AmCham president warns foreign firms about China

 

RISING COMPETITION: Foreign enterprises face increasing competition from both local firms and foreign rivals, which will put pressure on margins, AmCham Beijing's chief said

 

AFP , BEIJING

 

Foreign companies in China are facing a future of slimmer profit margins as their number multiplies and competition gets fiercer, the American Chamber of Commerce chief warned yesterday.

 

"This place is getting more competitive," AmCham President Charles Martin told a briefing in Beijing.

 

"There's more foreign companies coming in, there's more Chinese companies getting stronger," he said.

 

A survey of AmCham member companies suggested that about 30 percent were seeing better profits in China than in the world as a whole, down from 40 percent in previous years, he said.

 

"[China] is acting more like a normal competitive market and we would expect that to continue to happen over the coming years," he said.

 

"You're going to get more competition, you're going to get pressure on the margins," he said.

 

The tougher competition is coming about not just as more foreign enterprises enter China but also as new local competitors emerge, typically in service industries such as media and law, according to Martin.

 

"They say -- we can't do the offshore investment but we can do everything else you need done here at one half the price or one third the price," he said.

 

Hard data on profitability is usually difficult to come by in China, partly, observers said, because enterprises tend to understate the amount of money they make in order to avoid taxation.

But figures released earlier by AmCham showed that about 86 percent of members taking part in a survey said they posted higher revenues last year compared to 2003.

 

In the same survey, 68 percent stated they were "profitable" or "very profitable" last year.

 

The fact that a large number of foreign companies are making money at all in China is a fairly recent phenomenon, linked to China's entry into the WTO in late 2001, Martin said.

 

"The change from not profitable to profitable clearly is coincident with the WTO," he said.

 

"When China entered the WTO and started implementing WTO rules, companies started making much more money," he said.

 

WTO entry dismantled a large number of rules obstructing business in China, allowing wholly foreign-owned enterprises into a broader range of industries and so giving foreign investors an immediate profit boost, he said.

 

While WTO membership has improved the business environment for many foreign enterprises, some select industries are still facing insurmountable obstacles, according to Martin.

 

"In most countries, construction is hard to get into but the Chinese have put so many conditions on getting into the construction industry that companies are really unable to get in there," he said.

 

Oil exploration is another area that should be opened up, since China itself might also benefit from such a move, he said.

 

"China should open up its oil exploration, particularly onshore, more to foreign companies," he said. "Largely it's been a domestic game."

 

 

 

Chinese cosmetics firm using skin from executed prisoners

 

GUINEA PIGS: It is not clear whether collagen made from the harvested skin is just for research or is in production, but ethical questions remain

 

THE GUARDIAN , LONDON

 

A Chinese cosmetics company is using skin harvested from the corpses of executed convicts to develop beauty products for sale in Europe, an investigation by the Guardian has discovered.

 

Agents for the firm have told would-be customers it is developing collagen for lip and wrinkle treatments from skin taken from prisoners after they have been shot. The agents say some of the company's products have been exported to the UK, and that the use of skin from condemned convicts is "traditional" and nothing to "make such a big fuss about."

 

With European regulations to control cosmetic treatments such as collagen not expected for several years, doctors and politicians say the discovery highlights the dangers faced by the increasing number of people seeking to improve their looks. Apart from the ethical concerns, there is also the potential risk of infection.

 

The House of Commons' Select Health Committee is to examine the regulatory system and may launch an investigation and question ministers about the need for immediate new controls.

 

"I am sure that the committee will want to look at this," said Kevin Barron, its Labour chairman. "This is something everyone in society will be very concerned about."

 

Plastic surgeons are also concerned about the delay in introducing regulations to control the cosmetic-treatments industry.

 

It is unclear whether any of the "aesthetic fillers" such as collagen available in the UK or on the Internet are supplied by the company, which cannot be identified for legal reasons. It is also unclear whether collagen made from prisoners' skin is in the research stage or is in production.

 

However, the Guardian has learned that the company has exported collagen products to the UK in the past.

 

An agent told customers it had also exported to the US and European countries, and that it was trying to develop fillers using tissue from aborted fetuses.

 

When formally approached by the Guardian, the agent denied the company was using skin harvested from executed prisoners. However, he had already admitted it was doing precisely this during a number of conversations with a researcher posing as a Hong Kong businessman.

 

"A lot of the research is still carried out in the traditional manner using skin from the executed prisoner and aborted fetus, " the agent told the researcher.

 

This material, he said, was being bought from "biotech" companies based in Heilongjiang Province and was being developed elsewhere in China.

 

He suggested that the use of skin and other tissues harvested from executed prisoners was not uncommon.

 

"In China it is considered very normal and I was very shocked that Western countries can make such a big fuss about this," he said.

 

Speaking from his office in northern China, he added: "The government has put some pressure on all the medical facilities to keep this type of work in low profile."

 

The agent said his company exported to the west via Hong Kong.

 

"We are still in the early days of selling these products, and clients from abroad are quite surprised that China can manufacture the same human collagen for less than 5 percent of what it costs in the West," he said.

 

Skin from prisoners used to be even less expensive, he said.

 

"Nowadays there is a certain fee that has to be paid to the court," he said.

 

The agent's admission comes after an inquiry into the cosmetic surgery industry in Britain, commissioned by the Department of Health, pointed to the need for new regulations controlling collagen treatments and the use of cadavers for cosmetic treatments.

　

The Department of Health has agreed to the inquiry's recommendations, but is waiting for the European commission to draw up proposals for laws governing cosmetic products. It could be several years before this legislation takes force.

 

Meanwhile, cosmetic treatments, including those with with aesthetic fillers, are growing rapidly in popularity. Lip enhancement treatments are one of the most popular.

 

Some fillers are made from cattle or pig tissue, and others from humans. Health officials believe that there may be a risk of transmission of blood-borne viruses and even vCJD from collagen containing human tissue.

 

While new regulations are to be drawn up, the UK's health department is currently powerless to regulate most human-tissue fillers intended for injection or implant, as they occupy a legal grey area. Most products are not governed by regulations controlling medical products, as they are not classified as medicines.

 

They also escape cosmetics regulations, which only apply to substances used on the surface of the skin and not those injected beneath it. The UK Healthcare Commission is planning new regulations for cosmetic surgery clinics next year, but these will not control the substances used by plastic surgeons.

 

A number of plastic surgeons have said that they have been hearing rumors about the use of tissue harvested from executed prisoners for several years.

 

Peter Butler, a consultant plastic surgeon and UK government adviser, said there had been rumors that Chinese surgeons had performed hand transplants using hands from executed prisoners. One transplant center was believed to be adjacent to an execution ground.

 

"I can see the utility of it, as they have access and no ethical objection," he said. "The main concern would be infective risk."

 

Andrew Lee of the University of Pittsburgh School of Medicine, who has visited China to examine transplant techniques, said he had heard similar rumors.

In China, authorities deny that prisoners' body parts are harvested without their consent. However, there is some evidence to suggest it may be happening.

 

In June 2001, Wang Guoqi, a Chinese former military physician, told US congressmen he had worked at execution grounds helping surgeons to harvest the organs of more than 100 executed prisoners, without prior consent. The surgeons used converted vans parked near the execution grounds to begin dissecting the bodies, he told the House International Relations Committee's human-rights panel.

 

Skin was said to be highly valued for the treatment of burn victims, and Wang said that in 1995 he skinned a shot convict's body while the man's heart was still beating.

 

Wang, who was seeking asylum in the US, also alleged that corneas and other body tissue were removed for transplant, and said his hospital, the Tianjin paramilitary police general brigade hospital, sold body parts for profit.

 

Human-rights activists in China have repeatedly claimed that organs have been harvested from the corpses of executed prisoners and sold to surgeons offering transplants to fee-paying foreigners.

 

Wang's allegations infuriated the Chinese authorities, and in a rare move officials publicly denounced him as a liar. The government said organs were transplanted from executed prisoners only if they and their family gave consent.

 

Although the exact number of people facing the death penalty in China is an official secret, Amnesty International believes around 3,400 were executed last year, with a further 6,000 on death row.

 

 

Legislature must put aside feuding

 

After a three-month adjournment, the second session of the Sixth Legislative Yuan got underway yesterday. Despite the ridicule and criticism that's been leveled at them, our legislators look set to continue neglecting their duties and wasting taxpayers' money. With pressure from the year-end mayoral and county commissioner elections building up, we dare not hope for too much in the new session other than that legislators refrain from embarrassing Taiwan in the international media yet again.

 

The previous legislative session saw controversy over China's passing of the "Anti-Secession" Law, former Chinese Nationalist Party (KMT) chairman Lien Chan's and People First Party Chairman James Soong's China visits, and a transfer of power within the KMT. So we might have expected the current session to be relatively free of sharp political confrontation.

 

However, after taking up his post as KMT chairman, Ma Ying-jeou suddenly changed his stance and opposed the proposed US arms procurement plan after Soong, during a meeting last Wednesday, allegedly recounted comments made to him by Chinese President Hu Jintao. Soong's eagerness to be Beijing's mouthpiece is shameful, and we also regret that Ma has shown himself unwilling to take responsibility for his political position.

 

The arms procurement act does not, after all, affect only a single political party. It affects the livelihood and prosperity of all Taiwanese people. If there is any major flaw in the policy, it should be subject to rigorous debate by the government and opposition. Moreover, the public should be made aware of the contents of this policy and its pros and cons. The opposition is wrong to indiscriminately use its legislative majority, blocking the bill on 27 occasions in the procedure committee, so that the bill has never been properly debated before a full sitting of the legislature.

 

That a policy proposed by the government should give rise to debate with the opposition is a most natural thing in the world's democratic nations. The difference in opinion between the government and the opposition should be subject to open debate and a consensus should be reached, so that the final draft of the bill is one that has the broadest possible public support. This is the real meaning of legislative transparency. At the moment the opposition is practicing a form of violence on the legislative process in using its majority to prevent the bill from even coming before the legislature.

 

To add insult to injury, this legislation was in fact first formulated under the KMT when it was still in power. So why should it oppose the bill now that it is out of power? And how can Ma, even if he is party chairman, change party policy just on his say-so? Surely this is no different from political blackmail. The hopes of the Taiwanese people that the KMT, under its new chairman, will manage to counter the negative image it has acquired for consistently boycotting policies will likely be disappointed.

 

One cannot help but feel pessimistic over the current mood in the legislature. If the achievements of the legislature in this new session are similar to the last, in which only 41 bills were passed, then the legislators are clearly in dereliction of their duty, and this will lead to more vociferous public protests. This might even extend to calls for new legislative elections, such as the one made by Premier Frank Hsieh (謝長廷) and similar to what was just done by Japanese Prime Minister Junichiro Koizumi.

 

We hope that the legislature will prove our pessimism wrong in this new session. We hope that the parties can put aside their feuding, with the pan-blue camp showing its ability to work as a loyal opposition, and the government showing forceful administrative ability, making the legislature a true leader in national development, rather than being a stumbling block.

 

 

 

 

 

US ambiguity harmful

 

By Huang Jei-hsuan

 

Late last year, former US secretary of state Colin Powell declared that Taiwan has no sovereignty. That was obviously then the US State Department's view.

 

A few days ago, US Secretary of Defense Donald Rumsfeld said that Taiwan is a sovereign nation.

 

In essence, the US government has treated the status of Taiwan with uncertainty, to the point of being schizophrenic.

 

A similar ambiguity has also been applied to the potential US response to China's aggression if Taiwan declares formal independence. The US government concluded a while back that an opaque response would be the best way to keep those independence-minded Taiwanese off balance without giving an inordinate amount of leverage to the Chinese.

 

This approach has served the US' interests for years, by helping to keep peace in the Taiwan Strait. But it may have outlived its usefulness.

 

One reason is that this ambiguity seems to have weakened the Taiwanese people's confidence in the US. This, together with the US' active discouragement of formal Taiwan independence, has managed to dash the hopes of many Taiwanese people for their own nation and instead made them vulnerable to China's "poisoned carrot and heavy stick" tactics. One of the immediate effects has been the difficulty in passing the special arms procurement bill.

 

It's true that the main culprits are those treacherous pan-blue legislators. But support for the bill among average Taiwanese, although widespread, can only be depicted as shallow and lukewarm. The public finds it hard to be very enthusiastic about spending an enormous amount of tax-payer money on something that's intended to maintain a tenuous status quo, at best.

 

Furthermore, some might even be led to believe that the days of the status quo may be numbered -- if they're not gone already -- if neither the US nor the Taiwanese people are sufficiently vigilant.

 

For example, if the outdated US policy described above is left unaddressed and if enough Taiwanese people are slumbering, the Chinese Nationalist Party (KMT) could be returned to power in 2008 and the status quo could soon crumble.

 

That's because the alliance established between the Chinese Communist Party (CCP) and the KMT could bring about the absorption of Taiwan into China.

 

But the process would be conducted in such a way that the US would find the Taiwan Relations Act (TRA) nearly toothless. That would be the case even though the likely back-door settlement of "unification" would be without the consent of the Taiwanese people, a clear violation of at least the intent if not the letter of the TRA.

 

Meanwhile, the US would discover that its ability to meddle in Taiwan's internal affairs had become quite limited in a KMT administration, since Beijing would be the one calling all of the shots -- at least in the context of cross-strait interaction. That means the US window of opportunity to effectively help prevent Taiwan from being stealthily annexed by China could be as short as one year, but no longer than two years, starting now.

 

The US must make up its mind by then. After that, events might outrun Washington's hesitation. The US could be left in the dust, haplessly watching its strategic interests in Taiwan literally snatched away, not to mention the outrage of witnessing a democracy being devoured by an authoritarian regime.

 

Therefore, the catalyst for US action would come from the CCP-KMT alliance's relentless push to set the stage for China's takeover of Taiwan. The timing for the US to act would most likely be shortly after the US government concludes that the KMT, even under the new leadership of Ma Ying-jeou (馬英九), is not going to cooperate with the US on procuring arms and that it's time to give up on the pan-blue camp.

 

The US can justify its about-face on the grounds that the CCP-KMT alliance's underhanded efforts amount to evading or obstructing the application of the TRA, and that action is needed also to reverse a trend that could lead to long-term regional instability. In other words, there will be ample national security imperatives to support this undertaking.

 

Then there is also the issue of fairness, which can add some moral gravity to US action, on account of the CCP and the KMT ganging up to undermine the administration of President Chen Shui-bian.

 

By now, it should be clear that carrying out a significant shift in the US' "one China" policy is the most effective approach for the US to regain the initiative and stem the ominous tide in the Taiwan Strait.

 

At minimum, Washington must declare that Taiwan's status is still undetermined and that there is no provision in the TRA to release the US from its obligation to aid in Taiwan's defense against China's aggression even if Taiwan declares independence.

 

That would naturally signal a change in the status quo and clear up the ambiguity discussed earlier. This in turn would restore the Taiwanese people's confidence in the US, as well as the future of Taiwan -- a situation that would bode well for them being able to vote to reject Taiwan being sold off, and to forcefully demand that the nation's deterrence capabilities be beefed up.

 

And, should the US change its "one China" stand, the ensuing crisis might also force China to seek a multilateral peace conference with at least the US, Japan and possibly a couple of other regional powers.

 

Hopefully, that would provide the opportunity and platform to settle the cross-strait issue once and for all -- presumably in a spirit of justice for the Taiwanese people, as well as long-term regional peace and prosperity.

 

Huang Jei-hsuan

California

 

 

Chinese sea power is on the rise

 

By Hideaki Kaneda

 

In an age of missiles and terrorist threats, many people think that "sea power" is a concept from the past. Not in China. Indeed, China is increasingly emphasizing its naval and maritime interests: economic development, territorial management, energy and food security, as well as trade. A navy sufficient to promote such activities is being rapidly developed and purchased from abroad (mostly from Russia, and the EU when possible).

 

Many of China's neighbors are alarmed. The US Defense Department views China's goal as being to build a series of military and diplomatic strategic bases -- a so-called "string of pearls" -- along the major sea lanes from the South China Sea to the oil rich Middle East.

 

China seeks not only to secure its energy supplies, but to achieve broader security goals. For example, the Gwadar military port, which China is constructing in southwest Pakistan, is strategically placed to guard the throat of the Persian Gulf, with electronic eavesdropping posts to monitor ships -- including war ships -- moving through the Strait of Hormuz and the Arabian Sea.

 

Similarly, China is building container port facilities at Chittagong in Bangladesh for its naval and merchant fleets, as well as more naval bases and electronic intelligence gathering facilities on islands owned by Myanmar in the Gulf of Bengal. Indeed, China's ties with Myanmar's military dictators look set to turn into a de facto military alliance. In nearby Thailand, China has invested US$20 billion in a plan to build a canal across the Kra Isthmus to connect the Indian Ocean and the Gulf of Siam, thereby providing an alternate oil import route that avoids the Strait of Malacca.

 

In the South China Sea, China is developing systems to allow large-scale deployment of naval and air force units by fortifying bases on Hainan island and the southern Chinese coast. On the Spratley and Paracel islands -- seized from Vietnam and the Philippines respectively -- China is building facilities to moor large ships and runways large enough to handle long-range bombers. In effect, China is in the process of building a group of literally unsinkable aircraft carriers in the middle of the South China Sea.

 

Why is China, usually considered a "continental power," engaging in this maritime expansion? China dominated Asia in terms of "sea power" until the 17th century.? Indeed, during the Ming Dynasty (1368-1644), Admiral Zheng He's (鄭和) "Great Navy" was the world's most powerful. But for the last three centuries, China has had no global maritime strategy, nor has it possessed -- or sought to possess -- naval forces capable of supporting such a strategy.

 

Ironically, China's current maritime strategy has its roots in the US, the nation that China appears to perceive as its key strategic rival, namely in the "sea power" theory developed by Admiral Alfred Thayer Mahan at the end of the 19th century. In The Influence of Sea Power upon History, published in 1890, Mahan argued that maritime power and economic development were deeply intertwined. Only the ability to protect trade and project power by sea could assure the vitality of this nexus.

 

These conditions applied to the US of Mahan's time, and they surely apply to China today. China is already the world's third largest trading nation and is rapidly developing its port capacities to manage an ever-increasing volume of trade. Its ship tonnage (excluding fleets that sail under flags of convenience) is the fourth largest in the world. Rapid expansion of ship tonnage is part of China's current Five-Year Plan, and by 2010 its shipbuilding capabilities will likely rival those of Japan and South Korea.

 

However, unlike the US and Britain in the past, China today must turn to overseas bases rather than colonization to enhance its "sea power" -- hence its "string of pearls." Still, China is transforming its coastal navy into an ocean-going navy at a pace far quicker than most experts reckoned possible. By 2010, China is expected to have 70 of the most modern surface vessels, several modern strategic nuclear submarines, and several tens of modernized attack submarines, exceeding the modern forces of both Taiwan's navy and even Japan's Maritime Self-Defense Force, at least in quantitative terms.

 

Moreover, China plans to improve its capabilities for assault landing and joint logistical support, both of which used to be weak points. This will provide it with necessary capabilities to invade, should China's rulers wish, Japan's most remote islands, including the disputed Senkaku Islands, as well as Taiwan.

 

Asia must wake up to the arrival of Chinese-style aggressive "sea power." Japan, in particular, must reformulate its maritime strategy with this in mind. Japan, the US and other maritime countries must also once again treat "sea power" in Asia as a key component of their ability to defend their own national interests.

 

Hideaki Kaneda, a retired vice admiral of Japan's Self-Defense Forces, is currently director of the Okazaki Institute.

 

 

Japan's Koizumi is in the driver's seat on reform

 

In the wake of a landslide election victory, the Japanese prime minister has been hailed for making voters feel that they have a say in a behind-closed-doors political system. And the voters want speedy structural reform, not only postal privatization

 

DPA , TOKYO

 

Japanese Prime Minister Junichiro Koizumi doesn't want to waste any time.

 

A day after the landslide victory of his Liberal Democratic Party (LDP) in elections to pick a new lower house of parliament, Koizumi on Monday announced a special session of the Diet, beginning next week, to push through his proposed postal privatization, the cornerstone of his economic reforms and of the LDP election campaign.