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China's
economic boom on Oct 24, 2004 US
investors gain access to China's economic boom TIP
OF A TREND: A new fund enables Americans to invest in an index of 25 companies
in China, although analysts warned that Chinese markets tend to be extremely
volatile As
the Chinese economy has grown into a colossus over the last decade, many
investors in the US have sought ways to capitalize on China's strength. Unfortunately,
this has often proved difficult. Researching Chinese stocks listed in Hong Kong
or the US can be tough for individual investors not fluent in Chinese corporate
governance. China-centered mutual funds are comparatively few, perhaps because
even big financial institutions can face significant costs in researching the
relatively opaque Chinese market. Now,
though, US investors have a chance to vastly broaden their access to China. In
early October, Barclays Global Investors started a fund that tracks the FTSE/Xinhua
25, an index of 25 companies in China that includes many of the country's
largest businesses. The
Barclays fund is the first exchange-traded fund listed in the US to focus
exclusively on Chinese companies. Called the iShares FTSE/Xinhua China 25, it is
listed on the New York Stock Exchange under the symbol FXI. Exchange-traded
funds can be bought and sold continuously, in contrast to mutual funds, which
are bought and sold at one price each trading day. As of Aug. 31, statistics
from Morgan Stanley show, exchange-traded fund trading volumes worldwide had
risen nearly 20 percent this year, and about 313 of them were listed on markets
in the US and overseas, up from virtually none a decade ago. Barclays,
the world's largest provider of exchange-traded funds by assets under
management, is on the tip of a trend. State Street Global Advisors, at No. 2 on
the list, is working with the Shanghai stock exchange to create an ETF that will
track 50 top Shanghai stocks. PowerShares Capital Management, an asset
management firm based in Wheaton, Illinois, is also developing a fund focused on
China, said Deborah Fuhr, executive director for ETF research at Morgan Stanley.
Specialists
in exchange-traded funds expect demand for these issues to be strong. "If
you want to invest in China, even through Hong Kong, it can be difficult for
retail investors, but now they can do so easily through an ETF listed on the
NYSE," Fuhr said. Still,
buying a Chinese ETF entails significant risks. For ordinary investors, the new
ETF "should be used sparingly at best," said Dan Culloton, a mutual
fund analyst at Morningstar Inc who has studied the Barclays offering. The
Chinese ETF includes several important caveats, Culloton said. Systemic
political and economic risk, unemployment, labor unrest and problems in the
banking sector, for example, make Chinese markets extremely volatile. What's
more, he said, the Barclays offering will focus on a small number of stocks for
an ETF. Among its biggest holdings are China Mobile, the cell phone company;
PetroChina, the oil company; and China Telecom and China Life Insurance. "You're
not spreading out that concentration of stocks," he said. "Portfolios
that hold large positions in individual stocks tend to be more volatile." Culloton
notes that the Barclays fund is also focused on a small number of sectors, like
natural resources and telecommunications. That could add to volatility. But
for an investor whose holdings are already diversified, a portfolio of Chinese
stocks may make sense if it is kept to a small part of total assets. And a
Chinese ETF offers some advantages for investors over picking Chinese stocks by
themselves, or choosing an actively managed mutual fund with a focus on China. "You
can move in and out of an ETF as you want if you want to overweight China,"
without redemption fees, said Brad Durham, managing director of Emerging
Portfolio Fund Research. "If,
oh my God, the Chinese government is rattling their sabers over invading Taiwan,
let's get out," he said. Exchange-traded
funds, which track indexes, also have lower expenses than China-centered mutual
funds run by active managers. Barclays says its fund will have an expense ratio
of 0.74 percent; Culloton noted that expenses averaged 2.2 percent for actively
managed funds focusing on Asia, excluding Japan. As
a result, Fuhr said, an ETF may prove valuable to some investors. "It's
for investors more likely to want to make decisions themselves," she said. Jim
Pacetti, head of ETF International, a consulting firm, added that previous
exchange-traded funds focused on Taiwanese and Indian indexes have sold well
with individual investors. Lee Kranefuss, chief executive of iShares, the part
of Barclays Global responsible for ETFs, said he expected demand for the
Barclays offering to be split roughly equally among retail and institutional
investors. "When
you look at the longer-term future, the growth rates, China is a good broad
play," Durham said. "You can get a lot of short-term factors dead
wrong and if you're in the China market for a long time, you'll do well."
Who's
pulling the puppet strings? By
the Liberty Times editorial
In
recent days former Costa Rican president Miguel Angel Rodriguez and Nicaraguan
president Enrique Bolanos were respectively accused of accepting illegal
political donations from Taiwan. While the truth behind these allegations
remains to be unearthed, the international image of Taiwan has been seriously
damaged already. Why
did these alleged scandals, one after another, suddenly take the spotlight? Is
it mere coincidence that Taiwan is accused in all these scandals? What kind of
messages are being conveyed by this phenomenon? What is the underlying motive,
story, and significance? These are all questions worthy of further reflection
and examination. With
respect to the alleged receipt by former Costa Rican president Rodriguez of a
US$1.4 million political donation from Taiwan, the Ministry of Foreign Affairs (MOFA)
has already given a reply to the Costa Rican government, indicating that only
US$400,000 in aid was given to a Costa Rican foundation for the purposes of
funding implementing personnel training programs and international conferences. In
the other allegation, the Nicaraguan opposition said that Bolanos had accepted
US$4 million in political donations from Taiwan three years ago when he ran for
the presidency. The Taiwan government explained that Bolanos did request a
"foundation for Taiwan's donation" be established, and that Taiwan
provide US$4 million for the implementation of cooperative programs for the
improvement of human rights, health care, social welfare and disaster relief. All
these programs were gradually implemented pursuant to agreements reached between
the two governments after extensive negotiations, and the funds provided were
not political donations, according to the Taiwan government. Balanos himself
personally explained that his campaign funds for the 2001 presidential election
all had lawful sources, and he also asked that the opposition leader to make
public the source of his own campaign funds. In
reality, every single dollar of foreign aid given by the Taiwan government was
documented and legal. They were all furnished pursuant to legal and standardized
operational procedures. Therefore, aid given by the Taiwan government to allies
was all perfectly legal. Nor
could they possibly have interfered with the internal government operations of
Taiwan's allies. In other words, the rumors about illegal political donations
were all untrue and without an ounce of credibility. However,
as indicated by Minister of Foreign Affairs Mark Chen, while attempts are made
to control and monitor aid to allies, it is not always easy to do so. Therefore,
after the funds were given to the allies, there is very little that can be done
to stop funds from being forwarded into private accounts and to keep scandals
from taking place. But
regardless of whether they are for disaster relief, financial aid or other
cooperative programs, funds given to allies are all documented and recorded.
There is nothing that cannot be laid out in the open. Only on very rare
occasions do scandals occur after the funds were given to Taiwan's allies. Moreover,
the Taiwan government is not behind any such scandals. Therefore, one cannot
simply label such charitable and well-intended aid as "political
donations" or means to "control foreign governments." It
is hard to predict how these alleged scandals will unfold. However, it is worth
noting that Taiwan has very little breathing room in the international
community. Currently, only 26 countries hold formal diplomatic relationships
with Taiwan. Half of them are in South and Central America, which have become
critical to Taiwan's diplomacy. Now allegations of Taiwan's involvement in
scandals have repeatedly been made in this region. It
is truly worth pondering whether anyone or any government is behind all of this.
This is not to mention that giving financial aid to allies in Central America is
based on policies formulated in the days of the Chinese Nationalist Party (KMT)
government. These
policies have remained unchanged for decades, although the budgets for this aid
was classified as highly confidential and budget reviews were all made behind
closed doors. In reality, the surfacing of these allegations most certainly had
something to do with inter-party rivalry in the countries in question. In
addition, it is hard to imagine that this has nothing to do with China, which
has spared no effort to take down Taiwan in the international community.
Presidential Office Secretary-general Su Tseng-chang pointed out during
questioning at the Legislative Yuan that Taiwan most certainly did not give
political donations to any individuals. In view of past experience with China's
efforts in making things difficult for Taiwan, it's "very possible"
that China deliberately pinned all of these allegations on Taiwan, Su added. Lo
Chih-cheng, executive director of the Institute for National Policy Research,
gave a very refined and in-depth analysis of this whole situation, emphasizing
that this was an attempt by China to portray Taiwan as an international
"leper." He said it is only too obvious that China is a master of
using politicians or incumbent office-holders in Taiwan's allied countries to
expose to the international media the supposed "scandals" of their
predecessors or opponents, without a shred of evidence. The attempt to depict
Taiwan as a "leper" is clear. The tactics used by China are becoming
increasingly refined and potent. The intention is to scare foreign politicians
and governments from becoming Taiwan's friends. Actually,
in view of a series of recent political developments, those who pay attention
can observe a pattern. Deliberate efforts are being made to blacken Taiwan's
reputation abroad and scotch its arms procurements. Arms procurements and
foreign aids are critical to Taiwan's self defense and establishment of
international space. Without
submarines and anti-missile systems, among other advanced weapons purchased from
the US, Taiwan will be incapable of dealing with the increasing military
imbalance between the two sides of the Taiwan Strait. Without
giving foreign aid, Taiwan may be left without any formal recognition and become
an orphan in the international community. Perhaps arms procurements and foreign
aid are financial burdens, but they are the necessary price of the nation's
survival. They are crucial to the nation's sovereignty, democracy and indeed the
property and lives of our countrymen. Cornered
by the Chinese ambition to take over the country, what other choice do we have?
Taiwan is neither crazy nor foolish. If China did not have 600 missiles
targeting the country, and had not been trying to buy off our allies, Taiwan of
course would have no need to put so much resources into developing foreign ties
and buying arms. In
the past Taiwan reaped the benefits of both financial and military aid from the
US. Giving a helping hand to our allies today is merely returning the favor.
Strengthening our arms can further demonstrate our determination to defend
ourselves, which is ultimately our own responsibility. It
is truly worrisome that, given China's deliberate efforts to trample Taiwan,
within this country some politicians and members of the media are echoing
Beijing's views. They condemn the arms purchase, saying it will spark a
cross-strait arms race while leaving it to future generations to pick up the
bill. They label well-intended foreign aid as "bribery to foreign
officials." They have gone all out in belittling and mocking the attempts
to give foreign aid and purchase arms. It
is worth noting that if the special budget for arms purchases is not approved by
the Legislative Yuan and foreign ties suffer major setbacks, Taiwan will become
isolated and helpless. How will Taiwan's sovereignty be safeguarded then? What
other choice will Taiwan be left with besides accepting "one country, two
systems?" In
the face of scandals involving alleged political donations from Taiwan to top
officials at allied countries and strong opposition against arms purchases, it
isn't hard to discern who controls the puppet strings of the opposition. How can
we sit around and consider these isolated incidents, while Taiwan's national
defense capabilities and foreign diplomacy fall into ruins, leaving the nation
dangerously unprotected?
`1992
consensus' a sham By
Charles Hong If
there was a so-called "1992 consensus," China has since aborted it.
According to this "consensus," both China and Taiwan would accept the
principle of "one China, with self-description by each side." The
self-description automatically excludes any intention to use force. To
date, China has trumpeted the "one China" principle and supplemented
its self-description with military threats against Taiwan. On the other hand,
China has completely deprived Taiwan of self-description and
self-interpretation. Whatever Taiwan says or does domestically or
internationally, China just says no without exception or hesitation. China's
intrinsic intention is to suffocate Taiwan. This is not a consensus, by any
standard. Nobody
can deny that the "one China" is the People's Republic of China (PRC)
and the PRC is China. By the same token, President Chen Shui-bian recently
stated that the "Republic of China (ROC) is Taiwan and Taiwan is the
ROC." Leaders in China and many people in Taiwan do not like Chen's
statement. Someday, Taiwanese will be proud to state that "Taiwan is
Taiwan" when a new constitution specifically for Taiwan is promulgated and
implemented. What
China should do is give up its military power against Taiwan and let Taiwan have
free expression and global participation. The US should also reassess the
"one China" principle, which is contrary to the status quo and against
the will of the freedom-loving people in Taiwan. Charles
Hong
The
failure of China-bashing in US elections By
Fan Gang With
China's rapid growth increasingly affecting a wide range of issues worldwide, it
has become expedient for US presidential candidates to blame China for some
domestic problems in the US. But in this year's US presidential election
campaign, China-bashing has been virtually non-existent. There are good reasons
for this welcome change. China
has found itself a frequent target of populist demagoguery. Its exchange-rate
regime, which pegs the yuan to the US dollar, has been blamed for the mounting
US trade deficit. Never mind that America's bilateral trade deficit with China,
even including Hong Kong, accounts for less than one-fifth of the total US
deficit. Growing imports from China and more direct investment by US companies
have supposedly fueled US unemployment. The jobs issue has been further
exploited by citing poor working conditions, low wages, child labor and other
problems commonly found in developing countries. Attacking
a communist country has always seemed to offer US politicians a convenient way
to appeal to the average voter. After all, most US voters can be trusted not to
understand how other countries -- let alone countries in the Far East -- really
work. But
this time, President George W. Bush and Senator John Kerry both know that it
would be unwise to bash China too hard. US companies and the entire US economy
have a huge stake in China now, so both candidates have no interest in rocking
the boat. A candidate may promise more anti-dumping actions against Chinese
goods, vow to press harder on China to change its exchange rate regime, or
sharpen criticism of China's weak enforcement of intellectual property rights;
but too much protectionism may make a candidate look irresponsible this year. Indeed,
protectionism can do nothing to reduce the US trade deficit and stanch domestic
unemployment. No matter how much politicians blame other countries, growing US
imports mean greater reliance on international markets, and some China factor in
America's investment portfolio is needed to compete against European and
Japanese firms. There
is no hiding these facts from US voters now. Bush failed to honor his
anti-Chinese protectionist campaign promises of 2000, as did former US President
Bill Clinton throughout his term. Any China-bashing and protectionist pleas this
time around will most likely ring just as hollow. Moreover,
China's geopolitical importance to the US has grown immensely since the
terrorist attacks in New York and Washington on Sept. 11, 2001. At least for
now, engaging China in the global fight against terrorism is in America's
interest. China does have some common interests in fighting Islamic extremist
terrorism, and it did not try to block America's path to the Iraqi war in the UN
Security Council. China has also been cooperating constructively with the US and
its allies in dealing with North Korea's nuclear capabilities. Of
course, the US still wants to contain China and prevent it from becoming a major
regional and world power. But that remains a long-term strategic goal, not the
stuff of presidential campaigns, especially when China seems too weak to pose
any immediate threat to the US on any front in the foreseeable future. China
has never been a positive factor in US politics, so from its perspective, the
less it is mentioned in this US election season, the better. The relative
silence about China in the US these days may be due merely to the Iraq war and
post-war situation still dominating the news. Yet it may also indicate that US
political elites are in the process of facing up to new realities and adjusting
their view of China accordingly. Fan
Gang is professor of economics at Beijing University and the Chinese Academy of
Social Sciences.
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