'Handle ties with care,' China warns US
　

CLINTON CAUTIONED: Chinese Foreign Minister Yang Jiechi's comments on bilateral relations were followed by a swipe at Timothy Geithner by the central bank's Su Ning

AGENCIES, BEIJING AND WASHINGTON
Sunday, Jan 25, 2009, Page 1

China’s central bank said yesterday US accusations that it was manipulating the yuan were misleading, a day after Beijing cautioned US Secretary of State Hillary Clinton to handle their diplomatic ties with care.

The remarks from Su Ning (蘇寧), a vice governor of the People’s Bank of China, were the bank’s first public reaction to comments from US Treasury secretary-designate Timothy Geithner, who said this week that Beijing was manipulating its currency exchange policies to gain an unfair trade advantage.

“These comments are not only out of keeping with the facts, even more so they are misleading in analyzing the causes of the financial crisis,” Su said of Geithner’s comments to the Senate Finance Committee, Xinhua news agency said.

The exchange suggests a testy start to relations between the administration of US President Barack Obama and Beijing, which may tarnish vows of cooperation in combating the global economic slowdown and security threats.

China worries that its already slowing exports will be even harder hit by US policies to narrow their trade imbalance.

Many US lawmakers believe the yuan is much undervalued, giving Chinese exporters a big advantage that they blame for US job losses and the US trade deficit, which hit a record US$256.3 billion in 2007.

Su did not directly accuse Geithner of trade protectionism. But the Chinese official’s warning was clear enough.

“We believe that faced with the financial crisis there should be a spirit of self-criticism,” Su said while visiting a business newspaper’s office in Beijing.

“The international community is currently working together in actively responding to the financial crisis and it must avoid exploiting different excuses for renewing or encouraging trade protectionism, because these are of no help in withstanding the financial crisis,” Su said.

Su’s swipe at Geithner came after China’s foreign minister urged Clinton to be careful with sensitive issues that could strain ties, calling the relationship between their nations one of the world’s most important.

Foreign Minister Yang Jiechi (楊潔箎) made the remarks to Clinton, settling into her new job as Washington’s top diplomat, in a telephone call on Friday, the Chinese Foreign Ministry Web site reported yesterday.

“The China-US relationship is one of the world’s most important bilateral relations,” Yang told Clinton, the report said.

Each side should “respect and show consideration for the other’s core interests and appropriately handle differences and sensitive issues,” he said.

The report did not specify those issues, but Beijing considers Taiwan its most sensitive topic in dealings with Washington. China has also been angered by US pressure over human rights and Tibet.

Yang, a former ambassador to Washington, said the two powers should “handle bilateral relations by adhering to a strategic high-point and a long-term perspective.”

Ties between the US, the world’s biggest economy, and China, with its bulging exports and foreign exchange reserves, have also been strained by trade disputes that could worsen during the global economic slowdown.

Under former US president George W. Bush, the Treasury Department urged Beijing to move to a market-determined exchange rate and has seen some progress since July 2005.

But it refused to formally call China a currency manipulator, which under US law would require the Treasury Department to begin “expedited” negotiations with Beijing to reduce China’s trade surplus and eliminate any “unfair” currency advantage.

The China Daily, an English-language paper that often reflects Beijing’s official policy, said Geithner’s position was “a clear move away from the stance of the Bush administration.”

Xinhua echoed that view.

“This may signal that, with the Obama administration in office, China faces growing pressure from US trade protectionism,” it said, citing Beijing economists.

Selig Harrison, director of the Asia program at the Center for International Policy in the US, said it was “very ill-advised for the new administration to confront China as if this were 10 years ago and we were in a strong financial position internationally.”

“We are dependent on Chinese goodwill for our economic survival and viability and, therefore, it seems to me that this type of posture is very risky,” Harrison said.

Bonnie Glaser, an analyst with the Center for Strategic and International Studies think tank, said the Chinese have said during the past several months that they want a good start to their relationship with the new US administration.

“Everybody just needs to be a little patient on this,” Glaser said. “I would not draw any premature conclusions that the administration has decided to take a tougher stance and hopefully the Chinese will be patient while the administration works this out.”

Police forcibly remove protesters outside legislature
　

By Loa Iok-sin
STAFF REPORTER
Sunday, Jan 25, 2009, Page 1

About 50 police officers yesterday morning raided a sit-in demonstration demanding reform of the Referendum Act (公民投票法) and the legislative election system that has been camped outside the Legislative Yuan since October, removing tents, banners and demonstrators by force.

The police arrived at around 9am yesterday at the demonstration site outside the entrance to the legislature’s Chun-hsien Building without prior notice and issued an order for the protesters to disband.

About 10 demonstartors were present at the time and they refused to follow the order, after which police began to remove them, their banners, tents, tables and other items by force.

Upset by this, some demonstrators shouted at the officers in protest, but were urged to stop by former Taiwan Association of University Professors chairman and demonstration organizer Tsay Ting-kuei (蔡丁貴).

Although he was trying to calm the other demonstrators, Tsay himself was also upset about the police action.

“I cannot accept a surprise raid like this,” Tsay said. “We will continue our fight until we accomplish our goal.”

The demonstrators started their sit-in on Oct. 25 after participating in an anti-government rally.

When the rally on Ketagalan Boulevard in front of the Presidential Office finished that night, dozens of people, led by Tsay, decided to begin a sit-in, with reform of the Referendum Act and the legislative election system as their main demands.

To avoid blocking traffic, the group later moved to the legislature’s side entrance, and Tsay began a six-day hunger strike until he had to be hospitalized.

The demonstrators have been circling the legislature three times a day in silence, holding placards detailing their demands, and every evening they have invited people to give speeches or bands to play at the site of their demonstration.

However, the legislature didn’t seem to appreciate their activities.

“We kept getting complaints from the legislature that demonstrators have been blocking the entrance, so we had to do something,” a police officer said. “Especially when the new legislative session is set to start on Feb. 2, and the Chun-hsien Building is where the registration of legislators is to be held.”

Soon after they were dispersed, many of the demonstrators, including Tsay, returned to continue their protest.

“We’re not sure how to deal with them now that they’ve returned. We’ll have to see,” the officer said.

Chiang’s honor guard returns to hall
　

ONCE AGAIN: The honor guard has been absent from the monument to the former dictator since the former DPP administration ordered them to quit performances

STAFF WRITER, WITH CNA
Sunday, Jan 25, 2009, Page 3
　

The government reinstated military honor guards at National Taiwan Democracy Memorial Hall after a 13-month hiatus, the Ministry of National Defense announced yesterday.

The honor guards, who perform rifle drill performances during the hourly changing of the guards, entered the hall at 6:30am yesterday morning and began their first performance at 9am.

This was the first performance since the ministry withdrew the guards and military police from the hall and the mausoleum of dictator Chiang Kai-shek (蔣介石) and his son, former president Chiang Ching-kuo (蔣經國) in 2007 at the order of the former Democratic Progressive Party (DPP) government.

The honor guards were removed when the hall was renamed National Taiwan Democracy Hall as part of the previous administration’s effort to abolish the cult of personality of Chiang Kai-shek that was encouraged during the KMT’s five-decades of single party rule.

The military reinstated the honor guards at the mausoleums in June, shortly after the KMT returned to power.

The honor guards are drawn from the three branches of the armed forces.

The honor guards planned performances with a Lunar New Year theme, the ministry said.

Another difference from previous performances is that instead of having honor guards from only one branch during each performance, the ministry has arranged for a mixed performance of all three branches so as to balance the manpower allocated by each branch.

General Sun Te-hsin (孫德信), who heads the department in charge of the honor guards, said he was happy to see the guards reinstated at the memorial.

“The three armed forces have been here for almost 30 years. We withdrew more than a year ago, and now that we are back, all the guards and directors are moved to see this moment happening,” he said.

The ceremony begins at 6:30am with the raising of the flag and singing of the national anthem. As the flag rises, the honor guards begin their rifle drill performance. However, the guards will not be performing today and tomorrow, so those who missed the performance yesterday can visit the memorial hall on Tuesday.

The move comes after the Ministry of Education announced on Wednesday that the name plaque at National Taiwan Democracy Memorial Hall will be removed and replaced with the original Chiang Kai-shek Memorial Hall plaque by the end of July.

The wrong treatment for the illness

Sunday, Jan 25, 2009, Page 8

Last Saturday, The government issued consumer vouchers to the public for the first time. Since then, officials have been doing all they can to promote the vouchers, while shops are offering a multitude of ways consumers might spend them.

All this hype has prompted a veritable spending craze among voucher recipients, which include all citizens and resident foreign spouses. For the disadvantaged, such as the unemployed and those with low incomes, the government’s “red envelope” of NT$3,600 just before the Lunar New Year may not lift them out of poverty, but it will be of some comfort.

With this in mind, we are reluctant to spoil the fun by throwing cold water on the scheme.

Still, we have to remind the self-contented government of President Ma Ying-jeou (馬英九) that the vouchers are no more than a temporary stimulant. They may be able to spur the economy for a short while, but they are not going to save it.

The government should not be satisfied with short-term effects while ignoring long-term planning. If it does not take action at the opportune moment, the economy will sink deeper and deeper into trouble.

The voucher issue is a first for Taiwan. Japan is the only country to have tried a similar policy in the past, and the results there were not very satisfactory.

However, the government still copied the Japanese example, showing that its financial and economic team was unable to come up with much to face the once-in-a-century economic tsunami.

Besides the fact the measure can only bring the country temporary relief, it is important to note that the vouchers have been paid for by raising debt under a special budget.

In other words, the government has borrowed money from the future to handle the predicament it faces today. Fundamentally, this is not much different from having consumers take out bank loans themselves.

While taxpayers may feel that this NT$3,600 is a gift from heaven, they should not be too happy too soon. There is no such thing as a free lunch and we will eventually have to repay the voucher loan plus interest.

The government’s optimistic estimate says the NT$85.6 billion (US$2.55 billion) in vouchers could boost the annual economic growth rate by 0.64 percent. However, the real reason for poor domestic demand is not the public’s reluctance to consume but the fact that many newly unemployed people have no money for shopping at all.

Even those who do have money in their pockets dare not spend it now because they are worried that they, too, could lose their jobs.

On top of this, many workers’ buying power has been hit by salary cuts. As fear of unemployment spreads, people’s consumption behavior tightens. These vouchers are really no more than a year-end subsidy that may make up for the shortfall in consumption but cannot stimulate it further. The economic benefit may be less than the government expects.

Taiwan’s economic ills arise not only from poor domestic demand, but also from a serious decline in exports. Many companies are closing down or slashing output. They are laying off employees, cutting salaries or forcing workers to take unpaid leave. With higher unemployment figures and lower salaries, a knock-on effect cuts consumption.

The decline of consumption power is part of a vicious cycle caused by the loss of job opportunities and falling wages — structural problems that the vouchers cannot resolve. At the same time, exports to China and Hong Kong were down 54 percent year-on-year last month and figures show the drastic decline is already taking a heavy toll on the economy.

Taiwanese companies are very much tied in to the Chinese market.

Now that exports to China have fallen so far, it seems that the country’s China-oriented bent is doing more harm than good to the economy.

A couple of years ago Chinese academic Hu Angang (胡鞍鋼) likened Taiwan’s economy to a diabetes patient who could die in seven days without “insulin” from China. That may sound arrogant, but it reflects the reality that Taiwan’s economy has become irreversibly reliant on China.

We do not wish to gloat over the inadequacy of the voucher plan. Rather, we wish to highlight the fact that the country’s economic problems stem from its heavy reliance on China.

Since Ma took office, his government has made no attempt to fix this structural flaw. On the contrary, it has accelerated economic integration with China by loosening restrictions on investment there while calling anyone who questions this policy an isolationist.

Now, to cover his flawed pro-China policy, Ma has made an overdraft on taxpayer dollars to pay for the consumer voucher stunt.

Officials from Ma and Premier Liu Chao-hsiuan (劉兆玄) down have presented this “consumer shopping show” in the hopes it will, at least for the time being, make the public forget about the country’s economic woes.

What worries us is that Ma’s government is only concerning itself with short-term benefits, rather than the overall situation.

Ma is unwilling to recognize that his pro-China policy lies at the root of the problem and is prescribing the wrong treatment for Taiwan’s economic illness. It is indeed the country’s misfortune to have such people in charge.
　

Finding a solution to the KMT’s party-state
　

By Chiu Hei-yuan 瞿海源
Sunday, Jan 25, 2009, Page 8

‘Be it in terms of economy or politics, everyone is very pessimistic.’

The Democratic Progressive Party (DPP) and the Taiwan Solidarity Union (TSU) are planning a Taiwan Civil National Affairs Conference this year and have already held a preparatory meeting in southern Taiwan.

The meeting is to be non-governmental, because it aims to gather opinions on political and economical developments from all sectors of society to provide important advice for dealing with the crisis that has been created since the Chinese Nationalist Party’s (KMT) return to power.

Following the second transfer of power, the national economy has slowed to a crawl and shows no signs of being revitalized, while politically there are many signs that democracy is regressing.

Despite these problems, it is clear that with the new KMT party-state system, the government has no intention of calling a meeting on national affairs or initiate dialogue with the political opposition.

The most serious problem is that the KMT ignores public opinion and acts in an authoritarian manner.

Because of the party’s absolute majority in the legislature and its hold on the Cabinet, and because it has total control over both the Control Yuan and the Examination Yuan, the judiciary is leaning toward the government.

In addition, the party has never gone through any true reform, and after coming to power, the conservative, arrogant administration of President Ma Ying-jeou (馬英九) has shown that it has a neo-authoritarian party-state mindset. Many of its actions run counter to democratic principles and are creating the image of democratic regression.

The DPP and the TSU have not been able to regroup or make a comeback after losses in the presidential and legislative elections and the moral impact of corruption allegations against former president Chen Shui-bian (陳水扁) and his family. While this is obviously a problem for the opposition, it is also developing into a crisis enveloping the entire democratic system.

Recent discussions I have held with academics regarding the political situation and the country’s future have all come to the same conclusion: The KMT’s neo-authoritarianism is hurting democracy, but we cannot have any optimistic expectations of the DPP. Be it in terms of economy or politics, everyone is very pessimistic.

Over the past six months, this pessimism has spread among the public and the government seems unable to do anything about it. Not only that, it is also loath to consolidate advice from civic society into a solution, instead taking advantage of its total control of power. Calling a non-governmental conference on national affairs is likely to consolidate public opinion and put pressure on the government to change its approach.

However, judging from the government’s neo-authoritarian mindset, it may well ignore such a conference.

Still, an even more important effect of organizing such a conference would be to consolidate the strengths and knowledge of the opposition parties and other non-governmental organizations in an attempt to find a solution. To achieve this goal, the conference must actively encourage public participation, in particular the participation and support of youth, local grassroots and women’s groups.

Chiu Hei-yuan works in the Institute of Sociology at Academia Sinica.