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China backtracking?

China Reform Monitor No. 336, October 16, 2000
American Foreign Policy Council, Washington, DC
http://www.afpc.org

INVESTORS BEWARE: CHINA STOCK MARKET LISTS INSOLVENT COMPANIES;
BEIJING BACKTRACKING ON PNTR AND WTO AGREEMENTS

Editor: Al Santoli

August 17: The Chinese government's stranglehold on information is
hindering attempts at market reform, the Asian Wall Street Journal reports.
Burgeoning government debt, loss-plagued state owned enterprises [SOEs] and
increasing social unrest have caused the Chinese communists to seek an
unlikely savior: the stock market. Chinese economic planners under Zhu
Rongji seek to keep stock prices high to help ailing SOEs stay afloat, while
relieving weak state banks with government loans. However, in an effort to
maintain tight political control, China's leaders are resisting the key role
of information in a free-market system. Even the Internet has been targeted
with strict laws to prevent the leaking of "state secrets" -- including
damaging information on listed companies that Beijing does not want made
public. The biggest problem, the Journal observes, is the Communist Party's
reluctance to allow the free flow of information about listed companies,
some of which should have been de-listed or declared bankrupt long ago.

October 3: Beijing has tightened control of China's Internet industry by
limiting foreign investment and imposing stringent surveillance of portal
content, the South China Morning Post reports. The new comprehensive
government regulations were published in Xinhua news agency. The rules
require Chinese Internet content providers [ICPs] to seek government
approval for joint ventures or any business cooperation with foreign
investors. Analysts say the harshest regulation holds Chinese portals
responsible for blocking "illegal content" and "subversive content" from
spreading through their Web sites.

The state rules define "subversive" as any content that, "harms the
reputation of China, spreads ideas that threaten the reunification of China
or the stability of Communist party rule and social order." Licensed ICPs
are responsible for blocking and reporting "subversive" content to the
police, and are required to keep detailed records of the Internet users who
spread "subversive" content.

October 10: The final round of international talks regarding China's bid to
join the World Trade Organization have stalled, with China balking on
previous promises and resisting demands by the United States and other
countries that it undertake major legal reforms and explain in greater
detail how it intends to open its market to foreign companies, the
Washington Post reports. The disputed legal documents, the Post adds,
combines the terms of the bilateral agreements China has reached
individually with the US, the European Union and 135 other members of the
WTO. Legal reform is especially important because less than 10 percent of
China's judges, chosen by the Communist Party, have legal training. In
addition, Chinese government ministries own many of the companies that may
be involved in disputes with foreign partners and investors.

October 12: The day after President Clinton signed the documents granting
Permanent Normal Trade Relations [PNTR] with China, US Trade Representative
Charlene Barshevsky made an emergency visit to China to urge Beijing to
stick to concessions that the US thought it had won over China's entry into
the WTO, the Associated Press reports.