-Caveat Lector- from: http://www.aci.net/kalliste/ <A HREF="http://www.aci.net/kalliste/">The Home Page of J. Orlin Grabbe</A> ----- Gold Market UK Sells the Family Gold Other central banks to follow suit? There are three questions to ask about the British government's decision, announced on Friday, to sell more than half its gold reserves over the next few years. Does the decision make sense? Is the timing right? And is the Treasury going about the job in the most sensible fashion? It is hard to be entirely rational about the case for holding gold bullion, as is evidenced by some of the comments over the weekend about this move. For example, there is no merit in suggestions from the Conservative opposition that the sale represents in some way a plot by the government to drag the UK into the single currency by stealth. Instead, it is just the latest in a series of decisions by central banks around the world - the Netherlands, Belgium, Argentina, Australia and Canada, to name just five - to reduce their bullion holdings. Central banks everywhere are seeking to improve the return on their reserves: for those within the single currency, this is one of their few remaining roles. Gold generates no income directly. And the scope for capital appreciation is limited by the probability of further official sales into the foreseeable future from, among others, the International Monetary Fund and from those members of the European Union that find themselves with more reserves than they need after consolidation of monetary affairs into the European Central Bank. The ECB has said it intends to hold 15 per cent of its reserves in the form of gold. By this benchmark the UK, which holds more than two fifths of its net reserves in bullion, can comfortably afford to cut back its holdings. As for the timing, the bullion price is close to the low point of a broad range spreading back over the past dozen years, and although the UK Treasury is by no means the last in the queue of likely sellers, that prospect is presumably already reflected in the price. But there is no reason to think that it would have done better by waiting. At least there were no leaks ahead of the event, and perhaps the worst that can be said about the timing is that the government appears to have been up to its old tricks of short-term news management. There were other things to excite the headline writers on the day after crucial elections across the UK. The decision to sell the gold by way of auction, and to announce the news in advance, is entirely to be welcomed. Gold auctions work well, as the US government showed back in the 1970s. Far better to conduct them in a transparent fashion than to allow the sales to be conducted in secret by a group of insiders. And with annual mining output running at more than 2,500 tonnes, the market is well capable of handling a sale of 125 tonnes from the British in 1999-2000. The Financial Times, May 10, 1999 Der Fuhrer Bombs Chinese Embassy US and UK Companies Tighten Security in China There goes our investment. US and British companies were yesterday stepping up security for their staff in China in the face of increasingly hostile anti-Nato protests spreading across the country's cities. Tens of thousands of demonstrators, some shouting "Kill Americans" and "Get out American pigs" and others hurling bricks at the US and British embassy buildings, rallied in Beijing during the weekend to vent their anger at the Nato bombing of China's embassy in Belgrade. As the protests grew yesterday James Sasser, US ambassador to China, said on television that he was concerned Chinese authorities could lose control. "No question that we're hostages here," he told CBS's Face the Nation. Describing the situation as ugly, he said virtually every window in the embassy's chancery and his personal residence had been broken. He said his wife and son were evacuated outside Beijing. The Chinese government last night announced its support for the mass protests which have targeted the US and British diplomatic missions and isolated foreign businesses and institutions across the country. Hu Jintao, vice-president, said on national television that the outpouring of public rage was an expression of "the keen patriotism of the Chinese people" and a condemnation of "the barbaric acts of the US-led Nato". But he also called on protesters to act within the law. The state media has fuelled public outrage by suggesting the attack on the Chinese embassy was deliberate. Nato and the US have acknowledged they targeted the embassy due to an error of intelligence, but their apologies have not been broadcast in China. The attacks on US property by angry students and workers, who threw rocks and paving stones at embassy buildings and American cars while Chinese police stood by, marked the most venomous outpouring of anti-US sentiment since bilateral ties were established 20 years ago. The bombings, which left four Chinese people dead and technically constituted an assault on China's sovereign territory, have struck a nationalist nerve and revealed the extent of simmering anti-American feeling. >From early Saturday afternoon, the growing crowds of demonstrators outside the US embassy carrying "Nato=Nazi" banners and placards of Bill Clinton complete with a Hitler moustache kept up a mantra of angry slogans: "Give us back our embassy! American bandits! Lower the American flag!" The demonstrations represent the largest and most volatile public protests in China since the Tiananmen Square crackdown in 1989, a development with unpredictable consequences for China's fragile social stability. Foreign companies have advised their staff to stay at home or, if they go out, to be careful. Employees at Dupont, the US chemical company have been told "to keep a low profile", travel in company vehicles and not walk around town. The US embassy told US citizens not to court public attention and warned they could be targeted if the situation deteriorates. Although most companies hope things will calm down during the next few days and say they do not yet see the need to evacuate overseas staff, some US and British businesses have begun to review the procedures to withdraw expatriates. "Everybody is thinking about it [evacuation]," a US executive in Beijing said. "The problem with this kind of situation is it can turn on the smallest thing." A US businessman said he had tickets to leave China tomorrow in case what he called the harassment of Americans escalates. American schools in Beijing and Shanghai will be closed today and US diplomatic missions will be closed today and tomorrow. In Chengdu, a city in southwestern China where thousands of demonstrators bombarded and burned US consular buildings on Saturday, some westerners said they were afraid to go out into the streets where the growing crowds were getting rowdy. The Financial Times, May 10, 1999 Der Fuhrer Bombs Chinese Embassy US-China Relations: the Chill Turns to Ice Where will NATO stop? A hall full of grandmothers screaming anti-American abuse. Hundreds of schoolgirls in summer frocks denouncing President Bill Clinton as a fascist. An embittered worker in Shanghai dismissing all Americans as "arrogant bastards". The vivid scenes on China's state-controlled television over the weekend, provoked by Nato's bombing of China's Belgrade embassy, show that China is in the middle of the most vituperative outpouring of anti-American sentiment since diplomatic relations were established in 1979. The anti-US and anti-Nato protests engulfing many large cities over the weekend were supported and even encouraged by the authorities. But even if they were partly stage managed, the demonstrations and sporadic rioting, which were still raging late last night, carry a deeper message. They are a jolt to China's ambivalent attitude to the west - it feels simultaneously victim and emerging superpower, inferior and superior. That is why it is difficult to predict with certainty how bad and how permanent the impact of this crisis will be on ties between the world's only superpower and Asia's rising giant. China's response, as it evolves over the next few days, will be an important part of its attempt to define its place not just in relation to the US, but in the international community at large. Just as China appeared to be inching closer to the western world on a number of fronts, will it now turn in on itself? It is already clear that the chain of events over the 48 hours since Saturday morning - the killing of four Chinese in the Belgrade embassy attack, the retaliatory burning of a US consul-general's residence in southern China and the stoning of the US and UK embassies in Beijing - will cast more than a transient pall over an often volatile bilateral relationship. It could all have hardly come at a worse time. Beijing for more than a month has appeared to be near a deal with the US on its admission into the World Trade Organisation (WTO) - potentially the culmination of the "open door" policy which China has developed over the past two decades. In the diplomatic arena, the co-operation of China as a permanent member of the United Nations security council is seen as important for the future of any Kosovo peace plan that includes a UN peacekeeping presence. The Group of Seven industrialised countries and Russia last week proposed a complex peace initiative which suggested the establishment of an interim government in Kosovo supervised by UN peacekeepers. Bilaterally, the crisis comes as many in China and in the US are asking the most fundamental of questions; are Washington and Beijing "strategic partners" as they claim, or are they instead squaring up to become geopolitical rivals? Of these concerns, the most immediate is the WTO. Negotiations had recently run into trouble, partly because of growing Chinese opposition to concessions offered by Zhu Rongji, the premier, to the US in an attempt to secure admission to the world trade body last month. The venting of anti-US spleen may leave Mr Zhu even more vulnerable to domestic criticism from ministry officials and industry leaders that he promised Washington too much. It may also undercut those in China who still argue for more tariff reductions and market access offers to secure a WTO deal before the end of the year. The situation is further complicated because the gap between what China has been prepared to offer for WTO entry, and what the US and European Union want from it has widened significantly in the few weeks. Talks last week between the EU and China on WTO revealed that Beijing has diluted several of the crucial market access promises it made Washington last month for foreign banks, insurance and telecoms companies. In banking, one of the most important areas, China has mentioned in negotiations with the US that it may allow foreign banks to engage in local currency business with local companies by 2003, lifting heavy restrictions. But last week, Beijing told EU negotiators that it would reserve the right not to grant foreign banks treatment equal to their local competitors. "We have said many times that the document announced by the US in Washington last month was not the Chinese WTO offer," says Shen Jiru, director of the institute of world economics and politics at the Chinese Academy of Social Sciences (Cass), a top government think-tank. "The US always just wants to raise the price of WTO entry. If they continue to do this, there won't be any agreement," Mr Shen added. It was also unlikely, foreign diplomats said, that the US administration and particularly Congress would be in the mood for compromise after the damage inflicted on US property by protesting Chinese mobs. The issue of Chinese co-operation for a Kosovo peace plan, though, may not have been irreversibly set back by the embassy bombing. Beijing has been keen since Nato began its war in the former Yugoslavia to steer Nato back to a political solution that heeds the wishes of the UN security council, where China has a voice. A senior Chinese official, who spoke just before the Belgrade embassy was hit, said that Beijing welcomed the fact that the peace plan by the Group of Seven plus Russia represented a return to the political process. Foreign diplomats said Beijing could be amenable to it as long as it had the support of Russia and of Slobodan Milosevic, the Yugoslav president. China has had both principled and strategic objections to Nato's war on behalf of Kosovo's ethnic Albanians. On issues of principle, the intervention of a foreign army to redress human rights abuses and secure autonomy for an ethnic minority has a deeply worrying resonance for Beijing, which presides over several autonomous regions populated by restive ethnic minorities. >From a strategic viewpoint, Nato's intervention in Kosovo has fuelled an intense but rarely public debate among Chinese officials over what seems to many here as the expansion of Nato's sphere of influence. "Where will Nato stop? Will they next intervene in Azerbaijan or maybe in Tajikistan on China's border?" asked one senior Chinese official. Mr Shen adds: "[Nato] wants to elevate human rights to a level of importance above sovereignty and therefore give themselves the grounds to intervene anywhere they perceive a human rights abuse." Given these strategic misgivings, observers said, China is keen to do as much as it can to discredit the military efficacy of Nato's Kosovo campaign. To this end, the officially-sanctioned demonstrations in China over the weekend keep the spotlight on Nato's erroneous bombing of the Chinese embassy - its most serious tactical blunder to date. China's leaders may also be hoping that the continued protests could amplify pressure on Washington to seek a quick political solution, observers said. So far, China has not acknowledged Nato's claim that the embassy bombing was a mistake. Its newspapers and television news reports have suggested that the strike was premeditated, thereby fanning public outrage and prolonging the protests. But though the outpouring of anti-US sentiment has been to some extent stage-managed, Chinese concerns over Washington's growing strategic influence in the world could not be more genuine. An article last week in the Liberation Daily, the army's official newspaper, expressed an increasingly common fear that the US is aiming to contain China by expanding its influence in Asia and elsewhere in the world. It fulminated over recent news that Washington plans to supply an early warning radar system to Taiwan, the island off China's south-east coast that Beijing regards as a renegade province. If deployed in Taiwan the radar system, the newspaper said, would "have a serious negative impact on [China's] mission to reunify with Taiwan and on US-China relations". The concern over the radar warning system adds to high anxiety over Washington's plans to deploy Theatre Missile Defence (TMD) systems for Japan and, possibly, Taiwan. China warns that TMD would lead to an arms race in Asia and lead the region back into an era of Cold war confrontation. "Can we really say we are strategic partners if they are bombing our embassy and re-arming Taiwan?" asked one member of a government think-tank in Beijing. But despite the fact that US-China relations appear from some perspectives to be poised on a knife-edge, diplomats said the alternatives to co-operation may be simply too risky. China, which recorded a US$57bn trade surplus with the US last year, can ill-afford to jeopardise commercial relations at a time when its domestic economy is slowing down and unemployment stands at its highest level since the 1949 Communist revolution. The two countries also have common diplomatic interests in preventing the spread of nuclear technology on the Korean peninsula and in persuading Pyongyang to seek a peaceful accommodation with Seoul, its US-backed southern neighbour. "I don't think our goal should be to use barbaric cold war tactics to get back at the US," says Mr Shen. "But at the same time I don't think that China will just turn the other cheek. We reserve the right to further action [following the embassy bombing]. "Both the US and China, it seems, may have too much to lose from a sustained period of hostility. The Financial Times, May 10, 1999 ----- Aloha, He'Ping, Om, Shalom, Salaam. Em Hotep, Peace Be, Omnia Bona Bonis, All My Relations. Adieu, Adios, Aloha. Amen. Roads End Kris DECLARATION & DISCLAIMER ========== CTRL is a discussion and informational exchange list. Proselyzting propagandic screeds are not allowed. Substance�not soapboxing! 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