REVIEW: Article

Global Impact: United States-China Relations in the 21st Century

One of the single most important international developments of the 21st century is the rise of China as a great economic, political and military power. This evolution presents the United States (US) with some of its greatest foreign policy challenges and opportunities.  How we manage this most critical bilateral relationship today will not only materially affect the futures of our two nations, but will also shape the world that our children shall one day inherit.

China possesses a fabled 5,000 year history replete with a fabulously rich cultural and artistic heritage of which all Chinese everywhere are justly proud. China’s talented population, however, has not been as blessed as we have in America with abundant farmland.  China’s arable land equals less than one-half of what we enjoy in the United States, but this scarce arable land has had to sustain a population five times the size of ours. The resulting population density, combined with an intense daily competition for scarce resources, has had a profound effect on Chinese society, culture and institutions throughout its long history. That relentless geographical, natural and population pressures have led China to develop a fundamentally different outlook on life, the individual, society and government than ours is hardly surprising.

China, today, is in many respects a work-in-progress, caught up in transforming itself from a planned, command economy to a market economy, from an agrarian society to an industrialized, urban society (resulting in the biggest population migration in history), from a go-it-alone, isolated and inward looking nation to one desiring to assume its place as not only an integrated member of the global community but as a leader of that community. While China’s gross domestic product (GDP) has grown at a stunning annual rate of approximately 9.5 percent for two decades and has more than quadrupled since 1979 to become the world’s seventh largest economy and America’s third largest trading partner, China’s per capita GDP is still only US $1,200 per year, ranking it 100th in the world. Size does matter, however, and vital global issues such as counterterrorism, nonproliferation, avian influenza, HIV/AIDS, economic prosperity, energy security, global warming and environmental pollution cannot be addressed effectively without a responsible and fully engaged China at the table.

President Bush has consistently sought a candid, cooperative and constructive relationship with China.  As Secretary of State Rice has said, “The United States welcomes a confident, peaceful and prosperous China.” A China that is at peace with itself and its neighbors and that plays a positive and constructive role in the region and beyond is a China that serves the interests not only of its own people but of people everywhere, including Americans.

The principal foreign policy challenge is that, while the United States’ vital strategic and other priority national interests are shared by China in many important respects, in other significant areas, Chinese positions and practices continue to be at odds with fundamental United States values and interests. As Deputy Secretary of State Zoellick has said, “Relationships built only on a coincidence of interests have shallow roots.  Relationships built on shared interests and shared values are deep and lasting.”

President Bush has said, “Prosperity and freedom and dignity are not just American hopes, or Western hopes. They are universal human hopes.” Writing in his best-selling book, The Case for Democracy, Natan Sharansky, a victim of Soviet political oppression, sounds the clarion call:

I am convinced that all people desire to be free. I am convinced that freedom anywhere will make the world safer everywhere. And I am convinced that democratic nations, led by the United States, have a critical role to play in expanding freedom around the globe.

As Americans, we believe deeply in the power of freedom, democracy and what President Bush refers to as “the non-negotiable demands of human dignity.” These demands include the inalienability of human rights and the freedom to practice and express one’s religious beliefs.  Our goal is not to “westernize” China or to make China over in our own image. We cherish diversity as one of the great strengths of our nation. Rather, as President Bush has said, “Our goal…is to help others find their own voice, attain their own freedom, and make their own way.” This does not, as some Chinese unfortunately seem to believe, mask a secret plan to subvert China. To the contrary, a China that respects certain fundamental human rights, the rule of law and is open to all forms of religious thought and spiritual expression will be more stable and an even greater and more respected China. There is no secret plot, merely a well-intended and open suggestion, offered in the spirit of equality and mutual respect. We already recognize China’s village elections as a step in the right direction.

We at the United States Mission in China persistently and continuously raise individual human rights and humanitarian cases involving prisoners of conscience. No other single issue receives more of my personal attention.  China has made positive strides in developing laws and legal institutions, but all too often the system is marred by a lack of due process and disregard for its own rules.  Among current cases of concern are Mr. Zhao Yan, a Chinese researcher for The New York Times detained on fraud and espionage charges for allegedly revealing “state secrets;” Mr. Jude Shao, an American citizen and Stanford M.B.A. serving a 16-year sentence for alleged value added tax (VAT) tax fraud and American long-term permanent resident Dr. Yang Jianli detained on espionage charges after a secret trial. Sadly, I could continue.

Despite China’s dynamic embrace of globalization and the global marketplace, China’s leaders remain internally focused, driven by the need to maintain domestic stability for the sake of economic development and protection of the legitimacy of the 70 million member-strong Communist Party. There were some 74,000 public demonstrations involving 50 or more participants in China reported in 2004 alone, some of them quite large and violent. Many Chinese have taken advantage of the new opportunities to become rich, creating a growing tension in Chinese society as the divide between rich and poor widens. Confrontations over land rights, pensions and ethnic issues are now commonplace, as the number of attacks on police grows.

In order to focus on stability and economic development at home, in foreign policy, China has aimed to placate its immediate neighbors with whom it has sometimes had rocky relations, such as Vietnam, Russia and India, as well as the United States, China’s biggest market for her exports after the European Union. The one notable exception is Japan. The tectonic plates of the old order in Northeast Asia are shifting as a result of China’s rise and the rifts are most evident in the bilateral relationship between China and Japan, where tensions are stoked by growing nationalism in both countries.

For decades, the United States encouraged China to forsake its isolation and to become an integrated, contributing member of the rules-based international order. For example, the United States strongly supported China’s bid to join the World Trade Organization (WTO). As a result of its joining the WTO in 2001, China has enjoyed extraordinary double-digit economic growth and increasing integration into the world trading system.

Tens of millions of Chinese citizens have been lifted out of abject poverty over the period of a single generation. Chinese in the relatively well-off coastal provinces enjoy economic choices unimaginable even ten years ago with respect to private housing, automobile ownership, employment, education and even foreign travel.

Having embraced globalization, a nation that a mere 25 years ago was but a minor player in international trade has evolved into an increasingly dynamic marketplace and challenging competitor, as well as the beneficiary of the largest bilateral trade imbalance in the history of the world. In 2004, the United States’ trade deficit with China reached an unprecedented $162 billion, a figure which is on course to exceed a breathtaking $200 billion in 2005.

This staggering bilateral trade deficit combined with the perceptions that trade with China is not free, fair and mutually beneficial has created a backlash in Washington that threatens America’s pro-free-trade consensus. China should recognize that, as a major beneficiary of the global trading system, it is manifestly in its own interest to work together with the United States and other members to maintain and protect the system by ensuring that trade is free, fair and mutually beneficial.

Despite problems, China is our fastest growing market for merchandise exports, with sales of American goods to China increasing by 28 percent in 2003 and by another 22 percent in 2004. China is among the world’s largest customers for US soybeans, cotton, chemicals, machinery and electrical products. Exports of United States agricultural products to China have more than doubled since China joined the WTO four years ago.  China will also likely be the world’s largest purchaser of commercial aircraft over the next two decades.

Services, including insurance, banking, retailing, construction, express delivery, transportation, telecommunications and audio-visual services, currently account for more than 70 percent of the United States’ GDP and for about 20 percent of global trade. In 2003, United States exports of commercial services to China were valued at $5.9 billion, and US imports of services from China totaled $3.4 billion. When China joined the WTO in 2001, it agreed to open up its domestic markets to foreign competition in services as well as goods and to abide by the WTO’s rules-based system. Nevertheless, China has effectively limited foreign participation in particular areas of its services sector through a variety of means including onerous licensing, experiential and capitalization requirements. While some Chinese remain concerned that foreign firms will dominate China’s growing domestic services sector, greater foreign participation would provide a variety of benefits to China, including assistance in the areas of investment, technical expertise, management skills and jobs, among others. Domestic providers alone cannot meet the increasing demand for world-class services and expertise.

While China has taken a number of significant steps, the lack of protection for and enforcement of intellectual property rights (IPR) remains a major irritant in bilateral trade relations. Despite marginal improvements in its relevant legislation and organization, China’s IPR enforcement efforts have not yet demonstrated a deterrent impact on pandemic piracy and counterfeiting. American industry continues to encounter significant challenges protecting all forms of IPR within China. Further, United States Customs seizures of IPR-infringing exports from China continue to increase year after year. In 2004, goods from China constituted nearly 70 percent of all counterfeit and pirated goods detected at ports of entry to the United States.

In recognition of the importance of this problem, in 2002, I initiated the annual Ambassador’s IPR Roundtable to raise the profile of this problem with Chinese national-level officials and to seek American industry’s guidance as to the specific problems and proposed solutions. At our third annual Roundtable in January 2005, over 150 members of American industry met with United States government and Chinese officials, including then Commerce Secretary Evans and Chinese Vice Premier Wu Yi, to discuss IPR protection in China and to seek common ground for IPR reforms.  The United States China Mission’s current IPR priorities include improving China’s criminal IPR enforcement system, improving market access for legitimate American IP products and developing reliable benchmarks for measuring progress. We continue to work closely with Chinese IPR agencies and officials to these ends.

The United States, the International Monetary Fund and others have been calling for China, as a major player in the global economic system, to accept the responsibility that accompanies such a position by pursuing a more flexible exchange rate policy for some time. Secretary of the Treasury Snow first raised this issue directly with Chinese leaders in October 2003, but until July 21, 2005, there was still no indication that China was prepared to make a policy change. China’s announcement on that date that it was delinking its currency from the US dollar and adopting a more flexible exchange rate regime was warmly welcomed by the United States and other major participants. China’s peg to the dollar had been dubbed “Bretton Woods II” because so many Asian currencies had followed the Chinese yuan in being closely tied to the dollar. The new exchange rate mechanism references a basket of currencies. To date, however, the renminbi (RMB) has continued to trade in a very narrow range leading many to wonder if the RMB has really been floated or merely repegged to the dollar by two percent. The United States Treasury Department continues to monitor this situation closely. A genuine market-driven, floating rate mechanism would benefit Beijing by enabling Chinese financial authorities to employ more robust monetary controls with respect to its domestic economy and by encouraging domestic investment in domestic, as opposed to export, opportunities.

In addition to our shared interest in economic globalization, the United States and China share common interests in and cooperate on a breathtakingly broad scope of critical issues from counterterrorism and nonproliferation to achieving a nuclear-free Korean Peninsula; from the environment to epidemiology. In China’s view, Taiwan remains the most sensitive core issue in its relationship with the United States, touching the raw nerve of nationalism as it does with respect to China’s sovereignty and territorial integrity.  Continuing tensions between Beijing and Taipei threaten regional peace and stability and require our vigilance with regard to any possible unilateral moves by either side that might upset or change the status quo.

The United States remains committed to a peaceful resolution of the differences between Beijing and Taipei, while China threatens military action if Taiwan pursues de jure independence. In fact, China’s recent Anti-Secession Law mandates the use of “non-peaceful means” if Taiwan unilaterally declares independence. The United States’ “One-China” policy with respect to Taiwan as interpreted by the three US-Sino Joint Communiqués and the Taiwan Relations Act remains unchanged. This policy has provided the region with 30 years of peace and prosperity, and we look forward to it continuing to do so. China and the United States share a strong common interest in a peaceful resolution of the cross-Strait dispute, a resolution that is agreed upon by the peoples on both sides of the Strait. In this regard, China’s rapid military modernization and peacetime build-up raise questions of intent which, given China’s singular lack of transparency with respect to military matters, leave our military planners little choice but to assume the worst.

One notable example of the benefits of our cooperation with China has been China’s contribution not only in persuading North Korea to return to the Six-Party Talks for the Fourth Round in August 2005, but also their active role in persuading North Korea to agree to the Joint Statement of Principles that establishes North Korea’s verifiable abandonment of its nuclear weapons and of all its nuclear programs as the avowed goal of the Talks. A nuclear-armed North Korea is a serious threat to world security. The active involvement of China’s leaders to achieve the denuclearization of the Korean Peninsula attests to how far Chinese foreign policy has matured and to the type of cooperation that is now possible. As host to the six-party process, China recognizes the vital national security and other interests of South Korea, Japan and Russia in this issue and in any comprehensive settlement. As we all know, however, the devil is in the details and much heavy lifting remains to be done at the upcoming Fifth Round prior to any implementing action being taken. Time is not on our side as North Korea continues its development of nuclear weapons and materials. Our patience, therefore, cannot be unlimited.

Constructive, broad and frank engagement with China can yield positive results, from cooperation on counterterrorism and the thorniest of international problems, to economic integration, and even to areas not covered in the scope of this article, including scientific collaboration on combating emerging and infectious diseases, such as avian influenza. China generously donated US five million dollars and a planeload of goods to the Hurricane Katrina relief efforts and is active in Iraq and Afghanistan reconstruction efforts.

The United States and China and our respective citizens have much to gain by cooperating and much to lose if we fail. A China that is positively and responsibly engaged with the international community is a China that seeks a safer, more stable and prosperous global environment. President Bush is committed to building a strong, mutually beneficial relationship with China. As he stated, “The United States and China have made great progress in building a relationship that can address the challenges of our time, encourage global prosperity and advance the cause of peace.”

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United States Ambassador to the People’s Republic of China