TO THE POINT: At the very end of the first quarter this year, the United States filed an anti-subsidy case against imported Chinese coated paper and planned to levy a punitive tax of up to 20 percent. The Chinese Government regretted the decision and is working to resolve this matter. As the Chinese foreign exchange watchdog discovered, the surging trade surplus in recent years is partly shored up by a huge influx of international hot money. The supervisory department is bent on checking the speculative capital in an effort to balance China's international payments. At the end of March, the Chinese Ministry of Commerce issued its guidelines on foreign investment in China. Service and hi-tech companies are welcomed. China itself has invested heavily in overseas markets with a total of $16.1 billion last year, mostly in Latin America. Late in April, China CITIC Bank, the seventh largest bank in China, will be listed on both the Hong Kong and Shanghai stock exchanges, the second duel-listing after Industrial and Commercial Bank of

Protectionism in Disguise?

The United States is scheming to levy an anti-subsidy tax of up to 20 percent on imports of Chinese made glossy, high-quality paper used in books and magazines.

It's definitely not Uncle Sam's first attempt to self-guard against outside competition. In early February, the U.S. Government filed a complaint with the World Trade Organization, alleging China had offered subsidies in steel, paper, semi-conductor and other industries.

China is considered a non-market economy by the United States, a fact that helps the U.S. Government win anti-dumping cases against imported Chinese goods. However, as a 1984 U.S. judicial precedent (Georgetown Steel Corp. v. United States) prescribed, anti-subsidy law can't be applied to non-market economies. But now, the U.S. Government is revising what it had believed before. Is it a Catch 22 or just self-contradictory?

"While it is fine for the U.S. Commerce Secretary to rail against Chinese Government-sponsored tax breaks, loans and such, what about the billions of subsidized tax breaks, soft loans, and such that the U.S. steel lobby has been living on for decades?" said trade expert Greg Rushford in the Wall Street Journal. He also added that the Bush administration's anti-subsidy shift is "a bad policy."

The Chinese Ministry of Commerce regrets the move and is dissatisfied with the U.S. charges. "This action goes against the consensus reached by the leaders of both countries to resolve disputes through dialogue," said Wang Xinpei, spokesman for the ministry.

The paper industry bears the brunt of the subsidy charge. If the U.S. succeeds in winning the case, experts believe it is very possible that other sectors could encounter similar charges.

The continuous media bombardment about cheap Chinese goods and the loss of American jobs has made U.S. citizens wary of the "Made in China" label. They come to this conclusion without realizing how expensive their lives would be if inexpensive Chinese goods were not readily available.

To cope with the U.S. allegation, Lian Yanfen, an expert with the Ministry of Commerce, said China might come develop tough measures against imported U.S. goods and instead turn to other countries for its imports.

Hot Money On Ice

Wake up, hot money! The Chinese foreign exchange watchdog State Administration of Foreign Exchange (SAFE) enunciated at its latest nationwide conference that it will crack down on speculative international hot money in an effort to strike a balance in the country's international payments.

SAFE claims that short-term speculation and abnormal international hot money are two of the culprits pushing Chinese trade surpluses to record highs. This in turn has triggered international pressure over Chinese trade and currency policies.