Made in (The People's Republic of) China: September 2009 Archives

By SHARON LaFRANIERE and JOHN GROBLER | THE NEW YORK TIMES
September 22, 2009

WINDHOEK, Namibia -- It is not every day that global leaders set foot in this southern African nation of gravel roads, towering sand dunes and a mere two million people. So when President Hu Jintao of China touched down here in February 2007 with a 130-person delegation in tow, it clearly was not just a courtesy call.

And in fact, China soon granted Namibia a big low-interest loan, which Namibia tapped to buy $55.3 million worth of Chinese-made cargo scanners to deter smugglers. It was a neat illustration, Chinese officials said, of how doing good in Namibia could do well for China, too.

Or so it seemed until Namibia charged that the state-controlled company selected by China to provide the scanners -- a company until recently run by President Hu's son -- had facilitated the deal with millions of dollars in illegal kickbacks. And until China threw up barriers when Namibian investigators asked for help looking into the matter.

Now the scanners seem to illustrate something else: the aura of boosterism, secrecy and back-room deals that has clouded China's use of billions of dollars in foreign aid to court the developing world.

From Pakistan to Angola to Kyrgyzstan, China is using its enormous pool of foreign currency savings to cement diplomatic alliances, secure access to natural resources and drum up business for its flagship companies. Foreign aid -- typically cut-rate loans, sometimes bundled with more commercial lines of credit -- is central to this effort.

Leaders of developing nations have embraced China's sales pitch of easy credit, without Western-style demands for political or economic reform, for a host of unmet needs. The results can be clearly seen in new roads, power plants, and telecommunications networks across the African continent -- more than 200 projects since 2001, many financed with preferential loans from the Chinese government's Exim Bank.

Increasingly, though, experts argue that China's aid comes with a major catch: It must be used to buy goods or services from companies, many of them state-controlled, that Chinese officials select themselves. Competitive bidding by the borrowing nation is discouraged, and China pulls a veil over vital data like project costs, loan terms and repayment conditions. Even the dollar amount of loans offered as foreign aid is treated as a state secret.

Anticorruption crusaders complain that secrecy invites corruption, and that corruption debases foreign assistance.

"China is using this financing to buy the loyalty of the political elite," said Harry Roque, a University of the Philippines law professor who is challenging the legality of Chinese-financed projects in the Philippines. "It is a very effective tool of soft diplomacy. But it is bad for the citizens who have to repay these loans for graft-ridden contracts."

In fact, such secrecy runs counter to international norms for foreign assistance. In a part of the world prone to corruption and poor governance, it also raises questions about who actually benefits from China's projects. The answers, international development specialists say, are hidden from public view.

"We know more about China's military expenditures than we do about its foreign aid," said David Shambaugh, an author and China scholar at George Washington University. "Foreign aid really is a glaring contradiction to the broader trend of China's adherence to international norms. It is so strikingly opaque it really makes one wonder what they are trying to hide."

Until recently, wealthy nations could hardly hold themselves out as an example of how to run foreign aid, either. Many projects turned out to be tainted by corruption or geared to enrich the donor nation's contractors, not the impoverished borrowers. But over the past 10 or 15 years, some 30 developed nations under the umbrella of the Organization of Economic Cooperation and Development (O.E.C.D.) have made a concerted effort to clean up their assistance programs.

They demanded that foreign money be awarded and spent transparently, using competitive bidding and outlawing bribery. Increasingly, they also are also pushing to give borrowers more choice among suppliers and contractors, rather than insisting that funds be recycled back to the donor nation's companies.

China, which is not a member of the O.E.C.D., is operating under rules that the West has largely abandoned. It mixes aid and business in secret government-to-government agreements. It requires that foreign aid contracts be awarded to Chinese contractors it picks through a closed-door bidding process in Beijing. Its attempts to prevent corrupt practices by its companies overseas appear weak.

Some developing nations insist on independently comparing prices before accepting China's largesse. Others do not bother. "Very often they are getting something they wouldn't be able to get without China's financing," said Chris Alden, a specialist on China-African relations with the London School of Economics and Political Science. "They presume that the Chinese are going to give value for money."

Development experts say they have tried to convince the Chinese government that better safeguards and a more open process will enhance its efforts to gain influence and business. If its projects collapse because of kickbacks or inflated costs, they argue, China will end up exporting not only goods and services, but a reputation for corruption that it is already battling at home.

But Deborah Brautigam, the author of a coming book on China's economic ties with Africa titled "The Dragon's Gift," says Beijing is hesitant to hobble its companies with Western-style restraints before they have become world-class competitors.

Thinking Business, Not Ethics

"The Chinese are kind of starting out where everyone else was years ago, and they see themselves as being at a disadvantage," Ms. Brautigam said. "The Chinese don't particularly want a big scandal. That doesn't further their interests. They just want their companies to get business."

Sometimes they get both. In 2007, the Philippines was forced to cancel a $460 million contract with the Beijing scanner company, Nuctech Company Ltd., to set up satellite-based classroom instruction after critics protested the company had no expertise in education.

It also canceled a $329 million contract awarded to ZTE Corporation, a state-controlled Chinese communications company, after allegations of enormous kickbacks. ZTE denied bribing anyone, but the controversy has lingered. Last month an antigraft panel recommended filing criminal charges against two Philippines officials in connection with the contract.

A Manila-based nonprofit group, the Center for International Law, has mounted a legal challenge against still another Chinese contract in the Philippines, to build a $500 million railroad. Professor Roque, who leads the center, contends that the price of China's state-owned contractor "was simply plucked out of the sky." Officially, China's directive to its companies is toe an ethical line overseas.

"Our enterprises must conform to international rules when running business, must be open and transparent, should go through a bidding process for big projects and forbid inappropriate deals and reject corruption and kickbacks," Wen Jiabao, China's prime minister, told a group of Chinese businessmen in Zambia in 2006.

But China has no specific law against bribing foreign officials. And the government seems none too eager to investigate or punish companies it selects if they turn out to have engaged in shady practices overseas.

Indeed, it has an added incentive to look the other way because of the state's ties to many foreign aid contractors -- connections that sometimes extend to families of the Communist Party elite.

>> Continue reading this outstanding report

By Radio Free Asia
September 14, 2009

Chinese authorities detain parents observing the anniversary of a far-reaching milk scandal that sickened their children.

Three parents of children sickened in China's 2008 tainted-milk scandal were detained after observing the one-year anniversary of the milk scandal, and another who planned to join them has been taken to an unofficial "black prison," victims' parents say.

Guo Caihong and Zhou Jinzhong from central Henan province and Xiang Qingyu from southern Jiangsu province met last Friday at a restaurant in suburban Beijing's Daxing county, parents said. But authorities then detained and questioned them.

Milk powder contaminated with an industrial chemical killed at least six babies and sickened nearly 300,000 others with painful kidney stones last year. Friday marked one year since Sept. 11, 2008, when a Chinese dairy recalled hundreds of tons of baby formula and the government vowed "serious punishment" for those responsible.

Chinese authorities are jittery and eager to crack down on dissent ahead of the 60th anniversary of Chinese Communist Party on Oct. 1. Police have arrested or detained leading dissidents and are harassing lawyers who defend them.

Zhao Lianhai, a representative of victims' parents, said a local official from Henan contacted Guo Caihong on Friday and promised to take her home from Beijing.

"But on Saturday afternoon, a volunteer told me that the three parents had been taken by their respective local officials to an unknown place instead of home. When they were led away, local police were there as well," Mr. Zhao said.

Zhou Jinzhong, one of the three parents, described what has happened.

"On Saturday, I was taken away by staff members from the Henan Province Office in Beijing, and then they questioned me. Now I am with local officials from our township and our village. I will be heading home tomorrow," Zhou said in an interview Monday.

He said the two other parents received similar treatment.

Another parent of a tainted-milk victim, Liu Hai from Siyang city, had planned to attend anniversary activities in Beijing but was sent to a "law study group," an unofficial detention center also known as a "black prison."

"My husband has been taken away by an office of the local government," Liu's wife said.

"This is the news his uncle managed to get through his connections. For me this is the end of the world."

Original reporting by Qiao Long for RFA's Mandarin service. Mandarin service director: Jennifer Chou. Translated by Ping Chen. Written for the Web in English by Sarah Jackson-Han.

>> Original source

By THE ASSOCIATED PRESS | The New York Times
10 September 2009

Chinese police have tried to prevent parents of children sickened by tainted milk powder from traveling to Beijing to mark the anniversary of last year's scandal, an activist said Thursday.

Milk powder contaminated with an industrial chemical killed at least six babies and sickened nearly 300,000 others with painful kidney stones -- making it one of China's worst food safety scandals.

Zhao Lianhai, the father of a sickened child who has rallied other families through a Web site he created, said 11 parents had planned to hold a small commemoration in Beijing on Friday with a dinner, lighting of candles and prayers for the children.

''The scandal has affected a whole generation of China's future,'' Zhao said in a phone interview. ''This day is a humiliation for all Chinese. It is a national disaster. We should have the courage to remember this day.''

Friday marks one year since Sept. 11, 2008, when a Chinese dairy recalled hundreds of tons of baby formula and the government vowed ''serious punishment'' for those responsible for the contamination, days after the scandal was first reported in Chinese media.

The commemoration also comes amid efforts by Chinese authorities to curb dissent in the lead-up to the 60th anniversary of the Communist Party's rule. Police have arrested or detained leading dissidents and are harassing lawyers who defend them. The Oct. 1 celebration will be marked by a military parade.

Liu Hai, a father whose two children developed kidney stones after taking tainted milk powder, said he was detained by police Wednesday in Kunshan city of Jiangsu province while waiting for a train. The police told him they had to stop him because he was headed to an ''illegal gathering,'' Liu said by phone while being taken in a county government car to his hometown of Siyang.

An official at the Kunshan police propaganda department who refused to give his name said he has no information about Liu's case.

Zhao said in the days running up to the anniversary, several parents have reported being warned by police that their group was an illegal organization. However, Beijing's public security bureau on Thursday issued him a letter saying the anniversary event had been approved. The discrepancy in official positions on the commemoration could not immediately be explained.

>> Original source

By Keith Bradsher | The New York Times
01 September 2009

China is set to tighten its hammerlock on the market for some of the world's most obscure but valuable minerals.

China currently accounts for 93 percent of production of so-called rare earth elements -- and more than 99 percent of the output for two of these elements, vital for a wide range of green energy technologies and military applications like missiles.

Deng Xiaoping once observed that the Mideast had oil, but China had rare earth elements. As the Organization of the Petroleum Exporting Countries has done with oil, China is now starting to flex its muscle.

Even tighter limits on production and exports, part of a plan from the Ministry of Industry and Information Technology, would ensure China has the supply for its own technological and economic needs, and force more manufacturers to make their wares here in order to have access to the minerals.

In each of the last three years, China has reduced the amount of rare earths that can be exported. This year's export quotas are on track to be the smallest yet. But what is really starting to alarm Western governments and multinationals alike is the possibility that exports will be further restricted.

Chinese officials will almost certainly be pressed to address the issue at a conference Thursday in Beijing. What they say could influence whether Australian regulators next week approve a deal by a Chinese company to acquire a majority stake in Australia's main rare-earth mine.

The detention of executives from the British-Australian mining giant Rio Tinto has already increased tensions.

China's Ministry of Industry and Information Technology has drafted a six-year plan for rare earth production and submitted it to the State Council, the equivalent of the cabinet, according to four mining industry officials who have discussed the plan with Chinese officials. A few, often contradictory, details of the plan have leaked out, but it appears to suggest tighter restrictions on exports, and strict curbs on environmentally damaging mines.

Beijing officials are forcing global manufacturers to move factories to China by limiting the availability of rare earths outside China. "Rare earth usage in China will be increasingly greater than exports," said Zhang Peichen, the deputy director of the government-linked Baotou Rare Earth Research Institute.

Some of the minerals crucial to green technologies are extracted in China using methods that inflict serious damage on the local environment. China dominates global rare earth production partly because of its willingness until now to tolerate highly polluting, low-cost mining.

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