In this issue:

WHO: Pandemic Likely if Bird Flu Spreads Among People

A 'Henry Ford Principle' for China?

Chinese PM Calls on U.S. To Stop Dollar Crash

Danger of Speculation Against China's Yuan

China-India Talks at ASEAN Summit

China-India Group Discuss Free-Trade Agreement

Australia Attends First ASEAN Summit; May Not Be Reinvited

General Abizaid in Islamabad for Talks

U.S. Building Military Base Near Iran Border

From Volume 3, Issue Number 49 of EIR Online, Published Dec. 7, 2004
Asia News Digest

WHO: Pandemic Likely if Bird Flu Spreads Among People

Dr. Shigeru Omi, the World Health Organization's Regional Director for Asian and the Pacific, said that if an H5N1 strain of influenza virus should break into a pandemic—which he said is "very, very likely"—then the death toll could reach "20 million or 50 million, or in the worst case 100 million." Previously, the WHO had said that the death toll would be from 2 to 7 million people. Dr. Omi said that, should an H5N1 pandemic strike, then governments should be prepared to close schools, office buildings, and factories, to slow the rate of new infections. They should also work out emergency staffing to prevent breakdowns in basic public services like electricity and transportation.

Dick Thompson, a spokesman for WHO, said, "WHO is trying to raise concern because we're concerned, but WHO is not trying to scare the planet." A top influenza researcher, Dr. Malik Peiris of the University of Hong Kong, said Dr. Omi's range of possible death tolls is realistic.

A 'Henry Ford Principle' for China?

A former World Bank economist with long experience in Asia reported that China is trying to implement the "Henry Ford principle." The economist, who wrote a book in 1995 warning that the "Asian tigers" were a bubble ready to burst, had read Lyndon LaRouche's memo, "The Crash of 2004-2005 Is Here," with great interest, and with some trepidation. He said that the Chinese are aware that they are damned if they do, damned if they don't, as far as dumping their dollar holdings, but are already slowing down on purchases of U.S. debt, "as a bargaining chip with the U.S." He reports that China is trying to do what Henry Ford did, by providing wages adequate for the population to buy the products they are producing—but face a daunting task with 400 million or so unemployed or underemployed workers.

On the China/ASEAN trade pact signed at the 10th Annual summit of the ASEAN countries Nov. 29-30, he is concerned that China may do (in a milder form) what the U.S. has done, using their economic clout to gain control over the region. He is studying LaRouche's New Bretton Woods proposal, but voiced concern that fixed exchange rates would require flexible wages (i.e., falling wages) in deficit countries—reportedly a "classical economic" issue regularly debated within the World Bank, as a "humanitarian" argument against fixed exchange rates.

Chinese PM Calls on U.S. To Stop Dollar Crash

Chinese Prime Minister Wen Jiabao criticized the U.S. for not taking measures to stop the dollar crash, adding that China will not revalue the yuan under speculative pressure, Xinhua reported Nov. 29. Wen was speaking at a press conference in Vientiane, Laos on Nov. 28 at the 10th ASEAN heads of state.

Wen responded to journalists' questions on pressure to change the yuan peg to the U.S. dollar, saying, "We have to ask a question. The U.S. dollar is depreciating and it is not managed. What is the reason for that? Shouldn't the relevant parties adopt measures?" Wen pointed out the contrast to China's policy during the Asian financial crisis in 1997-98: "China is a responsible country. In 1997, during the financial crisis, we maintained the basic stability of the yuan and made the kind of contribution that we should.

"Honestly speaking, the more speculation [about a yuan revaluation] there is in society, the more unlikely it is that the necessary measures can be undertaken. You must consider the impact on China's economy and society and also consider the impact on the region and the world.... The most important thing is that we need a stable macro-economic environment, a healthy market mechanism and a healthy financial system."

It is estimated that some $30 billion in "hot money" has entered China in speculation that the yuan will be upvalued against the dollar.

Wen said that Chinese policymakers must have an appropriate plan to keep the yuan stable at a "reasonable and balanced" level, while allowing the exchange rate to be more flexible.

Danger of Speculation Against China's Yuan

The Beijing Morning Post reported Nov. 29 that financial speculators betting on a revaluation of the yuan against the dollar could pose a serious threat to the Chinese economy, although China is not vulnerable in the same way that other Asian economies were in 1997-98, due to exchange controls.

Andy Xie, chief Asia economist for Morgan Stanley in Hong Kong, told the Beijing Morning Post that global hedge funds that can allocate $3-4 trillion would be likely to break down China's $1.7 trillion economy, as these funds will rush in were there to be a yuan appreciation.

China's State Administration of Foreign Exchange reports that its foreign exchange reserves reached a record high of $514.5 billion at the end of September, up $111.3 billion from the beginning of 2004. Estimates are that $20-$50 billion of speculative money has entered China. Dr. Yin Jianfeng of the Chinese Academy of Social Sciences blames the speculative influx on inadequate supervision of the current account. This is a cause of inflation in China, since the People's Bank of China has been forced to issue more reminbi to buy foreign currency inflows.

China-India Talks at ASEAN Summit

Chinese Prime Minister Wen Jiabao told Indian Prime Minister Manmohan Singh Nov. 30, following a 40-minute meeting at the ASEAN summit in Vientiane, Laos, that his March 2005 visit to India is "the most important event on my agenda in 2005." Wen said: "I hope this will send a positive signal throughout the world.... The handshake between you and me will catch the attention of the whole world."

Wen said that positive relations between the world's two most populous countries, should be expanded in all spheres. He said that resolving the border problem "is by no means an easy task," but this should not stand in the way of expanding other relations. Already, joint trade reached close to US$12 billion in 2004, some $2 billion higher than had been projected.

Dr. Singh agreed with Wen, and said that the four rounds of special representative talks since the breakthrough visit of former Indian Prime Minister Vajpayee to China in June 2003, have done "useful work."

China did not raise the issue of Tibet this time, since India already acknowledged in 2003 that Tibet is part of China. When Dr. Singh asked that China would complete the process of acknowledging Sikkim as part of India, Wen said "a decision has already been taken" and "we will certainly gradually implement the decision."

China-India Group Discuss Free-Trade Agreement

The China-India Joint Study Group on trade and economic cooperation opened its third meeting in Beijing Dec. 1, to discuss the possibility of signing a Free Trade Agreement (FTA) between the two countries. The JSG is working out a five-year plan to expand China-India economic and trade ties. The Group was set up during Vajpayee's 2003 visit.

India-Southeast Asia Road Rally To Forge Links

A road rally will start in northeast India and wind through India and Southeast Asia to Singapore, to forge links and to indicate future road and rail improvements. The rally will begin in Guahati in Assam, through Mandalay in central Myanmar, Chiang Rai in northern Thailand, to Vientiane in Laos, Hue in Vietnam, and down the coast to Ho Chi Minh City, through Cambodia, and back into Bangkok, Thailand, and finally down the Kra Isthmus through Malaysia to Singapore. Portions of this road have only recently been completed for decent passage—although there is much improvement to be done, and a railroad to be built—but it demonstrates the progress since the days of war destroyed connecting routes throughout the region.

Australia Attends First ASEAN Summit; May Not Be Reinvited

Australia attended its first ASEAN summit, in Vientiane, Laos, but is refusing to give up its defense of preemptive war. Malaysia's former Prime Minister, Dr. Mahathir bin Mohamad, historically led opposition to Australia's attendance at ASEAN meetings, but with Mahathir gone, the ASEAN leaders agreed to invite Australia and New Zealand, for this year's event. But it is not permanent, and it is not clear if they will be invited back. Indonesia, in particular, is not keen on making it permanent.

It is thus significant that ASEAN's request for Australia to sign the ASEAN Treaty of Amity and Cooperation, which Russia and Korea signed at the summit, and which India and Pakistan have also signed, has been rejected by Prime Minister John Howard. ASEAN leaders remember that only months ago, Howard talked about the right to invade Indonesia or the Philippines preemptively if he perceived Australia to be at risk. Indonesia's Foreign Ministry spokesman Marty Natalegawa said that the best way for Australia to "dispel fears of its intentions" was to sign the treaty. Thus far, Howard is maintaining his Cheney imitation and standing tough—but nemesis is already at hand....

General Abizaid in Islamabad for Talks

CENTCOM Chief U.S. Gen. John Abizaid arrived in Islamabad, Pakistan for a two-day visit on Dec. 1. Media reports indicate that the visit is part of maintaining regular contact that began with the events of 9/11. Pakistan is an important ally in America's stated war on terrorism.

But intelligence reports indicate that Abizaid is following up on the previous trip to Pakistan by outgoing Deputy Secretary of State Richard Armitage. As EIR reported after the Armitage visit, Washington and Islamabad had come to the conclusion that the Kashmir issue and the Israel-Palestine issue are to be considered Islam-related issues, whereas other conflicts which involve Islamic nations, such as Iraq and Afghanistan, are to be considered terrorist-related conflicts. The objective of getting Pakistan to agree to this concept was to clear the ground for Pakistani troops to go to Iraq in time for the planned January elections.

Washington is aware that the Iraq situation calls for more troops on the ground. The preferred troops are Muslim troops and non-Arabs. Pakistan, among a few other nations, meet these criteria very well.

U.S. Building Military Base Near Iran Border

The U.S. is building a military base near Iran's border, according to the Lahore-based English-language Daily Times, which reports that the U.S.-led coalition forces are sketching and surveying 300 hectares of land in the Ghorian district of Herat province in Afghanistan, just 45 kilometers from the Iranian border. The Daily Times says the Combined Forces' Command in Kabul confirmed that it is indeed building the base, but strongly rejected that it would only be for coalition forces. According to the military commentators quoted, the area is suitable for an air base.

The building of the base so close to the Iranian border by the U.S.-led coalition forces, is of particular significance, since it is taking place at a time when tensions between the United States and Iran are running high. Last month, soon after Afghani President Hamid Karzai won the Presidential election, Herat Governor Ismail Khan was deposed. Ismail Khan is a very powerful warlord and is also very close to Iran. It seems the removal of Ismail Khan became necessary in light of building the base. "Creation of a base in a place completely dominating Iranian airspace could provoke an argument from Iran," said Gen. Nader Azemi, a commander of the Afghan national Army in Herat.

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