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To: KevinThompson who wrote (6199)	5/25/2000 12:11:00 PM
From: KevinThompson	Read Replies (1) \| Respond to of 13094

One more timely article from Stratfor.com. This one references China and the WTO. It appears that China will pursue a path toward tighter government control of businesses, while at the same time advertising abroad of a "free-er" market. stratfor.com KT -------------------- Summary As the U.S. Congress nears a historic vote on normalizing trade relations with China, Beijing appears to be engaged in a pattern of economic behavior at home that would undermine its credibility as a member of the World Trade Organization. There are increasing signs that economic reformers are losing the power struggle in Beijing. And in the midst of the debate in Washington, President Jiang Zemin himself is calling for the Communist Party to play a greater role in China?s private businesses. Analysis China faces two crucial tests in order to enter the World Trade Organization (WTO). On one front, the European Union?s trade commissioner, Pascal Lamy, is in Beijing hammering out the details of a bilateral trade deal, one of the last prior to China?s WTO accession. On the other front, in Washington, the House of Representatives is expected to vote on Permanent Normal Trade Relation (PNTR) status for China next week. But in the midst of these debates over free trade, the president of China himself has sounded a surprisingly discordant note. Speaking at a Communist Party conference in Shanghai on May 14, President Jiang Zemin, called for the party to take on a more powerful role within the country?s private enterprises. In his speech, Jiang ? who also serves as the party?s general secretary ? called private enterprises integral to the socialist market economy. And the president said that party cells should be added to these enterprises in order to guarantee the healthy development of the private sector. Party cells in private enterprises would educate entrepreneurs, advocate party policies, ensure that businesses are operating according to the law and protect the interests of the employees. The president?s remarks were reported by the official Xinhua news agency. The president?s call is part of an increasingly visible pattern toward centralization ? even as the United States and Europe debate China?s role in free market economics. Economic reformers have been marginalized. And increasing doubts about the value of reform itself ? particularly in light of the massive social cost that it brings ? have been given the official seal of approval. On the same day that Jiang gave his speech, one of the country?s official newspapers editorialized on the widening income gap of the capitalist system. In August 1999, Jiang announced that a top priority for the Communist Party would be the revitalization of State Owned Enterprises (SOEs). At the time Jiang?s announcement was a subtle shift in policy ? emphasizing the importance of SOEs to China?s economic future, rather than calling for their reform and privatization. But officials in Beijing have steadily taken larger and more dramatic steps. When Prime Minister Zhu Rongji failed to conclude a WTO deal with the United States in the spring of 1999, Jiang began to strip him of his economic leadership role and political power. The country?s most well-known economic reformer ? largely unnoticed in the West ? was so marginalized that by February, the National People?s Congress announced that it will increase its own authority over national economic policies. The leader of the NPC ? and the man with increasing influence over the economy ? is Li Peng, an old guard Party member, who opposes the rapid economic opening and reform once promoted by Zhu. Hardliners in China are not reacting in a knee-jerk fashion; instead they are responding to the powerful social effects of the country?s economic opening to the West. Economic disparity is a growing concern. Beijing is scrambling to focus new development in the impoverished western regions. In April, the National Statistics Bureau pointed out the growing disparity between company executives and employees. The idea that economic reform is destructive has clearly gained official approval. On May 16, the state-run People?s Daily ran an editorial discussing the country?s widening income gap. The country is also struggling with another impact of capitalism, Chinese style: the corrosive effect of corruption. Smuggling, embezzlement and bribery threaten to undermine the authority of the central government and the Communist Party. Investigations into massive corruption scandals have led dangerously close to the top members of the party and government. Assuming that Beijing succeeds in its bid to enter the WTO, the government will likely be forced by circumstance to engage in exactly the opposite of free, unfettered trade ? indeed, it must regain some measure of control merely to maintain order in China. The very free market solutions that China is officially pursuing unofficially ? but very realistically ? threaten social upheaval and worse, the collapse of the regime itself. China appears to be pursuing a dichotomy. Abroad, it pursues economic expansion that brings valuable technical knowledge, trade and capital needed to support a population of 1.2 billion people. But at home, China?s economic policy is headed in the opposite direction. The West hopes that economic association with the world will wean the country from its tradition of central planning; instead it appears that state involvement will increase at the very time that China takes its place in the global economy.

To: KevinThompson who wrote (6199)	5/25/2000 12:24:00 PM
From: James Strauss	Read Replies (2) \| Respond to of 13094

This scheme is expected to bring in $69 million to the debt-ridden Osaka government. The proposal mirrors a law passed by Tokyo?s metropolitan government earlier this spring, expected to raise nearly a billion dollars for the city. ??? Kevin: They probably mean 69 Billion... I agree... More taxes never helps the economy grow... What they need to do is have their own version of the Resolution Trust Fund to get rid of all those depressed real estate holdings from the bank's balance sheets... Also, a revised accelerated depreciation plan would offer more incentive to buy real estate, and should help that market recover... If the real estate market recovers, so will the overall economy... Jim