China-U.S. relations: current issues and implications for U.S. policy.(Report)

 Contents  Most Recent Developments Background and Overview China's Importance and Implications for U.S. Policy Current Issues in U.S.-China Relations    Global Financial Crisis    Military and National Security Issues       South China Sea Incidents       China's Growing Military Power       PRC Space Activities    Economic and Trade Issues       Currency Valuation       Unfair Trade Subsidies       Intellectual Property Rights    Concerns about Product Safety    Tibet    U.S.-PRC Official Dialogues    Taiwan      Prospects for U.S. Taiwan Policy      U.S. Arms Sales to Taiwan      Taiwan's Bid for U.N. Observer Status      Resumption of PRC-Taiwan Talks    China's Foreign Relations    Environmental Issues    Domestic Political Issues       Social Stability       Human Rights China-Related Legislation in the 111th Congress Chronology of Events  Appendixes Appendix. Selected U.S. Government Reporting Requirements 

April 2, 2009

Most Recent Developments

April 1, 2009--On the eve of the G-20 Summit in London, President Obama announced the initiation of a new high-level dialogue with the PRC: the Strategic and Economic Dialogue. The dialogue is expected to focus on economic, security, and other issues, and will be co-chaired on the U.S. side by Treasury Secretary Timothy Geithner and Secretary of State Hillary Clinton, and on the PRC side by State Councilor Dai Bingguo and Vice Premier Wang Qishan.

March 25, 2009--The Pentagon released its annual report on China's Military Power.

March 9, 2009--The Pentagon reported that PRC ships and aircraft operating in the South China Sea had been acting in increasingly aggressive ways toward two U.S. Navy ocean surveillance ships operating in the area, the USNS Impeccable and the USNS Victorious. In an unrelated visit the same day, PRC Foreign Minister Yang Jiechi arrived in the United States for official meetings.

March 5, 2009--China's national legislature, the National People's Congress, began its annual meeting in Beijing. The meeting focused on the government's economic stimulus package and other economic issues.

March 4, 2009--An article in the Los Angeles Times reported that China's highest court for the first time had agreed to accept lawsuits against companies whose milk products had sickened tens of thousands of children.

February 27, 2009--The United States and China began two days of military consultations in Beijing that Pentagon officials described as very positive.

February 20, 2009--Secretary of State Hillary Clinton made her first official trip to the People's Republic of China. In a statement that generated some controversy, she named the international financial crisis, global climate change, and a range of security issues as primary points in U.S.China relations, leaving out the topic of human rights. In response to a press question about human rights and other issues, the Secretary said, " ... our pressing on those issues [Taiwan, Tibet, and human rights] can't interfere with the global economic crisis, the global climate change crisis, and the security crisis."

Background and Overview

The Administration of President Barack Obama has inherited from the George W. Bush Administration a relationship with China that is smoother than in the past, but also has grown significantly more complex, multifaceted, and intertwined. During the Bush Administration, Washington and Beijing cultivated regular high-level visits and exchanges of working level officials, resumed military-to-military relations, cooperated on anti-terror initiatives, and worked closely on the Six Party Talks to restrain and eliminate North Korea's nuclear weapons activities. These and other initiatives of engagement are likely to continue in some fashion under the Obama Administration. In addition, the Obama Administration has indicated that it would like to forge greater cooperation with China on the international financial crisis, global climate change, and a range of security interests. These issues were the points of focus during Secretary of State Hillary Clinton's first official trip to China in February 2009. (1)

Despite these new avenues of cooperation, ongoing bilateral issues provide a constant set of challenges for U.S. policymakers. They include difficulties over the status and well-being of Taiwan, ongoing disputes over China's failure to protect U.S. intellectual property rights, China's economic and trade policies, and growing concerns about the quality and safety of exported PRC products. The PRC's more assertive foreign policy and continued military development also have significant long-term implications for U.S. global power and influence and have been of concern to U.S. policymakers. Some U.S. lawmakers have suggested that U.S. policies toward the PRC perhaps should be reassessed in light of these trends.

China's Importance and Implications for U.S. Policy

Many U.S. observers have become increasingly concerned about China's growing economic and political reach in the world, often referred to as "China's rise," and what it means for global U.S. economic and political interests. Some in this debate believe China's growing global power and influence is a malign threat that needs to be thwarted; others believe that it is an inevitable phenomenon that needs to be guided and managed. Complicating this debate are the effects of globalization, which have bound together U.S. and PRC interests much more closely than in the 1990s. These extensive inter-linkages make it increasingly difficult for either government to take unilateral actions without inviting far-reaching, unintended consequences that could adversely affect other policy interests. Like the 110th Congress before it, the 111th Congress is facing recurring issues involving this debate and what policies and approaches may best serve and protect a broad range of U.S. interests.

This policy debate is animated by continuing uncertainty over how China ultimately may choose to wield its rising capabilities. According to one school of thought, China's economic and political rise in the world is inevitable and needs to be accommodated and managed. In this view, as China becomes more economically interdependent with the international community, it will have a greater stake in pursuing stable international economic relationships. China has a vested interest, for instance, in cooperating on ways to address the global economic crisis by helping to craft a new international financial system. Growing wealth in the PRC also is likely to encourage Chinese society to move in directions that will develop a materially better-off, more educated, and cosmopolitan populace. Such a populace, according to this view, is likely to be more conservative and more desirous of avoiding conflict with the United States. Already, say such proponents, these developments have led China's population to press its government for greater political pluralism, transparency, and inclusiveness--key U.S. objectives--and this trend is likely to continue as China's capabilities grow.

From this perspective, U.S. policy should seek to work more closely with the PRC, not only to encourage these positive long-term trends, but to seek ways to mutually benefit by cooperating on important global issues such as the international financial system, alternative energy sources, climate change, and medical research. Ultimately, some proponents of this view say, the United States simply will have to make room for the economic and political appetites of the superpower that China is likely to become. Viewing the PRC as a "threat" or attempting to contain it, these proponents say, could produce disastrous policy consequences. In addition to possible military conflict with the PRC, these consequences could include the possible creation of greater Chinese nationalism with a strong anti-American bias, a breakdown in PRC governance, the bolstering of party power and subsequent retrenchment of reforms, and/or an increasingly isolated United States that the international community may see as out of step with global trends.

Other proponents of the "inevitability" of China's rise especially stress the extreme competitive challenges of China's growing power. They say these challenges, even if benign, pose potentially huge consequences for U.S. global interests. Beijing officials, say this group, view the world as a state-centered, competitive environment where power is respected, and are determined to use the means at their disposal to increase their nation's wealth, power, and influence in a largely opportunistic fashion. A militarily muscular China with substantial international economic ties will be able to exercise considerable political power that could prompt U.S. friends and allies to make different choices, eroding U.S. influence around the world. These observers charge that the PRC already is exploiting the international financial crisis to strengthen its access to international energy sources and other commodities. The United States, they argue, should develop a comprehensive strategic plan in order to counter China's growing power by strengthening its existing regional alliances and making new ones, expanding overseas investments, sharpening American global competitiveness, and maintaining a robust military presence in Asia and elsewhere as a counterweight to growing PRC power and influence.

Others in the American policy debate see malign factors at work in China's growing power. PRC leaders, they argue, may be portraying their growth as a "peaceful rise" with no harmful consequences, but actually they are biding their time, simply conforming to many international norms as a strategy while China is still weak. In reality, these proponents say, Beijing seeks at least to erode and at best to supplant U.S. international power and influence. In conducting their international relations, they maintain, Chinese leaders seek to cause rifts in U.S. alliances, create economic interdependence with U.S. friends, and arm U.S. enemies. Despite the statements of support for the U.S. anti-terrorism campaign, according to this view, the PRC's repeated violations of its non-proliferation commitments actually have contributed to strengthening nations that harbor global terrorists. Furthermore, they maintain that the PRC under its current authoritarian form of government is inherently a threat to U.S. interests, and that the PRC political system needs to change dramatically before the United States has any real hope of reaching a constructive relationship with it. From this perspective, U.S. policy should focus on mechanisms to change the PRC from within while remaining vigilant and attempting to contain PRC foreign policy actions and economic relationships around the world where these threaten U.S. interests.

Current Issues in U.S.-China Relations

With this broad array of difficult and challenging policy choices in mind, U.S.-China relations today are defined by a comprehensive list of bilateral and multilateral issues. Some of these remain key irritants in the relationship, while others are rooted in significant inter-dependence and mutual benefit. Likewise, some are characterized by vigorous competition, while others are founded on bilateral and multilateral cooperation.

Global Financial Crisis (2)

With the continued troubles in the U.S. financial system, the PRC is positioned to play a crucial role in any policy that Congress and the Obama Administration design to address the U.S. economic problems. (3) China has amassed a huge supply of foreign exchange reserves, totaling $1.9 trillion as of December 2008, and the Chinese central government has become an ever more important purchaser of U.S. Treasuries and other U.S. debt. The financial rescue and economic stimulus program thus far enacted--and any further program that may be needed for the U.S. economy--will require a substantial level of new U.S. government borrowing, with China positioned to be a major purchaser of this new U.S. government debt. Some U.S. policymakers have expressed concern that this poses an economic risk to the United States should China's foreign exchange purchase patterns change, and a political risk should China use this position to seek advantages on other bilateral issues.

There are signs that China may be re-thinking its policy on purchasing U.S. Treasuries. In a January 2009 statement in London, PRC Premier Wen Jiabao said, "Whether we will buy more U.S. Treasuries, and if so, how much--we should make that decision according to China's own needs ... " (4) U.S. observers and Members of Congress also have raised concerns that other PRC initiatives, such as the new sovereign wealth fund it established in 2007, signal that PRC officials may be interested in changing their investment strategies. (5) The PRC also is implementing a $586 billion stimulus package for its own slowing economy, ostensibly designed to build major infrastructure projects, which may draw investment away from U.S. Treasuries. The plan has been criticized by some in China who say that its lack of project details or spending safeguards is an invitation for corruption, misuse, and malfeasance. According to one western news account, a group of Party elders has pressed the senior leadership on the need to establish oversight and accountability for the recovery spending program. (6) China's stimulus plans pose other complications for U.S. officials, who have long pushed Beijing to stimulate Chinese domestic consumption, but now have the added complication of needing Chinese capital.

The scope of the current financial crisis suggests that global economic decision-making in the future is moving beyond the confines of the developed "G7" countries, where China does not participate, and into the broader arena …