In this issue:

China CP Congress: Transition to New 'Fourth Generation' of Leadership

Amendment to Chinese Constitution Approved on Development

Jiang Zemin Speech Praised for Vision, Truthfulness

Train Buffs: All Aboard for Asian Rail

Some Asian Circles Want To Block China in Mekong Cooperation

Three U.S. Ambassadors in Southeast Asia Objected to the U.S. Travel Warnings

U.S. Firm Puts Financial Paper Before People

Minister: Indonesia Faces Economic Collapse

Afghanistan Situation 'Dire'

China Trumpets Progress on Roof-of-the-World Railroad

From Volume 1, Issue Number 37 of Electronic Intelligence Weekly, Published Monday, Nov. 18, 2002
Asia News Digest

China CP Congress: Transition to New 'Fourth Generation' of Leadership

At its 16th National Congress, held during the week ending Nov. 15, the Chinese Communist Party (CCP) has achieved a smooth transition to a new "fourth generation" of leadership, with the older generation, including Party General Secretary Jiang Zemin, officially retiring. As was expected, the CCP elected a new central committee, which in turn elected Vice President Hu Jintao to be the general secretary.

Jiang Zemin and five other leading members of the CP and government bodies were not re-elected to the central committee. This confirms their retirement, and was the expected procedure. Others retiring include National Peoples Congress head Li Peng, Prime Minister Zhu Rongji, Li Ruihuan, head of the Central Committee Politburo Standing Committee (CCPSC,) Wei Jianxing, and Li Lanqing. Since only central committee members can be on the Politburo Standing Committee, "This is the first official confirmation that President Jiang Zemin, 76, is retiring as Party chief," stated People's Daily. Hu Jintao was the only member of the current seven-man CCPSC who was re-elected to a new five-year term on the central committee.

Some 180 out of the 356 members and alternate members of the new Central Committee are new. The new members include some leaders of Chinese big enterprises.

The new Central Committee met on the final day of the 16th Congress to elect the new general secretary, political bureau, and political bureau standing committee.

Amendment to Chinese Constitution Approved on Development

The Chinese CP 16th National Congress approved an amendment to the Chinese Constitution, which adopts the idea of the "Three Represents" into the Constitution.

The "Three Represents" was first proposed by Jiang Zemin in a speech to the CPC in July 2001. It is, in essence, that the Party "must always represent the development trend of China's advanced productive forces, the orientation of China's advanced culture, and the fundamental interests of the overwhelming majority of the people in China."

While touted in the Western press as an adoption of "capitalism," the "Three Represents" encourages an important role for Chinese entrepreneurs in policymaking, an idea which actually goes back to the policies of the CPC in the early 1950s.

Jiang Zemin Speech Praised for Vision, Truthfulness

Chinese President and Communist Party leader Jiang Zemin made a "very good" speech to the Party Congress, and the general reaction was that he was presenting a truthful picture, not propaganda, noted an observer in Beijing, commenting to EIR's European office this week.

It was balanced, depicting what is good in the current situation, but also the challenges China faces. Most important is the fact that real economic development is going on in China's western internal region, including construction of railroads, roads, the Three Gorges Dam, and so on.

Also, said the observer, "and this is very important," the landscape in the interior provinces of Gansu and Shaanxi, is really growing greener. The water shortage and desertification are critical problems in these areas of China, and there is genuine progress towards reversing the situation, he added.

Another important element is that now, in Xinjiang, experts are locating significant underground water resources, which make it really possible to "develop the west," he said. There is very little surface water.

Finally, it is seen among the population, that the basic economic policy orientation is China's "inner needs," and that China will not just rely on trade. This is "very important!"

Train Buffs: All Aboard for Asian Rail

The Sunday, Nov. 10 edition of the leading paper in Virginia's capital—the Richmond Times Dispatch—featured nearly a full-page article on plans for high-speed rail in continental Asia, reviewing a lot of material familiar to EIW readers, but generally kept out of the American press. Could it be that the article is linked to the just-concluded Senate campaign by LaRouche Democrat Nancy Spannaus, who ran as an independent against Republican John Warner in the Nov. 5 election? Spannaus's campaign posters featured the map of the Eurasian Land-Bridge as developed by 2004 Presidential pre-candidate Lyndon LaRouche, along with a picture of LaRouche. See this week's USA DIGEST for more on this story.

Some Asian Circles Want To Block China in Mekong Cooperation

Thailand's newspaper, The Nation, gives a hostile slant to China's participation in the Greater Mekong Sub-Region plans, in an editorial Nov. 13. The paper writes, "A senior Chinese engineer from Yunnan is reported to have said: 'Our ancestors erected the Great Wall, now we are constructing the great dams.'"

The editorial attempts to show devious intentions by the Chinese, saying China is "proudly revealing the ambition behind (the) government's plan to tame the mighty Mekong River." China completed the gigantic Manwan, the first of eight hydropower dams, in 1996, while the second, Dachaochan, will be operational by next year. Last December, it laid the foundations for the third, Xiaowan.

The Nation claims that China will not join the Mekong River Commission (MRC), an offshoot of the now-defunct Mekong Committee, established with support from the United Nations Development Programme, since this group demands that members get approval from the others before large-scale river projects are carried forward. China has nonetheless offered technical assistance to the MRC, such as hydrological data on the upper reaches of the Mekong River during the flood season.

China prefers to work with the Greater Mekong Sub-region (GMS), a grouping of the six Mekong riparian states, endorsed by the Asian Development Bank (ADB). By emphasizing mainly economic "exploitation" (as The Nation puts it), the GMS appears to be an ideal vehicle for China. It was the GMS which held the highly productive meeting preceding the ASEAN Summit in Phnom Penh last week, reported in last week's EIW.

Three U.S. Ambassadors in Southeast Asia Objected to the U.S. Travel Warnings

Three U.S. Ambassadors—to Thailand, Singapore, and Malaysia—joined with national spokesmen in their respective countries protesting that the U.S. (and other countries') travel warnings against Southeast Asia were unwarranted and damaging to the economies, wrote New York Times reporter Raymond Bonner from Jakarta on Nov. 11. One ambassador said that the warnings played into the hands of the terrorists. A European ambassador told the New York Times: "There are cells in the U.S., there are cells in Europe, there are cells in Southeast Asia. Why was the travel warning only for the countries of Southeast Asia?"

U.S. Firm Puts Financial Paper Before People

A bad debt crisis threatens to cripple Asia's economies again, and governments and banks will have to act quickly if they want to avert the financial sting, writes consulting firm McKinsey & Co., in a paper called "Fixing Asia's Bad Debt Mess." The report, described in Business World of Thailand Nov. 13, accused banks and governments of ignoring the problem, and misrerporting the size of NPLs (non-performing loans) in their banking systems.

McKinsey said Asia's 1997-98 financial crisis has left a bad debt burden of $2 trillion—equivalent to almost 30% of the region's Gross Domestic Product. "Yet governments have yet to recognize the full extent of the problem: Their own reports peg the amount at a fraction of that level," the consulting firm says.

In the Philippines, for example, with the NPL ratio standing at 17.58%, McKinsey writes: "In fact, many banks would be insolvent if their balance sheets reflected the true value of their loan portfolios." McKinsey's "solution" is for governments to stop "explicitly or implicitly protecting depositors," and let the banks go.

Minister: Indonesia Faces Economic Collapse

The Indonesian Minister for National Development Planning warned that "Indonesia's economy is on the brink of collapse," according to the Jakarta Post Nov. 14. Minister Kwik Kian Gie, who has long been the most vocal critic of the IMF in the government, said that the current plan to restructure domestic government bonds will add $55 billion to the long-term debt burden, since it will require additional borrowing, and is a sign of the pending collapse. He intends to do a complete study of the plan for formal presentation to the government and to the international institutions. He has posed no solution other than forcing the banks that were bailed out to pay off the bonds, which is no solution at all. The $72 billion in domestic government debt (on top of another $72 billion in foreign debt) came entirely from the bailout of the banking system after the 1997-98 speculative assault on Indonesia's currency.

The desperation of the government was shown by the announcement on Nov. 13 that subsidies on fuel and electricity are to be totally eliminated through 6% rate hikes every three months, until the price reaches "international market prices." Only kerosene, used for cooking by the poor, will be exempt. The outcry by business and population alike is already intense.

Afghanistan Situation 'Dire'

As called for by Joint Chiefs of Staff Chairman Gen. Richard Myers in a speech at the Washington, D.C.-based Brookings Institute on Nov. 4, the Pentagon is trying to shift the emphasis of the Afghanistan operation from pursuing remnants of al-Qaeda and Taliban, to providing security in cities and rebuilding infrastructure. One hundred seventy additional U.S. Civilian Affairs soldiers, who build small infrastructure projects, are being sent to Afghanistan. The Pentagon is considering using the Army Corps of Engineers to manage road and bridge projects in northern Afghanistan.

But how will it be funded? Earlier this year, the Administration rejected Congressional efforts to increase aid to Afghanistan by only $200 million. Now, William Taylor of the State Department and Dov Zakheim, controller of the Pentagon, recently toured the Persian Gulf together to raise funds.

Andrew Natsios, administrator of U.S. Agency for International Development (USAID), claims that large-scale projects are getting underway, and that work on a 35-mile stretch of the Kabul-Kandahar road has just begun.

EIW's reports from the area are dire. The flow of international refugees into Northern Afghanistan has ceased because of the destruction of irrigation systems and other preconditions for farming, and many refugees have returned to camps, unable to cultivate their land.

In addition, fighting and chaos are breaking out. Two U.S. bases in Afghanistan came under attack on Nov. 14, while student demonstrations at Kabul University continued throughout the week, killing as many as six demonstrators.

Nine 107-mm rockets landed near the fire base at Gardez, and the U.S. Special Forces base at Lwara was hit with rockets, mortars, and rocket-propelled grenades. There was at least one hit within the compounds, but no reported U.S. casualties. U.S. warplanes bombed and strafed the suspected positions of the attackers, and a patrol from the 82nd Airborne Division engaged in a firefight, reporting two suspected deaths among the attackers.

The student protests were initially aimed against the living conditions provided to university students, who lack electricity, water, or food. Riot police opened fire on Monday, Nov. 11, killing two, and again on Tuesday, leaving more dead in running battles across the campus.

China Trumpets Progress on Roof-of-the-World Railroad

The China Central TV daily broadcast Nov. 12 presented a feature video on the leading project of the Western Region of China: the Oinghi-Tibet Railroad. The 2,000-km route (at its longest definition) is to connect Xi'ning with Lhassa. It is considered the most difficult of all rail projects ever, because of the demanding physical conditions. As of 1984, the line had been built from Xi'ning to Golmud, but it stopped before the high mountains. The engineers were unable to solve three problems: 1) the high altitude and lack of oxygen for the work crews; 2) the stretches of permafrost ground, with its effects of sinking and loosening the trackbed; 3) environmental damage issues in this landscape. For the desired route, 1,110 km go through very demanding conditions: 960 km are over 4,000 meters high; and at the highest level reaches 5,072 m above sea level. Much of this spans frozen ground.

In June 2001, the entire project was reopened, as all the three problems stalling construction were considered solved. Work crews have been deployed since then, with no deaths. Thermal insulating layers for parts of the track have been devised, and use of extra thicknesses of materiel for the bed. For some stretches, bridges are used, and no track is laid on the Earth's surface at all.

Western Region development received specific impetus in 1999, according to the CCTV report. In January 2000, a group was set up under Zhu Rong Xi, to advance the program. Over the past three years, $30 billion has been pumped into the region, with 80% of that going to infrastructure. This $30 billion amounts to one-third of the total of China's investment funding. Built or under active construction so far are: 4,000 km of railroads; 50,000 km of new roads; and the conversion of 3 million hectares of farmland to forest, for conservation of land resources. College enrollment in the region has been doubled, and 2,000 science and technology projects have been initiated. The High Plateau railway is the centerpiece of all the Western projects.

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