This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 03 TAIPEI 003116 
 
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
SUBJECT: MEDIA REACTION: PENTAGON'S REPORT ON PRC 
MILITARY POWER, RENMINBI REVALUED 
 
¶1. Summary: The major Chinese-language dailies in 
Taiwan July 22 focused on the appreciation of China's 
Renminbi (RMB) and the Pentagon's annual report on the 
PRC's military power.  The pro-independence "Liberty 
Times" (Taiwan's biggest daily), the centrist "China 
Times," and the pro-unification "United Daily News" all 
reported under banner headlines on their front pages 
that the RMB has for the first time in about a decade 
appreciated by two percent. These newspapers also spent 
their first few inside pages discussing the reasons 
behind China's move to revalue the RMB and its impact 
on Taiwan's currency and stock market.  The pro- 
independence "Taiwan Daily," in addition to carrying 
the news story on the Chinese currency, also printed a 
banner headline on its front page that said "Bian: 
China's rise poses threats to world peace."  The 
newspaper also spent its whole page three on news 
stories related to the Pentagon's report on China's 
military power, and the top news story on the page 
carried the following headline: "The United States will 
go to war to protect Taiwan?  Rumsfeld: Of course we 
are capable of doing that."  The "United Daily News," 
however, covered this wire service news story from a 
different angle with the headline: "[The United States] 
is willing to fight for Taiwan?  Rumsfeld dodged 
[talking about] war but talked about peace."  The sub- 
headline added: "Following the release of the report on 
PRC military power, U.S. Defense Secretary replies to 
journalists that `we are capable of doing what we have 
indicated we have the capability of doing.'" 
 
¶2.  Several newspapers continued to editorialize on the 
Pentagon's report on the PRC's military power while 
only one news analysis discussed the appreciation of 
the RMB.  A "Liberty Times" news analysis said the 
Pentagon's report has accidentally cut into the 
achievements KMT Chairman Lien Chan claimed he had made 
during his trip to China.  An "United Daily News" 
editorial said the report revealed that the United 
States believes China's `rise' is a fixed fact, but it 
is really up to Washington to tell whether it is a 
`peaceful' rise or not.  An editorial in the limited- 
circulation, conservative, pro-unification, English- 
language "China Post" said for Taiwan, an independence 
ideology is more dangerous than an arms shortage.  An 
editorial of the limited-circulation, pro-independence, 
English-language "Taiwan News," however, said the DPP 
administration's call on the Taiwan Legislature to 
approve the special arms procurement bill is a 
responsible action to prevent a rapid and dangerous 
imbalance in the cross-Strait military equation.  With 
regard to the appreciation of the RMB, a "United Daily 
News" news analysis said the U.S. reaction to this move 
by Beijing is worth further observation.  End summary. 
 
¶1. Pentagon's Report on PRC Military Power 
 
A) "U.S. Report Accidentally Slashes the Achievements 
Lien Chan Made during His China Trip" 
 
Journalist Tsou Jiing-wen noted in a news analysis of 
the pro-independence "Liberty Times" [circulation: 
800,000] (7/22): 
 
"Following the release of the U.S. Department of 
Defense's annual report on China's military power, the 
reactions of two sets of people [to the report] are 
especially notable: The first is that of [the Chinese 
authorities accused in the report] whose [reaction] was 
that of outrage and [who] turned to criticize 
Washington for intervening and sowing discord [in the 
Taiwan Strait].  The other are some Pan-Blue members in 
Taiwan, who claimed in reaction that the report is 
Washington's best packaging for its arms sales to 
Taiwan. . 
 
"The old [leadership] in the KMT that is to step down 
in August has [attempted to] create a scene . . That 
is, during the recent meeting between members of the 
International Democracy Union and U.S. President George 
¶W. Bush, [KMT Chairman] Lien Chan claimed that Bush had 
expressed approval of his China trip.  To Lien's 
surprise, Washington's reference in the Pentagon's 
report to the special arms procurement bill which is 
currently stuck in the Legislative Yuan was in reality 
a move to vote against the KMT's boycott action, which 
was done under Lien's leadership. ." 
 
B) "`Rising' in China, But Whether It Is `Peaceful' Or 
Not Is up to the United States?" 
 
The pro-unification "United Daily News" [circulation: 
600,000] editorialized (7/22): 
 
"The U.S. Department of Defense's `2005 Annual Report 
on the Military Power of the People's Republic of 
China' was finally released.  In general, this report 
gives people the core impression that the United States 
believes China's `rise' is a fixed fact, but it is 
really up to the United States' evaluation to tell 
whether it is `peaceful' rising or not. . 
 
"The PRC believes that to handle the Taiwan issue, it 
requires the heightened and international level of 
military attentiveness [of the People's Liberation 
Army] and that without such preparedness, China can not 
possibly maintain a deterrence force that is capable of 
`attacking [Taiwan] the moment it declares 
independence.'  The U.S. side, however, believes that 
military preparedness by the PRC has posed an 
international threat.  Washington thus reminded the 
Beijing authorities that China is now standing at a 
`strategic crossroad' in an attempt to turn [China's 
military buildup] into a matter that is beyond `Taiwan 
independence.'  Thus, in terms of the `Taiwan 
independence' issue, Beijing [believes that it] can 
remain peaceful as long as it maintains [its principle 
of] `attacking [Taiwan] the moment it declares 
independence,' but for the United States, it also 
enjoys the liberty of which it could seize a pretext to 
make it [i.e. China's rise] not so peaceful. 
 
"It is noteworthy that the `National Security Report' 
that President Chen Shui-bian is currently working on 
also focuses on China's `peaceful rise.'  In the 
report, [Chen] also seeks to expound China's rise as a 
threat to the Asia-Pacific region and to the world, and 
[he even attempts] to imply that the rise of China will 
pose a threat to the United States' position as a sole 
superpower.  Such a perception is obviously the one 
that is generally held by the Western hegemonies toward 
China, and it is also a perception that treats Taiwan 
as a foot soldier attendant going before these Western 
hegemonies.  This perception may not really meet the 
true reality . of China's rise and it may even fail to 
meet the strategic views of Taiwan's multiple 
interests. ." 
 
C) "Independence Ideology More Dangerous Than Arms 
Shortage" 
 
The conservative, pro-unification, English-language 
"China Post" [circulation: 30,000] commented in an 
editorial (7/22): 
 
". Observers in Taiwan indicated that one of the 
purposes of the Pentagon report is to lure Taiwan into 
purchasing more U.S.-made weapons and to force Taiwan's 
lawmakers to approve the Chen Shui-bian 
administration's plan to buy NT$618 billion in military 
equipment from the U.S. . 
 
"In fact, a fundamental reason that Taiwan faces a 
grave threat from the mainland is the ruling Democratic 
Progressive Party's independence ideology. .  This 
tendency [to make Taiwan an independent state] is the 
main contributing factor to the tensions in the Taiwan 
Strait. 
 
"As long as Taiwan is ruled by independence-minded 
politicians, the island will continue to face a serious 
military threat from across the strait, regardless of 
how much it spends on improving its military arsenal." 
 
D) "Facing the Reality of PRC Armed Threat" 
 
The pro-independence, English-language "Taiwan News" 
[circulation: 20,000] editorialized (7/22): 
 
". We believe that the reality of the PRC's rising 
military clout and its declared willingness to even its 
nuclear capabilities to prevent what it defines as a 
`Taiwan independence event' cannot be ignored.  The 
people of Taiwan cannot blithely assume that either 
Washington or Tokyo will risk - or will be allowed by 
their citizens to risk - their lives for the sake of 
defending Taiwan form PRC attack for any reason 
whatsoever. 
 
"Therefore, any Taiwan government must place the 
defense of our democracy and autonomy as the highest 
priority, exercise considerable caution in dealing with 
cross-strait relations and should refrain from 
unnecessarily provoking Beijing's Chinese Communist 
Party regime while working to strengthen Taiwan's 
political, economic, social, culture, diplomatic and 
defense fundamentals. . 
 
"While we do not believe that more weapons offer 
absolute protection, we also believe that the DPP 
administration's call on the opposition-dominated 
Legislature to approve the draft special law for 
defensive military procurements is also a responsible 
action to prevent a rapid and dangerous imbalance in 
the cross-strait military equation. ..." 
 
¶2. Renminbi Revalued 
 
"[Renminbi] Slightly Appreciates Two Percent in 
Response to the United States' Call" 
 
Journalist Wang Li-chuan wrote in a news analysis of 
the pro-unification "United Daily News" [circulation: 
600,000] (7/22): 
 
". Since the beginning of 2005, the international 
community, especially the United States, has been 
demanding for the appreciation of renminbi.  At last, 
Beijing was no longer able to withstand the pressure 
and let renminbi appreciate for a small percentage. 
This move can be accounted as giving `a response' to 
the United States.  It is also meant to express China's 
sincerity in improving the U.S.-China trade deficit. 
On the surface, China has to demonstrate that it is not 
succumbing to U.S. pressure.  The reevaluation is 
taking the `Chinese pace.'  It is following the 
principle of `proactiveness, controllability, and 
gradualism,' as instructed by Premier Wen Jiabao.  The 
scale of the appreciation is quite small.  Whether the 
United States will accept this or will continue to 
exert pressure is the focus for observation. ." 
 
PAAL