US embassy cable - 05TAIPEI3132

UNCLAS SECTION 01 OF 04 TAIPEI 003132 
 
SIPDIS 
 
DEPARTMENT FOR INR/R/MR, EAP/RSP/TC, EAP/PA, EAP/PD - 
ROBERT PALLADINO 
DEPARTMENT PASS AIT/WASHINGTON 
 
E.O. 12958: N/A 
TAGS: OPRC, KMDR, KPAO, TW, Cross Strait Politics, Cross Strait Economics 
SUBJECT: MEDIA REACTION: RENMINBI REVALUATION, CROSS- 
STRAIT RELATIONS, PENTAGON'S REPORT ON CHINA MILITARY 
POWER 
 
1. Summary: Amid the extensive coverage of local 
politics and the return of an injured Taiwan super- 
model from China to Taiwan, the major Chinese language 
Taipei dailies also spent pages July 23-25 reporting on 
the impact of the revalued Renminbi on Taiwan, 
President Chen's offer to attend this year's APEC 
Leaders' Summit in South Korea and meet with Chinese 
President Hu Jintao, the cross-Strait talks scheduled 
for July 27 on selling Taiwan fruit to China, and the 
car bombs in Egypt.  The centrist "China Times," 
interestingly, spent almost the whole of its second 
page July 25 discussing the Donald Keyser case and the 
interaction between Taiwan's and Washington's 
intelligence agencies over the past year.  The 
newspaper also carried a news story on the same page 
introducing U.S. Army Colonel Albert Willner, who will 
come to Taiwan in August to take on the job as head of 
AIT's Liaison Affairs Section. 
 
2. In terms of editorials and commentaries, several 
newspapers continued to editorialize on Beijing's move 
to revalue the Renminbi.  An editorial in the pro- 
unification "United Daily News" said Beijing's move has 
unveiled new changes to the world economy, while an 
editorial in the centrist "China Times" called the move 
similar to Taiwan's own experiences.  An editorial in 
the limited-circulation, pro-independence, English- 
language "Taipei Times," however, expressed concern 
about the possible speed of capital outflow from Taiwan 
to China created by the Renminbi revaluation.  With 
regard to President Chen's proposal to attend the APEC 
summit and meet with Chinese President Hu Jintao, a 
commentary in the "United Daily News" called it a chess 
move that is meant as a show for viewers inside and 
outside Taiwan rather than a part of a real chess game 
with Beijing.  Two editorials and one commentary 
continued the discussion of the Pentagon's annual 
report on China's military power that was released last 
week.  A commentary in the limited-circulation, pro- 
independence, English-language "Taipei Times" and an 
editorial in the limited-circulation, pro-independence, 
English-language "Taiwan News" both called the 
Pentagon's report a wake-up call to the international 
community that Taiwan is not the only potential victim 
of Beijing's missile development and military threats. 
An editorial in the limited-circulation, conservative, 
pro-unification, English-language "China Post," on the 
other hand, said Washington now views Beijing as a 
competitor and a potential enemy.  End summary. 
 
1. Renminbi Revaluation 
 
A) "One Pebble Splashes High Waves: Renminbi's 
Appreciation Has Unveiled New Changes to the World 
Economy" 
 
The pro-unification "United Daily News" [circulation: 
600,000] editorialized (7/23): 
 
". The significance of [last week's] Renminbi 
revaluation is manifested in two aspects, and the first 
is in the political aspect.  No matter whether the 
Beijing authorities admit it or not, mainland China's 
announcement to appreciate the Renminbi prior to 
Chinese President Hu Jintao's planned visit to the 
United States has provided essential bargaining chips 
to the Bush administration and has removed pressure 
from the protectionists inside the United States.  Such 
a move was also made in an attempt [for Beijing] to 
further strengthen its political ties with the United 
States.  In addition, Beijing intended to use this move 
to send a clear message to the international community, 
expressing its willingness in shouldering certain 
responsibility for the imbalanced global economy and 
its interest in sharing the obligations of a major 
member in the global economic system.  In the meantime, 
Beijing also wanted to remove any barriers that might 
block its plan to deepen its relationships with major 
international economic organizations. 
 
"The other aspect is the reform of [Beijing's] exchange 
rate system.  When compared to the fact that it is 
generally acknowledged by the international society 
that the Renminbi was undervalued by more than ten 
percent, the appreciation of only two percent was 
really nothing.  But the critical point lies in the 
change of the Renminbi exchange system, which has 
scrapped the peg to the dollar in favor of a basket of 
currencies of those major trading partners of mainland 
China.  The move has created immense possibilities for 
the future direction of the Renminbi. . Mainland 
China's money exchange policy will enjoy greater 
flexibility in the future, so will the fluctuation of 
the Renminbi.  Such a development will bring about 
various possible impacts for mainland China's economy 
and for the regional or even the global economies. ." 
 
B) "Reform of the Renminbi Exchange System Is Actually 
a Replica of Taiwan's Experience" 
 
The centrist, pro-status quo "China Times" 
[circulation: 600,000] observed in an editorial (7/23): 
 
". Beijing's timing to appreciate the Renminbi was 
perfect and the world's responses to the move were all 
positive.  The current small-scale appreciation of the 
Renminbi will be conducive to readjusting the 
imbalanced economy of mainland China as well as that of 
the other countries in the world.  Several stocks that 
focus on China's market of domestic demand and whose 
profits are valued in the Renminbi are those that are 
mostly benefited by the Renminbi revaluation.  But it 
was bad news for the Taiwan firms that are based in 
Taiwan and have their products manufactured on the 
mainland and exported to the United States.  In the 
short term, the New Taiwan dollar and other Asian 
currencies will be lifted by the Yuan's revaluation, 
but their appreciation range will be much lower than 
that of the Renminbi, so Taiwan people need not panic 
about it." 
 
C) "Yuan Changes Could Speed Outflows" 
 
The pro-independence, English-language "Taipei Times" 
[circulation: 30,000] commented in an editorial (7/25): 
 
"The timing of China's decision last week to revalue 
its currency and allow it to fluctuate against a basket 
of currencies came as a surprise, despite widespread 
expectations that it would eventually happy.  The move 
does not, however, mark a complete end to China's 
decade-long peg to the US dollar, but rather the start 
of a new currency regime. . 
 
"While the impact of the yuan's 2 percent revaluation 
will take time to assess, the issue of potential 
capital outflows to China from Taiwan has also caught 
the attention of the Mainland Affairs Council.  Last 
week the Cabinet said it would monitor the potential 
impact on the export sector and help small and medium- 
sized enterprises hedge against the risk of currency 
fluctuations. 
 
"As China is run by an opaque regime, its next move 
regarding the yuan cannot be predicted.  For democratic 
economies such as Taiwan, the change in the yuan's 
value has become a regional and global issue we have to 
face." 
 
2. Cross-Strait Relations 
 
"The Chess Move of Bian-Hu Meeting Was Simply a Gesture 
Made for the Eyes of the [Local and International] 
Spectators" 
 
Journalist Huang Ya-shih noted in the "United Notes" 
column of the pro-unification "United Daily News" 
[circulation: 600,000] (7/24): 
 
". The move [by President Chen Shui-bian] to fly a 
[test] balloon of a `meeting between Chen and Chinese 
President Hu Jintao' can show the international 
community and the Taiwan businessmen that favor the 
three links across the Taiwan Strait Chen's efforts in 
resuming the cross-Strait dialogue.  Also, the harm 
that such a proposal would do to the feelings of 
[Chen's] pro-independence supporters will be minimum 
because China has already turned down the conditions 
set by Chen for his meeting with Hu.  Every time when 
Beijing relentlessly turned down Taipei's offer, it 
would mean an opportunity for the Bian administration 
to accumulate its advantages that can be used to 
harshly criticize China's `haughtiness' [toward 
Taiwan]. 
 
"Over the past few months, Chen has kept on talking 
about the `Bian-Hu meeting.'  He first threw out 
remarks like `hoping to invite Hu to visit Taiwan,' 
then said that he was willing to meet [with Hu] in a 
`third country.'  The statement was later followed by 
Chen's articulation that he hoped they could `meet in 
the United States' in August or September.  The latest 
version was that [Chen hoped he and Hu could] meet at 
the APEC summit.  The topic regarding the Bian-Hu 
meeting that has been repeatedly thrown out [over the 
past few months] has managed to keep the heat of cross- 
Strait issue, but in reality, the progress on this 
issue is zero and remains to be static. 
 
"As a result, when people view Chen's chess move of the 
`Bian-Hu meeting,' they would prefer to calling it a 
move played to be shown to the viewers inside and 
outside Taiwan rather than a [real] chess game with 
Beijing." 
3. Pentagon's Report on China Military Power 
 
A) "Beijing's Expanding Military a Global Issue" 
 
Liu Kuan-teh, a Taipei-based political commentator, 
wrote in the pro-independence, English-language "Taipei 
Times" [circulation: 30,000] (7/25): 
 
". The Pentagon report is a wake-up call to the 
international community that Taiwan is not the only 
potential victim of Beijing's missile development and 
military aggrandizement.  China's emerging military 
threat has extended beyond the Asia-Pacific region to 
Russia, Central and Southern Asia, and Australia. 
 
"Even though the Chinese authorities have introduced 
the concept of `peaceful rise,' a new term to describe 
China's emergence, the notion of the `China threat' is 
by no means limited to the Taiwan Strait. 
 
"In pursuing engagement with China, the international 
community, including the US, must state clearly that 
safeguarding a strong and democratic Taiwan is in the 
interest of US efforts to create peace and prosperity 
in the Asia-Pacific region.  Only by offering Taiwan 
support for continued democratic consolidation and 
defense can the impact of the `China threat' be jointly 
managed." 
 
B) "Heed Wake-up Call on PRC Military" 
 
The pro-independence, English-language  "Taiwan News" 
[circulation: 20,000] noted in an editorial (7/25): 
 
". The [Pentagon's] report shows that Taiwan is not the 
only potential victim of Beijing's missile development 
and military threats, but that China's expansive 
military capability is stretching beyond Asia-Pacific 
region to reach into Russia, Central and Southern Asia, 
and even Australia. 
 
"Despite the attempt by Beijing authorities to ease 
global concerns over its rising military threat under 
the guise of its `peaceful rise' slogan, China's 
military expansion has clearly become a serious 
provocation and a threat to the peace and security of 
the entire world as well as to the Taiwan Strait. 
 
"A collective effort must be made by the international 
community to both incorporate China into the 
international framework and deter Beijing's military 
saber-rattling against a democratic and free Taiwan. 
 
"The people of Taiwan must do their part by putting 
pressure on the pan-blue legislative majority to face 
up to the reality of this threat and cease their 
spiteful boycott of plans to purchase necessary 
advanced defensive weapons procurements." 
 
C) "Beijing's Rapid Rise Worries Washington" 
 
The conservative, pro-unification, English-language 
"China Post" [circulation: 30,000] commented in an 
editorial (7/23): 
 
". The message from the [Pentagon's] report is loud and 
clear: China is a threat, regional if not global. 
Washington now views Beijing as a competitor, not a 
partner.  Beijing is in fact seen as a potential enemy, 
next only to the rogue states like Iran, Iraq and North 
Korea. . 
 
"It is evident that Beijing is now in Washington's 
cross hairs.  It would be better for Beijing to stay 
off the U.S. gun sights by assuming a low profile and 
refrain from making inflammatory rhetoric.  Beijing 
should know that the United States, the sole superpower 
in the world, needs an enemy, real or imaginary, to 
fill the spot vacated by the former Soviet Union. 
Beijing should never dream of being a U.S. partner 
because it is a communist country and a dictatorship 
whose rise poses a threat to U.S. hegemony." 
 
PAAL