With the 2008 Olympics less than a month away, China is making every effort to shed its austere image. Gordon Rayner reports from Beijing. Just 27 days to go until the opening ceremony of the 2008 Olympic Games and in Beijing nothing, but nothing, is being left to chance. At the Changing Vocational School, 380 Olympic hostesses have been relentlessly drilled in such complex skills as how to smile.

To pass muster, they must always show between six and eight teeth and be capable of unflinchingly holding their grin for 10 minutes at a time. Those who cannot manage this must train for hours with a chopstick clamped between their teeth to build up their facial muscles. Elsewhere, 800,000 students are being taught how to clap and cheer in unison, and even the weather will be strictly controlled, using “cloud-seeding” techniques to ensure it rains before, but not during, the Games.

Yet the great irony of the communist party’s instinct to control every aspect of public behavior is that the Chinese, of all people, don’t need lessons in how to conduct themselves. Paying my first visit to China last week, my overriding impression of the Chinese was that they are unfailingly charming, friendly and polite. They’re also the smallest people I’ve ever come across (even without the chopstick exercises) and they have an endearingly childlike enthusiasm for the Games and for foreign tourists, which makes them natural ambassadors for China.

Walking down Beijing’s busiest thoroughfare, Chang’an Jie (a 30-mile long avenue thick with hooting traffic and whistling policemen) I made a point of stopping people in the street to ask them what they hoped the Games would achieve. There was, of course, a time when the only people allowed to speak to Westerners would have been communist party members primed with propaganda, but those days are gone, and I had no reason to doubt the motives of Ma Bin, a 32-year-old salesman for a coffee company, who said he hoped foreign visitors would discover “that China is a beautiful place where they will feel welcome”, or Sang Shigany, 25, a law student, who said tourists “might be surprised to find how cosmopolitan Beijing is”.

And there were some dissenting voices – one man told me about what he perceived to be corruption in the awarding of Olympics contracts, and suggested many Games venues would turn out to be white elephants. Alas, I can’t give you his name, because freedom of speech is still a distant dream in China, which locks up journalists, bloggers and dissidents, allegedly torturing some of them, and uses violence to crush independence rallies in Tibet. Yet China is changing fast, and changing for the better. It is worth pointing out that the man who told me about alleged corruption had travelled extensively and had lived abroad, including in Britain, but returned to China “because there are so many opportunities here. All countries have problems, but this is a great place to live.”

Indeed, the changes in China since Chairman Mao’s death in 1976 have been so rapid that anyone who has never visited Beijing is likely to have misconceptions that are 10 or 20 years out of date. Beijing is full of smart shopping malls, where wealthier citizens park their Audis and VWs (there are surprisingly few bicycles) to shop in Max Mara, Burberry and Tiffany just a short walk from Mao’s preserved corpse in Tiananmen Square (how much less complicated clothes shopping must have been in his day). And China’s booming economy, set to become the biggest in the world, has raised standards of living in its cities to unimagined levels.

Hi Xiao Long, a tour guide barely out of his teens, told me: “When I was a kid very few people had a television, and if they did, they would have 10 or 12 families coming around to watch it. Now everyone has three or four TV sets, people have cars and mobile phones. People here are happy with their lives. “China is desperate to get this message across, hence my visit as a guest of the Beijing Organizing Committee of the Olympic Games (BOCOG), but after 60 years of communist rule, Chinese officials remain better at monologue than dialogue, lending a sometimes surreal twist to our meetings.

On a visit to the new subway line serving the Olympic Park, I was presented with a 52-page pamphlet on how to use the subway, including instructions on what to do if you drop your handbag on the line (do not jump off the platform for it, or electric shock or contusion by trains may be incurred) and what to do in the event of a poison gas attack (use handkerchief to cover your mouth, go away from the source of gas quickly). Failure to observe the rules (which include “being neatly dressed”) will result in you being “transferred to public security departments”. Perhaps foreign visitors would be better off walking after all.

The Chinese also love statistics – I was told the exact circumference of each of Beijing’s five concentric ring roads, the exact number of workstations in the press centre (971) the total mileage of the city’s subway system by 2015 (561km), the improvement in the carbon monoxide levels in the city since 1998 (39.4 per cent)… anyway, you get the picture. I began to suspect the Chinese officials were bombarding us with numbers so there would be no time left for awkward questions about Tibet, Sudan, the disastrous torch relay or anything touching on human rights.

In fact, the top brass did let us ask questions about such prickly issues; Beijing’s deputy mayor, the sharp-suited Chen Gang, remained good-humored throughout repeated questioning about how pro-Tibetan demonstrators would be treated, though his answer wasn’t exactly candid. They would be dealt with, he said, in accordance with Chinese laws. Anyone wanting to demonstrate must have a permit (cue wry smiles) and, he said, “You will see during the Games how we will handle such situations.” A rather unsettling answer. Yet it may come as a surprise that the question could be asked at all.

China is a country which, just four years ago, was so wary of the media that it blocked almost all foreign internet sites, yet I was able to call up the BBC and UK newspaper websites and even search those sites for articles on China’s human rights record. Beijing, of course, wants the world to behold the impressive Bird’s Nest stadium and the funky Water Cube in the Olympic Village, the showpieces of the Games.

Sadly, visitors may struggle to find them through the unrelenting smog, which is so thick here that, on a bad day, it seems to cling to your face like a mask. Forget the blue-sky publicity shots of the Olympic venues you might have seen; when I visited the Bird’s Nest it was shrouded in a miasma and already appeared to have a thin film of grime coating its steel exoskeleton. The officials seem to be in denial about this, quoting endless statistics to prove how safe the air is. They don’t seem to realize that if the world sees this murk beamed into their homes every day, prospective tourists might choose to go elsewhere. And that would be a great shame, as they would miss out on a country which deserves to be seen first-hand.

William Hoover, Assistant Director for Field Operations of the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), recently told the United States House of Representatives Committee on Foreign Affaires Subcommittee on the Western  Hemisphere that the violence fueled by Mexico’s drug cartels poses a serious challenge for both U.S. and Mexican Law Enforcement in that the drug trafficking related violence is threatening the well being and safety of citizens on both sides of the border. Mr. Williams is in charge of operations of all of the Bureau’s field offices, including those along the Southwest Border.

Mr. Hoover pointed out that the ATF has long been committed to investigating and disrupting groups and individuals who utilize firearms trafficking as a means to facilitate the drug trade on both sides of the border through the use of firearms illegally obtained in the U.S. and subsequently smuggled into Mexico.  Mexican President Calderon and Attorney General Medina Mora have identified the cartel-related violence as a top priority and have proclaimed the illegal trafficking of U.S.-sourced firearms the “number one” crime problem affecting the security of Mexico today.

Public safety along the U.S.-Mexico border has deteriorated considerably and Mexico has seen nearly five years of intensified bloody turf battles between the major Mexican drug cartels operating within Mexico. The ATF claim that the  battles for control over lucrative narco-corridors into the U.S. from Mexico are the result of intense U.S. and Mexican law enforcement and military counter-narcotics operations and extraditions that commenced in late 2003 targeting the leaders of the most prolific Mexican drug cartels.  In seeking to gain control of the disputed corridors, namely the Baja/Tijuana, Sonora/Nogales, Juarez/ Chihuahua and Nuevo Laredo corridors, Mexican drug cartels and their ruthless Mexican and American gang enforcers have more aggressively turned to the U.S. as a source of firearms. The weapons are then used against other cartels, the Mexican Military, Mexican and U.S. law enforcement officials, as well as innocent civilians on both sides of the border.

The ATF says that the intelligence gathered by them and other domestic Federal law enforcement entities indicates that the cartels or as they like to call them DTOs have tasked their money laundering, distribution and transportation apparatuses, all of which reach across the border into the United States, to acquire firearms for illegal transfer back to Mexico for use in facilitating narco-trafficking and other criminal activities.

In analyzing the data collected through ATF’s investigative and regulatory operations that have been focused on the abatement of illegal firearms trafficking to Mexico, there is more than enough evidence to indicate that over 90 percent of the firearms that have either been recovered in, or interdicted in transport to Mexico, originated from various sources within the United States.  An in-depth, comprehensive analysis of firearms trace data over the past three years shows that Texas, Arizona and California are the three most prolific source states, respectively, for firearms illegally trafficked to Mexico.

Until recently, the Mexican drug cartels “weapons of choice” had been .38 caliber handguns.  However, recent trace data of firearms seized in Mexico and “Stateside” interdictions of firearms bound for Mexico shows that cartel members and gang enforcers have now developed a preference for higher quality, more powerful weapons.  The most common of these firearms now includes the Colt AR-15 .223 caliber assault rifle, the AK-47 “type/variant” 7.62 caliber assault rifle, FN 5.57 caliber pistols (better known in Mexico as the “Cop Killer”… or “Asesino de la Policia”).  In conjunction with the dramatic increase in U.S. source firearms that have either been recovered in Mexico, or interdicted prior to reaching Mexico, ATF also routinely seizes small arms and assault rifle ammunition destined for Mexico.  ATF has also seized large quantities of .50 caliber ammunition for use in high-caliber long range sniper weapons and machine gangs.

The National Association of Retired Border Patrol Agents reported that the following are the first paragraphs of a long editorial found in Diario de Xalapa  (Xalapa, Veracruz), a member of “O.E.M.”, (A Mexican editorial organization ) a large media chain of 70 newspapers in Mexico. This particular column was found to have been removed from this and other ”O.E.M.” sites when they returned to it later today.
 

(SEC) “The alarming figures about crimes committed by the underworld in Mexico, which overall since Dec. 1, 2006 to date surpass 4,800 executions, demonstrate that in the country organized crime, the guerilla and narcotraffic have in their hands as many weapons as the national government.
The main clandestine entry of weapons into the country is done through the northern border and the Pacific, originating from the big American firms and from China, where there is no control for the transfer of weapons produced by their five gigantic firearms industries factories. For Georgina Sanchez, a researcher with the Latin American Social Sciences (”FLACSO”) in Mexico, there is an amount estimated at between 12 and 20 million high power firearms, mostly AK-47s from China, and 40 million pistols and rifles, the majority of them in the hands of guerilla fighters, narcotraffickers and organized crime.
 

As hard as one might fight (because in Mexico no one has declared war on anyone else since the EZLN did so on Jan. 1, 1994) against the criminals, nothing will be accomplished by the federal, state and city governments as long as firearms traffic is not brought to a halt.”

As such, ATF is working with Mexican officials to increase their current usage of ATF’s eTrace system. eTrace provides web based access to ATF’s Firearms Tracing System to allow law enforcement both domestically and internationally the ability to trace data from firearms seized in connection with a criminal investigation.  eTrace allows law enforcement to access their trace results directly and offers the ability to generate statistical reports to analyze their trace data to determine firearms trafficking trends or patterns.  In addition, ATF is developing Memorandums of Understanding with Mexico to provide e Trace training to nine consulates in Mexico.  This initiative should increase the amount of trace information Mexico provides to ATF each year.

ATF is also part of the Administration’s recently announced “Merida initiative.”  Mr. Hoover told the committee “This initiative is a comprehensive U.S. strategy to address drug smuggling, firearms trafficking, and increasing violence in Mexico and Central America.   If the FY 2008 supplemental is enacted, ATF would receive $2 million through the initiative to assist in the expansion of Spanish eTrace to countries in the Central America region.   Funding would also be used to deploy an ATF regional advisor to Central American countries to assist them with firearms trafficking issues.  As part of the proposed Spanish eTrace expansion, ATF would provide training to Mexican and Central American countries to ensure that the technology is utilized to the greatest extent possible.”

Sources:

NATIONAL ASSOCIATION OF FORMER BORDER PATROL OFFICERS

United States House of Representatives Committee on Foreign Affaires Subcommittee on the Western  Hemisphere

Mexican Federal Government

“O.E.M.”, ( Mexican editorial organization )

Editorial found in Diario de Xalapa Newspaper 

ATF

Latin American Social Sciences (”FLACSO”)

Open source international news organizations

The People’s Bank of China continued nipping away at its one-year lending rate, cutting off 0.27 percentage points to 5.31%, its fifth rate cut in three months.

China also lowered its deposit rate by the same amount and reduced the proportion of deposits lenders have to hold as reserves by 0.5 percentage points to 15.5%, Bloomberg reported. All rate cuts will take effect Tuesday.

China’s slow burn of its interest rates is a calculated response to falling numbers across its board: gross domestic product could fall as low as 5% next year, way down from the 11.7% growth in 2007; exports fell for the first time in seven years last month; imports and manufacturing numbers also fell.

Unemployment figures are getting ugly, too. So far, the global financial crisis has taken 4 million city jobs from migrant workers and pushed urban unemployment up to 9.4%, the Chinese Academy of Social Sciences estimated last week. The result is rising gang violence and increased police measures and surveillances in cities hardest hit, Reuters reported.

China is also facing a dangerous decline in inflation, which limped at 2.4% annual pace in November, its fourth consecutive month-to-month drop and a sharp drop from the 4.0% posted in October, its National Statistics Bureau reported two weeks ago.

“The surprise is how small the move is,” Mark Williams, an economist with Capital Economics in London, told Bloomberg. “There’s been a sudden very rapid deterioration in all China’s economic data over the last 8 to 12 weeks.”

Last month, China cut interest rates by 1.08 percentage points, its biggest reduction in 11 years.

Also last month, China announced a massive $586 billion economic stimulus plan that will pump money into low-income housing, water and energy projects, airports, disaster relief and new railroads for the next two years.

“China understands that it’s gaining importance in the world economy and that it’s going to participate in that process,” said Keith Fitz-Gerald, Money Morning’s investment director and a former professional trade advisor who’s spent more than two decades focusing on investment opportunities in China, Japan and the rest of the Asia region.

“Many experts will see this as just a ‘bailout’ that’s directed at Chinese infrastructure projects, Chinese technology companies and at holding the global financial crisis at bay,” Fitz-Gerald said. “But the real message here is that Beijing is going to pull out all the stops to ensure that its economy does not falter. And that’s because China realizes that it’s become the super glue that’s holding the rest of the planet together.”

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Investment News

For instance, the U.S. Dollar Index topped on March 4th at approximately 89.63. Ever since then, it’s been tanking overall, despite Obama & his puppet, Geithner saying that we have a “strong dollar”.

Obama had better stick to his “day job”!

Russia & China love to kick the Dollar when it’s down!

Since the dollar peak AND the break of the U.S. Dollar Index’s break of the uptrend line, China and Russia have been gripping about the dollar and how we need a new reserve currency.

It’s almost like they waited for the “opportune time” to take a stab at the greenback once the trend broke. Think this is coincidental? I think not!

They’ve waited for the U.S. borrowing to undermine the greenback before making their move. After all, both of these countries are gunning for the “king of the hill”.

Russia’s president stated yesterday that it may discuss his proposal to create a new world currency when he meets with Brazil, India and China (BRIC nations) on June 16th.

He made this proposal at the last G-20 meeting in April. However, the idea wasn’t entertained there because they had “bigger fish to fry” at the time with the world economy still being quite shaky.

Russia’s comments are coming at a time when small central banks have to sell some dollars so that they don’t risk being hurt as the dollar broke its uptrend and crumbles further. The larger central banks can handle the gyrations better than the smaller ones.

Russia is also trying to “help its own cause”. In November, it was reported that they now hold more Euros in reserves than dollars. Their dollar reserves decreased from 45% down to 41.5% while their euro reserves climbed from 44% up to 47.5%. Amazing how they made that shift before they started all of this “talk” huh? It’s almost like they were trying to help themselves out too!

The Russian president told CNBC on June 1st that “we need a universal means of payment. It’s our idea, and our Chinese colleagues support it”.

China conveniently “Tag Teams” with Russia!

Amazingly, as Russia commented on June 1st and 2nd.  China’s former central banker, Yu, also decided to chime in on the 2nd. He was quoted as telling Geithner, “The U.S. shouldn’t be complacent about China continuing to buy Treasuries. Don’t think that there is no alternative to your bills and bonds. The euro is an alternative. And there are lots of raw materials we can buy.”

I don’t know how much plainer they could have been!

China finally starts flexing its muscles as it has become the 3rd largest economy in the world and the 2nd largest energy consumer in the world.

They have for sure stepped up their purchases of raw materials as a way to hedge themselves vs. a falling dollar. So it wouldn’t surprise me if they add Euros into the mix as well.

While I hate it that there is such a “disdain” out there for the buck…I must say, I have to agree with China’s concerns.

Yu went on to say that, “It’s very natural for the world to be concerned about the U.S. government’s spending and planned record fiscal deficit.

While Geithner has stated that the Obama administration plans to reduce the fiscal deficit to roughly 3% of GDP down from a projected 12.9% of GDP currently, Yu added…”It may be helpful if Geithner can show me some arithmetic. We need to know how the U.S. government can achieve this”.

Well, I’d have to say I have the same concerns and doubts. And it’s not just me doing all of the “doubting”. You’ll remember that recently, even one of the major rating services talked about lowering the U.S. credit rating from its current AAA status.

So you can see why Russia, the former Chinese central banker and the present Chinese central banker (Zhou) are all calling for the creation of a “new international reserve currency” or “supracurrency” as Russia put it.

The bottom line: All of this produces doubt and a negative sentiment on the dollar. It’s like a “black cloud” over its head at a time when the dollar really could use every break it could get.

This negative sentiment will continue to weigh down the dollar over the next year or two as the fundamentals behind the dollar continue to erode. Any time you print tons of excess money, increase debt and job losses and decrease personal savings…you know the dollar will have issues.

The Aussie, Kiwi and Euro to benefit as the Buck falls!

Therefore, all of this “ganging up” on the dollar at a time like this will only keep the trend pointed downward for the greenback and will boost currencies like the Australian dollar, New Zealand dollar and the euro against it.

While there will be pull backs along the way, the trend for AUD/USD, NZD/USD and EUR/USD are likely “up” and not “downward”.

The shift has happened. Many out there will not realize it until way later after their accounts have suffered severe losses. Why? Because for the last year, the theme was “dollar buying” and a dollar uptrend. Retail traders are slow to realize and accept new trends. They usually won’t wake up to that fact for months. Therefore, this will take a toll on them…but it doesn’t have to take a toll on my readers.