Studies / Reports: January 2011 Archives

By Radio FREE Asia
January 27, 2011

Censors ban an animated video which bashes China's human rights record.

A violent animated film depicting an unjust world in which rabbits revolt against their tiger overlords has been deleted from a Chinese video-sharing website ahead of the Year of the Rabbit, its creator said.

"It has been deleted," said director Wang Bo, who created the South Park-style cartoon, which features babies poisoned by toxic milk and rabbit children run over by tigers.

"It's probably because the cartoon is very violent," said Wang, whose film references the recent Sanlu tainted milk scandal, which sickened thousands of infants, and the death of a Hebei college student hit by the car of a 23-year-old police chief's son.

"I don't know how other people will see this," Wang said. "But the inspection authorities frequently delete things that I create."
"Of course I don't like to have my stuff deleted, but maybe it broke one of their rules ... I'm not sure exactly which rule ... There's not really much I can do about it," Wang added.

But other commentators said the gruesome content pointed at real problems in today's China, and gave vent to simmering public anger over widespread official corruption and shoddy safety standards.

'Background of social realism'

The cartoon went viral on video-sharing sites in recent days, suggesting it touched a nerve with Chinese netizens.

"I have seen this cartoon," said Ai Xiaoming, literature professor at Guangzhou's Zhongshan University. "I thought it was extremely clever. Everything that happens in it is the sort of thing that people today are worrying about."

"It was made against a background of social realism, and especially the anger depicted," Ai said. "They have turned people's real feelings about events into a whole meaning system."

"They have managed to express things which people are unable to express in any other way."

Guangxi-based author Jing Chu said the authorities appeared to be stepping up controls over the Internet, inhibiting ordinary people's freedom of expression in favor of social stability.

"I saw the rabbit cartoon. It exposes a number of problems which we find in contemporary Chinese society," Jing said.

"The authorities are controlling the Internet ever more tightly now, because they are afraid."

"The government has always relied on lies and terror to control China, [but] sometimes on the Internet you can still see something authentic."

Creating 'a pressure cooker'

Jing warned that suppressing the Internet as the last forum for free expression would lead to greater social instability.

"If you close off every possible [outlet] then it turns into something like a pressure cooker, which is extremely worrying," Jing said.

The cartoon opens with baby rabbits who die horribly from drinking "Sanlu" milk formula, made by the now-defunct Chinese dairy giant that was at the center of a huge scandal in 2008 over tainted milk.

The milk was blamed for killing six infants and sickening 300,000 others.

The rabbits in the video refer to the Chinese Year of the Rabbit, which begins on Feb. 3, while 2010 was the Year of the Tiger.

At the end of the video, the rabbits stage a mass uprising against the tigers, sparking general bloodbath.

Reported by He Ping for RFA's Mandarin service. Translated and written in English by Luisetta Mudie.

>> Original Source

By Paul Krugman | The New York Times
January 20, 2011

With Hu Jintao, China's president, currently visiting the United States, stories about growing Chinese economic might are everywhere. And those stories are entirely true: although China is still a poor country, it's growing fast, and given its sheer size it's well on the way to matching America as an economic superpower.

What's also true, however, is that China has stumbled into a monetary muddle that's getting worse with each passing month. Furthermore, the Chinese government's response to the problem -- with policy seemingly paralyzed by deference to special interests, lack of intellectual clarity and a resort to blame games -- belies any notion that China's leaders can be counted on to act decisively and effectively. In fact, the Chinese come off looking like, well, us.

How bad will it get? Warnings from some analysts that China could trigger a global crisis seem overblown. But the fact that people are saying such things is an indication of how out of control the situation looks right now.

The root cause of China's muddle is its weak-currency policy, which is feeding an artificially large trade surplus. As I've emphasized in the past, this policy hurts the rest of the world, increasing unemployment in many other countries, America included.

But a policy can be bad for us without being good for China. In fact, Chinese currency policy is a lose-lose proposition, simultaneously depressing employment here and producing an overheated, inflation-prone economy in China itself.

One way to think about what's happening is that inflation is the market's way of undoing currency manipulation. China has been using a weak currency to keep its wages and prices low in dollar terms; market forces have responded by pushing those wages and prices up, eroding that artificial competitive advantage. Some estimates I've heard suggest that at current rates of inflation, Chinese undervaluation could be gone in two or three years -- not soon enough, but sooner than many expected.

China's leaders are, however, trying to prevent this outcome, not just to protect exporters' interest, but because inflation is even more unpopular in China than it is elsewhere. One big reason is that China already in effect exploits its citizens through financial repression (other kinds, too, but that's not relevant here). Interest rates on bank deposits are limited to just 2.75 percent, which is below the official inflation rate -- and it's widely believed that China's true inflation rate is substantially higher than its government admits.

Rapidly rising prices, even if matched by wage increases, will make this exploitation much worse. It's no wonder that the Chinese public is angry about inflation, and that China's leaders want to stop it.

But for whatever reason -- the power of export interests, refusal to do anything that looks like giving in to U.S. demands or sheer inability to think clearly -- they're not willing to deal with the root cause and let their currency rise. Instead, they are trying to control inflation by raising interest rates and restricting credit.

This is destructive from a global point of view: with much of the world economy still depressed, the last thing we need is major players pursuing tight-money policies. More to the point from China's perspective, however, is that it's not working. Credit limits are proving hard to enforce and are being further undermined by inflows of hot money from abroad.

With efforts to cool the economy falling short, China has been trying to limit inflation with price controls -- a policy that rarely works. In particular, it's a policy that failed dismally the last time it was tried here, during the Nixon administration. (And, yes, this means that right now China is going to Nixon.)

So what's left? Well, China has turned to the blame game, accusing the Federal Reserve (wrongly) of creating the problem by printing too much money. But while blaming the Fed may make Chinese leaders feel better, it won't change U.S. monetary policy, nor will it do anything to tame China's inflation monster.

Could all of this really turn into a full-fledged crisis? If I didn't know my economic history, I'd find the idea implausible. After all, the solution to China's monetary muddle is both simple and obvious: just let the currency rise, already.

But I do know my economic history, which means that I know how often governments refuse, sometimes for many years, to do the obviously right thing -- and especially when currency values are concerned. Usually they try to keep their currencies artificially strong rather than artificially weak; but it can be a big mess either way.

So our newest economic superpower may indeed be on its way to some kind of economic crisis, with collateral damage to the world as a whole. Did we need this?

>> Original Source

By Radio Free Asia
January 21, 2011

Chinese authorities move against a writer who exposed their involvement in a casino.

A blogger who served one year and nine months in labor camp after exposing official corruption on the overseas Chinese-language website Boxun said he will continue to fight for compensation after state security police threatened his family.

"This morning, several officers from the Shenyang municipal national security police burst into my relatives' home and started threatening them and intimidating them verbally," said Sun Haiyang, who was sentenced in early 2009 after he wrote a series of articles about officials' involvement in a local casino.

"They don't want me to speak out about this miscarriage of justice, and they don't want all the news about this protected casino to come out in the media for even more people to read," Sun said.

"So, when they couldn't find me, they started threatening and intimidating my relatives."

Sun, who said he had already received a beating in June 2007, of which a video recording was available online, vowed to keep up the struggle to tell his story and fight for his rights.

"I did nothing to break the law," he said. "It seems fairly clear to me that this is an act of revenge against people who work in the media."

Corrupt officials

Sun said he began writing about the local casino on a news blog hosted by the U.S.-based Boxun, which is blocked inside China.

"The local officials hated me, because I reported that they all had shares in the casino," he said.

"I revealed a dark side of corruption among the local judiciary, and so local officials took their revenge against me."

Sun's lawyer said he has so far been unsuccessful in lodging an official complaint against Sun's sentence to "re-education through labor," an administrative punishment which can be handed down for up to three years without a trial.

"The authorities haven't provided him with the decision document [from the re-education through labor committee] ever since he was released last year," said lawyer Wen Haibo.

"We tried to get it from the Heping district police, but they were afraid we'd use it to pursue some sort of legal challenge, so they wouldn't give it to us, even though we went round a number of departments ... We didn't succeed in getting it back from any of them."

Sun was first detained on Jan. 9, 2009 after he wrote an article for Boxun four days earlier about illegal parking by a vehicle belonging to the Shenhe district police department.

According to local sources, the article led to the criticism of the Shenhe police department at a municipal-level meeting six months later.

Increased attacks

Overseas rights groups say press freedoms came under greater attack in China in 2010, amid increased government censorship and attacks on individual journalists.

While Chinese journalists and intellectuals now increasingly use social networking tools like Facebook and Twitter to disseminate information, the authorities have stepped up reprisals against those whose reporting steps across officially defined boundaries of acceptable reporting.

The Paris-based media rights watchdog Reporters Without Borders listed China as 171st, or eighth from the bottom, on its Press Freedom Index 2010.

The group has documented previous cases of apparent reprisals against Boxun bloggers and citizen journalists, including a four-year jail term for Nanjing-based journalist Sun Lin in 2007.

Reported by Fang Yuan for RFA's Mandarin service. Translated and written in English by Luisetta Mudie.

>> Original Source

By Radio Free Asia | FREE Press for CLOSED Societies
January 17. 2011

Chinese authorities refuse medical parole for a rights activist and winner of the Sakharov Prize.

Jailed Chinese AIDS activist and rights campaigner Hu Jia's health is deteriorating badly, according to his wife Zeng Jinyan, who visited him in a Beijing prison on Friday.

"When we were talking, he suddenly had a seizure, with his face and lips turning pale and his head sweating," Zeng wrote on the microblogging site Twitter.

"He said his left abdomen was hurting. Then he could no long sit upright, so we let him lie down, and we saw that his shirt was wet from perspiration. The guards sent him to the prison hospital, and my visit had to end early," Zeng wrote.

"Hu Jia has always been sick like this. Seizures similar to the one on Friday actually happened several times before, but he hadn't told us," Zeng said in an interview on Monday.

"His medical treatment in prison has never been adequate," Zeng added.

Hu suffers from hepatitis and cholelithiasis, but authorities have denied him medical parole five times in the past without explanation, according to Zeng.

Zeng applied anew on Sunday for Hu's release on medical grounds.

"I filed on Hu Jia's behalf for medical parole again," she said. "Even one day less in jail is a plus for the health of my husband."

Phone calls to Beijing City Prison, where Hu is serving his jail term, went unanswered on Monday.

Wrote critical articles online

Hu's Beijing-based lawyer Mo Shaoping said, "The prison really should give either oral or written explanation for why they have denied Hu Jia's appeal for parole."

>> Please Read Complete Report

By Radio Free Asia (15 years of bringing FREE press to CLOSED societies)
January 14, 2011

U.S. leader to raise human rights at U.S.-China summit.

President Barack Obama has held his first meeting in the White House with key campaigners for human rights in China, highlighting the prickly issue in bilateral relations ahead of talks next week with Chinese leader Hu Jintao.

The meeting on Thursday came as Obama's top diplomat Hillary Clinton, in an unusually forthright message, urged China to release dissidents, including Nobel laureate Liu Xiaobo.

The Secretary of State said on Friday that "the longer China represses freedoms, the longer it will miss out on" opportunities and "the longer that Liu Xiaobo's empty chair in Oslo will remain a symbol of a great nation's unrealized potential and unfulfilled promise."

>> Complete Report Here

By David Leonhardt | The New York Times
January 11, 2011

When China's president, Hu Jintao, visits here next week, the exchange rate between Chinese and American currency will inevitably become a big topic of conversation.

China has been holding down the value of its currency, the renminbi, for years, making Chinese exports to the United States cheaper and American exports to China more expensive. The renminbi's recent rise has been too modest to change the situation, and Mr. Hu's state visit is sure to highlight the real tensions between the countries.

Yet the focus on the currency has nonetheless become excessive. The truth is that the exchange rate is not the main problem for American companies hoping to sell more products in China and, in the process, create more jobs in this country. The exchange rate does not need to be the focus of next week's meetings.

For the United States, the No. 1 problem with China's economy is probably intellectual property theft. Technology companies, for example, continue to notice Chinese government agencies downloading software updates for programs they have never bought, at least not legally.

No wonder China has become the world's second-largest market for computer hardware sales -- but is only the eighth-largest for software sales.

Next on the list, say people who work in China or do business there, is the myriad protectionist barriers China has put up. These barriers make this country's recent efforts at "buy American" protectionism look minor league. In some cases, Beijing has insisted that products sold in China must not only be made there but be conceived and designed there. The policy goes by the name "indigenous innovation."

The renminbi certainly matters, too. It affects the price of every American product sold there and every Chinese product sold here. But discussion of the renminbi typically ends up exaggerating the problem somewhat by relying on an imperfect measure.

The most relevant comparison of two currencies is one that is adjusted for inflation in the two countries. When inflation is higher in one country, as in China today, it means that country's products are becoming more expensive -- and imports into the country become relatively cheaper. In effect, the real price of Chinese-made goods is rising faster than the exchange rate suggests.

Without taking inflation into account, the renminbi has risen 3 percent against the dollar since last summer, when China began letting it rise. Once inflation is accounted for, the real increase has been about 5 percent. At that pace, the renminbi could erase its artificial undervaluation -- as some economists estimate it -- in less than two years.

Of course, one reason for the rise is the political pressure from the United States and other countries. As much as China's Communist Party leaders may claim otherwise, they really do respond to international lobbying sometimes.

The obvious question now is how the Obama administration can apply similar pressure on intellectual property theft and trade barriers. Arthur Kroeber, a Beijing-based consultant and editor of the China Economic Quarterly, goes so far as to call the currency discussion a distraction. "What exactly there is to be gained by quibbling over a point or two in the annual appreciation rate," Mr. Kroeber says, "is beyond me."

The best hope for getting another country's leaders to do anything is to persuade them that it's in their interest. That task is not so easy with trade barriers, because every time an American company is kept from making a sale in China, a Chinese company presumably benefits. It makes the sale instead or, in the case of piracy, it saves money that it would have spent on the authentic product.

Still, China's leaders have reason to be nervous about all the barriers they have built. China's elite, in government and business, are deeply concerned that their companies remain unable to create truly innovative products. The obsession with the fact that no Chinese citizen has won a scientific Nobel Prize stems partly from this worry.

Opening up your economy to more competition may bring some short-term pain, but it also forces companies to become stronger and more creative -- or to wither. Competition breeds innovation.

This self-interest argument is the one that Mr. Obama and his advisers are most comfortable making. They worry that outright pressure on China will put it on the defensive and ultimately backfire. Sometimes, they may worry too much. Pressure clearly can work, as the last few months have demonstrated.

The United States should be able to round up some allies on these issues, just as it has with recent military matters relating to China. BASF and Siemens, two big German companies, have already complained about Chinese protectionism, as have some European leaders. Other countries also have reason to be frustrated with the exchange rate: relative to many currencies other than the dollar, the renminbi has actually lost value in recent months.

But even by itself, the United States is big enough -- and important enough to Chinese companies -- to exert some pressure. That is why the recent "buy American" provisions in a couple of bills, small as they may be, are useful. The same goes for continued discussion of Congressional bills that would penalize China.

If anything, the Republican takeover of the House offers a new chance to hold hearings on those bills. Representative Dave Camp, the Michigan Republican who will become chairman of the Ways and Means Committee, has been a vocal critic of China's protectionism.

Finally, both Republicans and Democrats can use Mr. Hu's coming visit to emphasize -- to him and to the many Chinese citizens who will be following -- just how frustrated many Americans are with the economy's woes. As the scholar Zhang Guoqing wrote in a Chinese newspaper recently, "A high unemployment rate and the trouble in stimulating the economy" are helping to create "enormous hidden dangers" in the United States.

One of those dangers is the possibility that American politicians will eventually decide that tough talk isn't enough to satisfy voters' anger. If that day comes, the United States and China could end up in a trade war that only worsens the situation for both countries.

>> Original Source

Editorial | The New York Times | Print Edition of January 11, 2011

While the Obama administration has been pressing China to stop artificially cheapening its currency, Chinese leaders still resist, insisting that that would damage exports and risk the country's economic health and possibly its social order. Spiraling inflation -- exacerbated by the cheap currency policy -- could threaten both.

Right now, China is twisting itself into a pretzel as it tries to rein in prices while also holding down the value of the renminbi. The central bank has increased interest rates twice since October, and in recent months it has boosted banks' reserve requirements three times and introduced price controls on food.

Annual inflation still hit 5.1 percent in November, the highest in more than two years, while higher interest rates are pulling in more money from abroad, fueling a housing bubble and further complicating economic management. Price controls and crackdowns on hoarding might temporarily ease the inflation rate, but they cannot provide a lasting solution. They tend to push businesses to the black market and depress production of regulated staples, leading to shortages -- and often more inflation.

Allowing the renminbi to rise substantially would be far more effective. It would reduce the domestic price of imports, pressuring local producers to keep prices low. And it would temper money inflows by introducing a dose of uncertainty to the exchange rate. A rising currency could ultimately prove far less damaging, in terms of lost growth and employment, than the raft of conflicting policies that the Chinese government is deploying, so far unsuccessfully, to keep rising prices at bay.

So why won't China let the renminbi rise? The most plausible answer is that powerful interests in the export sector are swaying its decisions. Cheap exports have turbo-charged China's growth, but these days it is generating very few new jobs. And the policies supporting the export sector are detrimental to many Chinese, who earn little and pay more than they might for imports.

A more expensive renminbi would cool inflation. It would bolster Chinese leaders' stated objective of developing the domestic consumer economy. The government could deploy some of the hundreds of billons of dollars of reserves it has amassed (now parked in American Treasury bonds in order to keep a cheap currency) to pay for pensions and health insurance for ordinary people. Chinese consumers would then be able to consume more, encouraging imports and slowing exports, and helping both the world economy and the Chinese people.

China would be wise to stop tailoring economic policy to satisfy its exporters and start thinking about the big picture, starting with its own people.

By Fran Wang | AFP Agence France-Presse | via UNCENSORED Yahoo! News
January 07, 2011

China is failing to deliver on pledges to help its 300 million smokers kick the habit, according to health experts who warned of a sharp rise in tobacco-linked deaths if strong steps are not taken.

By 2030, more than 3.5 million Chinese could die from smoking-related illnesses each year, compared with 1.2 million in 2005, a joint report by Chinese and foreign medical experts said.

The report, "Tobacco Control and the Future of China", was officially released on Thursday and said China would almost certainly miss a January 9 deadline to impose an indoor ban on smoking.

China, the world's largest tobacco producer and consumer, pledged to enact the ban when it became a party to the World Health Organization's Framework Convention on Tobacco Control (FCTC) five years ago.

"China's score remains low in terms of its implementation of tobacco control and FCTC obligations. China significantly lags behind in its implementation of the FCTC's requirements," the report said.

The report was sponsored by the Chinese Center for Disease Control and Prevention.

Despite its pledge, no such indoor smoking ban has been put in place and smokers in China continue to light up freely in restaurants and office buildings.

Tobacco is the country's top killer, and smoking and exposure to second-hand smoke result in a huge medical and social cost, the report said.

"Medical costs and labour losses caused by smoking are increasing year by year and at an ever-faster rate," the report said.

Smoking is deeply ingrained in Chinese society and widely accepted, with the offering of cigarette a common gesture of greeting.

As a result, the report said, an estimated 738 million Chinese are exposed to second-hand smoke, including 182 million children.

Government agencies are the largest buyer of high-grade cigarettes, which are often given as official gifts, sometimes as bribes, according to the report.

It singled out the Chinese cigarette industry for particular blame, saying it had seriously undermined anti-smoking efforts and was a key barrier to effective tobacco controls, it said.

"The tobacco industry has become the largest 'health-hazard' industry," said the report.

"Although it is a major taxpayer, the industry is generating a much greater social burden."

China's tobacco monopoly acts as the lead entity in implementing the tobacco control framework, which effectively allows it to impede adoption of anti-smoking policies and laws, it added.

The report called for the establishment of a high-level tobacco control bureau to implement rigorous anti-smoking activities and for the government to discourage smoking by hiking cigarette taxes and other market measures.

>> Original Source

By Edward Wong | The New York Times
02 January 2011

MURGHAB, Tajikistan -- On the outskirts of this wind-scoured town, founded in 1893 as a Russian military post, the construction of a new customs compound heralds the return of another major power.

When it opens this year, the sprawling new lot will accommodate much larger caravans of Chinese trucks than the existing trade depot, speeding the flow of clothing, electronics and household appliances that have lately flooded Central Asia, from nomadic yurts on the Kyrgyz steppes to ancient alleyways in Samarkand and Bukhara.

"Trade is growing between China and all these countries around it," said Tu'er Hong, whose truck was one of about 50 from China transferring goods to Tajik drivers one day recently at the current post.

While China is seizing the spotlight in East and Southeast Asia with its widening economic footprint and muscular diplomacy, it is also quietly making its presence felt on its western flank, once primarily Russia's domain.

Chinese officials see Central Asia as a critical frontier for their nation's energy security, trade expansion, ethnic stability and military defense. State enterprises have reached deep into the region with energy pipelines, railroads and highways, while the government has recently opened Confucius Institutes to teach Mandarin in capitals across Central Asia.

Central Asia, says Gen. Liu Yazhou of the People's Liberation Army, is "the thickest piece of cake given to the modern Chinese by the heavens."

The five predominantly Muslim countries that won independence after the Soviet Union collapsed in 1991 -- Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan -- are once again arenas for superpower rivalry, much as the region was during the 19th century Great Game between Russia and Britain. This time the players are China, Russia and the United States, which uses Central Asia as a conduit for troops to Afghanistan.

Chinese officials are wary of what they view as American efforts to surround China, seeing American troops and military alliances in Central Asia, India and Afghanistan as the western arc of a containment strategy that also relies on cooperation with nations in East and Southeast Asia.

China is flexing its own military muscle in the area, conducting sophisticated war games in Kazakhstan in September as part of annual exercises that traditionally include several Central Asian nations. According to a State Department cable released by WikiLeaks, American officials suspected China of offering Kyrgyzstan $3 billion to shut down the American air base there.

The cable, dated Feb. 13, 2009, described an awkward meeting between Tatiana C. Gfoeller, the American ambassador to Kyrgyzstan, and Zhang Yannian, the Chinese ambassador there, in which Ms. Gfoeller confronted Mr. Zhang with her suspicions of the $3 billion bribe. "Visibly flustered, Zhang temporarily lost the ability to speak Russian and began spluttering in Chinese to the silent aide diligently taking notes right behind him," the cable said. Mr. Zhang then rebutted the accusation.

>> Please Read Complete Report Here

By Radio Free Asia
December 31, 2010

Beijing may be moving to tighten censorship and protect state-owned companies.

Chinese officials and media are warning of a crackdown on "illegal" Internet telephony services, like those provided by Skype, that are not licensed or approved by the country's powerful telecoms regulator.

"We are currently working together with relevant departments to launch a crackdown on illegal voice-over-IP (VoIP) telephony," Beijing's ministry of industry and information technology (MIIT) said in a statement carried on its website.

"We are looking to recruit members of the public who have clues in cases of illegal Internet telephony," said the statement, dated Dec. 10 but featured prominently in official media reports on Friday.

The statement provided a hotline number for anyone wanting to report information to the authorities.

Lucrative

The ministry's move is seen by some as a means of protecting the lucrative international call business of China's state-owned telecom operators.

Others have speculated that the government is also concerned that high-level encryption on VoIP services such as Skype make calls too difficult for the authorities to monitor.

Skype has been a popular tool with activists and others who want to share information relatively freely, getting around the complex system of blocks and filters known collectively as the Great Firewall (GFW).

Gong Shujia, an expert in electronic communications at George Mason University, said the fixed-line service providers found it very hard to compete with the Internet-to-phone services.

"If you have a fixed-line telephone in your home, that'll cost you 30-40 yuan per month, whereas if you use Internet phone services you will only spend 2-3 yuan per month," Gong said.

Important factor

But he said profits were not the only concern behind Beijing's planned crackdown on Internet telephony.

"There are two issues here. One is the issue of the profits of the telephone service providers," Gong said.

"The other is that any information sent as speech over these networks...is already encrypted when it leaves your computer."

"Even if someone was listening in, they wouldn't be able to hear the sound, so I think that is also another important factor [behind this decision]," he added.

Officials have so far declined to clarify the implications of the message for specific services.

But the Beijing Morning Post on Thursday quoted MIIT vice-minister Xi Guohua as saying only state-owned major Chinese telecommunications operators were licensed to provide Internet phone services linking telephones and computers.

Discounted rates

Beijing officials have made similar statements in the past, and also declined to clarify their implications for services such as Skype.

However, Xi said communications between computers (PC-to-PC) remained open to China's 450 million Internet users.

Currently, Skype operates both PC-to-PC calling services, which are free, and PC-to-phone services which enable users to dial international phone networks from their PC at discounted rates.

The ministry has previously said unlicensed VoIP services are illegal, but has declined to specify what action would be taken.

The Beijing Morning Post cited the case of UUCall, a homegrown VoIP service which calls itself "the first Chinese Internet phone brand," which was shut down in October 2009.

UUCall resumed business in February after moving its domain name to Hong Kong, the paper added.

"Not banned"

Netizens hit back at the proposed ban, complaining that VoIP was a public good that should not be declared illegal.

"What benefits people is not legal. I really want to curse out loud," one angry user said.

Skype told Bloomberg on Friday that its services in China remained operational.

"Skype is not banned," Jennifer Caukin, a Palo Alto, California-based
spokeswoman for the service provider, said in an e-mail to the financial news service.

"Our users in China currently can access Skype via Tom Online, our majority joint venture partner."

Reported by Shi Shan for RFA's Mandarin service. Translated and written in English by Luisetta Mudie.

>> Original Report