian's economy. The province's capital, Xiamen, is home to 3000 foreign firms, 53 percent of which rely on exports. As the South China Morning Post explains much of their exported wares are bound for Southeast Asia, and because of the currency crisis the province is bracing for a decrease in the number of new projects for the coming year. Meanwhile . . . ( Province braces for currency pressure ) in Guangdong province, bordering on Hongkong, officials are apparently putting on a 'brave face', the South China Morning Post reports, and believe they can compete on quality, not just price. The paper also publishes the following numbers: "Figures announced at the annual meeting of the Guangdong People's Congress showed export values rose to 6.5 billion yuan (HK$5.98 billion) last year, an increase of 14 per cent in 1996". "They also showed the total value of foreign direct investment contracts dropped 33 per cent in 1996 and another 46 per cent in the first 11 months of last year." An official interviewed by the paper said these figures were not reliable indicators for performance in 1998, and it was stated the effects of regional economic woes might take six months to be seen in Guangdong. Asia's economics: SEF chair calls for 'golden triangle' of Chinese cooperation (source: Central News Agency) Taipei's top negotiator with mainland China on Wednesday called for Taiwan, Hong Kong and mainland China to cooperate among themselves amid the financial upheavals in Southeast Asia that have dragged down the region's economies. If the three Chinese areas can complement each other to their mutual advantage and engage in multilateral cooperation, they could well become a "golden triangle" in the world's economic development in the next century, said Koo Chen-fu, chairman of the Straits Exchange Foundation (SEF), during an academic seminar on economic ties among Taiwan, Shanghai and Hong Kong which kicked off Wednesday in Taipei. Koo said that although he is please that last year showed signs that a breakthrough could come in the long-stalled cross-strait dialogue, the two sides need to take the matter more seriously. Cross-strait talks on legal, social and welfare issues resulting from increased exchanges across the Taiwan Strait should not be shelved for political differences, Koo argued, adding that the two sides should return to the negotiating table whenever the need arises, and in the meantime should refrain from politicizing all issues related to the talks. Koo urged authorities from both sides of the Taiwan Strait to be realistic and to discard their preconditions so as to allow the long-stalled cross-strait dialogue to be resumed early. As long as the two sides reach a consensus on the understanding that both sides are seeking the peaceful reunification of one China, resuming cross-strait talks or even cooperation with each other should not be that hard, Koo pointed out. Indonesia: hoarding and Suharto's health Two New York Times articles tell of President Clinton's conversation with President Suharto, and agitation throughout the [polity for the government to step down. . . . Indonesia's currency fell 26 percent in value on Thursday on fears the IMF would hold up funds in light of the government's budget deficit. Hoarding of food followed, stripping markets of rice and other staple commodities. But news of Clinton's phone conversation with Suharto rippled through the country, restoring a measure of confidence. On Thursday the rupiah plunged to 10,550 against the US dollar and traversed a roller coaster ride on Friday before finishing at 7900. The stock market fell 12 percent on Thursday, and another 1.2 percent on Friday. Another issue to keep in mind: Indonesia is experiencing serious drought in the country side. Both rice yields and job opportunities have suffered. . . . . See also NYT ( Clinton Phones Suharto, Insisting on I.M.F. Plan ) NYT ( Panic in Indonesia Replaced by Political Anxiety )

CHINA

Security: China gets set to join US and Japan in regional security dialogue (source: Reuters) Mainland China is ready to join a proposed three-way dialogue with academics from the United States and Japan on regional security, mainland officials said on Tuesday. Dropping earlier qualms, the officials said Beijing would accept a future informal session to discuss, among other things, revised US-Japanese security guidelines that have angered Beijing. "We can go along with that," said one official of the proposed trilateral dialogue. Clinton administration officials regard such three-way talks as a potential key to 21st century stability in East Asia and the Pacific. Mainland officials, on a US government-sponsored visit to the United States, referred to the proposed session as "Track 2." Such unofficial meetings often help prepare the ground for progress on diplomatic fronts. Preparations were under way for a trilateral get-together that could take place this spring, possibly in Tokyo, a visiting communist Chinese official said in an interview with Reuters. A US official said organizers of the proposed forum included the Asia Foundation, a San Francisco-based grant-making group that seeks to foster US-Asian ties, and the Japan Institute of International Affairs, a foreign ministry-sponsored think tank. The mainland Chinese officials said Beijing would use the forum to explore the implications for Taiwan of the US-Japanese defense guidelines adopted in late September. Under the new understandings, Tokyo agreed in principle to boost military support to US forces in unspecified "areas surrounding Japan" in an Asian crisis. Beijing has warned the United States and Japan against applying their military cooperation arrangements to Taiwan, which the PRC regards as part of its territory subject to reabsorption, if necessary, by force. Washington began pushing for trilateral sessions last year to soothe mainland Chinese concerns about the revised defense framework, which the United States and Tokyo say is not geographical but situational. Beijing initially shield away from such talks, apparently in the belief that the guidelines were directed against communist China, Stanley Roth, the assistant secretary of state for the region, told a House of Representatives panel on Sept.30. At the time, he termed the US-spearheaded trilateral approach "an excellent way of ameliorating some of Beijing's concerns that they are being left out of the dialogue and what is happening in Northeast Asia. US officials insist that the new arrangements are not directed against mainland China but instead are aimed at bolstering regional security. The visiting communist Chinese officials, who said they were speaking personally, voiced their interest in using any future trilateral dialogue as a means of enhancing mutual understanding and trust throughout Asia and the Pacific region. Consumerism: Beijing's affluent receive tips on being consumers ( China's New Generation Enters the Culture of Consumerism ) It was noted recently how the starchy People's Daily has added a 'society' section. Offering anecdotes from people's lives and letters from readers, the inclusion was made after a survey of its readers determined many often look for such letters and anecdotes first, scanning over the daily rante on political and economic news. An article in today's New York Times might be considered a follow-up to this story in that it presents a fairly new paper, published by the Ministry of Light Industry, which has become the 'in thing' for Beijing's newly affluent (and young) generation. 'Producers needed a place to advertise, and consumers needed a place to learn about all the new goods," said the newspaper's editor, Zhao Yinong, 37. What more logical place than the Ministry of Light Industry -- itself a chief producer of consumer items -- to establish a new paper devoted to the art of better consuming, writes the New York Times.' It's an interesting story, spotlighting one young couple who 'window shop' in the paper before deciding how to spend their $186.00 per month budget. Noted in passing, this amount of money equals twice the average salary of a college professor. Also note how the young couple spotlighted in the article is rather typical: one works for a state-owned work unit, where he receives housing and medical benefits, and the other works for a private company where no such benefits exist. In fact . . . ( Shadow of iron rice bowl lingers ) A survey conducted by an employment agency under the Beijing Labour Union probed into the reasons why workers had problems finding new jobs, reports the South China Morning Post. The reasons: most identified state-owned enterprises with providing lifetime employment, housing and social security benefits many indicated they simply wanted to retain a position in a state-owned enterprise, regardless of the company's profitability. They wanted the security such a job affords. it was suggested workers who felt this way were mostly aged 35 or older. "In other words, most laid-off workers are likely to have been born after 1949 but long before the 1979 launch of Deng Xiaoping's economic reforms, and were thus raised on a socialist doctrine of life-long employment and welfare benefits," writes the paper. 'Strange' journeys: ( January 16, 1998 - UP MEMORY RIVER ) Asia Week contributing writer Rose Tang returns to her native Sichuan after six years in Australia. What she finds is strange and unfamiliar. . . . SCMP: focus on Kunming ( Tourism emerges as mainstay for Yunnan ) ( Sluggish state sector set to move into higher gear ) ( Provincial diversification plans may see tobacco's days numbered ) ( New golf Mecca ready for pilgrims ) ( Transport links deliver growth ) ( Benefits from joint venture begin to filter into province ) ( Medicine man has the right tonic for corporate revival )

TAIWAN DESK

Taiwan: Holiday in the Sun, revisited ( January 16 - Money for Influence? ) We reported last week on Premier Lien Chan's trip to Singapore where he played many rounds of golf with senior officials. Beijing balked, cautioning Singapore about Taiepei's mischief. Asia Week explains: "Taipei has shown a renewed eagerness to bolster its neighbors' ailing economies. Late last year, it promoted the idea of a regional stabilization fund for cash-strapped nations. And three years ago, Taipei encouraged its investors to "Go South" and put money into Southeast Asia to diversify their investments away from China. But support for the program waned because of the crisis as well as Taipei's desire that companies stay at home. Still, the island has always seen its investments as providing leverage it cannot get diplomatically. With Southeast Asian economies in trouble, Taiwan spied a prime opportunity. No sooner had Lien returned from Singapore than his government was talking about reinvigorating the "Go South" policy. Taipei, said central bank governor Sheu Yuan-dong, was ready to extend local businesses soft loans totaling $1.22 billion to invest in Southeast Asia or acquire stakes in companies there." Politics: tensions evident between Lee and Soong Tensions between President Lee Teng-hui and Taiwan Governor James Soong apparently still exist, as they hardly talked to each other during a public function yesterday. Lee, taking local media executives on a tour of a provincial agriculture laboratory, was received by Soong. They shook hands upon Lee's arrival, but did not talk. Soong then briefed the guests, during which the governor lauded Lee, an expert in agricultural economy, for his contribution to the development of local agriculture. But witnesses said in the tour of the lab following the briefing, Soong was almost always a few steps behind Lee, hardly engaging in any conversation with the president. After Lee's departure, Soong refused to comment on his relations with the president, saying he would only talk about agricultural issues. Once the president's right-hand man, Soong has fallen into disfavor with Lee after Lee decided to trim the provincial government. They now seldom appear in public together, and if they do, they hardly talk, observers said. Politics: Siew dismisses rumors of cabinet reshuffle Premier Vincent Siew yesterday dismissed rumors of a Cabinet reshuffle, saying nothing had been decided about the time and scope of the reshuffle, or whether a new lineup is needed. "So far, we are still making assessments. So, there hasn't been any substantial action," Siew told reporters. The United Daily News yesterday quoted unnamed Cabinet officials as saying the Cabinet would be reshuffled before the Jan.24 local elections. The paper said Liu Chao-shiuan, chairman of the national Science Council, and Minister Without Portfolio Huang Ta-chou, would go. They were the only two officials named in the report. But the premier had not yet made a decision about the scope of the shakeup, the officials were quoted as saying, adding that Siew would not make decisions according to personal preferences. Instead, he would base his judgments objectively, such as performance reports by the ministerial Research, Development and Evaluation Commission (RDEC) about various Cabinet bodies, the officials said. Government spokesman David Lee, who later repeated Siew's remarks, dismissed the newspaper report as mere rumors. He said the premier regularly keeps a close watch on the performance of Cabinet members and it was still premature to talk about a reshuffle. Siew would not base his judgments only on staffers' reports, said Lee, making apparent referrence to the newspaper report that the RDEC evaluations would be the objective criteria for the reshuffle. Lee said there would be two criteria for the reshuffle: "First, the overall political scenario; and second, the needs for future policy." Cabinet officials said the "overall political scenario" might be the public approval rate for the Cabinet, according to the Central News Agency. The "needs for future policies" might mean the government's emphasis on technology, information, environmental protection, education, and bureaucratic reform, the officials were quoted by CNA as saying. Siew is expected to hold a press conference on Jan. 20 to brief the public about his blueprint for national development, the CNA said. Education: foreign students to be tapped for their English (source: The China Post) Education Minister Wu Jin announced yesterday that foreign students from English-speaking countries will soon be permitted to teach real-life English at local elementary schools. Before being adopted islandwide, the program will be tried out on an experimental basis in Taipei when the new semester starts in February at the earliest, Wu said. He said the ministry is offering real-life extra-curricular English courses in elementary schools to help students pick up the international lingua franca, adding that the best way to learn real-life English is to speak with foreigners. Also, he said the ministry is considering letting parents join the classes together with their children in the future. He suggested that the program will help resolve the shortage of teachers in the launching of English classes in local elementary schools and offer part-time job opportunities for foreign students living here. At present, the ministry is encouraging foreigners to study in Taiwan, and most of these students do not enjoy any scholarships, he said. Vice Education Minister Yang Kuo-tze said the ministry is thinking about raising the pay for English teachers to NT$400 per hour as an incentive for foreign students to accept teaching work. Currently, the pay of elementary teachers on an hourly basis is NT$260. Yang said the hiring of foreign students must be consistent with the regulations governing the employment of foreign students in Taiwan. A job undertaken by a foreign student must not exceed 12 hours a week and the student must also obtain at least an 80 grade average and the permission of the university which he or she is studying to work, he said. Prostitution: Prosecutor Liu nabs heads of Lily Group A prosecutor declared victory in his war on a major prostitution ring yesterday after the ring's alleged leaders were arrested in a raid on a Taichung apartment. Chen Chun-hung, 44, known in the business as "Brother Bao," and Liu Chiu-hsueh, 43, who went by the nickname "Sister Wang," were rounded up along with four other key ring leaders and three taxi drivers, Prosecutor Liu Cheng-wu said. The gang had allegedly forced hundreds of foreign women into prostitution. Prosecutor Liu, who had vowed to quit if he wasn't able to track down the ring's alleged masterminds, yesterday expressed delight at dealing a final blow to the so-called "Lily Group" syndicate. "Brother Bao" and "Sister Wang" denied forcing the women into the sex trade, saying they were aware of what was expected before they came to Taiwan. Liu had twice since Dec.7 ordered large-scale raids on dozens of hotels in the greater Taipei area, netting some 220 suspects in all. He said he believed those arrested, whose numbers included prostitutes, cab drivers and dozens of hotel staffers who introduced prostitutes to customers, represented roughly a third of the syndicate's entire membership. Many of the prostitutes came from Malaysia, Thailand, Indonesia, mainland China, Hong Kong and Macao. At least two of the prostitutes were diagnosed to be carriers of the AIDS-causing human immuno-deficiency virus.

HONGKONG

HKFE: trading surges to record high (source: Bridge News) The annual trading volume at the Hong Kong Futures Exchange (HKFE) surged to a record high in 1997, the exchange said in a statement on Thursday. A total of 8,081,880 contracts changed hands in 1997, up 35.9 percent from 1996. The exchange cited factors such as a 35-percent turnover increase in the Hang Seng Index futures trade to 6,446,696 contracts in 1997, and the launch of Red Chip futures and options on Hong Kong-firms mainly owned by mainland Chinese parents as the lead causes for the increase. The introduction of a market-making system and electronic trading for stock futures in February 1997 and for three-month HIBOR futures in September also boosted turnover, it said. Exports: Hongkong leads world in exports of toys (source: Agence France-Presse) Hong Kong remained the world's leading toy exporter, with export growth last year expected to exceed 10 percent, the Hong Kong Trade Development Council (TDC) said Wednesday. "We're still the world's leading exporters of toys and the industry is growing bigger and better," Edmund Young, chairman of the TDC Toys Advisory Committee, said at the opening of the 24th Hong Kong' Toys and Games Fair. Hong Kong's total exports of toys for the firts 10 months in 1997 reached HK$77.76 billion (US$10 billion), up 10 percent from the same period of 1996, Young said. The United States remained the largest market for toys from Hong Kong, taking nearly half of the territory's toy shipments. Cinema: ( January 16 - Cock-a-Doodle-Doo! ) Asia Week writer Richard Havis says you can't write off Hongkong's cinema, although just one year earlier it seemed destined to go 'bye-bye'. . .

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

China Business and Economy SCMP ( SOE reforms could fall victim to fight against slower growth ) SCMP ( Yuan stands alone, but pressures grow ) SCMP ( Good connections add to spring in Kunming tourism ) SCMP ( Shenzhen sets standard for sector revamp ) SCMP ( Vinegar-maker survives without compromise ) ( Zhang shows way to reform of enterprises ) China SCMP ( Boost for military ties ) SCMP ( Interpol seeks $409m fraud probe suspect ) SCMP ( Mainland plans to keep HIV in check ) SCMP ( Qian meets king on brief visit ) Taiwan TSMC ( DRAM price plunge appears likely with Korean crisis, "cost holiday," 1/8/98 ) TSMC ( TSMC in production with 0.25-micron wafers, 1/8/98 ) SCMP ( Foreign firms still bullish despite slide in currency ) SCMP ( Scholars' trip postponed ) SCMP ( Kuomintang chief to visit US )

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