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[You have to pull out a map for this one but it's worth it. China claims sovereignty (and oil rights) over all waters leading out to the edge of Asia's continental shelf. This then would include every square foot west of the southern third of Japan, everything west of the Korean peninsula and all the waters around Taiwan. When China chooses to enforce this claim, as is apparently happening now, it is a certainty that all hell will start to break loose in the region. This may be the reason for a US Naval exercise last year involving five aircraft carrier battle groups. It is on this shelf that small but very significant deposits of oil and gas are known to exist from northern Japan all the way south to the Spratly islands near Vietnam, the Philippines and Indonesia. - MCR]
Taiwan issue could lead to war,
says China
Beijing's ANZUS warning
By John Kerin
The Courier-Mail (Australia)
08mar05
http://www.thecouriermail.news.com.au/printpage/0,5942,12477132,00.html
In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.
CHINA is demanding that the Howard Government review its 50-year-old military pact with the US, warning that the ANZUS alliance could threaten regional stability if Australia were drawn into Sino-US conflict over Taiwan.
Under the ANZUS alliance, Australia is obliged to support the US should China resort to force to resolve its long-running dispute with Taiwan.
But a top Chinese official - Beijing's director-general of North American and Oceanian Affairs, He Yafei - told The Australian that Australia and the US needed to be careful not to invoke the ANZUS alliance against China.
"We all know Taiwan is part of China, and we do not want to see in any way the Taiwan issue become one of the elements that will be taken up by bilateral military alliances, be it Australia-US or Japan-US," he said.
"If there were any move by Australia and the US in terms of that alliance (ANZUS) that is detrimental to peace and stability in Asia, then it (Australia) has to be very careful."
Asked if he were referring to Taiwan, Mr. He said "especially so". "It (Taiwan) is our internal affair."
But a spokesman for Foreign Minister Alexander Downer said last night that Australia had no plans to alter any of its commitments. "Neither Australia nor the US have any plans to amend the ANZUS alliance," he said.
But Mr. Downer hinted at a policy shift on Taiwan in Beijing last year, when he suggested Australia might not have to go to Taiwan's aid under the terms of ANZUS because a flare-up might not constitute a direct attack on US interests.
He was quickly corrected by Prime Minister John Howard, but the Downer comments raised expectations in Beijing that Australia now considers its more than $20 billion-a-year trade relationship with China as too important to sacrifice over Taiwan.
Australian National University Strategic and Defence Studies Centre board chairman Paul Dibb said the warning from Beijing was simply another sign of China's "growing economic strength and predominance in the Asia-Pacific".
"China is gaining confidence and this suggests it wants to throw its weight around a bit," he said yesterday.
But China's objection could not change Australia's policy, which was to make a decision at the time if it came to a conflict in the Taiwan Strait.
"There's little doubt the US would expect Australian support in the event of naked aggression against Taiwan by China," Professor Dibb said.
"If the Taiwanese provoke an attack, then that might be different."
Lowy Institute security analyst Alan Dupont said he could not recall a Chinese official referring directly to the ANZUS alliance.
"It's a reminder that our relationship with China is rather fragile, and that intervention in Taiwan could have negative consequences for our political and economic relationship," he said.
Dr Dupont said there was also concern in Beijing about how trilateral security talks between Australia, the US and Japan might develop in relation to Taiwan.
A Taiwan government spokesman told The Australian that China had no right to attempt to influence the policies of other nations towards Taipei.
"Those countries have taken a position on Taiwan they believe is in the best interests of stability and security in the region," he said.
The comments come after Chinese Foreign Minister Li Zhaoxing told Tokyo and Washington on Sunday to drop Taiwan from their joint security pact.
He was commenting after Tokyo and Washington named Taiwan as an issue of "strategic" concern during defence talks in Washington.
China Enacts Law to Stop
Taiwan Secession
Mar 13, 8:50 PM (ET)
By Christopher Bodeen
http://apnews.myway.com/article/20050314/D88QERS01.html
In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.
BEIJING (AP) - China's national legislature on Monday overwhelmingly approved a law authorizing a military attack to stop Taiwan from pursuing formal independence, a day after President Hu Jintao told the 2.5 million-member People's Liberation Army to be prepared for war.
The measure was approved by a vote of 2,896 to zero, with two abstentions at the closing session of the annual session of the figurehead National People's Congress' annual session.
"We shall step up preparations for possible military struggle and enhance our capabilities to cope with crises, safeguard peace, prevent wars and win the wars if any," the official Xinhua News Agency quoted Hu as saying Sunday.
Hu's comments, made to military delegates at the national legislature, appeared aimed at underlining Beijing's determination to unify with democratically ruled Taiwan, which split from the Chinese mainland in 1949.
Also Sunday, Hu was appointed as chairman of the government's Central Military Commission, a largely symbolic move that capped a generational transfer of power. He already heads a parallel party commission that runs China's military.
Hu, 62, has shown no sign of diverging from former President Jiang Zemin's hard-line stance toward Taiwan, a democratically ruled island that Beijing insists is part of the communist mainland.
The two sides split in a civil war more than 50 years ago, and Beijing has long threatened to invade if Taipei takes formal steps toward independence.
The anti-secession law passed Monday is aimed at discouraging self-ruled Taiwan, which Beijing claims as its territory, from making its de facto independence permanent.
"We must ... always place the task of defending national sovereignty, security and territorial integrity and safeguarding the interests of national development above anything else," Xinhua quoted Hu as telling military delegates to the congress.
Delegates to the NPC burst into applause after the approval of the law, shown live on national television.
"This law ... represents the people's determination not to allow Taiwan to be separated from China by any means or any excuses," said Wu Bangguo, China's No. 2 leader and chairman of the parliament.
Taiwan's government has condemned the law, saying it risks raising tensions. The United States also appealed to China not to enact the measure.
Taiwanese President Chen Shui-bian has said it "enables China to unilaterally decide Taiwan's future and ignore that Taiwanese have the right to choose a democratic and free lifestyle."
The United States would be Taiwan's most likely defender if China attacked. Washington is lobbying strongly against European Union plans to lift a 15-year-old arms embargo against China, arguing that high-tech European weapons might be used against Taiwanese or U.S. forces.
Hu replaced Jiang as Communist Party leader in 2002 and as president the next year, as power passed to a new generation of Chinese leaders. He succeeded Jiang as head of the party's military commission in September.
Analysts say Jiang, 78, still exerts influence, but not to the extent that his predecessor, Deng Xiaoping, did after retiring from his government posts. Deng was considered China's paramount leader until his death in 1997.
Unlike earlier Chinese leaders who were revered as heroes of the 1949 communist revolution, neither Hu nor Jiang has military experience.
The Communist Party newspaper People's Daily said Sunday that the anti-secession law "shows the Chinese people's common will and firm determination of safeguarding territorial integrity and sovereignty and absolutely does not allow Taiwan independence forces to separate Taiwan from China by any name or by any means."
Jiang, a former Shanghai mayor, was chosen to head the party in 1989 in the tumult that followed the military crackdown on pro-democracy protests centered on Tiananmen Square in Beijing.
He served as president from 1993-2003. During his leadership, China boomed economically even as it remained an authoritarian one-party political system.
Dollar catching Asian flu
By Alan Boyd
Asia Times
March 11, 2005
http://www.atimes.com/atimes/Asian_Economy/GC11Dk01.html
In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.
SYDNEY - They may be telling a different story to money markets, but Asian central banks have been quietly switching their dollar holdings to regional currencies for at least three years, confirm global banking data. In a further, and so far the biggest, setback for the greenback's status as the undisputed reserve currency, Japan on Thursday said it might diversify its holdings, though monetary chiefs later sought to play down the prospect. South Korea rattled currency traders with a similar announcement late last month, followed by a similar backtrack.
China, India, Thailand, Indonesia, Taiwan, the Philippines and Hong Kong have already started a sell-off, despite a diplomatic show of solidarity for the greenback that is prudently designed to prevent a crisis of confidence in exchange systems. The likelihood is that much of this outflow will never return to US dollars as economic interdependence within East Asia and the widening shadow cast by China's trading conglomerates are slowly transforming the traditional market structure.
The Bank of International Settlements (BIS), which acts as a bank for the world's central banks, has just released a study showing that the ratio of dollar deposits held in Asian offshore reserves declined to 67% in September, down from 81% in the third quarter of 2001. India was the biggest seller, reducing its dollar assets from 68% of total reserves to just 43%. China, which directly links the yuan to the dollar and is under US pressure to allow a freer movement of its currency, trimmed the dollar share from 83% to 68%.
This shift conforms with global trends as central banks seek a buffer from the burgeoning US trade and budget deficits. A separate survey by European-based Central Banking Publications found that 29 of 65 nations surveyed were cutting back on the dollar and 39 were buying more euros. America's annual budget deficit of US$500 billion is largely funded by Asian purchases of US government bonds, mostly from China and Japan. The US trade and current account deficits are in a similar plight: it took $530 billion of foreign capital to finance US imports in 2003 and $650 billion last year. Projections for 2005 range up to $800 billion.
Export-led Asian central banks have been accumulating dollars for two decades or more to keep their own currencies competitive. Japan alone has stockpiled $841 billion of reserves to stop the yen from over-valuing as it searches for an economic stimulus. If the central banks pull out, the US may find it hard to borrow the cash it needs to keep the wheels of government turning. The conventional wisdom is that Asia is in too deep to quit, as to do so would invite huge exchange losses.
But some monetary chiefs have already decided there are greater risks in staying in bond markets as rock-bottom US interest rates - still only moderately above the 45-year low reached last year - have dragged yields to unappealing levels. China became a net seller of US government bonds in 2002, shifting much of its reserves to euros, Australian and Canadian dollars. Taiwan left the securities market in the same year and Hong Kong sharply reduced its exposure.
Currency market trading has also had a shift of emphasis, with China's yuan emerging as a potential regional substitute, albeit in the distant future. While this reflects the changing structure of East Asian trade, it is also an indicator of the increasing maturity of Asian exchange activity. According to the BIS data, turnover of the yuan in Asia has surged by 530% since the third quarter of 2001, compared with more restrained growth of 48% by the dollar, 49% by the euro and 93% by the pound sterling.
Trading in India's rupee grew by 114% in the same period and the yen registered 35% growth. The big losers were the Hong Kong dollar (21%) and the Singapore dollar (32%), reflecting the declining economic fundamentals of the two trading hubs. It is a similar picture with foreign exchange derivatives. Trading in yuan derivatives has soared by a staggering 272,355% in the past three years; next best was the Thai baht, with a growth of 2,858%. Dollar trading in derivatives rose by a mere 94% in this time, with euro trading up by 95%, pound trading by 126% and the yen trading by 58%.
The yuan data were calculated from a very low base in previous years and the BIS cautioned that the Chinese currency still had a miniscule influence on trade, due to tight domestic curbs on portfolio funds: it comprises only about 1% of the overall ratio of forex turnover to gross trade flows.
Movements in the dollar/yen spot rate remain the prime influence on Asian currencies and more than 90% of all external trade is still conducted directly in dollars. Only about 12% of holdings are believed to be in euros. Nonetheless, the yuan is converging with the yen and the Korean won and already exerts a strong pull on spot rates for the Hong Kong and Taiwan currencies, possibly hinting at a significant unrecorded trade in the Chinese currency.
While Asian currencies were expected to align themselves with US currency after the 1997-98 regional financial crisis in a de facto dollar bloc, the BIS said there is little evidence that this has occurred, despite the dollar links adopted by China and Malaysia. Rather, it appears that Asian currencies have become more elastic and their central bankers increasingly determined to pursue an independent course as financial markets gain greater depth and begin to more accurately mirror the region's importance to world trade.
However, it remains to be seen how much leash they will be given before being reined in by the nervous US Federal Reserve. The Bank of Korea, which has $200 billion of reserves and $69 billion of US Treasury debt, tentatively announced last month that some might be switched to other currencies, then quickly backtracked when the won surged to a seven-year high in global currency markets. The bank said the proposal, first floated in a parliamentary debate, was not a statement of intent.
Japanese Prime Minister Junichiro Koizumi triggered a similar frenzy after suggesting on Thursday that his country "in general" might need to make an "overall judgment" on diversifying its foreign reserves. The dollar had fallen to a nine-week low against the euro by the time a Finance Ministry official came out with a "clarification". It was merely a topic for discussion, not policy intent, he said. "We are taking a very cautious stance on how to manage foreign reserves, because the impact would be big," Finance Minister Sadakazu Tanigaki told reporters.
Big, indeed, as Japan has the largest dollar reserves in the world. Almost all Asian currencies surged vis-a-vis the dollar following Koizumi's unexpected statement. The Indian rupee rose to 43.56 in late morning deals, sharply higher than Wednesday's close of 43.64. The dollar went down against the Indonesian rupiah by 17 points at 12 noon on Thursday from Wednesday's closing value of 9,375.00, while the South Korean won went up by 0.1% against the dollar, provoking the Ministry of Finance and Economy to say that it was contemplating to intervene in the foreign exchange market.
Alan Boyd, now based in Sydney, has reported on Asia for more than two decades.
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Taiwan issue could lead to war, says China