China Plans 12 Highways into Central Asia and Pakistan

China is planning to build 12 highways which will connect its western part to Central Asia, Russia, and Pakistan. The longest will be the one that would connect Urumqi, the capital of China's Xinjiang province, to Istanbul, Turkey. But the other ones will connect China to Russia, Kazakstan, Tajikistan and Pakistan, China's transport administration reported. Xinjiang province of China shares border with eight countries.

China's objective in developing these highways is to link up with energy and raw material sources of Central Asia, Russia, and Pakistan. Already, China has invested heavily in helping Pakistan to develop the Gwadar port in the southeast corner of Pakistan at the mouth of Strait of Hormuz in order to bring hydrocarbon from the Persian Gulf. These highways, and the existing highways within Pakistan, would bring the hydrocarbon resources into western China.

In addition, however, these highways will also be designed to provide a sea export route for goods and resources of the Central Asian countries which are landlocked. China will also be looking at supplying the Central Asian nations with the Chinese manufactured goods in return for the oil, gas, and mineral resources that these countries have as reserves.

NATO's Loss Is Taliban's Gain

Afghan insurgents have taken hold of the Khak district of Afghanistan, according to the governor's spokesman, Gulab Shah Alikhail, Xinhua reported April 6. More than 100 insurgents carried out an armed attack in the center of the district, which lies only 40 miles from Qalat, Zabul's capital.

Ghulab Shah also pointed out that between Qalat and the district of Mizan, insurgents attacked a construction site and killed five guards and injuring four others.

Zabul province is situated just north of both Helmand and Kandahar provinces, both of which have significant presence of Taliban and other anti-foreign forces, and anti-Kabul insurgents. In fact, NATO, with 4,500 troops, launched Operation Achilles last month in Helmand province to weaken the insurgents there. Helmand, where rebels held a small town for almost two months, is also the hub of Afghanistan's opium production. Reports indicate the NATO forces have met with little resistance there so far.

The significance of this development is that under pressure from NATO, insurgents crossed Helmand's borders and moved into Zabul to gain control of Khak, and it is likely that they would launch an attack on Qalat in the coming days. This is a pattern which NATO, and the U.S. forces, will have to deal with for years to come.

Disastrous Free-Trade Deal Signed by U.S., South Korea

The free trade agreement signed by the U.S. and South Korea in early April will be a disaster for both, although it may not make it through the opposition in the legislatures of either nation. The deal, signed literally at the midnight hour of the last day in which Bush has fast-track authority (meaning the Congress can vote yea or nay, but may not add amendments), is estimated by the Korea Rural Institute to mean the loss of employment for 130,000 Korean farmers, and the loss of $2 billion in agricultural sales. The Seoul government has promised to subsidize farmers for lost income, or compensate those who choose to leave their land. Rice was not included (despite U.S. insistence) among the 38% of agricultural products whose tariffs will be scrapped, but the rural opposition is still fierce and occasionally violent. Ninety percent of tariffs on industrial goods, for both sides, will be eliminated.

President Roh Moo-hyun admits that, "Parliamentary ratification won't be easy," with his own base almost totally opposed, and support coming only from some among the opposition conservative forces. One former supporter of Roh is on a hunger strike against the FTA, and said upon its passage that Roh was "handing Korea's economic sovereignty to the U.S. on a platter. This act of betrayal of the people, and their livelihood and of democracy, will be judged harshly."

In the U.S., House Speaker Nancy Pelosi (D-Calif.), joined by Reps. Charlie Rangel (D.-N.Y.) and Sander Levin (D-Mich.), wrote a letter denouncing the FTA, attacking South Korea for not opening up enough, while Sen. Max Baucus (D-Mt.) called the Korean ban on beef imports "entirely unacceptable," which the deal will see removed over a 15-year period.

Illiteracy Is Growing in China

The number of illiterates in China grew by more than 30 million, between 2000 and 2005, despite efforts to eradicate the problem, the Ministry of Education reported April 2. Although more than 9.75 million adults learned to read and write in those years, still, the overall number of illiterates in the country rose to 116 million, Gao Xuegui, director of the illiteracy eradication office of the ministry said. China ranks second in the world, after India, in illiteracy.

Gao said that one matter of concern, is that illiteracy is growing, not so much in the poorer inland regions, but in the central and eastern areas. Two-thirds of all illiterates are in these areas, with 9.63 million alone in the relatively "well-off" coastal province of Shandong.

Gao emphasized that the "market economy" is actually contributing to growing illiteracy, since the peasant population is more and more joining huge migrant labor force all over China to earn money, and not going to school, even when nine years of education is compulsory, and fairly widely available. (Farmers also have to pay fees for books, schools, etc., which many cannot afford for their children or themselves, if they are adult illiterates.) Also, local governments, once they consider the problem "solved," are shutting down the programs to eradicate illiteracy. The ministry's own budget is far too small, at only 0.07 yuan per illiterate person in China. It is calling for additional funds for the program.

In 2000, China had 11.3% of the world's illiterates, still second only to India, and by 2005, China had 15.01%. "The situation is worrying," Gao said. "Illiteracy is not only a matter of education, but also has a great social impact." In China, you have to be able to read and write at least 1,500 Chinese characters to be considered literate.

PBOC Raises Reserve Ratios Again

The Peoples Bank of China is again raising reserve ratios for banks and other deposit-taking institutions, in an effort to control the ever-expanding, excessive liquidity in the economy. The PBOC will raise the ratio by 0.5% as of April 16, to 10.5%. This is the third time the PBOC has raised the ratio this year (after January and February), and the ratio was raised by 0.5% in June, August, and November 2006. China is overwhelmed with excess liquidity, due to the massive inflow of funds due to its huge trade surplus, and "hot money" speculating on a shift in the currency, and on real estate and other sectors. Also, on March 18, the PBOC had raised one-year benchmark interest rates by 0.27%.

Xinhua on April 6 quoted Chen Deming, deputy director with the National Development and Reform Commission (NDRC), saying at a financial conference in Chengdu that excessive liquidity is a big problem for the Chinese economy, and the situation worsened in the first two months. The consumer price index (CPI) was up by 2.7% in February on a year ago. The PBOC is also trying to curb bank lending, which was up over 17% year-on-year, to control excess monetary credit.

China Will Not Pull Out of Dollar

China's new foreign exchange investment agency will not suddenly pull out of the dollar, an economist at an important Chinese think tank, the Institute of World Economics and Politics at the Chinese Academy of Social Sciences, emphasized. He Fan was quoted in the Peoples Daily April 6 saying that the new agency will only make gradual changes in the composition of China's forex. "Initially, the portfolio of the foreign reserve agency could include a large proportion of U.S. Treasuries ... and any move in reducing the holdings of U.S. Treasuries will be gradual and cautious," He Fan said. The composition of the reserves is a state secret, but it is presumed that at least 66% of China's reserves are in low-risk dollar bonds. He Fan said that China would have little incentive to sell off dollars, because that would bring down the value of its dollar-denominated assets.