Why China's Leaders Are Reviving Mao's Legacy and "Red Culture" (Time.com)

Twelve-year-old Chen Le is a typical Chinese kid. He loves flying paper airplanes, plays Ping-Pong and dreams of becoming a scientist. And he aims one day to join the Chinese Communist Party (CCP) so, as Chen puts it, "I can puff out my chest and say I am a party member." The public school that Chen attends in China's southwestern metropolis of Chongqing was renamed the Red Army School earlier this year to pay tribute to the soldiers who gave their lives to the People's Republic. "I'm very proud of my school's new name because the Red Army soldiers were tough and had a strong spirit," says Chen, a little crimson kerchief tied around his neck. "I want to be as red as they were."

This summer, China is awash in red. As the nation commemorated the 90th anniversary of the CCP on July 1, hundreds of millions of schoolchildren, officials, retirees and even top Internet executives joined voices to sing "red songs" praising the motherland. Cinemas have rolled out the red carpet for a blockbuster propaganda film about the creation of the party. Local governments have sent out text messages with pithy quotes from Mao Zedong, the founder of the People's Republic, whose Little Red Book of sayings has for years been mere flea-market kitsch. (See pictures of China celebrating 90 years of communism.)

A Red Olympics with 200 teams was held with competitions like "Heroes Bombing the Bunkers" and "The Grenade Throw." Then there's the Red Army school program, which uses donations and other funds to instruct 1.15 million kids in academies named after the communist militia. "Our patriotism classes are even more patriotic than those of normal schools because loving our country is very important for our current society," says Fang Qiang, the secretary-general of the National Red Army Construction Project Council. "Our students all have a warm love for Chairman Mao."

Say what? Is this the same country that overtook Japan to become the world's second-largest economy last year, whose love of the free-market system has spawned thousands of books and created a whole industry of Western wide-eyed consultants? Indeed it is. Over the past three decades, the CCP may have replaced its founding revolutionary zeal with a turbocharged commitment to economic development; but the party has not managed to last for nine decades without a keen sense of survival. China's red revival might seem like a throwback, yet it is quite the opposite: a struggle for the future waged by the nation's leaders. As China's populace views its politicians as increasingly out of touch with a society beset by a widening income gap, the crimson tide is aimed at instilling pride in a country where there is no government but the party. "Looking back at China's development and progress over the past 90 years," said President Hu Jintao in his July 1 keynote speech, "we have naturally come to this basic conclusion: success in China hinges on the party." So that's clear. (See a gallery of the Chinese actors impersonating Chairman Mao Zedong.)

Leading the revival of attention to the CCP's history, myths, symbols and beliefs is an unlikely figure: Bo Xilai, party secretary of megalopolis Chongqing and the closest thing to a political rock star in China. In June, under Bo's directive, some 50,000 Chongqing residents flocked to a stadium to belt out red songs. Bo has replaced moneymaking commercials on local TV with red programming, and he has ordered cadres to the countryside to "learn from the peasants" - an echo of Mao's disastrous rural revolution.

All this is somewhat surprising. Bo's father was a famed communist contemporary of Mao, but he was purged during the Cultural Revolution. Bo, now 62, is hardly a revolutionary: he favors luxury cars and suits and sent his son to Harrow and Oxford. Prior to becoming Chongqing's leader, Bo earned praise in Western capitals as China's Commerce Secretary, ready to deal with the outside world. He doesn't seem the obvious type to sign off on scarlet billboards across Chongqing that urge residents to "spread mottoes" and "sing red songs." But sign off on them he did.

The Only Suitable Color
Look at China's political calendar, and a possible answer to the puzzle presents itself. Next year the CCP will begin a carefully composed, once-a-decade leadership transition as Hu and Premier Wen Jiabao ready themselves for retirement. As the jockeying for power gets under way, few want to be seen as anything less than loyal to a party that has ruled for 62 years. Bo has a good chance of being elevated to the hallowed ranks of the Politburo Standing Committee in the coming leadership reshuffle. His red fervor seems designed to help his cause.

See pictures of the largest military parade in China's history.

If politics explains Bo's zeal, he's chosen just the place to demonstrate it. Chongqing is a sprawling municipality of 30 million, and shares with only Beijing, Shanghai and Tianjin a special status as a centrally run municipality. During World War II, Chongqing served as both the capital of the Nationalist government run by Chiang Kai-shek and as a base for the communists who were supposedly allied with Chiang in a popular front against the Japanese. (Chongqing's top red tourist attraction commemorates former jails where departing Nationalist agents executed imprisoned communist rebels.) Today, the river port is the investment gateway to China's underdeveloped hinterlands, and it is booming. Chongqing added 63 million sq m of new construction in 2010, 66% more than the year before. But with such growth have come social tensions. "Secretary Bo realized that people wanted more spirituality as Chongqing developed so quickly," says a Chongqing official who declined to be named. "So he gave them red culture in which they can sing songs and feel good."

Given that Chongqing has sold itself as China's reddest city, it's all the more puzzling that another city official I meet does not want to be named either. But I can see why when he begins his rhetorical somersaults. "There is a mistaken impression that red culture is just about the Chinese Communist Party," he begins. "That's not true. It also includes Confucius, democratic culture, Einstein, Shakespeare, even Martin Luther King's 'I Have a Dream.'" He then goes on to vaguely connect red culture to Michael Jackson. I question the Chongqing government's decision, then, to name its campaign after a color so associated with communism. With a smile, the bureaucrat, in his well-made clothes and expensive-looking watch, answers: "Well, you can't call it 'purple culture,' can you?" he says. "Or 'blue culture'? Other colors are not suitable." (See pictures of the making of modern China.)

Indeed not. But it is not only Chongqing officials who are searching for a guiding ideology - or hue. For all its successes, the CCP may be in the midst of a crisis. One day, China's long economic boom will, at the very least, slow down - planning chiefs are already scaling back expectations to 7% growth this year, after years of 8% or more. The risk for China's leaders is that, someday, they will not be able to depend on continuing increases in prosperity to buy acquiescence in CCP rule. Given that truth, it is little wonder that Bo and others who hope to one day lead China have fixated on a red-tinged spirit to unify the masses in these uncertain times.

And the times are uncertain. Even as Hu presided over a lavish 90th anniversary ceremony for the party in Beijing, he acknowledged serious problems. "The whole party," said Hu, "is confronted with ... lack of drive, incompetence, a divorce from the people, a lack of initiative, and corruption." From the leadership's standpoint, that does not bode well. Last year China saw 180,000 "mass incidents" ranging from labor protests to village riots, according to a sociologist at Beijing's prestigious Tsinghua University - a significant increase from the 74,000 officially reported in 2004. (See pictures of Hu Jintao's day at the White House.)

For a nostalgic faction in the Chinese leadership, it is the market-oriented economic reforms of Mao's successor Deng Xiaoping - which turned China into the world's factory - that are responsible for having allowed ills such as graft and income inequality to flourish. In national surveys from 2005 onward, Chinese have expressed progressively less satisfaction with their lives, even as their incomes have surged. "We can't stop divisions in society completely, but we can try to lessen the pain," says Fang Ning, director of the Institute of Political Science at the Chinese Academy of Social Sciences in Beijing. "The central theme of red culture is to promote unity and equality in society. China has had economic growth. Now we want to pay attention to social growth as well."

The Elite Snickers
In Chongqing, Bo has introduced various social reforms, including a comprehensive public-housing plan and a tree-planting effort that is greening a foggy, gray city. But his red crusade is unabashedly old-style. Under the party secretary's orders, 200,000 government officials are being sent to the villages to listen to farmers' wishes and learn from their struggles, though it is not clear that the program has been a hit. "When government officials came to our area, they just played poker in the field," said one online commenter. Another alleged: "You have to offer the officials good wine, good food and good women."

See "China's Great Swindle: How Public Officials Stole $120 Billion and Fled the Country."

Following central-government policy to concentrate on the rural sector, which risks being left behind as China's coast races toward the future, Bo has vowed to raise Chongqing farmers' incomes by 10,000 yuan ($1,540) within three years. At the city's exhibition center, I am guided through the "Red Culture Resources Exhibition," where one display shows a middle-aged farmer feeding chickens in an orange grove. But we are the only visitors, and the whole scene has been crudely Photoshopped, though my guide assures me it depicts authentic rural happiness. The program may have a hard time convincing those to whom it needs to appeal. I ask Wang Hong, a farmers' son who moved to the city because he couldn't make a living in agriculture, whether he expects his family farmland to reap the dividends promised by the authorities. "No way," he laughs. "I can't see that happening in my area."

Indeed, Bo's red revival is facing something of a backlash. For some Chinese, the color red brings back the bad memories of the 1966-76 Cultural Revolution, when frenzied Red Guards rampaged nationwide. The resurgent glorification of Mao, who even staunch supporters have grudgingly labeled "70% right and 30% wrong," has alarmed others. As the red-culture campaign reached a crescendo this spring, economist Mao Yushi of Beijing think tank Unirule Institute of Economics wrote an online essay blaming Mao for overseeing the deaths of some 50 million Chinese. The Great Helmsman was "a backstage orchestrator who wrecked the country and brought ruin to the people," the academic wrote. Censors quickly purged his comments. (See why China's economy may defy the doomsayers.)

In an increasingly sophisticated nation, crude propaganda won't cut it. In late June the Chongqing Daily ran the story of a cancer patient who survived chemotherapy thanks to a regimen of red songs. The Chinese Internet howled in derision. The urban elite would have snickered if they had been with me when I was taken by an official guide on a staged visit to Chongqing's Oriental Garden, a comfortable apartment complex not far from a Ferrari and Maserati dealership, and whose community center is adorned with portraits of Marx, Lenin and Mao. As we strolled in, residents crowded around computers open to Web pages on Chongqing's red-culture drive. An elderly man gave a lecture on the hardships endured by China's founding communists.

The East Is Red
It would be a mistake, however, to imagine that none of these sentiments are genuine. For many Chinese of an older generation, "red" signifies an era in which equality and unity prevailed - or at least those virtues were cherished. To them, red culture denotes the blood spilled by communist soldiers and the selflessness of an idealistic generation of laborers and farmers. Wistfulness for this altruistic, can-do spirit infuses even young Chinese - who also recognize that a red affiliation doesn't look bad on a rEsumE. In 2009 the CCP welcomed 3 million new members; nearly half were university students. "We have great material conditions now, and we don't need to die for our country like the Red Army soldiers did," says Wei Zheng, a 22-year-old university student and party member from Hunan, Mao's home province. "So for me, red spirit means that I have to study harder and work harder." (See "China Takes on the World.")

Nor is there anything staged about the fervor of the 60 or so Chongqing residents, mostly middle-aged or older, who gather twice a week under a fig tree to belt out their favorite red songs. "The sun will never set on China," they warble before embarking on a rousing war march: "Enemies, wherever you are fighting from, we will find you and kill you."

The open question facing China is whether this backward-looking mood, with its celebration of the CCP, will resonate among those who have grown up in the 30 years since China has turned its back on Marxist economic planning and embraced the market. "These red songs teach very important values," says Yang Mingying, 60, a former teacher. "We cannot let the new generations forget that their happy lives today resulted from the sacrifices of all those Red Army soldiers." It's a universal sentiment: the old want the young to remember. But will they?

- with reporting by Chengcheng Jiang / Chongqing

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China's fresh rare earths export quotas restore cuts (Reuters)

BEIJING/SHANGHAI (Reuters) – China on Thursday issued a second batch of quotas for exports of rare earths this year -- virtually making up for previous cuts -- after its commerce minister met with his EU counterpart to discuss this and other thorny issues between the two trading partners.

The announcement of 15,738 tonnes in the second batch of quotas for 2011 adds to the first round of 14,446 tonnes announced late last year. It also comes just a week after the World Trade Organization ruled against China's curbs on a different mix of raw materials but which some trade partners say could set a precedent.

The WTO's ruling last week that China had breached trade law by curbing exports of eight raw materials led Europe and the United States to say that meant China should also be forced to increase exports of 17 rare earths.

"We feel that a total of around 30,000 tonnes this year is a reasonable number given that Beijing probably does not want to cut the quota a lot, as that could bring more criticism from foreign countries," said an analyst at a foreign-invested fund in Beijing.

The latest issue brings China's total export quotas for the year to 30,184 tonnes, down slightly from 30,258 tonnes in 2010.

China, which accounts for some 97 percent of global output of the minerals crucial to global electronics, defense and renewable energy industries, had slashed rare earth export quotas by 35 percent for the first half of 2011, building on previous quota cuts. That move choked off global supplies, boosted prices and angered China's trading partners.

Beijing, which has defended its limits on exports on environmental and other grounds, said following the WTO decision that it would reform its exports of rare earths.

At a briefing on Thursday, Chinese Commerce Minister Chen Deming did not mention the new quotas but sounded a note of confidence, telling reporters he was not concerned about any possible WTO challenge to Beijing's rare earths restrictions.

"The rare earth issue has not entered the WTO stage," Chen said during a joint briefing in Beijing with the visiting EU trade commissioner, Karel De Gucht.

"I am not worried because we have already had some negotiation (with the EU)," Chen said without elaborating.

At a later briefing, De Gucht said he was confident a negotiated solution could be achieved and would review China's new quotas. But he added that China should publish such quotas further in advance of when they are imposed.

"The level of the quota is very important and also the predictability," he said. "What the industry needs is predictability."

ENVIRONMENTAL IMPACT

Following the WTO's earlier ruling, De Gucht had said the EU, the United States and Mexico could consider legal action if China failed to cooperate.

"On rare earths, what we have been saying is that we want to see applied to rare earth materials the principles that have guided the WTO panel when making the judgment on the raw materials case. We want the same rules to be applied," De Gucht told reporters after he and Chen read separate statements on the morning's trade negotiations.

China expressed its intention to appeal the WTO raw materials decision, De Gucht said, adding that the rules on trade in raw materials would be clear by year-end.

In its raw materials ruling, the WTO panel said China's domestic policies fell short of demonstrating that its export duties on the materials, such as zinc and bauxite, were to curtail pollution or conserve exhaustible natural resources.

China has taken steps to consolidate and rein in its polluting rare earths industry, which may bolster its case if the raw materials ruling is used as a precedent in a similar challenge.

China has said claims by countries that its export curbs on rare earths threatened their economic and national security were "groundless," and that its quotas fell within WTO regulations.

"China only intends to protect its environment and resources and has set tougher and tougher standards for irresponsible mining, and there is no intent to target any other countries," said Liao Yuling, a metals analyst with Huachuang Securities.

(Additional reporting by Aileen Wang in Beijing and Polly Yam in Hong Kong; Writing by Jason Subler; Editing by Ken Wills)

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China's Catholic church ordains another bishop (AFP)

BEIJING (AFP) – China's state-controlled Catholic church on Thursday ordained another bishop, its vice president said, in a move likely to worsen ties with the Vatican, which did not give its approval.

Liu Bainian, deputy head of the Chinese Patriotic Catholic Association (CPCA) -- which controls the church -- told AFP that Huang Bingzhang had been ordained in Shantou city in the southern province of Guangdong.

The Vatican and China have been locked in a bitter struggle in recent months over control of the Catholic Church in China, with the Vatican saying that ordinations being carried out by the state-run church are illegitimate.

China's 5.7 million Catholics are increasingly caught between showing allegiance to the CPCA, or to the Pope as part of an "underground" Church.

Illustrating this, three bishops loyal to the Pope went missing or were detained recently in an apparent attempt to force them to take part in Huang's state-sanctioned ordination, their diocese members told AFP.

The issue has angered the Vatican, which has not had formal diplomatic ties with Beijing since 1951.

Earlier in July, the Rome excommunicated an "illegitimate" Chinese bishop and in May the Pope called on all bishops to "refuse to take the path of separation" in spite of "pressure" from the communist authorities.

But China has ignored these appeals. Last month, it announced that it would try to ordain at least 40 bishops "without delay".

And earlier this week, foreign ministry spokesman Hong Lei said that China ordained bishops "in accordance with the principles of independence, self-reliance and self-governance".

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China's New Parochialism (Time.com)

On any particularly hot day this month, people around the world will do what they have done for decades: go to an air-conditioned movie theater and watch a summertime blockbuster. The latest, biggest movie is Transformers: Dark of the Moon, which has broken box-office records in the U.S. and in many of the 110 other countries in which it has been released. Except in the world's fastest-growing economy and movie market - China. The Chinese people will not get to see Transformers, nor the eagerly awaited new Harry Potter movie, nor any other Hollywood production. At least not yet. Gao Jun, the deputy general manager of Beijing's New Film Association, explained that no foreign movie would be allowed into China until the Chinese film Beginning of the Great Revival made 800 million yuan, or $124 million, which would be an all-time record for a Chinese movie.

Beginning of the Great Revival is a two-hour tale of the rise of China's Communist Party - released on the occasion of its 90th anniversary - and its heroic leader, Mao Zedong, who is played by a young Chinese heartthrob. The movie features a cast of hundreds of major Chinese actors, including Chow Yun Fat, with impressive sets and design, all at record cost. It has been released in 6,000 theaters across the country. But it doesn't seem to be winning hearts and minds. Despite many mass ticket giveaways, cinema houses are reported to be empty. A barrage of negative reviews on the Internet have been censored. On VeryCD, a pirated-film website, more than 90% of users described the film as "trash." (See a video of TIME's favorite Chinese movies.)

On one level, this is just a crude propaganda effort by a Chinese regime seeking legitimacy. But there is another aspect to this story. China is going through an internal struggle over whether it needs to borrow more ideas from the West or follow its own particular course. The question of how to handle Western films is becoming part of a much larger debate.

China is on course to become the largest movie market in the world. It has more than 6,200 movie theaters and is adding to them at the astonishing pace of three new theaters a day. But the government seems determined to keep Western movies at bay. There is a strict quota of 20 foreign movies imported every year. Those movies are censored and tightly restricted to a limited number of theaters. Hollywood studios receive only 13% of the ticket price, about half what they get everywhere else in the world. The DVDs are pirated within days, and the government makes no effort to stem this criminal activity. The result is that Hollywood, America's largest export industry, makes very little money in China. (See if Hollywood can afford to make films that China doesn't like.)

And Hollywood isn't alone. The CEO of General Electric, Jeff Immelt, told the Financial Times earlier this year that it appeared that China did not want Western companies to succeed in that country anymore; he was voicing the feelings of many foreign CEOs. There is growing evidence in many areas that Beijing is favoring locals over Western companies, even violating the rules of market access and trade. The World Trade Organization ruled recently that China's regulations on foreign movies were a form of illegal protectionism and had to end. So far, Beijing has done nothing to abide by that ruling, though it is likely to expand its quotas to mollify the WTO.

Countries play trade games all the time, but this is different. Over the past few years, a new Chinese parochialism has been gaining strength in the Communist Party. Best symbolized by the senior party leader, Bo Xilai, it includes a romantic revival of Maoism, harking back to a time when the Chinese were more unified and more isolated from the rest of the world. It is a reaction to the rampant marketization and Westernization of China over the past 10 years. Bo, who has organized mass rallies to sing old Maoist songs and routinely quotes Mao aphorisms, might well ascend to the Standing Committee of China's Politburo next year on the strength of this new populism.

After centuries of isolation, China has grown in power and strength because it opened itself to the world, learned from the West and allowed its industries and society to borrow from and compete against the world's best. It allowed for an ongoing modernization of its economic structures and possibly its political institutions as well. Its leaders Deng Xiaoping and Jiang Zemin understood that this openness was key to China's success. A new generation of Chinese leaders might decide they have learned enough and that it is time to turn inward and celebrate China's unique ways. If that happens, the world will confront a very different China over the next few decades.

See why American films are popular in China.

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US-Vietnam naval drill begins against China's wish (AFP)

DANANG, Vietnam (AFP) – Former enemies Vietnam and the United States began a joint naval drill on Friday, despite Chinese objections after weeks of escalating tension in the disputed South China Sea.

US officials described the week-long exercises off Vietnam's central coast as "non-combatant events", focused on areas such as navigation and maintenance, in a statement from the consulate general in Ho Chi Minh City.

But China's top military officer General Chen Bingde said Monday that the timing of US naval exercises in the area was "inappropriate", after talks with his American counterpart Admiral Mike Mullen aimed at cooling the tensions.

China, the Philippines, Vietnam, Brunei, Malaysia and Taiwan all have overlapping claims to parts of the South China Sea, believed to be rich in oil and gas deposits and home to shipping lanes vital to global trade.

Vietnam and the Philippines have in recent months accused Beijing of taking increasingly aggressive actions in staking its claims in the sea.

Tensions flared in May when Vietnam said Chinese marine surveillance vessels cut the exploration cables of an oil survey ship.

Since then, a series of anti-China protests have been held in Vietnam, where rallies are rare, with the latest on Sunday being forcibly dispersed by local police. At least 10 people, including journalists, were briefly arrested.

During talks on June 25, Beijing and Hanoi promised to resolve the issue peacefully, and China has warned Washington not to get involved in regional maritime disputes, according to state media.

The US and Vietnam, former wartime enemies, normalised relations in 1995 and have been rapidly building relations across a wide range of areas, including military affairs.

"This exchange helps our respective sailors gain a greater understanding of one another and builds important relationships between our navies for the future," Rear Admiral Tom Carney said of the latest drill.

The Philippine and US navies also recently held 11 days of military exercises close to the South China Sea, war games that have been seen as aimed at recent Chinese provocations.

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China's BYD, Societe Generale unit end tie-up (AFP)

HONG KONG (AFP) – Chinese car maker BYD, backed by billionaire Warren Buffet, said Wednesday it has ended a joint venture to provide financing for car purchases in China with a unit of France's Societe Generale.

The company signed a 500 million yuan ($77 million) joint venture with Compagnie Generale de Location d'Equipements (CGL) in June last year to tap growing mainland demand for cars in the world's biggest auto market.

However, in a statement to the Hong Kong stock exchange, BYD said: "CGL is of the view that the automobile market in the mainland China is facing increasing risks."

BYD added that it had a "different evaluation on the potential risk in association with the business and cannot reach consensus".

Shares of BYD -- which held an 80 percent share of the tie-up -- closed down 3.16 percent at HK$26.05 ($3.35) in Hong Kong.

BYD, which saw first-quarter profit shrink 84 percent due to increasing costs and falling auto sales, said the decision would not have a significant impact on its financial position and business operations.

BYD reported earnings of 266.7 million yuan in the three months to March 31, well below its 1.7 billion yuan net profit in the same quarter last year. Operating revenue fell 12 percent in the quarter.

Despite this, shares of BYD -- which is already listed in Hong Kong -- soared 41 percent in their share debut on the Chinese mainland last week.

Analysts said the stellar trading debut showed some investors are giving BYD, which has powered ahead in development of clean-energy vehicles more aggressively than its peers, a significant premium for the long-term prospect of such cars.

BYD, which began as a manufacturer of rechargeable lithium-ion and nickel batteries, drew international attention when Buffett bought a 9.89 percent stake in it for $230 million in 2008.

China's auto sector overtook the United States in 2009 to become the world's largest car market but it has lost steam after Beijing phased out most sales incentives implemented to ward off the global downturn.

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China's export restrictions on raw materials illegal: WTO (AFP)

GENEVA (AFP) – The World Trade Organisation ruled Tuesday against China's export restrictions on raw materials, in a case that could have a bearing on Beijing's moves to tighten its grip on rare earths.

Both Washington and Brussels hailed the ruling, with the European Union urging China to halt its restrictions on rare earths, key minerals used in high-tech products.

The United States, the European Union and Mexico took China to the WTO in 2009, charging that export quotas and duties imposed by Beijing on some raw materials were illegal and against commitments that China made when it joined the world trade body.

These minerals include bauxite, coking coal, fluorspar, magnesium, manganese, silicon metal, silicon carbide, yellow phosphorus and zinc.

All are key inputs for numerous products in the steel, aluminium and chemical sectors and as China is a leading producer for these raw materials, any restrictions could lead to sharp spikes in world prices, they argued.

WTO arbitrators backed the complainants, ruling that China had failed to abide by its accession commitments when it imposed quotas and duties on these minerals.

They rejected Beijing's arguments of conservation concerns as China failed to prove that it imposed export restrictions in tandem with limits for domestic consumption of the raw materials.

In other words, China failed to demonstrate that its restrictions were not just targetted at foreign usage but also domestic use.

Tuesday's ruling came amid an international uproar over China's moves to tighten its grip over rare earths.

China has cited environmental concerns and domestic demand for slashing its exports and imposing higher taxes, leading to skyrocketing prices.

For the European Union, the WTO finding was a "clear verdict for open trade and fair access to raw materials.

"It sends a strong signal to refrain from imposing unfair restrictions to trade and takes us one step closer to a level playing field for raw materials," said Karel De Gucht, EU trade commissioner.

"I expect that China will now bring its export regime into line with international rules.

"Furthermore, in the light of this result, China should ensure free and fair access to rare earth supplies," he said.

In Washington, US Trade Representative Ron Kirk said the ruling was "an important confirmation of fundamental principles underlying the global trading system.

"All WTO members, whether developed or developing, need non-discriminatory access to raw material supplies in order to grow and thrive," he said.

China meanwhile expressed regret at the ruling and said that its measures are "in line with the objective of sustainable development promoted by the WTO and they help to induce the resource industry towards healthy development.

"China will adopt scientific administration on resource products in accordance with the WTO rules so as to maintain fair competition and promote sustainable development," Beijing said in a statement issued by its mission to the WTO.

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China's New Wave of Digital Political Sex Scandals (Time.com)

By ZHANG YILAN / ECONOMIC OBSERVER / WORLDCRUNCH Zhang Yilan / Economic Observer / Worldcrunch – 2?hrs?28?mins?ago

This post is in partnership with Worldcrunch, a new global-news site that translates stories of note in foreign languages into English. The article below was originally published in the Economic Observer.

A new form of public entertainment has also landed in China: the digital political sex scandal. The starring role, as always, goes to a respectable, married middle-aged man in an important position. The script includes the usual wealth of spicy details to prolong the pleasure.

Take the hapless Xie Zhiqiang, director of Jiangsu province's Bureau of Health. Someone told him that e-mails and texting were old hat and that he should get into Twitter-style microblogging. They neglected to mention that his updates would be visible to everyone. Xie's communications with his mistress, a married woman, were laid bare for all to see, including the meeting time, hotel-room number and preliminary discussions of what they'd be busy doing. For the delighted readers, it was a carnival. Not only that, but Xie told his paramour to bring along any receipts she had so he could get them refunded. (See the top 10 Twitter controversies.)

The municipal government and the commission for discipline promptly intervened, immediately suspending Xie from his position and placing him under investigation for corruption. Online supporters expressed sympathy for the unfortunate bureaucrat, convinced he was truly in love with the woman, and just an idiot when it came to new technology. Some were even inclined to forgive his attempts to claim expenses with his dodgy invoices.

In another case, Liu Ning, a section chief in the local administration of the city of Guangzhou, got in the habit of joining Internet chat rooms in which participants are naked, but their faces are hidden. As you might guess, in Liu's case his face was clearly visible. Embarrassment is painful but rarely fatal.

Then there's the case of Han Feng, director of the Tobacco Monopoly Bureau in Guangxi province, who was using his elevated status to enjoy the favors of no fewer than six female subordinates. However, a disloyal husband should always beware of revenge. Han's private diary mysteriously found its way online, dripping with saucy details. After each encounter with one of his ladies, he wrote a blow-by-blow account - what he called his hunting bounty. These appeared on the Web, and became very popular reads. (Healthland: "Online Cheaters Still Prefer Real-World Infidelity.")

Going back to Xie's situation, while many Westerners would think right away of recently disgraced former U.S. Congressman Anthony Weiner, the Chinese thought first of Bill Clinton and Monica Lewinsky. Looking back, we understand that in party politics, a President's moral flaws will be ruthlessly attacked by the opposition party. The U.S. Congress started impeachment proceedings, and the Republicans were eager to kick Clinton out.

But at a crucial juncture, Hillary Clinton saved her husband by publicly supporting him, so changing the minds of those who had been in favor of his ouster. Clinton kept his job not because Americans accept lax moral standards in their officials. On the contrary, because of the media muckraking in party politics, the public sets a very high moral threshold in selecting officials. And even more importantly, in the Clinton affair, this "philandering" President was not guilty of abusing his powers: Lewinski did not get a job in the White House after her internship ended. (See photos from the Anthony Weiner scandal.)

By contrast, Xie's affair has provided some conclusive evidence that this director-valentine offered to reimburse his lover's invoices for personal purchases. This is corruption. Most people who sympathize with him are basing their reasoning on their presumption that Xie is indeed corrupt, but not to an extreme degree. He was only trying to cheat on a few expense claims. The biggest grief would be that this kind of tolerance becomes the common public attitude.

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China's Hu: Communist party faces 'growing pains' (AFP)

BEIJING (AFP) – Chinese President Hu Jintao on Friday warned that the ruling Communist party, marking its 90th birthday, was facing "growing pains" and said members needed to be more disciplined than ever.

"The whole party is confronted with growing pains," Hu said in a keynote address to party leaders and thousands of members gathered in the Great Hall of the People in Beijing to celebrate the anniversary of the CCP's founding.

Hu, who has repeatedly said that rampant corruption threatens the party's legitimacy, told the audience that "incompetence" on the part of some members and their "being divorced from the people" had created problems.

"It is more urgent than ever for the party to impose discipline on its members," the Chinese president said.

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China's Hu says Party survival rests on growth, stability (Reuters)

BEIJING (Reuters) – China's ruling Communist Party must ensure economic growth and its iron grip on stability do not slacken, President Hu Jintao said on Friday, using the party's 90th anniversary as a show of unity ahead of a tricky leadership succession.

"Development is of paramount importance and stability is the paramount task," Hu told hand-picked party members inside Beijing's cavernous Great Hall of the People, in a speech carried live on state television.

"Without stability, nothing can be accomplished, and the achievements that we have made will be lost. All of the party's comrade's must take this message to heart, and they must also lead all the people to take this to heart," he said.

"Only by promoting both healthy and fast economic development can we secure a strong material foundation for the great revival of the Chinese nation."

The party has shown no sign of diluting its own vast powers before a big political shake-up late next year, when Hu will hand over power, most likely to Vice President Xi Jinping.

Xi gave a short introductory address before Hu took the stage, to congratulate model party members.

Hu's predecessor, Jiang Zemin, did not attend the ceremony, possibly a sign of the 84-year-old's declining health. Hu, aged 68, is also beginning to show his age, despite the jet-black head of hair that all central leaders sport, thanks to dye.

China launched a wave of propaganda in the weeks leading up to the anniversary, producing slick films and decking out Beijing with banners lauding party rule and the progress the country has made since the 1949 revolution.

While Premier Wen Jiabao, who is also preparing to retire, has made a habit recently of more directly calling for political reform than his more cautious comrades, the party appears in no mood to listen.

"Looking back at the progress that China has made over 90 years, we can reach one fundamental conclusion -- that the key to properly managing China's affairs lies in the party," said Hu, who oversees the world's largest political party, with 80 million members.

"We have every reason to be proud of what the party and the people have achieved, but we have no reason to be complacent. We must not and will never rest on our laurels."

Yet despite some oblique sniping between provincial leaders vying for a place in the next central leadership, Hu has presided over a strikingly disciplined group of top leaders, said Kerry Brown, head of the Asia Programme at Chatham House, a London foreign policy institute.

"Some pundits try to create a drama, when in fact the most interesting thing is the absolute, icy stillness at the center," said Brown, who is writing a biography of Hu.

"With the things that are going on, and all of the problems, there must be pretty passionate debates, but we don't get a sign of it," he said in a telephone interview.

"CONFLICTS AND PROBLEMS"

After some muted moves to give citizens stronger legal protections early in his time as president, Hu has made enforcing firmer control over China's increasingly diverse and fractious society a feature of his time in power.

The last few months have been marked by arrests and detentions of dissidents, human rights lawyers and long-time protesters, following calls online for Arab-style "Jasmine protests" in China.

Hu warned about the strains buffeting party rule as the consequences of economic transformation courses through Chinese society.

"Currently China is undergoing an unprecedentedly broad social transformation. At the same time as bringing tremendous vitality to our country's development and progress, this will also inevitably bring all kinds of conflicts and problems."

Despite China's robust economic growth, its communist leaders worry that their rule could be eroded and eventually challenged by social unrest and elite schisms and send it the way of the Soviet Union which collapsed two decade ago.

The country saw almost 90,000 "mass incidents" -- riots, protests, mass petitions and other acts of unrest -- in 2009, according to a 2011 study by two scholars from Nankai University in north China. Some estimates go even higher.

By contrast, in 2007, China had more than 80,000 mass incidents, up from over 60,000 in 2006, according to an earlier report from the Chinese Academy of Social Sciences.

"The whole party must see with crystal clarity that the conditions facing the world, the country and party are undergoing profound changes, and that under these new circumstances we face unprecedented new circumstances and challenges," Hu said.

(Additional reporting by K.J. Kwon; Editing by Alex Richardson)

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China's Gay Community Fights Online Censorship (Time.com)

When the Beijing LGBT Center screened a prerecorded lecture on gay-themed movies last year, the venue was so packed that latecomers had to jostle for a spot on the windowsills of the rented classroom doubling as their makeshift theater. This year, however, a similar event attracted only a handful of people, leaving much of the same room empty. The organizers soon realized their online announcements never reached the community. Soon after, other lesbian, gay, bisexual and transgender (LGBT) groups reported that their posts were disappearing from Douban, ostensibly one of China's most liberal social-networking websites. They have since banded together to boycott the site.

Douban, once a popular online platform among China's growing gay community, has yet to directly address the complaint. A spokesperson told state media that the company "doesn't welcome any remarks of discrimination and hatred toward race, religion ... or sexual orientation," but declined to comment further. However gay-rights activists see it as part of an on-again, off-again crackdown on the LGBT community. "My feeling is that the level of censorship right now has slightly improved from its worst," says Wang Qing, 26, a spokeswoman for the Beijing LGBT Center. "It's better than a month ago when they basically wouldn't publish any of our messages. Now they are letting through a selected few." (Read more about homosexuality in Beijing.)

This latest censorship saga underscores China's still-fluctuating stance on homosexuality. Since the decriminalization of gay sex in 1997, the Chinese government has come a long way in lifting some of the stigma associated with the gay community. Starting in 2001, homosexuality is no longer classified as a mental illness. And, over the past few years, several prominent gay clubs have emerged as a staple of nightlife in China's first-tier cities. Even in the state-run China Daily, a recent op-ed piece called for more tolerance of the LGBT community so that, it said, cities like Shanghai could one day be culturally on a par with New York City. When it comes to movies and TV shows, however, strict censorship still applies to homosexual content, which is deemed inappropriate for public consumption.

For now, Beijing's gay community is focusing on finding new ways to get their message out. Since the Douban boycott, they've resorted to alternative channels including microblogs, where their event announcements have successfully reached thousands of followers. But according to Wang, it may take a while for turnout to reach preboycott levels, since as many as 20% of active members had heard about the group through its website. Plus, publicity comes at a cost. "On the one hand, we definitely hope to reach out to more people, but on the other hand, we are worried that too much publicity will lead to unwanted attention from the government, which often means trouble for us," Wang says. (Read about China's actions regarding homosexuality.)

Indeed, few familiar with China's gay-rights movement can forget that the much-hyped Mr. Gay China pageant was abruptly called off right before it was set to begin in January 2010. More recently, a downtown Beijing shopping mall quietly cancelled its Valentine's Day kissing contest this year, allegedly after many gay couples had expressed an interest in joining the event. "The official reason for cancellation given by the mall was due to 'lack of participants,'" says Wang, "but clearly that's not true." In 2009, China's first gay-pride festival in Shanghai was interrupted by last-minute visits by the police, resulting in several movie screenings and performances being cancelled, despite earlier positive coverage in the state media.

Although no strangers to acts of repression, many Chinese gay-rights advocates find Douban's censorship a major frustration. "We all know that LGBT groups love Douban," writes Aibai, another Beijing-based gay-rights group, in an open letter to the popular website. "You once aspired to freedom, independence and equality, but now you have broken our hearts."

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China's Hu warns of risks as Communist Party turns 90 (AFP)

BEIJING (AFP) – Chinese President Hu Jintao warned the ruling Communist Party faced severe "growing pains" as it turned 90 on Friday and said corruption, and alienation from China's masses, could erode public support.

But in a speech on the anniversary of its 1921 founding, Hu gave no sign that the party intended to loosen the iron grip on political power it has maintained for more than six tumultuous decades.

Hu capped months of orchestrated anniversary build-up by praising the party for leading China out of civil war and chaos, but made clear that pitfalls lie ahead as the party strikes an ungainly balance between economic openness and political rigidity.

"The entire party must clearly see that, with the deep changes in the world, national, and party situations, we face many new problems and challenges to improve the party's leadership and rule and to strengthen the ability to resist corruption and risks," Hu said.

Hu, who has headed the party for nearly a decade, singled out rampant corruption as a clear danger to Communist ruling legitimacy.

Corruption by Communist officials is routinely named in opinion polls as a top source of public discontent, and Hu said the anti-graft fight was the key to "winning or losing public support and the life or death of the party".

"Corruption will cost the party the support and trust of the people," the Chinese president warned.

Hu delivered the speech in a ceremony in the Great Hall of the People -- the Stalinist-style monolith at the heart of Beijing -- that was attended by thousands of party leaders and members and broadcast live on state television.

The party has sought to fan enthusiasm in the anniversary run-up through an official outpouring of nostalgia for China's Communist past.

The propaganda blitz has included a stream of laudatory media articles, the singing of "red" songs from Communist China's early years, museum exhibitions and the release of a film glorifying the party's birth.

China also launched a high-speed rail line linking Beijing and Shanghai, and opened the world's longest cross-sea bridge just ahead of the party fete.

But analysts say such campaigns conceal the deep insecurities of a party still named for an ideology it has junked and struggling to address a range of complex problems without the flexibility that democracy affords.

These include an accelerating wealth gap, high inflation, horrific environmental degradation, demands for autonomy from millions-strong ethnic minorities, and regular reports of corrupt and abusive officials that inflame the public.

These and other issues spark tens of thousands of public protests and other disturbances each year, and China has ramped up its ability to put down such outbursts.

"China's Communist Party at 90 is a bit like many 90-year-olds: increasingly infirm, fearful, experimenting with ways to prolong life, but overwhelmed by the complexities of managing it," China scholar David Shambaugh wrote in a commentary piece.

Hu conceded that "the whole party is confronted with growing pains," warning that many party officials were "incompetent" and "divorced from the people".

"It is more urgent than ever for the party to impose discipline on its members," he said.

The practice of securing lucrative party and government positions through connections and backroom deals is considered to be widespread.

Hu vowed a more merit-based personnel system and a drive to recruit talented young members into the 80-million-strong party, about 75 percent of whose card-holders are more than 35 years old.

"(Young members) represent the future and hope of the party," Hu said.

The CCP was established in July 1921 in Shanghai as the brainchild of a dozen intellectuals, and took power in China in 1949 after defeating the rival Nationalists in a long and bloody civil war.

Revolutionary leader Mao Zedong then plunged the country into nearly 30 years of chaos through misguided policies that triggered political purges, famine, and social upheaval, leaving tens of millions died.

Hu made only passing reference to the period.

After Mao's death in 1976, Deng Xiaoping took over and launched a period of reforms that transformed China from an underachieving economic backwater into the world's second-largest economy.

But a small party elite maintains a tight rein on politics, the media and the world's largest military.

Hu paid lip service to democracy and public participation in policy-making, but made clear this would be done under the "leadership of the party" and stressed "stability", signifying no change in the current set-up.

Analysts say China's lack of political reform has fuelled many of the problems now faced by the party and makes it difficult to root them out.

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China's communists mark 90th, hail party's success (AP)

BEIJING – Chinese President Hu Jintao celebrated the Communist Party on its 90th anniversary Friday for its ability to adapt and said it must use that skill to fight corruption and ease social conflict if it is to stay in power.

The nationally televised speech capped a patriotic campaign of films, TV programs and nostalgic "red" song sing-alongs aimed at solidifying the notion that the communist government has propelled China to greatness.

Hu said reforms of recent decades that have made China affluent and powerful have brought new challenges, making the public more demanding and more prone to protest. But he gave no indication of any moves toward loosening the party's firm grip on government.

"We have every reason to be proud of what the party and the people have achieved, but we have no reason to be complacent," Hu told the more than 6,000 party select gathered in the Great Hall of the People in Beijing.

Hu glossed over the radical campaigns and policies that led to tens of millions of deaths in the first decades of communist rule. But he said the party endured because it learned from its mistakes.

"In some historical periods, we once made mistakes and even suffered severe setbacks, the root cause of which was that the guiding thought then was divorced from China's reality. Our party managed to correct the mistakes by the strength of itself and the people, rose up amid the setbacks and continued to go forward victoriously," Hu said.

While the speech broke little new ground on policy and was laden with references to Marxism and other jargon most people ignore, it also frankly acknowledged that the party faces a new era and needs to improve governance to keep public support. Spectacular economic growth has produced side-effects like corruption and a yawning rich-poor gap that have triggered protests and challenged the party's legitimacy.

In Hong Kong, tens of thousands of people marched in protest, blowing whistles and banging drums and metal cups, to protest high property prices and the rich-poor divide. Friday's protest is an annual affair marking the former British colony's return in 1997 to China, which administers the territory under separate, freer rules than the mainland.

Chinese leaders ramped up this year's celebrations for the party's founding — like they did for the 2008 Beijing Olympics and the 60th anniversary of the People's Republic — to excite the public and broaden the government's appeal. Events have included a star-studded feature film about the party's founding, a torrent of documentaries and serialized historic dramas on television. Mass performances of "red" songs of the 1950s were staged in schools and offices.

The purpose is to inspire patriotism and loyalty to the party and reinforce a now well-practiced narrative: that after a century of civil war, dynastic collapse and foreign invasion, the Communist Party has returned China to greatness and restored its rightful place as a world leader.

"In some ways we can see that with the Communist Party that they are trying to elevate this to a sacred event," said Jeffrey Wasserstrom, a historian at the University of California, Irvine.

The need to find new rationales for rule has grown as the party itself has evolved from an underground group of hardcore revolutionaries to a vast organization of 80 million members bound together more by ambition, power and connections than ideology. Many among the public laud the party leadership for steering China to a more prosperous today yet vilify local officials as indifferent, or even abusive.

As with similar calls in the past, Hu likened the effort to root out corruption as matter of "the party's life and death." He noted that the party's entrenched position in part contributed to the rampant graft.

"The party is soberly aware of the gravity and danger of corruption that have emerged under the conditions of the party being long in power," Hi said. "If not effectively curbed, corruption will cost the party the trust and support of the people. The whole party must remain vigilant against corruption."

Like his predecessors and in keeping with his own nine years in power, Hu, however, did not call for institutional reforms, such as creating an investigating entity independent from the party, that many experts say are necessary to rooting out endemic graft.

Similarly, though Hu several times mentioned the need for political reform, he did so in formulaic language that so far has not heralded a loosening of the party's grip.

Critics, mostly liberal academics have warned that the anniversary hype — typified by red songs fests like one that drew 108 choirs and 100,000 spectators to a stadium Wednesday — is being used by the party to avoid grappling with deep-seated problems.

"The propaganda for the 90th anniversary of the party's founding is not only holding up its achievements, it's deifying the party," said Minzu University professor Zhao Shilin in an open letter posted, removed by censors and reposted on the Internet this week. The party "should be seriously, profoundly, objectively summing up lessons learned to truly improve and enhance your party's ability to govern."

Awards were handed out at the party gathering to more than 700 party members for outstanding work, including rocket scientist Sun Jiadong, who is lead designer for China's lunar exploration program.

Bestowing the honors was Vice President Xi Jinping. Xi is the leading candidate to replace President Hu next year, and his high-profile role at Friday's ceremony lends greater credence to his likely promotion.

___

Associated Press reporter Gillian Wong and researcher Zhao Liang contributed to this report.

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China's Buffett-backed BYD shares surge on debut (AP)

By ELAINE KURTENBACH, AP Business Writer Elaine Kurtenbach, Ap Business Writer – Thu?Jun?30, 4:53?am?ET

SHANGHAI – Shares in Chinese auto and battery maker BYD Co. jumped 41 percent in their debut on the Shenzhen Stock Exchange on Thursday, despite news that the company's profit fell by 84 percent in the first quarter.

Shenzhen-based BYD's 1.42 billion yuan ($220 million) share offering was aimed at raising cash needed for an expansion mainly focused on an auto research, development and production base.

Its shares gained 7.45 yuan, or 41.4 percent, to 25.45 yuan, performing much better than some other recent lackluster share offerings.

BYD, whose name stands for Build Your Dreams, said the plunge in its first quarter profit was mainly due to weak auto sales. Unaudited results showed net profit in the quarter ended March 31 was 266.7 million yuan ($41.2 million), compared with 1.7 billion yuan a year earlier, it said.

"The performance in the first quarter of 2011 dropped significantly, which was mainly due to a decline in the performance of the automobile business," BYD said in a notice to the Hong Kong Stock Exchange, where its shares already trade. But it also noted weakening sales of rechargeable batteries and cell phone parts.

MidAmerican Energy, a subsidiary of billionaire investor's Warren Buffett's Berkshire Hathaway, owns 9.9 percent of BYD.

The company sold 79 million shares, or a 3.4 percent stake, at 18 yuan each in its offering on the Shenzhen Stock Exchange, the smaller of China's two stock markets.

Local media reports said the company chose to be listed on the small- and medium-size company index to help improve the likely performance of its shares. The company scaled back its original fundraising plans by some 770 million yuan ($119 million), apparently in recognition of relatively weak markets recently.

The Shenzhen Composite Index has lost 9.4 percent in the past three months, as sentiment has been battered by worries over the slowing economy.

BYD's sales of its best-selling F3 conventional sedan have faltered as the once torrid Chinese car market, the world's largest, has cooled in recent months. Efforts to win a wider market for its hybrid electric cars have also made slow progress.

In recent comments to shareholders, Berkshire Hathaway's vice chairman, Charlie Munger, said he was still enthusiastic about BYD, despite its recent troubles, which have delayed its plans to launch car sales in North America.

Munger said BYD's mistake was in trying to double its automotive sales every year for six years in a row. It worked for the first five years, he said.

The company started out making batteries and later shifted to automaking. Recently, it has branched into energy storage systems and bus production.

The strategy reflects an expectation that China will move faster in commercializing use of electric buses than private autos, said a report Thursday in the state-run newspaper Southern Weekend.

Until China develops the infrastructure needed to support wider use of electric vehicles, BYD sees greater promise in sales to government fleets and bus companies, it said.

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UN rights chief slams China's failure to arrest Bashir (AFP)

GENEVA (AFP) – The UN rights chief expressed disappointment Thursday that China failed to arrest Sudanese leader Omar al-Bashir, who is wanted on genocide charges, during his visit to Beijing.

"There is a duty and responsibility of every government, including China, to assist the court in bringing to justice" individuals who are sought for alleged violations, said Navi Pillay, UN High Commissioner for Human Rights.

"It is disappointing when states do not deliver on this responsibility," she said.

"In this case there was an opportunity to ensure that Mr Bashir is able to stand trial," added Pillay.

Bashir arrived in Beijing Wednesday and was given a red-carpet welcome by Chinese President Hu Jintao, to the anger of Washington and rights groups. His trip to China was due to end Thursday.

The Sudanese president is wanted by the International Criminal Court (ICC) on charges of genocide, war crimes and crimes against humanity that occurred in the Darfur region, where about 300,000 people have died since 2003.

ICC statutes dictate that any member country should arrest Bashir if he visits. China is not a party to those statutes, nor is the United States.

"We reserve our opinion on the ICC's prosecution against President Bashir," Chinese foreign ministry spokesman Hong Lei said ahead of the Sudanese president's visit.

Pillay noted that if Bashir were arrested, he would be brought to stand trial, "it's not like we're calling for an execution of someone."

"I do feel disappointed when governments do not deliver on something that is intrinsic to their national systems -- to bring someone to trial," she added.

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China's Mongolian herders protest over lead mine (AP)

BEIJING – Ethnic Mongolian herders protested a lead mine operating on grazing land in the latest tension in a Chinese border region that recently saw its biggest demonstrations in two decades, a rights group and a local resident said Thursday.

The herders in Inner Mongolia's Bayannur township were upset that the Bayannur Lead Mine was discharging large amounts of toxic waste that was damaging the environment and killilng livestock, said the Southern Mongolian Human Rights Information Center.

The herders marched to the mine last Friday and shut down a water pump that supplied a shaft, the New York-based group said.

Riot police moved in Saturday and "many herders were beaten severely," the group said in a statement. A local resident said there were about 100 protesters, four people were hurt, two of them police, and a police car was overturned.

The heavily polluting mining industry has fed deep resentment among Mongols. The mining boom has enriched some but pushed further to the margins an already dwindling number of herders — whose roaming the grasslands with their herds of cattle, goats and sheep lies at the core of Mongol identity.

Last month's protests followed the killings of two Mongols who were trying to block coal-mining and coal-hauling operations that locals complain damage grasslands.

In Bayannur, the protesters are among a group of 600 herders who moved to land near the mine about a decade ago and in recent weeks have been seeking compensation for the pollution caused by the mine, said a Han Chinese woman named Wang Cuiping who lives in housing on the mine compound.

Wang said that nearly two weeks ago, about a hundred of the herders went over to the administration building of the company operating the mine and set up their traditional dome tents in front of the offices in protest. "They just stayed there. Nothing else happened. And the mine bosses knew what they wanted. They wanted money and nothing else," Wang said.

The shutdown of the water pump forced production at the mine to be suspended for two days, she said. She added that the mine agreed to compensate the 600 herders with 1.2 million yuan ($180,000) in total and that the herders left two days ago.

Calls to the offices of the local government, the work safety bureaus and the Bayannur Lead Mine rang unanswered.

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Chongqing -- China's inland business capital (AFP)

CHONGQING, China (AFP) – After just a few years of explosive growth, China's mega-city of Chongqing has emerged as a major industrial hub, thanks in part to a "Go West" policy to open up China's less-developed inland.

The southwestern municipality, home to more than 32 million people, has been transformed by rapid urbanisation and a construction boom, with ultra-modern factories and skyscrapers galore.

The province-sized city is also becoming a major transport centre at the border of China's prosperous East and poorer West, luring major multinationals keen to expand.

The figures are mind-boggling -- per capita income increased sixfold from 2002 to 2009; foreign direct investment multiplied by four from 2007 to 2009; and the region's economic growth hit a staggering 17 percent in 2010.

"Chongqing is starting to get positive media buzz," Adam McWhirter, the local representative of the European Union Chamber of Commerce, told AFP.

From the cable car station jutting out over the Yangtze, China's longest waterway, McWhirter points to a cluster of new high-rise buildings that have sprung up in just three years.

"It's like building Manhattan across the water from Hong Kong," he says, listing the luxury hotels that are under construction -- Sheraton, Shangri-La, Westin, to name a few -- and all keen to cash in on the influx of foreigners.

Foreign trade jumped a massive 72 percent on-year in the first quarter of 2011, according to official data.

So how did Chongqing transform from one of China's notorious "furnaces" -- a nondescript mid-level industrial city with months of steamy, stifling weather each year -- into a major business hub?

A key reason is the government's "Go West" policy, which offers fiscal incentives to companies that set up shop in the country's less developed inland provinces, rather than in the industrial heartland of the coast.

Another is the fact that labour is cheaper and factories built out west allow workers to stay closer to home, rather than migrate to far-flung manufacturing hubs.

In March, when the central government in Beijing unveiled its new five-year plan for the world's second-largest economy, it featured the new Liangjiang economic development zone in Chongqing.

The zone hopes to succeed much as the southern boomtown of Shenzhen did in the 1980s, or Shanghai's Pudong did in the 1990s.

"Investors are flocking to Chongqing to take advantage of the markets in western China, which are showing strong growth," Huang Chengfeng, head of the school of finance and economics at Chongqing Jiaotong University, told AFP.

"They are coming not just from China, but from around the world."

Automakers Ford and Honda, Finnish mobile phone maker Nokia, French retail giant Carrefour and German chemical group BASF are among the major foreign firms already in Chongqing.

"As a location, it presents incredible strategic opportunities for us. We are connected to the north, to the south, to the east and now very much to the west," Marin Burela, president and CEO of Changan Ford Mazda, told AFP.

Burela said that Chongqing is already a major automotive centre. Ford will soon have three new factories there to meet auto sales that grew by over 56 percent last year, he said.

"We are seeing evidence that this is continuing. Chongqing will become to Ford the second largest automotive centre in the world outside of Detroit."

The mega-city is also quickly becoming a high-tech hub, with Foxconn, the world's biggest contract electronics supplier, Taiwan's leading personal computer maker Acer and Hewlett-Packard already in place.

In just a few years, the area will produce one-third of all laptops sold worldwide.

For the shipment of such high-value goods, Chongqing is depending on a train link that will pass through China's southwest, the far-western Xinjiang region, central Asia and Russia to reach western Europe.

The rail line would offer a major shortcut to the more traditional maritime trade routes from Shanghai, Hong Kong or Taipei, cutting travel time to Europe from about 40 days by container ship to just 15 days by freight train.

Cargo can also be sent out of Chongqing along the Yangtze or via air cargo -- a new air freight carrier went into operation in May.

"Logistically speaking, Chongqing will have access to the world," McWhirter said.

As for the daunting task of moving millions of people in and out of Chongqing, authorities are also making progress.

Airport passenger traffic rose more than 70 percent on-year in the first half of 2010. A second runway and second terminal building were completed late last year, with a third of each set to open by 2015.

"In 2035, there will be four runways with an annual volume of 70 million passengers," Huang said.

Such rapid growth has its social and environmental pitfalls. Pollution has contaminated the air and waterways, fuelling social unrest among people who have lost valuable land or been sickened by toxic waste.

But Bo Xilai, Chongqing's charismatic and ambitious Communist party chief, says he is up to the task, pouring billions of yuan into real estate, public transport and the planting of thousands of trees along the river.

"For the past two or three years, housing prices have clearly increased. But it's still less expensive than in Shanghai, and a lot of low-cost housing has been built," said local architect Gan Chuan.

Overheating "is a Western concern", he added. "The situation here has improved over the last decade. People in Chongqing are happier than those in other Chinese cities."

Many migrants who flock to Chongqing improve their lot in life by taking factory jobs. But thousands of others are not so lucky, working as what locals call "bang bang" -- porters hauling heavy goods up from the Yangtze's banks.

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Senate deplores China's use of force at sea (Reuters)

WASHINGTON (Reuters) – The U.S. Senate unanimously approved a resolution on Monday that deplored China's use of force against Vietnamese and Philippine ships in the South China Sea.

China has shown increasing assertiveness in its claim to the entire South China Sea, believed to be rich in oil and gas.

In its nonbinding resolution, the U.S. Senate urged all parties to refrain from using force to assert territorial claims.

"The Senate ... deplores the use of force by naval and maritime security vessels from China in the South China Sea," the resolution said.

Senator Jim Webb, chair of an east Asian and Pacific affairs subcommittee of the Senate Foreign Relations Committee, said that "a growing number of nations around the South China Sea are now voicing serious concerns about China's pattern of intimidation."

Chinese vessels have harassed Vietnamese oil exploration ships and the Philippines has also complained that one of its ships has been rammed, according to the Senate resolution.

On Sunday, China and Vietnam pledged to resolve their maritime dispute through peaceful negotiations, a sign of possibly easing tension. The dispute was one of several subjects discussed in the first set of talks in Hawaii between the United States and China over the weekend.

(Reporting by Diane Bartz, Editing by Sandra Maler)

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China's CNPC says Iraqi oil field now onstream (AFP)

BEIJING (AFP) – China National Petroleum Corp (CNPC), the country's top oil producer, has said operations have begun at Iraq's Al-Ahdab oil field, with an initial annual capacity of three million tonnes.

The field located in central Iraq, which came onstream a week ago, is a new major oil project in war-ravaged Iraq, the company said in a statement released on Monday.

The project marks "the realisation of the Chinese oil industry's goal to develop the high-end oil market in the Middle East," CNPC said.

In 2008, CNPC signed a three-billion-dollar contract to develop the Al-Ahdab oil field with another Chinese company, Zhenhua Oil, in the province of Wasit for 23 years.

The project, the first major oil development deal that a foreign firm has secured in Iraq since the fall of Saddam Hussein in 2003, revives a contract signed in 1997 that granted China exploration rights in Al-Ahdab.

Al-Ahdab's oil production is expected to reach 25,000 barrels per day in the first three years and expand to up to 115,000 barrels per day in six years, according to CNPC data.

The Al-Ahdab oil contract is strictly a service deal, which allows CNPC to charge a service fee of six dollars a barrel that will decrease eventually to three dollars, offering the Chinese an entry into Iraq ahead of Western majors.

China's state oil firms are scouring the world for resources to power what is now the world's second-largest economy.

In 2009, CNPC sealed a deal, along with Britain's BP, to ramp up production at Iraq's biggest oil field, Rumaila.

A consortium led by PetroChina, the listed arm of CNPC, has also signed a 20-year deal with Iraq to develop the Halfaya oil field.

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China's Wen in Britain to boost trade ties (AFP)

LONDON (AFP) – Chinese Premier Wen Jiabao toured Britain on Sunday, in a European trip aimed at cementing trade links, as Bejing freed high-profile human rights activist Hu Jia in a move seen as defusing tensions.

Wen arrived in the central English city of Birmingham late on Saturday as news emerged that Hu, one of China's most prominent prisoners of conscience, was to be released.

Beijing is seeking to gain a greater foothold in Europe, but has faced fierce criticism from the West over its human rights record -- and in particular a recent crackdown on dissidents.

Hu, 37, was jailed on subversion charges in April 2008 after angering the ruling Communist Party through years of bold campaigning for civil rights, the environment and AIDS sufferers.

His release followed that of outspoken Chinese artist-activist Ai Weiwei last week, but Hu looked likely to be similarly muzzled along with other top dissidents.

Britain's Foreign Office has yet to give any official reaction to the release of Hu, who spent more than three years in prison.

However, EU foreign affairs chief Catherine Ashton welcomed the news -- but her spokesman stressed the bloc's demands for Beijing to ensure full freedoms are respected.

And Germany said it will press human rights issues at its first joint cabinet meeting with China later this week, including the conditions of Ai's release, Foreign Minister Guido Westerwelle said.

London has also been among international critics, with Foreign Secretary William Hague repeatedly speaking out against Ai's detention and the crackdown against activists.

Wen visited England on Sunday before holding talks with British Prime Minister David Cameron on Monday and attending the UK-China summit -- which is an annual event during which major investment deals will be announced.

The Chinese premier is on a three-country tour of Europe with 13 ministers and a large business delegation.

He visited the MG car plant in Longbridge, Birmingham, which was for many years a symbol of British manufacturing dominance but is now owned by Shanghai Automotive Industry Corp, which is China's largest automaker.

Wen will later indulge his interest in Shakespeare with a visit to the bard's birthplace in Stratford-upon-Avon, where he will be treated to a short performance.

The premier, who began his trip in Hungary, will leave Britain on Monday for Germany, where he will underline his support for eurozone economies that have been rocked by a debt crisis, with Greece on the brink of a second bailout.

Around the time Wen arrived in England late Saturday, China released Hu after he completed a sentence for subversion, and he returned to his home outside Beijing early Sunday morning, his wife said in a Twitter posting.

"On a sleepless night, Hu Jia arrived home at 2:30 am. Peaceful, very happy. Need to rest for awhile. Thanks to you all," Zeng Jinyan, also an activist, wrote on her Twitter account.

Hu's release came several days after Ai was freed on bail after nearly three months in police custody.

Foreign Secretary William Hague had given Ai's release only a cautious welcome, saying that "serious questions" remained about the circumstances of his detention and legal status.

It is Wen's second Europe tour in just nine months, highlighting a shift in China's interest towards investing in the continent after having ploughed money in recent years into Africa, Australia, Latin America and the United States.

Beijing has vowed to be a long term investor in the European debt market and has repeatedly expressed its confidence in the eurozone, and has invested an increasing portion of its foreign exchange reserves in euro-denominated assets.

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