Beijing Scene, Volume 5, Issue 12, June 11 - 17


Shanghai Closes Internet Cafes
Chinese boomtown Shanghai has punished 278 unregistered Internet cafes in a crackdown on uncontrolled forays into cyberspace, the official Liberation Daily reports.

The move is aimed at "standardizing the city's public Internet cafes" where customers can sip coffee and surf "the Net," the newspaper says.

A city official says some of the unregistered cafes will be fined while others will be given a warning.
The crackdown, described as "Public Action Number One," was launched jointly by the city's police and commercial, telecommunications and education authorities.

Shanghai now has more than 2,000 Internet cafes but only 1,500 of them have applied to register and only 350 are authorized, the newspaper says.
Late last month, Shanghai ordered local paging stations and computer information vendors to stop disseminating political news temporarily, including news downloaded from the Internet.

China has seen explosive growth in the use of the Internet in recent years but the government has also viewed it as a potential threat to its authority.

There are now an estimated two million Internet users in China and some experts predict the number of web surfers could top 10 million by next year.

Unicom IPO Faces Doubts
The planned US$1 billion initial public offering by China United Telecom- munications Co., or Unicom, is running into some obstacles, with questions being raised over the financial strength of some of its assets and access to U.S. cellular phone technology, officials at the Ministry of Information Industries say.

Unicom recently merged with Guoxin Paging Corp., which will be the main asset listed - probably on the Hong Kong Stock Exchange, officials say. But a problem with Guoxin is the paging business is mature and growth slowing, making it relatively unattractive to investors.

Last year, ministry officials say, Guoxin earned 800 million (US$97 million) on revenue of 3 billion. This year's figures could be even better, with profits topping 1.2 billion, they say. But over the long term, paging services are expected to level off as more Chinese buy mobile phones.

That would make Unicom's new mobile phone network - hoped to be built with Code Division Multiple Access technology - appealing to investors. Some members of the U.S. Congress, however, say China shouldn't be allowed to buy CDMA technology, which was developed by Qualcomm Inc. (QCOM) and is sold under license by other U.S. companies, such as Motorola Inc. (MOT) and Lucent Technologies Inc. (LU).

Members of Congress say that because CDMA technology encodes the signal before sending it out over the airwaves, it is harder for intelligence agencies to eavesdrop.

While most analysts believe the technology will be sold, the uncertainty makes it hard for investment bankers to draw up a prospectus, according to a consultant hired by an investment bank. "They don't know exactly what they'll be selling," he says.

Officials stress that the problems don't mean Unicom's listing is in jeopardy, saying it has been approved by top officials and is expected to take place this summer.

Chinese ICPs to Form Industry Organization
Eight of China's leading Internet Content Providers (ICP) have reached an agreement in Beijing to form the China ICP United Development High-Profile Conference, Xinhua reports.

The eight participants of the agreement are Chinabyte, China Wide Web, Goyoyo, Information Highway Tech, Netease, Shanghai Online, Sina and Sohu.

With the aim to promote coherent business practices and prevent undesirable practices in the sector, the eight ICPs say they hope the new organization will help to pave the way for a healthy and competitive business arena.

It is agreed by the group that local companies need a regulated domestic market to ensure that Chinese companies are able to expand quickly and gain sufficient strength to compete with foreign counterparts.

Private Companies To Sell B Shares
Stock market regulators have announced plans to enlarge China's hard-currency stock market by allowing private companies to offer Class-B shares, mainland media reports.

According to a front-page story in the China Securities News, "state companies, group companies and all other companies with standard operations" can now apply to sell hard-currency shares to foreigners.

The move will give private companies access for the first time to cheap capital and could help bolster the quality of listed firms. To date, non-state firms have been barred from China's equity market, which has been used by Beijing to raise reform capital for government-owned enterprises.

New Ideology Czar
China's hardline ideology czar is set to be replaced by a liberal better known for his knowledge of markets than Marx, according to media sources in Hong Kong.

Zhao Qizheng, currently director of the information office of the State Council, or cabinet, will take over from Ding Guan'gen, the long-time director of the Chinese Communist Party's Propaganda Department, later this year, according to party sources in Beijing.

The appointment of Zhao, who is already in charge of the party's Central Office for Overseas Publicity, is expected to spur further loosening of the muzzle on China's state-run press, allowing journalists wider scope for reports critical of the government. Zhao, a former vice-mayor of Shanghai, is an ally of premier Zhu Rongji, who has urged the media to report more critically.

More WTO
A senior U.S. trade official says that China still has to make some "hard decisions" on issues including banking and insurance to qualify for entry into the World Trade Organization (WTO).

Rita Hayes, U.S. ambassador to the WTO, says there is still a lot of work to do to complete the marathon negotiations on the terms for China's entry, contained in an accession protocol.

She was speaking to reporters in Geneva, where China and WTO's 134 member states are expected to hold the next round of accession talks sometime in June. But no firm date has been set for the next WTO talks, according to a WTO spokesman.

"We have had very intensive talks with the Chinese. We have made some progress on the (accession) protocol, but there is still a lot of work to do," Hayes says.

"There are still a lot of different items that need to be looked at, in particular getting into banking and insurance, some very difficult issues that China is not ready to make commitments on.

"It is not the United States that has to make hard decisions. It is China that is going to have to make hard decisions to become a member of the WTO because China is going to enter the WTO on the same footing and procedures as everybody else," Hayes adds.

China applied in 1986 to join the global trade watchdog, but has been unable or unwilling to meet Western demands for access to its lucrative markets.

Grain, Coal Aid to Pyongyang
China will give famine-stricken Communist neighbor North Korea 150,000 tons of grain and 400,000 tons of coking coal this year, Premier Zhu Rongji told a visiting senior Pyongyang official.

The official Xinhua news agency says Zhu offered the aid to Kim Yong-nam, head of North Korea's parliament and the highest-ranking North Korean official to visit China since 1991.

"Over the past years, China has provided assistance, within its capacity, for the DPRK (North Korea) people in their socialist construction," Zhu was quoted as saying.

North Korea has been struggling since 1995 with a devastating famine caused by floods and drought, magnified by mismanagement in the state-run collective farm system, which is believed to have claimed hundreds of thousands of lives.

After meetings in Beijing with China's leadership, Kim, North Korea's second in command, will be shown the fruits of China's capitalist-style economic reforms in the booming eastern port city of Shanghai.

Although China was expected to showcase its transformation from a backward state-planned economy to a global trading powerhouse, Chinese officials have said Beijing will not press its development model on Kim's delegation.

Xinhua quoted Kim as praising China's economic reforms and congratulating Beijing for avoiding the worst of the Asian financial crisis and maintaining economic growth.

Kim is the most senior North Korean official to visit China since late President Kim Il-sung came in October 1991, only 10 months before Beijing angered Pyongyang by forging diplomatic ties with rival South Korea.

The five-day visit, in which Kim is accompanied by Foreign Affairs Minister Paek Nam-sun, Cabinet Premier Hong Song-nam and Defense Minister Kim Il-chol, was seen as a signal of renewed warmth in ties between two of the world's last Communist states.

Xinhua quoted Zhu as saying ties were "well-grounded" between the two countries, which fought together against U.S.-led United Nations forces in the 1950-53 Korean War.

The two countries still hold many views in common, including wariness about U.S. policies in Asia, suspicion of strengthened U.S.-Japan military ties and rejection of Western criticism of their human rights records.

Beijing has reacted angrily to plans by the United States and Japan to build a regional Theatre Missile Defense (TMD) umbrella to protect U.S. forces and their allies in Asia from what Washington says is a North Korean menace. Beijing officials accuse the United States of exaggerating the North Korean threat as an excuse to project its power in the region, throw a protective arm around rival Taiwan and contain China's rise as a world power.

The renewed friendship between China and North Korea also adds a strategic twist to growing tension in Northeast Asia. The United States had increasingly looked to China to moderate the behavior of its unpredictable neighbor. Beijing is seen as one of the few countries with any clout among Pyongyang's secretive leaders.

    Previous Stories...

June 4 - 10, 1999

May 28 - June 3, 1999

May 21 - 27, 1999

May 7 - 13, 1999

April 30 - May 6, 1999

April 23 - 29, 1999


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