China Budges: the Renminbi Allowed to Appreciate 2%
7-22: After months of intense pressure from the US and its neighbors, China allowed its currency to shift from its peg at 8.28 to 8.11 renminbi to the dollar. The central bank also removed the renminbi from its strong dollar peg, allowing the currency to fluctuate versus an unspecified basket of currencies. This will allow the renminbi to rise or fall as the US dollar gains or drops against other currencies.
The Chinese allowed the appreciation in hopes of moderating the nation’s rapid economic growth as well as quelling US arguments that Chinese is doing nothing to subdue its burgeoning trade surplus with the US.
| US Movie Association Signs Landmark Anti-Piracy Pact with China|
7-20: The Motion Picture Association (MPA) of America concluded a pact with the Chinese government that would take new measures to clamp down on wide-spread piracy in China. The most important stipulation is that every three months MPA will provide the Chinese government with a list of release dates for films and DVDs that will allow the government to clamp down on bootlegged copies that appear before designated dates.
Piracy in the area of DVDs contains to be a major problem in China. MPA claims that bootleg DVDs and videos cost the industry three billion dollars each year worldwide, before taking internet piracy into account. The most recent Star Wars film was available on bootlegged DVDs in the streets of Beijing days after its motion picture release.
Previously, discussions on piracy in China were met with talk but no actual action, but recently, that trend has changed. Last month, Beijing reported that it had arrested 2,600 offenders in an eight-month crackdown on piracy.
| Pentagon Releases Report on China; Shows Active Military Buildup|
7-19: The Pentagon released its annual report on the Chinese military, after a series of delays as various US agencies attempted to intervene to adjust the tone of the report. The report unveils a Chinese military that is secretly diversifying, modernizing, and rapidly increasing its military might.
While the mainland estimates its defense budget to be approximately 30 billion dollars, the Pentagon report estimated Chinese defense spending to be approximately 90 billion dollars, or at least two to three times the published dollar amount.
While Taiwan remains the focus of Chinese military spending, the reports indicated that advancements in Chinese military equipment have extended China’s reach far beyond the island. The report also concluded that Chinese military prowess has begun to outstrip Taiwan’s, as a result of the island’s reduction in arms purchases at the same time that the mainland has escalated purchases.
China’s two major weapons vendors remain Israel and Russia. The US has attempted to block weapon’s sales by pressuring Israel as well as encouraging Europe to maintain the arms embargo on China. The US fears that if Europe also begins to sell arms to China, then Russia will be inclined to sell more advanced weapon’s technology to the mainland.
Vice Minister of Foreign Affairs and Former Ambassador to the US, Yang Jiechi, expressed a formal protest, charging that the report contained unfounded allegations that China had become the world’s third largest spender on military purchases.
| Bush and Howard Agree on China, Iraq|
7-19: At a White House reception, President Bush and Australian President John Howard discussed their commitment to Iraq and also their wish to continue strong economic ties with China as well as cooperation on the North Korea nuclear issue.
President Howard argued against the “misapprehension shared by a number of people in Australia” that the United States and China will have “inevitable” conflict. He concluded that Australia is “unashamed in developing our relations with China.”
Both Bush and Howard agreed that in spite of their disapproval of China’s human rights record, the US and Australia should continue their fruitful economic and political linkages with China, which have led to rapprochement with North Korea and expanded trade.
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