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Interview With Ayad Allawi; Turmoil in Palestine; Beslan Investigation Report Released; China's Booming Economy

Aired December 28, 2005 - 12:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

ANNOUNCER: Live from CNN Center, this is YOUR WORLD TODAY.
JIM CLANCY, CNN INTERNATIONAL ANCHOR: Chaos, armed chaos in Gaza. Masked gunmen trading fire with Palestinian policemen while Israeli takes -- Israel takes security matters into its own hands.

(BEGIN VIDEO CLIP)

AYAD ALLAWI, FMR. IRAQI PRIME MINISTER: There were gross intimidations throughout the country.

(END VIDEO CLIP)

COLLEEN MCEDWARDS, CNN INTERNATIONAL ANCHOR: Iraq's former prime minister goes public with allegations of fraud as thousands take to the streets denouncing Iraq's parliamentary election.

CLANCY: Full of failures. The head of the investigation into the Beslan school massacre puts the blame on local officials for not preventing the tragedy.

MCEDWARDS: And the European Union launches a satellite to challenge the U.S. global passioning system.

It is 7:00 p.m. in Gaza, 12:00 noon in Washington.

I'm Colleen McEdwards.

CLANCY: I'm Jim Clancy. And this is YOUR WORLD TODAY.

Two experiments in democracy, both beset by turmoil. That is what's happening today in two parts of the Middle East. We are going to take a closer look.

MCEDWARDS: That's right. We've got protests in Iraq over the recent parliamentary elections, primarily fueled by Sunnis and secular Shiites as well. They are complaining of fraud, and who are alarmed by the apparent clout of more Islam-oriented Shiites.

CLANCY: And with the Palestinian elections on the horizon, there are clashes ongoing in Gaza. Chaos pitting young militants in Fatah against the old guard in the same movement, raising questions about whether the Palestinian leadership can really control the turmoil.

MCEDWARDS: That's right. But we're going to begin in Iraq, where this month's parliamentary election has been deemed fair by the United Nations.

(BEGIN VIDEO CLIP)

CRAIG JENNESS, U.N. ELECTION ADVISER: The United Nations is of the view that these elections were transparent and credible. Turnout was high, the day was largely peaceful. All communities participated. Over 230,000 agents of political entities and 120,000 Iraqi observers were present in all stations.

(END VIDEO CLIP)

MCEDWARDS: Still, thousands of protesters are filling the streets across Iraq, calling this election a fraud. Disenchanted Sunni Muslims and secular parties are demanding a revote. They are threatening to boycott parliament.

Partial results show the ruling Shiite religious bloc with a large lead.

CLANCY: Now, it's interesting to note that former prime minister Ayad Allawi's party is one of the groups that is calling the recent elections unfair. The secular Iraqi National List got far fewer seats than it had expected.

In Baghdad, our own Jennifer Eccleston sat down with Mr. Allawi for this exclusive interview.

(BEGIN VIDEOTAPE)

JENNIFER ECCLESTON, CNN INTERNATIONAL CORRESPONDENT: There have been widespread calls for another vote because of allegations of voter fraud. These are serious allegations. What proof do you have, and how do you fight perceptions out there that this is perhaps a case of sour grapes?

AYAD ALLAWI, FORMER IRAQI PRIME MINISTER: I really -- you know, there were gross intimidations throughout the country, and especially in certain provinces in the south, and Baghdad, too, preceding the elections. There were assassinations.

We had numbers of people on my slate who had been killed, shot and killed, and supporters who have been killed. There were attempts to assassinate others, and they were badly injured.

All this, and then the day of the elections, before -- the evening preceding the elections, our headquarters in Nasiriyah was burned down. The number one heading the list in Nasiriyah was a clerical person, was shot with RPGs, his home riddled with bombs and mortars.

The Iraqi communist party headquarters, who are our partners also, was burned down in Nasiriyah and in Jiwaniyah (ph). And also -- so, you know, there were many violations.

We have submitted these violations with the proof to the Electoral Commission, a copy to the U.N. and a copy to the ambassadors of the P5, the permanent five members, in Iraq. And we are waiting for the results.

ECCLESTON: Now you'd like to have another vote in some parts of the country, correct?

ALLAWI: In some parts, maybe, yes. Or, alternatively cancelling some of the votes in certain areas. But to be realistic, to have a new vote throughout the country is quite difficult. And it can't be done.

ECCLESTON: It has been ruled out?

ALLAWI: Well, practically -- it's not practical. But practically, I think there are certain areas that the whole thing needs to be either another vote or to be completely weared (ph) away and say that this is not counted in the whole.

I hope this is what they do. At least we deserve an official answer both from the government, as well as from the Electoral Commission. We have nothing as yet. No answer.

ECCLESTON: Do you think that there is -- by installing these time frames, it is doing Iraq a disservice?

ALLAWI: I think there was a rush, yes. I think this should not have taken place.

I think this was probably -- I don't know what reasons for putting these and laying down this, but I recall very clearly I was not happy with these arrangements. I made my views clear that this is too much to do in Iraq, especially in a vacuum that had been created after liberation.

The problem, as we -- you know, it's not good always to say we have -- we have to look ahead and what have happened, have happened. We have in certain times to stop and look and examine what is -- are we really into democracy. Are we respecting this? Are we respecting the -- what we fought Saddam for?

(END VIDEOTAPE)

MCEDWARDS: All right. Well, that takes us to our inbox question of the day. We want to ask you this: Are you concerned about the political makeup of Iraq's new government?

CLANCY: E-mail us your thoughts to ywt@cnn.com. Don't forget, include your name, at least your first name, and where you are e- mailing us from.

MCEDWARDS: Iraqi police say eight people were killed in clashes that broke out at an Iraqi prison. Four guards and four prisoners died at the Al-Adala base in Baghdad. Three prisoners and two guards were wounded.

It reportedly happened during morning exercises when one of the prisoners grabbed a guard's weapon and then opened fire. The prison houses suspects accused of major crimes like terrorism. CLANCY: Well, more gunfire in Gaza this day. Palestinian officials, though, some of them, dismissing it as labor pains ahead of next month's democratic elections. There's no denying it is a power struggle between the old guard that once surrounded Yasser Arafat and younger members of the movement who want to share a political power and the jobs that may go with that.

Guy Raz joins us now from Jerusalem -- Guy.

GUY RAZ, CNN INTERNATIONAL CORRESPONDENT: Jim, two parallel and in many ways interelated problems for the Palestinian president, Mahmoud Abbas.

First, an ongoing military confrontation between the Israeli army and Palestinian militants on the Israel-Gaza border. Meanwhile, a spate of bizarre and chaotic incidents in Gaza in which Palestinian gunmen exchanged gunfire with Palestinian police when they attempted to take over several Palestinian election offices.

Later in the day, three British nationals were kidnapped in southern Gaza. And we understand those British nationals remain in captivity as we speak.

All of this coming at a crucial time for Palestinians, just about a month ahead before scheduled parliamentary elections.

(BEGIN VIDEOTAPE)

RAZ (voice over): Armed Palestinian militants occupied Palestinian government offices in Gaza. Gunmen freely shoot on the streets there. All the while, Palestinian President Mahmoud Abbas's grip on power is waning.

UNIDENTIFIED MALE: These are rough times for Mahmoud Abbas.

RAZ: The embattled Palestinian leader was in Gaza on Tuesday to try and convince armed militants to halt their rocket attacks into Israel. On Monday, one of those rockets barely missed a preschool near the Israeli city of Ashkelon.

SAEB EREKAT, CHIEF PALESTINIAN NEGOTIATOR (through translator): I will reiterate that we have called on all Palestinian factions to honor the truce because we believe it is in the vital Palestinian national interest.

RAZ: The internal Palestinian discussions failed. Militant groups vowed to continue their attacks. And increasingly, many Palestinians are seeming to grow restless with a government they regard as ineffective and unwilling to confront the chaos in certain Palestinian areas.

SAID ZEEDANI, PROVOST, AL QUDS UNIVERSITY: Mahmoud Abbas is saying all the good things. I mean, on the level of statements, on the declarative level. I mean, he is fine. I mean, no complaints, no problems. But how to translate these statements, how to translate these declarations and verbal positions into action on the ground, I think that is the failure.

RAZ: Talk among Palestinians now is about the imminent breakdown within the Fatah movement, the organization that's dominated Palestinian politics for four decades. The gunmen who have occupied various Palestinian offices in the past weeks are mostly members of Fatah themselves, younger members of the movement vying to break the older generation's grip on power.

HANAN ASHRAWI, PALESTINIAN LEGISLATOR: For a long time, the older generation has hogged power and the younger generations have been asking for some power-sharing and democratization within Fatah. Matters have been coming to a head.

(END VIDEOTAPE)

RAZ: And Jim, the biggest winner in all of this could be Hamas. Now, the militant Islamist group is expected to take a hefty share of the seats in those upcoming parliamentary elections, in large part because many ordinary Palestinian voters now regard the Fatah leadership as either corrupt or ineffective -- Jim.

CLANCY: Saeb Erekat noted to us here today that the situation is one where after the elections, he expects the Palestinian Authority to take control. That would be after the 26th of January. Apparently, the Israelis, though, aren't willing to wait for that as what you mentioned right there at the top, the missile attacks continue.

RAZ: Well, that's right. And of course it's impossible to know what will happen after the elections.

I think it's notable that for the past year many Palestinian analysts have been calling the year 2005 as the year in which Mahmoud Abbas would get what was described as his house in order. And really anecdotal evidence among Palestinians are evidence that the Palestinians that we've spoken to over the past several weeks suggest that there's growing disappointment really in his leadership.

Mahmoud Abbas was elected with a very large mandate. About 80 percent of Palestinian voters selected him last January. And in many ways, for some reason, Mahmoud Abbas has been unable to take that mandate and translate it into assertive authority.

Most Palestinians right now are simply calling on the Palestinian government to restore law and order in their streets. That's basically -- it's a simple demand, and it's what many Palestinians are demanding from their government. And in many ways, why the Fatah leadership, which essentially dominates the government now, will likely fare very badly in those upcoming elections -- Jim.

CLANCY: All right. Guy Raz reporting to us there live from Jerusalem.

Thank you, Guy.

And as he had just mentioned, another sign of the growing lawlessness in Gaza, Palestinian security sources reported that three British citizens were kidnapped. It happened along the border town of Rafah as they entered from Egypt.

Now, it's not clear who is responsible. Wire reports say the victims were a human rights worker and her parents.

MCEDWARDS: And Israel is warning Palestinians to stay out of unpopulated areas of Gaza that are being used to launch rocket attacks. This comes as Israel responded to a rocket attack in the north of the country with an air strike on a Palestinian militant group's base in Lebanon.

The strike hit deep into Lebanon just south of Beirut. The Israeli military says it will hold Lebanon responsible for not controlling Palestinian militants in the country.

No injuries reported there. A pro-Syrian militant group has denied responsibility for the attacks on the Israeli border town.

CLANCY: We are going to take a short break. But still ahead here on YOUR WORLD TODAY, we revisit one of the most horrifying hostage crises, the Beslan school siege.

MCEDWARDS: That's right. Moscow has released a report on who was to blame there, but the results are falling far short of what the victims' relatives wanted to hear. We'll explain that.

Stay with us.

(COMMERCIAL BREAK)

MCEDWARDS: Welcome back to YOUR WORLD TODAY.

The head of an investigation into Russia's Beslan school siege says the tragedy could have been prevented if local police officials had listened to warnings about increasing school security. More than one year ago, Chechen militants seized the school, provoking a three- day standoff which ended in a hail of gunfire. More than 300 people were killed, and more than half of them were children.

Ryan Chilcote has been following the story for us from Moscow -- Ryan.

RYAN CHILCOTE, CNN INTERNATIONAL CORRESPONDENT: Colleen, ever since Beslan's tragic outcome, the relatives of the victims have expressed their outrage. Outrage, they say, because they believe that the Russian government should have negotiated with the hostage-takers because they believe that the Russian government botched the rescue operation, because they believe that the Russian government should share in the blame with the hostage-takers, the Islamic militants that seized the school.

An outrage, they say, because they believe that ever since Beslan, the Russian government has done everything it could to try and cover up its -- what they call negligent handling of the crisis.

(BEGIN VIDEOTAPE) CHILCOTE (voice over): For the more than 1,100 Russian students, parents and teachers packed inside the school, the end of Beslan's hostage crisis was every bit as terrifying as the beginning. The hail of gun and tank fire that erupted between Russian forces and Islamic militants, 331 hostages died. More than half of them children.

Why did it end so tragically? And should Russian forces share in the blame?

After 15 long months, the head of the Russian parliament's inquiry tried to give some answers, chiding the government for botching parts of its response, saving its sharpest criticism for local authorities that he said had been warned of possible attacks on the first day of school but didn't react appropriately.

"Police acted with negligence, carelessness," he declared. "Conditions of a real terrorist threat."

The extent of Beslan's losses is almost impossible to comprehend. Psychologists believe most of the small town's residents suffer form post-traumatic distress. Some others have even turned to a mystic who promises to resurrect their children.

The victims' relatives have also formed a powerful political group called the Mothers of Beslan. But so far, only one accused culprit has appeared in the courtroom, a man police identify as the sole-surviving hostage-taker.

Every Tuesday and Thursday the Mothers of Beslan attend his trial, using the opportunity to vent their anger against him and the government officials who appear in the court. The mothers have criticized the Kremlin for failing to investigate higher-level officials for negligence and for failing to bring the attack's mastermind, Shamil Basayav (ph), to justice.

And they have already criticized the parliament's preliminary findings, saying it failed to name the individuals responsible from the government side. They wait for the commission's final report due some time this spring.

(END VIDEOTAPE)

CHILCOTE: In the meantime, the relatives of the victims say they will do everything they can to find out any information about what took place in Beslan, how it began, how it ended, and who's to blame. And as I mentioned earlier, one of the things that they are doing is attending the trial of the one surviving hostage-taker who is now twice a week appearing in a courtroom in southern Russia.

And some times they appear to almost take control of that trial. Case in point, just yesterday, when the Mothers of Beslan, the mothers of some of the victims from the school, actually staged a sit-in inside the courtroom, saying that they would not allow the court proceedings to go on until some of the representatives from the Russian government appeared and started giving them answers -- Colleen. MCEDWARDS: All right. Ryan Chilcote in Moscow.

Thanks very much, Ryan. Appreciate it.

CLANCY: Well, a check on what's moving on U.S. and international markets straight ahead.

MCEDWARDS: That's right. Still ahead as well, the European Union is launching its first navigation satellite to rival a U.S. company. We'll take a look at this.

Stay with us.

(COMMERCIAL BREAK)

DARYN KAGAN, CNN ANCHOR: I'm Daryn Kagan at CNN Center in Atlanta. More of YOUR WORLD TODAY in just a few minutes. First, though, let's check on stories making headlines around the U.S.

Weather is shaping much of the news in the nation's midsection. Dozens of grass fires have been racing across the tinder dry plains of Texas and central Oklahoma. In the Lone Star town of Cross Plains, about two dozen homes and structures have burned. The fires are blamed for one death in Texas.

The governor there has declared a disaster. And he's activated the National Guard troops there to help fight the fires.

The National Weather Service has issued a red flag warning across northern Texas. That means there's a high fire threat because of high winds, low humidity and extremely dry conditions.

Another Pacific storm slams the West Coast today. Taking a look -- is that live? It is a live look at the Golden Gate Bridge and the end of a rainy rush hour in San Francisco.

Flood warnings are up for several spots in northern California. Some places could see a foot of rain by the end of the weekend.

Two more storms are lined up to hit that area by Sunday night. In the mountains, the Sierra and the Cascades could get several feet of snow.

That means Chad Myers is going to be very busy watching things this afternoon into this evening.

(WEATHER REPORT)

KAGAN: Also under the microscope, the Bush administration's policies on domestic spying and the use of wiretaps without court approved warrants. According to "The New York Times," defense attorneys in some high-profile anti-terror cases will use the issue to make legal challenges. Specifically, the lawyers want to know if illegal wiretaps were used against their clients, whether they were monitored by the National Security Agency, and whether the government withheld information or misled judges. "The Times" report said the first test will come next week in Florida involving two men charged in the Jose Padilla case. He is the first U.S. citizen first accused of planting a dirty bomb attack in the United States.

The paper says another challenge will involve Iyman Faris. He was sentenced to 20 years in prison for plotting with al Qaeda to bring down the Brooklyn Bridge. The administration cited that very case to defend the intelligence value of the NSA eavesdropping.

Enron's former chief accounting office is expected to plead guilty in a Houston courtroom about three hours from now. Richard Causey is accused of knowing about or taking part in schemes to fool investors about Enron's financial health. Wire reports say Causey has agreed to testify against his former bosses, Ken Lay and Jeff Skilling, in exchange for a lighter sentence.

Marriott is the latest big-name company to suffer a breach or loss of personal data. More than 200,000 workers, timeshare owners and timeshare customers of Marriott Vacation Club International are at risk. Back-up tapes containing Social Security, bank and credit card numbers are missing from an office in Florida.

Investigators want to know what caused a concrete overpass to collapse onto the highway below just south of Pittsburgh. Cars had to dodge the chunks of debris on I-70 yesterday. One vehicle actually struck the falling concrete, injuring three of its passengers. A three-mile stretch of Interstate 70 remains closed in both directions.

A Christmas tree caught fire at a Disneyland resort in California early today. The Anaheim Fire Department says that it started when employees changed some light bulbs on the 35-foot tree and then turned it back on. The hotel sprinkler system kept the fire in check and crews were able to put it out pretty quickly.

Two guests were treated for minor injuries. Thousands received a wake-up call at 3:00 in the morning.

A new movie about an Olympic tragedy is garnering lots of attention. But just how true is it to history. Does creative license outweigh the facts? We'll talk about that at the top of the hour on CNN "LIVE FROM."

Meanwhile, YOUR WORLD TODAY continues after a quick break.

I'm Daryn Kagan.

(COMMERCIAL BREAK)

CLANCY: Hello, everyone and welcome back to YOUR WORLD TODAY on CNN International. I'm Jim Clancy.

MCEDWARDS: And I'm Colleen McEdwards. Here are some of the top stories that we are following this hour.

In Gaza, gunmen from the ruling Fatah party's military wing are clashing with Palestinian police. They tried to take over government buildings and they're demanding more representation in the Fatah party candidate list. This is an important list for next month's parliamentary election. On Wednesday, rival wings of the party submitted a joint list of candidates that merged some competing lists that were presented a couple of weeks ago.

CLANCY: Thousands more protesters are filling the streets across Iraq. They are calling this week's parliamentary election a fraud. Disenchanted voters, including Former Prime Minister Ayad Allawi demanding a government investigation into the vote.

Meantime, Iraqi police say four of their guards and four prisoners died in the Al Adala Base in Baghdad. The clash reportedly taking place during morning exercise routines. One of the prisoner's grabbed a guard's weapon and opened fire.

MCEDWARDS: The head of a Russian parliamentary commission that has been investigating the Beslan school siege is accusing regional officials of negligence. Alexander Torshin says police didn't follow orders to tighten security before the attack. Chechen militants seized the school in September 2004. They took more than 1,000 children, parents and staff hostage. The crisis ended in a blood bath. Police stormed the school and 331 people were killed. More than half of those killed were children.

CLANCY: The magnitude of the tragedy almost impossible to comprehend for anyone. We have to look at it in human terms on a case-by-case basis. One mother's agony provides all of us a glimpse. Anetta was forced to make a choice. She took her baby out of the school. She took her to safety. What was the price? Well, she had to leave her older daughter behind.

Matthew Chance met her back in September on the first anniversary of the Beslan tragedy. Here's the story.

(BEGIN VIDEOTAPE)

MATTHEW CHANCE, CNN CORRESPONDENT (voice-over): It's been a year, but Anetta's choice still haunts her. The grave in Beslan of her child, Alana (ph), left behind, then killed; now an agonizing reminder, set in stone. She was just nine.

ANETTA DOGAN, VICTIM'S MOTHER (through translator): Now the pain is not as sharp, but it is much deeper. It's hard to explain, but back then, I hoped for some kind of miracle. But now it's just a feeling of hopelessness. There will be no miracle. It's just a fact.

CHANCE: Pictured in a school gymnasium a year ago, hundreds of facts, just like Alana, many in Beslan, still to accept. Russia's worst hostage crisis ended in carnage. Most of the dead were children. Russian security forces stormed in. Residents and mothers like Anetta say they'll never forget or forgive.

DOGAN (through translator): I feel not only anger, but aggression. It's as strong as ever. I feel hatred towards the people who came here and did this. But I feel the same towards those who were supposed to save our children, but didn't save them. To me, both are guilty.

CHANCE: It is a conviction held by many here.

(on camera): This has been an agonizing year in Beslan, not just for Anetta, but for everybody who lost loved ones here. Twelve months has not been long enough to ease their pain. But for many, that pain has turned to anger at the pace of the investigation. For some, like Anetta, have launched themselves into political activism.

(voice-over): It started as a support group, but the Beslan Mothers Committee has emerged as a vocal force, criticizing official handling of the siege, calling for an independent inquiry, forcing even Russia's president to listen. In a country where political opposition has in recent years lacked voices, the mothers of Beslan are speaking out.

DOGAN (through translator): At the start it was difficult for us to criticize the authorities, but now the local government has changed and the treatment of our committee has changed, too. They pay more attention to us. They are more patient with us. And I think they feel we have some kind of power within us.

CHANCE: Perhaps it's the power to change the future, to hold those responsible for Beslan and its aftermath to account to ensure it never happens again. Something, even if a year after her daughter's death and Beslan's tragedy, Anetta knows the past is set.

DOGAN (through translator): I miss everything about her. Her hair, her skin, her smell, her laughter. I constantly talk to her, ask her for advice. Tell her about my problems. She gives me strength, enables me to go through all of this and still do something.

CHANCE: Matthew Chance, CNN, Beslan, Southern Russia.

(END VIDEOTAPE)

CLANCY: For a broader view of the Beslan stand-off and what it meant, logon to our Web site at CNN.com/world. Our coverage includes the latest on the investigation that has just been accomplished, as well as a photo gallery that documents the crisis.

MCEDWARDS: Well, construction has begun on what will become one of China's tallest skyscrapers. The work on the first of the twin towers in Guangzhou is the latest sign of China's steam-rolling economy. Last July under international pressure, China's central bank decided to adjust the country's currency.

Eunice Yoon has this look back at the yuan.

(BEGIN VIDEOTAPE)

EUNICE YOON, CNN INTERNATIONAL CORRESPONDENT (voice-over): How did this little piece of paper cause an international raucous in 2005? China's currency, called both the renminbi and the yuan, was pegged to the U.S. dollar for 11 years before officials there decided to cut it loose ever slightly. AMAR GILL, CLSA: For Beijing, one of the key priorities is employment growth. And with that in mind, I don't think they have the appetite to let the renminbi go up too rapidly.

YOON: With the economy growing fast, pressure mounted on Chinese officials to revalue their currency because and U.S. and European politicians believed the value of the yuan made Chinese goods unfairly cheap.

In July, China revalued it from 8.25 to 8.11 to the dollar, and now allows it to trade against a basket of currencies. So far, the reevaluation has had little impact on day-to-day business for manufactures there.

HORST PUDWILL, CHMN., TECHNTRONIC INDUSTRIES: A reevaluation of 2 percent or slightly over 2 percent actually means nothing. It should not affect us more than 1 percent on the cost of products. China has a quite good labor cost, very efficient.

YOON: Though it helped to encourage Chinese consumer spending abroad.

MOHAN SINGH, BNP PARIBAS: In terms of overseas currency, it will come cheaper. So you can expect the Chinese consumer to travel a bit more overseas.

YOON (on camera): Overcapacity worries for 2006 linger and economists say if China does stay strong into the new year, it could face greater pressure from U.S. and Europe to revalue its currency once again, perhaps setting them on another political collision course.

Eunice Yoon, CNN, Hong Kong.

(END VIDEOTAPE)

CLANCY: Well, is the issue for Chinese officials revalue or reform the yuan? For more on that and more, really, on the economy, let's turn to Allen Wastler in New York. He's managing editor of CNNmoney.com.

Allen, it wasn't too long ago people were asking the question how long is it going to be before China's the dominant economy? And I think the answer has to be, and everyone realizes it, sooner than we think.

ALLEN WASTLER, MANAGING EDITOR, CNN/MONEY.COM: Yes, quite soon. Most of the estimates are putting the figures for China GDP up well above 9 percent, and they see that continuing for a few more years. That would make it, you know, on a par with Germany and some of the leading industrial nations by the end of the decade. And so that's something for a lot of people to consider.

CLANCY: What influence -- what impact does that have on the rest of the world, China really now competing for resources, cutting deals all around the globe? WASTLER: That's right. There's two ways to look at it. One, it's actually kind of good for Western nations, because that's a new market emerging. Figure, China has 1.3 billion people. About 700 million of them are actually working people. And the percentage of those that are falling to what we categorize as middle class, that's growing by leaps and bounds with each one of these years. That's a huge market for Western companies to sell in, and they know that, and so they want a piece of that action.

On the other hand, as we noted, the currency situation right now is one of the barriers that keeps them from going after that market. Also, there's a legal structure there and a trade structure that sort of favors the Chinese companies over any foreign competitors. They want to see that change, and that's where you are going to see a lot of the friction in the next coming year.

CLANCY: All right, looking at the Chinese economy itself, there's a lot of waste. There's a lot of mistakes that are being made. Right now that's being masked by the tremendous growth rates that you describe. But how much effort is China really making to get its house in order?

WASTLER: You see, that's the big question right now. Because of their political structure, that really hampers the free-market movement of resources. What they have big problem with right there right now is asset allocation. Over here and in Europe, basically our capitalist system lets us put resources where we'll get the most bang for the buck out of it. In China, they're sort of edging to that system, but still there's a lot of entrenched interests of politics and we want...

CLANCY: Well, it's the communist party and the party leaders satisfying their own local workers, keeping factories open that don't make any sense?

WASTLER: Yes, they'll set aside their own. But don't forget, it's not just communist party. You also have an urban rule division there, too. So the guys in the rural areas saying, hey, no, I want to keep stuff for my folks, and they're fighting people in the city, saying no, we've got to get the manufacturing sectors going.

So you have a lot of different competing interests there that are really interfering with free enterprise.

CLANCY: This is so big, this story, this economy, but there's some dangers here. What do you see as the big ones?

WASTLER: Well, I see a couple of big dangers. The big one I really worry about is civil unrest, because that's not good for anybody. And remember that middle class I was going about? Well, as people get more and more affluent, they tend to want more stuff, and they don't like it when the government's telling them what to do. So I think you are going to see more and more instances of the people actually fighting the government over there, demonstrations, and the government has shown time and time again, it's not too adept of dealing with that. Another thing you're going to see is, if they do have an economic slowdown there. And remember, these numbers that we're throwing around, some people say, eh, the Chinese numbers aren't really as exact as they should be. If we do see an economic slowdown over there, you're going to see Chinese companies put more and more pressure into overseas markets, trying to either through mergers or their own operations take a bigger piece of the pie. We saw that earlier this year with the Chinese off-shore oil company trying to go after Yunoco (ph), and now we're seeing it a little bit in the steel markets, too.

CLANCY: All right, Allen Wastler, managing editor of CNNmoney.com. I want to thank you very much, as always, For being with us.

MCEDWARDS: Good points there. Still ahead on YOUR WORLD TODAY.

CLANCY: The space race in full gear. Europe aims high. It's launching its new standards in satellite technology. We'll have details of that right after this short break.

(COMMERCIAL BREAK)

MCEDWARDS: The E.U. has launched the first satellite for its Galileo navigational system. Once its up and running, Galileo will mean competition for America's global-positioning satellites, which are controlled by the U.S. military.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: What is very good is that, in fact, navigation will be part of a lot of applications, many of which we don't know, by the way, today.

For instance, it will be used for providing information to your mobile phone, you know, bringing the user all the information he needs to have just because he knows where he is. And this will make a great difference, and of course it will be part of any car that will be sold. And many applications which are more involving safety-of-life issues for aircraft or for maritime applications, and many, many, many others.

(END VIDEO CLIP)

MCEDWARDS: Well, Galileo is being touted as a much better alternative to GPS. Designers says its performance will be superior in high-latitude places such as northern Europe.

(WEATHER REPORT)

CLANCY: You know, Apple's iPod really big on everybody's Christmas gift list, and everybody out there trying to buy them right now. It's a must-have gadget. And TiVo put us in control of our TVs.

MCEDWARDS: I know, imagine that. Mariah Carey as well making one of music's biggest comebacks. Madonna keeping on going, too. 2005 was a big year for pop culture. And when we come back we are going to speak to television's Carson Daly. He'll be with us to review some of the year's highlights in entertainment.

Stay with us.

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MCEDWARDS: Well, it was the year that TiVo, iPods and podcasts became household names. And we couldn't get enough of Jennifer, Brad and Angelina. U.S. television host Carson Daly had a front row seat to some of the year's biggest entertainment events, and he joins us now from New York for a look at the year in pop culture.

Carson, thanks so much for being here. I mean, Brad and Angelina -- are they living together? Are they getting married? Are they going to have a baby together? Are they going to adopt another one? I mean, why do we love it so much?

CARSON DALY, U.S. TELEVISION HOST: I don't know. Thank you for having me. Happy new year to you.

MCEDWARDS: You too.

DALY: It's been an incredible year of the public's infatuation with celebrity lifestyle, and there's been a payday for it whether it's photos of Brad and Angelina. Photographers take the picture. The magazines buy them at astronomical fees, and then we, the public, flock and buy them.

So it's this cycle that has to get broken somewhere. It's -- I don't know what it says about our own lives that we are so bored with what we do for a living and what our families do that we have to flock towards this celebrity circle, and really be invasive.

MCEDWARDS: Yes, because, I mean, how much is gone from really just being OK, what are they doing, to really inside stuff? I mean, Tom Cruise and Katie Holmes -- they got the ultrasound machine. I mean, you know, how much do we need to know?

DALY: Right. A lot of it I see and I just go, who cares?

MCEDWARDS: But people do care.

DALY: I know they do, and I hope that Tom and Katie donate that quarter of a million-dollar machine to a hospital that can use it. And I hope that they have a healthy baby. But the fact that that's lead news everywhere I think is almost disturbing.

MCEDWARDS: I know. And of course we can watch it on TiVo over and over again if we really want to. And of course we all do. The technology has been astounding this year. I mean, it almost makes me wonder what we can look forward to next year.

DALY: It's been an interesting year. It's almost like we're in some sort of technological boom. To be a music fan in 2005 was to have a much more memorable experience finding music, downloading music, and sharing music.

Although the flip side of that is it was an awful year to own a record company. They didn't profit like they -- it's been a disaster to be -- it's ironic that music is at such an all-time high on people's list, yet it's not generating any revenue for the music companies.

And I think you are going to see the same at the movie studios. They are going to have to catch up to what's been going on with iPods and DVDs. And the typical distribution of all music and film is changing, and we just have to catch up and realize that people are experiencing video games and music and art and television in different forms now. And people have got to catch up.

MCEDWARDS: Yes, and as you say, the industry has to catch up. Really interesting year in terms of comebacks -- Mariah Carey, some others. What are we seeing happening there, do you think?

DALY: Well it's been interesting, you know. Mariah obviously had such a break-out year and a great comeback. Madonna, another legendary artist who was quiet for a little while there and also had a good comeback. It was a great year for Kanye West.

I think there's something interesting with established brands whether it be Mariah or Madonna. Or on the flip side of movies, whether it's the branded films of "Harry Potter" and "Star Wars." It seems like established people in pop culture had a great year, as you see there, you know, the Mariahs.

And Kanye has taken hip-hop which has already saw its boom last year, post Jay-Z and P. Diddy bringing it to mainstream. And then you see somebody like Kanye who has taken hip-hop music and is pushing it in another way. And it's responding to middle America and hence the huge record sales.

MCEDWARDS: All right, we have got to leave it there, Carson. Thanks a lot. Interesting stuff and we'll look forward to next year. Now, it's almost upon us.

DALY: If you get an iPod for Christmas you are going to have to learn how to use it, because they're not going anywhere.

MCEDWARDS: It's going to take me all of next year to do that.

DALY: That's right. Thank you, Colleen. Happy new year.

MCEDWARDS: You too.

CLANCY: It's not that tough.

MCEDWARDS: I know.

CLANCY: Sit your earphones down, though, for a minute. It's time to check the viewer "Inbox," and we are asking this. Are you concerned about the political makeup of Iraq's new government? Serious question. MCEDWARDS: All right. "Everyone should be concerned. The Shiites would largely run Iraq as a theocracy and treat women worse than before. The grand Iraq experiment may backfire." And that was from Barb there, I think.

CLANCY: "Of course I'm upset. Having served two years in Iraq with the U.S. Army, it is painful for me to watch Iraq's new government unfold in such an ugly way."

MCEDWARDS: And how about this one? "The political process seems to be falling into the hands of the very violent, which the political process had been trying to prevent." And that one there from James.

MCEDWARDS: All right, "I'm just as concerned about Iraq's government being run by Islamic fundamentalists as I am about the U.S. government being run by Christian fundamentalists." That's the final word on YOUR WORLD TODAY, and it came from one of you.

MCEDWARDS: That's right. Thanks a lot for sending in your thoughts. I'm Colleen McEdwards.

CLANCY: I'm Jim Clancy.

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