Sens. Charles Schumer and Lindsey Graham's bill, which would have seen a 27.5% tariff imposed on Chinese exports to the US was due for a vote on March 31 but has now been postponed until September. "I would have characterized China's trade policy as mercantilist," Schumer said. "But I am convinced now that the Chinese government agrees that the currency should float."
He suggested that they would know more about China's intentions after President Hu Jintao's visit to the US last month, at which currency reform was expected to be high on the agenda. But Schumer vowed to push ahead sooner with his bill if China did not demonstrate a real commitment to currency reform.
The backdown has been linked to various pressures, including both Hu's trip and President George W. Bush's threat to veto the bill if it successfully made its way past the Senate. There is also the issue of reluctance on the part of congress to sanction a law that would deprive US consumers of cheap Chinese goods.
Schumer and Graham said their bill would reduce China's unfair trade surplus, which they contend is derived from a currency that is 15-40% undervalued. However, many analysts doubt whether a stronger yuan would make a difference, blaming instead underlying structural problems in the US economy.
As Schumer-Graham was delayed, Sens. Charles Grassley and Max Baucus opened up a more politically palatable front in the currency war with a new, less China-specific bill. The proposed US Trade Enhancement Act of 2006 provides a clear definition for the US Treasury to find any country guilty of having a "currency misalignment" with the US and provides specific penalties which can be imposed in the absence of currency reform. This places the ball at the feet of appointed officials rather than risk-averse US lawmakers.
Meanwhile, a European Commission report urged China to go slow in exchange rate reform. EU monetary affairs commissioner Joaqu?n Almunia said it supported previous remarks that "volatile exchange rates are not desirable for economic growth".
Bird flu hits cities
At least two city dwellers have died from bird flu in the first confirmed cases of the killer H5N1 virus in a Chinese city, and a third urban resident suspected of having the disease was undergoing tests. A news blackout accompanied the admission of the 41-year-old woman to hospital on March 25 with an unexplained case of pneumonia. Authorities feared the woman was the second person to contract bird flu in Guangzhou following the death of a 32-year-old man there in early March. The man's death was believed to be the first human bird flu case in a Chinese city, but a 29-year-old woman later died in Shanghai on March 21. So far, 16 cases of human infections, including 11 deaths, have been reported in China.
DPP rejects Hu's overtures
Taiwan's ruling Democratic Progressive Party (DPP) dismissed President Hu Jintao's offer of fresh talks and trade concessions as "poison coated with sugar" intended to undermine the island's leadership. Hu called for a resumption of talks on the basis of the "One China principle" and unveiled the economic package at a series of events, including a television address and a cross-strait forum, featuring himself alongside Lien Chan, former head of Taiwan's opposition Kuomintang (KMT) party. DPP parliamentary whip Chen Ching-chun claimed Hu's references to "One China" were a bid to relegate Taiwan into a "local government".
Villager dies in standoff Thousands of villagers clashed with police in Guangdong province leaving one woman dead. About 4,000 people gathered in an effort to stop the government removing sluice gates that form part of an irrigation system in the village of Bomei. According to media reports, crowds were dispersed with tear gas, leading to the death of a woman in her 30s. Villagers fought more than 1,000 police officers with weapons including petrol bombs, which resulted in the arrest of one person. They erected the gates to help irrigate crops in September, but local authorities have deemed the construction illegal.
Japan loans suspended
Japan suspended new yen loans to China because relations between the two countries had become so badly strained. It was the first time a reduction or freezing of loans had been directly linked to politics. Shinzo Abe, chief cabinet secretary, said the action was being taken "because of various situations surrounding Sino-Japanese relations". In the past, Japan has cited China's growing economic power as a demonstration that the country no longer requires large amounts of aid. Japanese soft loans of US$25.7 billion have helped to build much of China's infrastructure.
Employment law fears
Plans to introduce a new law regulating employment contracts were criticized by overseas companies, which believe it will hand more control to the government-supported trade union. A draft of the Labor Contract Law states the trade union would have to be notified of large job cuts, and have a say in deciding rules for employees. Some firms believe this will remove flexibility in hiring and firing. The union, essentially the only one on the mainland, would be able to negotiate for workers through collective bargaining.
Zhao yet to be released
A Beijing court dropped charges against a New York Times assistant accused of leaking state secrets, but Zhao Yan, 44, has yet to be freed. Zhao, who worked as a researcher at the newspaper's Beijing bureau, was detained in September 2004, reportedly in connection with a story about Jiang Zemin's decision to give up a post in the military. No charges were ever made public. Separately, AIDS campaigner Hu Jia returned home after spending six weeks in custody, during which time the authorities refused to confirm whether or not he was being held. Hu was detained before this year's session of the National People's Congress after criticizing the government's AIDS policy.
Economists back reform
Chinese economists Wu Jinglian and Xu Xiaonian urged government reformers to maintain their efforts in the face of growing opposition from traditionalists. Wu, an adviser to parliament, accused "some adherents of the old system" of using negative social and economic issues to fuel opposition to reform. Xu, a finance expert, added that the current conflict came down to a decision whether or not to persevere with the market reforms introduced by Deng Xiaoping. The remarks reflect concerns at the increasingly vocal opposition to foreign involvement in China's economy from advocates of the state-controlled system.
Magazines placed on hold
The General Administration of Press and Publication (GAPP) put approval for new foreign magazines on hold in the first official confirmation of a year-old measure limiting the kinds of publication that can receive government approval. The announcement appeared to be a response to the confusion surrounding rock music magazine Rolling Stone, which made its China debut in March only to be banned for not applying for GAPP approval. The moratorium on new titles was expected to hit lifestyle magazines the hardest, while science and technology magazines are exempted from the ban. Foreign companies need "copyright cooperation" agreements with state-owned partners to publish magazines in China.
Dalai Lama visit possible
The director of the State Bureau of Religious Affairs said the Dalai Lama may be given permission to visit Buddhist landmarks in China, provided he has "completely abandoned" the idea of Tibetan independence. Ye Xiaowen said he had "failed to deliver a clear message on his stance", despite endorsing a "middle way" under which Tibet has greater autonomy but no independence. Tibet's spiritual leader fled to India in 1959 after a failed uprising against communist rule.
China hit back at Italian Premier Silvio Berlusconi after he claimed in a campaign rally that China "boiled babies for fertilizer in Mao (Zedong)'s era". Foreign Ministry Spokesman Qin Gang asked the Italian leader to pay attention to his words and actions. Despite this and criticism from Italian politicians, Berlusconi refused to apologize, claiming he had used irony when referring to the babies. His party later narrowly lost the country's April election to a center-left coalition.
Tough eco-laws planned
A raft of stringent new environmental laws focusing on the petrochemicals sector were said to be under consideration, which could result in price rises for clothes, household goods and other plastic products. The State Environmental Protection Agency is expected to introduce a more stringent approval process for new industrial projects after outlining the results of a two-month nationwide audit of 127 chemical producers in which it rejected or suspended approval for 44 projects across a range of heavy industries. It also published a "name-and-shame" list and ordered 20 projects to clean-up after they fell short of environmental standards. Of these, 12 were located alongside the Yellow River or the Yangtze River and had "serious hidden dangers".
Hospital blast kills 30
At least 30 people were killed in an explosion in a garage beneath the staff hospital of Xuangang Coal and Electricity Company in Yuanping, a city in north China's Shanxi province. Authorities were investigating large quantities of detonators and blasting fuses found at the site. The explosion completely destroyed a two-storey residential building and several small houses within a kilometer of the garage. Most of the victims were staff and members of their families. The blast also injured villagers living nearby.
CHINA BY NUMBERS
China's foreign exchange reserves reached US$875.1 billion at the end of March 2006 to become the largest in the world.
The country's economy grew by 10.2% in the first quarter of 2006.
China ran a trade surplus of US$11.2 billion in March 2006, more than double the amount for March 2005, and the largest surplus recorded since October.
Its trade surplus with the US hit a record US$202 billion in 2005, according to official US figures.
Of the world's 20 most air-polluted cities, 16 are in China.
90% of the country's urban groundwater is contaminated.
The renminbi rose against the US dollar at an annual rate of 1% from July 2005, when it was de-pegged and revalued, to January 2006.
Over February and March 2006 the renminbi rose at an annual rate of 4%.
The broad (M2) money supply reached US$3.9 trillion in the first quarter of 2006.
Sino-Indian trade is expected to exceed US$20 billion this year.
Trade between China and India totaled US$18.7 billion in 2005, up 37.5% from 2004 levels.
In 2005 the country's courts heard 3,567 intellectual property rights cases, an increase of 28% from 2004.
China has an estimated 300,000 millionaires, measured in US dollars.
More than 400 million Chinese live on less than US$2 a day.