The US has reaffirmed its policy of engagement towards China with President Clinton’s nine-day visit to Beijing this June. While general principles of cooperation and friendliness were agreed upon and some concessions made, several points of disagreement still loom large to obfuscate the initial overtures of this policy. These issues, which will be discussed in more detail later, include the progress of China’s membership to the World Trade Organization, its readiness to comply with the Missile Technology Control Regime, its conduct of dissidents and dealings with Tibet and its sovereignty over Taiwan.

The question now is whether is enough middle ground for the US to continue in the same course, or pursue a policy that steers closer to containing and isolating China.

The lack of substantive agreement reached in the recent summit gives rise to the inference that the US and China interests and ideologies are too divergent for workable solutions to be made out of the current differences. This could lead to a conclusion that the US should anticipate the inevitable clash by treating China as a potential foe rather than ally, and contain it.

China’s defense expenditure, already largest in the East Asia region and growing at an estimated 10 per cent annually, lends that view some credence. It’s GDP is estimated to exceed that of the US sometime in 20-30 years, which puts it in a better economic position than the US’s former foe, the Soviet Union, to shore up its military defenses. Beyond that, it has already shown that it will not be inhibited in its readiness to use military threats to enforce its sovereignty over Taiwan even at the cost of incurring international ire.

The US then, could stop its efforts to integrate China into the community of international institutions, introduce trade barriers blocking Chinese imports, and could also take a stand supporting Taiwanese interests and support its military program. It could go even further and build up its alliance with Russia to prevent a flow of Russian military technology into China.

A policy of containment and deterrent would also allay some of fears of an expansionist China which many of Asia-Pacific countries continue to have. It would also find supporters in Congress who remain paranoid about Chinese intentions, who favor a policy which recognizes Taiwanese self-determination and who remain convinced that the trade deficit in favor of China (estimates run from $40 to 60 billion) costs Americans jobs.

But such a policy comes with serious disadvantages. First it would be a reversal of the current policy, so very publicly broadcast and embraced before millions worldwide, giving a poor impression of US leadership. Also, it would severely hamstring US financial and business interests, which continue to view China as one of the best short and long-term hopes for new markets and opportunities in an increasingly competitive marketplace.

And it would be poorly timed, given that the present Chinese leadership has been more eager to liberalize and reform its economy and, restore its stature as a world power than at any other period in its history. The Chinese people have until recently also since the Tiananmen incident enjoyed the benefits of double digit economic growth. Even leaders of an authoritarian power would be reluctant to plunge its people back to the austerity of a Marxist economy after the promise of instant and visible prosperity.

Further, it would push the more pacifistic and pro-reform elements in the current Chinese leadership out of favor and empower the conservatives. President Jiang Zemin and Prime Minister Zhu Rongji both are active in promoting reforms such as the dismantling of state-owned enterprises and anti-corruption drives respectively. Both have invested much of their political capital in pursuing the policy of reform, and doing so through forging strong links with the US. To reverse the policy of engagement now would halt or even reverse the momentum that has been gathering since Deng Xiaoping intiatated reform in the late 1970s to liberalize and open up the economy. This would weaken pacific economic internationalists and put the power back into the hands of the conservatives who may pursue more aggressive political and economic interests. These reforms may not receive such fervent support if other figures in power elite have a bigger say, for example, the head of the National People’s Congress, Li Peng, who as Prime Minister during the Tiananmen period laid down martial law. Both he and Vice-President Hu Jintao are believed to have more hard-line views.

China is also facing a prolonged economic slump. It’s estimated that its growth is slowing to three to four per cent a year. This will affect its ability to employ the millions of young people who enter the work force and the growing numbers being laid off by the state sector. This will produce conditions ripe for instability, and prevent its ability to recover. The very scale of its economy means that the failure of its economy would be disastrous for the rest of Asia, still mired in a financial and economic crisis.

It is in the US’s interests to prevent this because this crisis is beginning to affect US businesses, banks, and jobs. A policy of containment would serve only to push China deeper into its slump, and without access to world capital and resources, never to recover. This will have an immediate, negative impact on the US financial sector, where much of its profits come from liberalized capital and currency markets. US businesses will also lose out on a deep well of investment opportunities, not just from the closure of Chinese markets to them, but also from a long depressed Asia.

Also, a demoralized China would not be as amenable or receptive to make any concessions on any of the issues that concern the US, whether in human rights or over Taiwan, and this again would not serve US interests. As a

A US policy to contain China would have all the elements of a self-fulfilling prophecy. It would drive China back into a more inward-looking mode, and this would drive the factions with more aggressive factions to the fore.

In planning a strategy with China it is necessary to build up a good relationship with it. This is because the issues that will continue to dog the US and China will be tough, intractable ones and the only way to gain any concessions from the Chinese will be to build a relationship of good will and trust. Building a good working relationship with China is a long term business. Establishing what the Chinese call guan xi, can only take place if the time frames set for finding solutions are thought of in terms of years, not months.

This has to be borne in mind constantly in a results-driven, short-term culture that exists in the United States. And it will start to sound tired, under the constant bombardment from the many factions in Congress who want quick results from problems that have eluded solution for decades.

The development of guanxi can take place at several levels. On a country to country basis, the US can use its support for China’s entry to international institutions as a basis for building that relationship. It matters a great deal to China to be treated as an equal of the United States, as it still has a historical memory of having had unequal treaties foisted upon it in the past and being excluded from a seat in the UN Security Council in the 1950s and 60s. America should capitalize on this need.

High level meetings are another way for establishing this relationship. In a hierarchical society like China’s the importance of the leader of the world’s only super power visiting it is a significant event. The recent summit should serve as an example of how this works. For President Jiang, having President Clinton visit was a rousing political victory for him, and a matter of national pride. For President Clinton, he came home to a barrage of criticism because he did not get any substantive agreements out of the Chinese. Beyond bargaining, building relationships, these meetings themselves should be used as leverages to getting concessions from the Chinese.

The role of the ambassador is crucial as he will have direct contact with the Chinese on a regular basis. For a country as vital to US interest as China, only appointees conversant in Chinese and with genuine interest in Chinese affairs should be appointed as much time will have to be invested in establishing friendly relations. He, or she, should also be seen to have a close relationship with the President, as the Chinese will be very alert to the dynamics of this tie and rate the ambassador accordingly. In the event of a crisis, this distinction will be crucial.

At an official level, diplomatic officers who speak Chinese will have to get to know Chinese officials personally, although they should also guard against falling prey to becoming too friendly to Chinese interests, as the Chinese will not be above exploiting that relationship. This will facilitate a freer give and take of information sharing and building up a relationship of trust. The embassy should also ensure that the change of staff (especially at a senior level) should not all take place at the same time, as that could set back the relationship considerably. That will help ease an inevitable transition that will take place, especially each time a new ambassador is appointed to the post.

At an sub-official level, cultural, language and educational exchanges should be encouraged. These exchanges can receive the support of the State Department, and be sponsored by say an educational institution like MIT and a corporation like Microsoft. They could be, for example, Chinese computer science students who get an opportunity to study or visit the US, and reciprocate by having American students study or visit China. They could work on projects which for example, could look to making the web more navigable for those using the Chinese language.

The Chinese people are keen to learn English in their effort to better their lot. Informal "English Corners" where they meet to practice their language skills form in cities. This is a fertile environment for the embassy to establish cultural education programs combined with English lessons. And better yet when combined with teaching the Chinese to use computer technology to access the Internet.

Projects such as these may be proposed whenever a large US corporation scores a big contract in China. For example, Eastman Kodak could be persuaded, as gesture of goodwill and the building up of guanxi with the community, to sponsor a program for fledgling filmmakers in China, either young Americans to make films about China or young Chinese to do so.

The US and China will never agree on human rights issues as long as each country puts a different value on the importance of an individual. To China dealing with student dissidents or rebellious monks is a simple of national security, and a purely internal matter. At the present time all that has been achieved is that both sides have agreed to disagree. Human rights may just become another bargaining chip, but at least concessions can be secured that way in the short term.

It is central to how Americans see themselves and their country that the rights of the individual be upheld. Nor should the US waver from this principle, if it wants to remain a standard bearer for democracy as individuals, groups and countries look to it for support when their liberties are taken away. However that does not mean it cannot coexist and even have dealings with a non-democracy, if it can be justified. The US may be the only force that can persuade China to improve its human rights record by integrating with the international community. That way China may have to be accountable to international institutions for its human rights record and subject to censure.

Security Issues

At the summit China agreed for the first time to actively pursue an export ban on land mines, and both nations pledged to shore up the Biological Weapons Convention by developing enforcement measures. The issue of China's non-membership in the Missile Technology Control Regime (MTCR), an international agreement on preventing the spread of nuclear and missile technology, was not resolved.

On a domestic level, security issues regarding China are touchy. When the Lorel Satellite went under investigation for possibly having leaked information to the Chinese military which could enhance their long range missiles 150 members of congress wrote to the President to protest his trip to China. China supplying missile technology to Pakistan raised further objections.

Encouraging China’s membership in the MTCR would stifle some of the criticisms. However, it would be likely that the Chinese will be cautious about signing any agreements until the issue with Taiwan is settled. In the short term, the better strategy will be to encourage friendly military exchanges. This could have a preventive and surveillance function. However China may be wary of such overtures, fearing reciprocity. The attempt should still be made

Sovereignty and Taiwan:

There is no easy solution for dealing with Taiwan. The US-Taiwan defense treaty puts the US in a very awkward position. In the short term, the balancing act of publicly supporting China’s sovereignty and discreetly maintaining links with Taiwan may stave off a clash between the two Chinese states. In the long term, a solution has to be found. For the US the only acceptable solution is to persuade China to allow Taiwan to become independent.

Anything else, and the backlash from Congress (whose strong support in late July, 3901-1 reiterating support for Taiwan) would be chaotic. US allies, especially in the Asia-Pacific, would become extremely insecure about US commitment to defend their territories. This could jeopardize the presence of US military bases on these countries.

China’s insistence on asserting its sovereignty takes us back to its need for recognition and acceptance as a world power. It may be persuaded to relinquish its claim but only when it feels more secure politically and economically. Given the current economic situation in Asia, this could take a very long time.

Joining the WTO and other economic problems

The economic crisis is also going to stall China’s efforts to join the WTO. The US will not support China’s membership until it lowers trade barriers and allows more foreign competition, and reducing its subsidies to state industries.

Membership is important to China as it sees membership would confirm its status a full-fledged member of the international economic system, as the world's fastest growing exporter. It would also free China of being subject to an annual vote in Congress to ensure it has the benefit of free trade with the United States.

China’s difficulty with meeting the requirements is that the slowdown in its economy prevents its dismantling of its State Owned Enterprises without causing widespread unemployment. But the US cannot back down on the call for lowering trade barriers as there is already great domestic concern that the trade deficit is too much in favor of China. While big US companies are anxious to invest more in China, protectionist pressures have mounted as Chinese exports have soared. The Clinton Administration's efforts to widen its regional trade deal NAFTA to Latin America and Asia have stalled. Any future deal with China would have to show significant gains for US companies and agricultural producers to get through Congress.

Yet it is in the US interests to have a China engaged in the conduct of international trade and markets. The strategy here would be to identify opportunities for US exports to China, facilitate entry into Chinese markets and broker a package of deals in exchange for support in China’s membership. The US could also encourage investment in industries which would not compete with the unprofitable SOEs, which in any case are mostly heavy industry, to tide over its slow down in order to help stimulate its economic and speed up the reform process.

Such overt acts of cooperation will be met with dismay by India and Japan, China’s old time rivals. But the long term importance of China’s economic health will have to override their objections. The US is expected to hit a recession too and in a depressed climate, the public will not be too supportive of jobs flying over to China.

If there is a middle ground to be found with China, it lies in the fact a thriving, secure China is going to be more useful to the US than a China struggling to survive. Even a struggling China can be a security threat. A China with a healthy economy would help stabilize the Asian economies and support the US in …

But as Republican Representative for South Carolina Mark Sanford said, shortly after the summit:

"Rhetoric itself will not change China. Markets ultimately will change China."

References and links:

The Economist: "China’s Economy: Red Alert" Oct 24, 1998.

Negotiating Across Cultures, Raymond Cohen

Institute on Global Conflict and Cooperation: "Assessing the Policy of Engagement with China" - March 1998 , Paul A. Papayoanou & Scott L. Kastner

Political Science Quarterly: "Courting disaster: An Expanded Nato vs Russia and China" Fall 1998, Bruce Russett & Allen C. Stam

Yahoo at http://headlines.yahoo.com/Full_Coverage/World/China_U_S_/ has links to:

1. BBC’s special report http://news.bbc.co.uk/hi/english/special_report/1998/06/98/clinton_in_china/newsid_118000/118430.stm Friday, July 3, 1998: "China hopes to join trade club dashed"
2. Chicago Tribune’s special report - http://chicagotribune.com/news/nationworld/ws/0,1246,10142,00.html
3. Asia Society’s report - http://www.asiasociety.org/special-reports/ Robert S. Ross: "The 1998 Sino-American Summit" - June 1998 http://www.asiasociety.org/publications/sino_american_summit.html
4. Time’s report: "Did the Summit Matter?" http://cgi.pathfinder.com/time/magazine/ 1998/dom/ 980713/world.the_china_summit.d4.html
5. CNBC’s web site - http://www.msnbc.com/modules/china_disputes/default.htm.
6. Inside China: Post-summit Sino-U.S relations.

Newpaper articles from Lexis-Nexis searches:

1. Business Times (Singapore), August 29, 1998, Clinton's new policy of engagement with China, William Bodde Jr.
2. USA Today, July 6, 1998, Substance, hard work must follow in Clinton's footsteps, Richard Benedetto; Bill Nichols
3. Newsday (New York, NY), June 21, 1998, Sunday, Clinton’s trip to China/ A diplomatic divide/High hopes, criticism follow Clinton to China, Ken Fireman
4. The Straits Times (Singapore), July 30, 1998, Sino-US ties more stable, but still remain fragile, Wang Hui Ling.
5. Financial Times (London), June 27, 1998, Saturday, Global sheriff needs deputies: The burdens upon the only superpower and the failure of sanctions as a policy tool have driven Bill Clinton to look for unlikely friends in China, says Stephen Fidler.
6. Hard Times (NY), Nov 17, 1998, Diplomacy paper: Fun to do but took a lot of thinking, Li-Hsien Lim.