Week of March 9, 2001

The 18 dissidents, who included long-time activist Leng Wanbao, asked the NPC to change the government’s position
on the Tiananmen Square massacre of 1989. They argued that the crackdown inspired corruption because it sent the
message to the bureaucracy that the government would side with it in conflict with pro-reform citizens. “Only reversing
the verdict on June 4th can bring about a breakthrough in the reform of the political system and resolve the social
contradiction,?the dissidents?letter maintained. The dissidents also called for the release of political prisoners,
including Wang Youcai, a founding member of the banned China Democracy Party. And they called for repeal of the
“hukou system? which forces peasants to get official permission to live in cities, on grounds it violates UN covenants
signed by Beijing.

The other two dissidents asked that the NPC increase reforms, separate the Communist Party from government and
augment separation of powers within the government. Meanwhile, HRIC called for reform of the criminal justice system,
in which it claimed arbitrary detention, lack of due process and major miscarriages of justice are common.

The decision on what country will host the 2008 Olympics is scheduled to be made in July. The Chinese government says it plans to spend $12 billion over the next seven years to clean up Beijing. 

The government’s new five-year plan sets a goal of under five percent for urban unemployment, which would require 40
million new jobs for newly unemployed urbanites and 40 million new jobs for rural folk no longer needed in the farm
sector. In his speech, Zhu mentioned the need to address problems such as increased unemployment and unpaid
pensions. He said China would keep its network of grain-buying bureaus but would encourage private transactions.

Zhu also called for cleaning rivers and lakes and clearing air pollution. He lambasted Falun Gong as a “cult which has
become a tool for domestic and overseas forces hostile to our socialist government.?He said the government would
stop any attempt at separatism by Taiwan, and mentioned terrorists, ethnic separatists and religious extremism as threats
to stability. “Serious corruption?was mentioned along with other problems such as water and energy shortages and
retrograde technology and education.

Zhu stressed the need for China to join the World Trade Organization. He said the government would allow foreigners
to purchase shares in local companies, grant farmers greater ownership of land and generally retreat from the economy.
State industries will be encouraged to transform into corporations, selling shares to the Chinese public or on foreign
stock exchanges.

China will also develop oil and gas reserves and construct a railroad to Tibet, Zhu maintained. 

The defense increase reflects a concern in China that the nation is falling behind the West in the arena of high
technology and that China must be prepared for conflict with the United States if it wants to reunify with Taiwan.
According to analysts, the defense increase also reflects the government’s knowledge of the need for better salaries and
training to be respected as a global force and the military’s need for funds after having divested from most of its
businesses.

James Mulvenon, a Chinese security specialist at the Rand Corporation, said China was heavily influenced by the
weapons used in the wars against Iraq and Serbia. A Chinese government white paper issued in October found America
to be China’s main global competitor, and said America is manifesting a “new gunboat policy and neo-economic
colonialism.?People’s Liberation Army deputy chief of staff Lieutenant General Xiong Guangkai recently wrote in
China Strategic Studies that “war, hegemony and power politics are increasing.?

The total defense budget this year will be $17.195 billion, Xiang said. Western sources say China’s actual military
outlays may be two to three times as large, and it is possible that some of the announced increase is a transfer of funds
to announced spending. Last year, announced military spending in China rose 12.7 percent. For the first time in over a
decade, China’s announced military spending is rising faster than announced spending on science and technology, which
rose 14.5 percent this year.

SUMMARY: Chinese Foreign Minister Tang Jiaxuan announced March 6 that China did not violate sanctions against
Iraq by exporting and installing fiber-optic cables and other equipment to help that nation’s air defenses. “Relevant
agencies in China have carried out some serious investigations,?Tang said. “Chinese enterprises and corporations have
not assisted Iraq in building the project of fiber-optic cable for air defense.?U.S. Secretary of State Colin Powell had
asked Chinese Ambassador Yang Jiechi for an explanation regarding the alleged fiber-optic cable sale.

One State Department official said Tang’s statements did not address America’s complaint because the U.S. never
specifically said the fiber-optics material went to improve Iraq’s air defenses. Even if the equipment did not aid Iraq’s air
defenses directly, the official maintained, exporting fiber-optic cables would have violated the sanctions because they
were not approved by the U.N. Tang appeared to leave open the possibility that a Chinese firm may have assisted Iraq
with non-military telecommunications. According to a State Department official, individuals in the Chinese Foreign
Ministry have told U.S. Ambassador Joseph W. Prueher that China will order its companies to stop any work that aids
Iraq’s telecommunications and will discipline those involved in such activity.

A spokeswoman for the National Security Council, Mary Ellen Countryman, said the U.S. would “continue to work with
the Chinese government?on the issue of sanctions against Iraq. She did not say whether the U.S. now views the
fiber-optic issue as finished.

SUMMARY: At least 37 children and four teachers were killed in an explosion March 7 at a school in Fanglin village
elementary school in Jiangzi province. According to witnesses and media, the children were being made to make
firecrackers without pay for teachers to sell. The explosion occurred as third grade children were inserting fuses and
detonators into big firecrackers. Parents said the children had quotas they had to meet before they could leave for the
day, and that local officials had ignored complaints about the situation.

The amount of money China spends on education is among the lowest in Asia, at below 2.4 percent of gross domestic
product. In the past couple of decades, the government has encouraged schools to operate businesses to help fund them.
The government has exempted campus businesses from taxes, leading some companies to base their operations in
schools. A 1996 New China News Agency story maintained that between 1991 and 1995, businesses in primary schools
and high schools earned $37 billion.

A parent whose daughter died in the explosion, Zhang Fujiu, said local officials would lie to those who complained and
say the children weren’t being forced to labor. “The leaders, they wanted money and they drove the children to their
deaths,?he said. The U.N. Children’s Fund expressed “outrage?at the incident, which it said highlights China’s
problems with child labor and lack of funds for education.