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9 February 2004

• Beijing Again Requests U.S. Help to Preserve Peace in the Taiwan Strait
• China Adopts Plan to Revitalize Struggling Northeast
• Growing Energy Demand Sends President Hu to Africa

Beijing Again Requests U.S. Help to Preserve Peace in the Taiwan Strait

China sent another diplomatic mission to Washington this week to try and get the Bush administration to take a stronger stance against Taiwan's referendum. Taiwan President Chen Shui-bian is planning to hold a controversial referendum alongside the 2004 presidential elections on March 20. Beijing has repeatedly stated that any referendum, no matter what the wording, is a threat to peace and stability in the Taiwan Strait.

Chen Yunlin, the head of the Taiwan Affairs Office of the State Council met with officials in Washington to reiterate the sense of urgency Beijing attaches to the issue. Chen conveyed Beijing's position that it is willing to use whatever means are necessary to preserve its perceived sovereignty.

One of the last remaining legacies of the Cold War, Taiwan has exercised de facto independence ever since the United States intervened to prevent a Communist take over of the island in 1950. Today however, the issue of national reunification still dominates the Chinese national consciousness. China's rulers fear that Taiwanese independence could cause an explosion of anti-Beijing popular nationalism that they would be unable to control.

This potential crisis in the Taiwan Strait comes at a time when the United States is preoccupied with North Korea and Iraq, and many in the Bush administration feel there is little more Washington can do to prevent Chen from holding the referendum. On December 10, 2003, President Bush issued a strong rebuke to Chen, urging him not to proceed with the referendum. Bush states, "We oppose any unilateral decision by either China or Taiwan to change the status quo, and the comments and actions made by the leader of Taiwan indicate that he may be willing to make decisions unilaterally to change the status quo, which we oppose."

Chen Shui-bian denounced the U.S. warning and stated that the referendum will take place as planned. Alan Romberg, an expert on U.S.-China-Taiwan relations, recently suggested that Chen is exploiting the referendum as a political tool to rally voters and save face in the wake of a major legislative set back last fall. Romberg maintains that the real threat to Taiwanese democracy is coming from President Chen Shui-bian. Whether consciously or not, his plans for a national referendum are provoking serious cross-strait tensions that could very possibly lead to war.

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China Adopts Plan to Revitalize Struggling Northeast

This week, China announced plans to construct a new railroad through the northeastern provinces that will link the port of Dalian on the Yellow Sea to Russia near the Pacific city of Vladivostok. The railway is the Chinese government's latest strategy to a region commonly referred to as China's rust belt. During the Maoist era however, the northeast had been a major industrial center and one of the wealthiest regions of the country.

The situation began to change when Deng Xiaoping instituted his policies of reform and opening, and China's coastal regions developed very quickly as cheap labor and business-favorable government policies attracted massive amounts of Foreign Direct Investment (FDI). As the coastal regions took off, huge economic disparities developed between the coastal regions and the interior regions. Deng himself had said that, "Some people must get rich first." After Deng passed from the scene, Jiang Zemin's third generation focused their policies on ensuring the continued economic growth of the coastal regions, and devoted comparatively little attention to the growing social inequality.

While the merits of Jiang's strategy are debatable, the fourth generation of leadership under Hu Jintao has shifted government focus to social welfare, including regional disparities and surging unemployment. They hope that the new railroad will help stimulate economic growth in the region and bring down the staggering rate of unemployment.

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Growing Energy Demand Sends President Hu to Africa

Last week Chinese President Hu Jintao made conspicuous state trips to Gabon and Algeria, two countries China has been quietly cultivating closer ties with. The reason is simple: As China's economy continues to grow at breakneck speed, energy supply is barely keeping pace with demand. While China's economic planners predicted a 6% increase in energy consumption for 2003, the actual increase was around 12%. As of late 2003, China is second only to the United States for oil imports.

Countries in the Middle East currently provide 60% of China's entire energy supply. As China, Japan, the United States and Europe all begin to contemplate their over-dependence on the world's most volatile region for their vital energy supplies, the competition for alternative sources of oil is fierce. In exchange for a contract guaranteeing a set, steady flow of oil from Gabon China signed a multi-million dollar series of contracts for development projects in Gabon. After Gabon President Hu traveled to Algeria, a country that China has invested hundreds of millions of dollars in oil refineries in the past year alone.

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