MEDIA REACTION: CURRENCY, CHINA'S MILITARY STRENGTH

UNCLAS SECTION 01 OF 02 BEIJING 000820

DEPARTMENT FOR INR/R/MR, EAP/CM, EAP/PA, EAP/PD, C
HQ PACOM FOR PUBLIC DIPLOMACY ADVISOR (J007)
SIPDIS

E.O. 12958: N/A
TAGS: OPRC KMDR CH

SUBJECT: MEDIA REACTION: CURRENCY, CHINA'S MILITARY STRENGTH

BEIJING 00000820 001.2 OF 002


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Editorial Quotes
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1. CURRENCY

a. "Enlarge the influences of the RMB and promote China's RMB
internationally "

21 Century Business Herald (21Shiji Jingji Baodao) under Guangdong
21 century publishing company Ltd. (03/27):
"While the U.S. dollar crisis it is a good time to reform the
international currency system. But, as the tool of the U.S.' global
hegemony, the weakened position of the U.S. dollar means the
weakened position of the U.S.' power. It is therefore understandable
that the U.S. is against this. Although Europe hopes to replace the
U.S. dollar with the Euro and strengthen the supervision and
restraint in the American financial system, Europe may not support
the new proposal of a super-sovereign currency, because if they do
so, the position of Euro will be weakened as well.

The new proposal, which reflects the opinions of most countries,
might do three things; spur America to responsibly stabilize their
exchange rate, highlight the unreasonable international status of
U.S. dollars (USD),and point out a direction for the reform of the
IMF. For China, the present is not the time to destroy the status
of the dollar. It is time to accelerate the regional influence and
internationalization of the RMB. China's aim is to support the
existing IMF framework rather wiping out the existing international
system."


b. "The call for international reserve currency is aimed at warning
America"

The Beijing based News Agency co-founded by Guangming Daily and
Nanfang Daily Group Publication; The Beijing News (Xin Jing Bao)
(03/27): "As the supporting foundation for the USD starts to shake
due to the global financial crisis; America continues to conduct
easy money policies. The voices for "pulling down (the current
international currency system) to build up a new one" have become
stronger. But in this situation, when the global economy hasn't
yet recovered, if the USD's position as the reserve currency
fluctuates, there are more disadvantages than advantages. Most of
the countries will suffer huge deficits from the devaluation of the
USD. Due to a lack of consensus on the future direction of reform
measures for the international currency system, 'the super-sovereign
currency' is hard to implement.

Although China has called for a new international reserve currency;
China's economic power is not up to the standard needed to lead. The
real purpose is to warn America. If America wants to keep its
international reserve currency status, it will have to restrain the
U.S. dollar. America must be responsible and respect the assets of
other countries. This is a signal to emerging economies, a call
towards participation in the reform of the international currency
system."


2. CHINA'S MILITARY STRENGTH

a. "Pentagon Report 'grossly distorts facts'"

The official English-language newspaper China Daily (03/27):
"Beijing yesterday dismissed a Pentagon Report on the country's
military strength, saying it "grossly distorts facts" and "smacks of
Cold War mentality". The report continues to play up the fallacy of
China's military threat and interferes in China's internal affairs.
China unswervingly sticks to a path of peaceful development and
pursues a policy which is purely defensive in nature, a Foreign
Ministry Spokes person said, noting that Beijing is committed to
safeguarding world peace and stability. "We urge the United States
to respect this basic fact. We suggest the United States drop the
Cold War thinking and prejudices, stop releasing such reports and
stop groundless accusations to prevent further damage to the
relationship between the two countries and two armies." Yesterday
the Ministry of Defense said that it was annoyed with the U.S.
Report. There are still many hurdles to be removed in the China-U.S.
military relations, which are experiencing a difficult period.

Song Xiaojun, a Beijing-based military expert, said the Pentagon
routinely uses the "China military threat" to seek increases in the
defense budget from Congress. "The Pentagon has always put China's
defense budget at twice the level of the Chinese government's
figure. Its motives are not pure," he said.

"The negative view of the U.S. military shows that some people in
the U.S. still view China as a threat. They always try to make the
worst-case scenario about China, said Niu Xinchun, vice-director of
the Center for American Studies at the China Institute of

BEIJING 00000820 002.2 OF 002


Contemporary International Relations. The U.S. military needs to
create a potential enemy after the Iraq War and some are picking
China," a military officer said yesterday on condition of
anonymity."

PICCUTA