The United States and China: Containment or Engagement?

Current Issues Brief 5 1996-97

Frank Frost
Foreign Affairs, Defence and Trade Group


Major Issues


The United States and China after the Cold War

Bilateral and multi-lateral issues

Developments since March 1996

Australia's interests



Major Issues

The relationship between the United States and China is one of the most important in the post Cold War international environment, but the two countries have not maintained harmony or confidence in their relationship in the 1990s. Discord has risen since the Tiananmen massacre in 1989 and has increased markedly since mid 1995, particularly over the longstanding issue of Taiwan. In March 1996, the military exercises conducted by China during Taiwan's presidential election campaign, and the dispatch by the US of two carrier groups to stand by near Taiwan, caused unease and some alarm in East Asia.

Australia has a vital stake in the progress of US-China relations. The sensitivities evident in Australia's own relations with China in 1996 (over issues including Taiwan, the impending visit of the Dalai Lama and the AUSMIN meetings in July) have illustrated the potential for tensions in US-China relations to affect Australia's policy interests. This paper provides a concise evaluation of these issues.

The paper suggests that two major factors have fuelled the difficulties experienced between the US and China: firstly, the conjunction of dynamic economic growth and political uncertainty in China itself and, secondly, the impact of the end of the Cold War.

China's economic growth has brought benefits to most Chinese but has also been accompanied by stresses on China's administrative and political system. With the decline of Communism as a credible ideology, China's regime has placed increasing emphasis on nationalism as a basis for its legitimacy. The decline of Cold War tensions since the mid 1980s has helped China to broaden greatly its foreign relations, especially with its neighbours in East Asia. At the same time, however, China's process of political transition, as the era of the 92 year old Deng Xiaoping draws to an end, has caused concern that leaders competing for political succession may be drawn towards assertive stances in foreign policy, particularly on issues of territorial sovereignty.

Domestic developments in China and the end of the Cold War have both changed the climate for US-China relations. In the 1990s, the US and China have been able to cooperate in a number of areas (such as in the negotiations to end the Cambodia conflict in 1991) but overall, the level of trust in the relationship has declined. The assertive attempt by the Clinton Administration in 1993 to link continuation of China's access to normal trading status (under 'Most Favoured Nation' provisions) was rejected by China. Chinese leaders have harboured suspicions that the US is intent on undermining China's Communist Party regime and may be unwilling to accept China's rise to major power status. Indeed, the levels of suspicion involved, especially on the part of China's leaders, have given rise to some concerns in both countries that a 'new Cold War' might emerge, in which the US might be drawn to 'contain' China's rising influence and power.

The climate of lack of confidence and trust clearly complicates the handling of bilateral and multilateral issues and the US and China must contend with five policy areas which are especially important in their relationship. Taiwan remains the most sensitive issue between China and the US and China's concerns were heightened by the non-official visit to the US by Taiwan's President Lee Teng-hui in June 1995. US-China economic relations have been accompanied by discord over market access, protection for intellectual property rights and China's desire to enter the World Trade Organisation. The US has had concerns about arms control issues, including China's approach to nuclear non-proliferation and over its alleged provision of arms and weapons-making materials to other countries. China's forthcoming resumption of sovereignty in Hong Kong in July 1997 may also see tensions arise with the US over China's policies towards civil and political rights of Hong Kong residents. Human rights issues are a further ongoing source of disagreement. None of these areas can be easily resolved and each is likely to be the focus for further dispute.

Faced with a serious deterioration in relations by late 1995, the US since early 1996 has moved to review its policies towards China. National Security Advisor Anthony Lake's visit in early July 1996 was received favourably by China and may have paved the way for further leadership meetings after the US presidential elections. However the potential for controversy and tension in the relationship continues.

Ongoing stress in US-China relations has significant implications for Australia's foreign policy interests. Since 1995 the climate for Australia-China relations has been affected by the wider tensions in US-China relations, with China showing increasing sensitivity over Australia's non-officinal links with Taiwan. In August 1996, China reacted critically to Australia's reaffirmation of its allied relations with the US in the AUSMIN talks. Continuing US-China tensions could clearly impact on Australia's bilateral and multilateral policy goals, if for example they were to inhibit the capacity of APEC to pursue its efforts towards regional trade facilitation and liberalisation.

The paper concludes that the future of US-China relations cannot be predicted with confidence. Both sides have recently taken steps to improve management of their relations, but no immediate breakthroughs appear likely. In the medium term, the future of the relationship will depend both on development of an enhanced US-China dialogue and on the process of economic and social change and political succession in China. Improved dialogue could clearly help increase communication and confidence in the relationship. However, until the outcome of the process of transition in China is clarified, Chinese foreign policy and its key bilateral relationship with the US, are likely to continue to be a factor for uncertainty in the Asia-Pacific region.


The United States and China have what is widely regarded as one of the world's most important bilateral relationships. China's rapidly growing trade with the US has played a major role in the process of export-oriented growth which is expected to make China the world's second largest economy within a decade. Cooperation between the two countries is vital to the prospects for preserving and enhancing security and economic cooperation in the Asia-Pacific region.

However, US-China relations have recently experienced discord and strain. China opposed bitterly the visit to the US of Taiwan's President Lee Teng-hui in June 1995. China's military exercises in the Taiwan Straits in early 1996 at the time of Taiwan's presidential elections produced a sharp response from the US, which sent two carrier groups to stand by, in one of its largest military deployments in the East Asian region since the Vietnam war. The tensions between the US and China have impeded communication and dialogue between the two countries and have caused concern among the states of East Asia. The recent tensions are also of concern to Australia, which has substantial bilateral relationships with both countries and which considers constructive US-China relations to be essential to the prospects for regional cooperation, especially in APEC.

Two major factors lie behind the difficulties between the US and China. Firstly, while rapid economic growth in China has produced many benefits both domestically and in the East Asian region, that growth has been accompanied by uncertainty in Chinese politics and in foreign policy. The ruling Communist Party has yet to resolve the process of leadership transition as the era of Deng Xiaoping draws to an end. In this climate of political transition and competition, China's neighbours and international associates have been concerned that its sensitivity on issues of territorial sovereignty and its accompanying tendency towards assertive stances in foreign relations will be exacerbated.

Secondly, the end of the global Cold War since the late 1980s has affected profoundly the context of East Asian international relations, and of US-China relations in particular. For two decades from 1972, the US and China cooperated in many areas in the face of a common opponent, the Soviet Union. The demise of the Soviet Union, however, has seen the emergence of a new environment as the US has sought to pursue a wide range of economic and strategic interests with a Chinese government which has cooperated with the US in many areas, but which has also been suspicious of US motives and in disagreement with some of its policies.

The US in the 1990s has sought to pursue relations with China under the banner of 'engagement'. However, the strain between the US and China in the mid 1990s has led to some concerns in both countries that a 'new Cold War' might be in prospect in East Asia, with the US in long term conflict with the last remaining Communist major power. Some Chinese commentaries, at both the official and popular level, have expressed the suspicion that the US may be unwilling to accommodate China as a major power and that it seeks to thwart China's influence through a policy of' 'containment'. In the wake of the stress generated during 1995 and early 1996, both countries have moved to attempt to stabilise their relations and improve dialogue. But significant areas of disagreement and conflicts of interests stand in the way of lasting detente and cooperation in US-China relations.

This paper provides a concise overview of the background to the US-China relationship, discusses the five major ongoing areas of contention (Taiwan, economic relations, arms control, Hong Kong, and human rights), reviews the immediate outlook in August 1996 as the US approaches the next presidential elections, and discusses the implications of recent developments for Australia.

The United States and China after the Cold War

China in the 1990s: Economic Growth, Political Uncertainty

China has for many centuries had the potential to be a major power but its international significance has been limited by its relative isolation and then (from the early nineteenth century) by the intervention of a series of foreign powers. With the end of civil war in 1949, China gained an improved capacity to assert its own foreign policy interests and its international profile rose, especially after the People's Republic of China (PRC) replaced Taiwan (the Republic of China) in the United Nations in 1971. Since the late 1970s, economic reform and growth in China has raised its profile further and increased its influence, both in East Asia and internationally.

China's pattern of growth since 1978 has been one of the most remarkable developments since the end of World War Two. By 1993, the World Bank estimated that China had the world's third largest economy but had the fastest growing economy of all. China may become the second largest economy in the world within the next decade. Growth has averaged 9.5 per cent annually since the late 1970s and was estimated in 1995 to have been 10.2 per cent, and Tables 1 and 2 illustrate the trend. Economic growth has been driven in part by extensive flows of foreign investment: China has been the world's largest recipient of foreign investment, with $US220 billion having been committed between 1979 and 1993. The result of China's economic expansion has been that between 1985 and 1993 alone, its economy doubled in size: by contrast, Australia's economy took 24 years to do the same thing (1969-1993). Since market and export-oriented economic reforms were initiated in 1978, China's GDP per capita has grown by 6.7 times, although it still remains modest in international terms ($US506 by official estimates for 1995).(1) Furthermore, China's economic growth has played a major part in bolstering and advancing growth and dynamism in the whole East Asian region, with which it now has extensive trade and investment links (see Table 3).

Table 1 : China: main economic indicators

Table 2: China: changing economic structure

China's continuing rapid growth has led many observers to conclude that it is heading for the status of a superpower in the next century. However, China continues to face some challenges in maintaining its recent pace of economic modernisation and expansion and of coping with the changes which this growth is bringing. China's limited capacities in education, for example, pose substantial obstacles to development. China has only about 2.5 million students enrolled in tertiary education (out of a population of 1.2 billion) and only about 7 million tertiary graduates overall. These limited numbers constrain China's capacities in economic and public sector management.

China also faces significant problems of inequalities in development as many coastal areas have expanded much faster than much of the countryside. This inequality has stimulated a pattern of mass migration of up to 150 million people from rural areas to the cities in search of work and opportunities. While many people have found work, there has also been a rise in crime and other social problems.(2) The urban economy is also threatened by the large array of inefficient state owned enterprises. These absorb subsidies which amount to about one third of budgetary expenditure, but they cannot be allowed to be bankrupted for fear of throwing about 100 million workers out of a job. In the absence of an effective legal structure and with high rates of growth straining administrative capacities, corruption has become a problem so severe that state and party leader Jiang Zemin has warned that if unchecked it could bring the regime down.(3)

Table 3 China: trade by destination and source

Rapid economic growth in China has also been occurring at a time of uncertainty for the ruling Chinese Communist Party (CCP) regime, which has had to contend with the declining international and domestic credibility of Communism as an ideology and with the impending leadership transition after Deng Xiaoping (who is 92 years old) departs from the political scene. The collapse of the Soviet Union and of the Communist regimes in Eastern Europe between 1989 and 1991 startled the leaders of the CCP. With China left as the only Communist-ruled major power, China's rulers have been suspicious that Western countries and particularly the United States are keen to see Communism overturned in China as well. The Party's authority has been under strain within China, partly because of the suppression of dissent in Tiananmen Square in June 1989 (in which at least one hundred demonstrators died) and because the process of economic reform has made the party less relevant in the day to day lives of China's people.(4)

The decline in the authority of Communism has been accompanied by a heightened emphasis by the ruling party on nationalism. This has been reflected in both official comments and in popular discussion and has included emphasis on the abuses suffered by China in the past at the hands of intervening foreign powers and on the need for China to protect its territorial sovereignty. Nationalist feelings have been fuelled by incidences in which Chinese feel that their country has not received the respect and recognition it deserves: the rejection in 1993 of China's bid to hold the Olympics in the year 2000 has been the most significant recent catalyst for these reactions. In a recent article, Nayan Chanda and Karl Huus have argued that:

The Chinese regime left ideologically bereft by the global collapse of communism, has taken refuge in nationalism to shore up its power. Its main goal may be to hold the country together during its rapid, turbulent transformation. Yet the implications are worrying. Dissidents see nationalism wielded as a new tool of repression, and foreign businessmen sense an anti-foreign backlash in investment policy. On issues ranging from Tibet to Taiwan and Hong Kong, meanwhile, rising nationalism can only translate into an even tougher Chinese line.(5)

The process of internal change in China, together with the end of the Cold War, have had a profound impact on China's foreign policy. With its economy increasingly open to foreign investment and trade, the Chinese government has been keen to stabilise and broaden the country's international relationships. The decline of Cold War tensions has facilitated this process greatly. Since the mid to late 1980s China has improved relations with all of its neighbours and with many other countries internationally. China has widened economic relations with Japan (although many suspicions about Japan remain in China after the trauma of Japan's military aggression in the 1930s) and redeveloped cooperation with the Russian Federation. Relations with South Korea were established in 1992. China was able to establish diplomatic ties with Indonesia and Singapore in 1990 and the Paris Agreements on Cambodia in 1991 removed that conflict as a source of serious regional tension in Southeast Asia and facilitated normalisation with Vietnam. At the same time, China's economic interactions with East and Southeast Asia since the late 1970s have increased dramatically (see Table 3). All of these developments have been beneficial for both China and the Asia-Pacific region.

However the combination of rapid growth and continuing political uncertainty has also proved unsettling for the countries of East Asia. China's growth has enabled it to pursue a military modernisation program which has involved a cutback of 500 000 in the 3 million strong armed forces. China has also pursued equipment upgrading (partly through cooperation with Russia) and the development of some weapons with a potential offensive capacity (such as medium and long range missiles) although it has been argued that the effectiveness of these programs so far has been limited.(6) China also has territorial disputes with a number of its neighbours. China and Japan for example, have an ongoing dispute over the Senkaku islands. China is also in dispute with neighbouring states over the islands and atolls of the South China Sea. China has claimed large areas of seas surrounding the Spratly islands: its claims are contested in whole or in part with Taiwan, Vietnam, the Philippines, Malaysia and Brunei. China's continued assertions of its 'incontestable sovereignty' over the area, a claim which it reasserted in May 1996 after it ratified the United Nations Convention on the Law of the Sea, has been viewed with concern, especially by the members of ASEAN.(7) A further focus for uncertainty in China's foreign policy is that its direction may be affected by the character of the process of political succession which emerges after Deng Xiaoping passes from the scene. The British specialist Michael Yahuda (London School of Economics and Political Science) has argued that a great deal depends on the dynamics of the succession process:

The less disruptive that may be, the more likely it is that a self-confident leadership will emerge that would be able to pursue China's sovereignty claims with moderation and with due regard to the wider issues that they encompass. The more difficult the succession the more likely that a weak leadership would respond erratically and assertively to perceived challenges, especially if it were dependent upon the armed forces who are imbued with more virulent nationalist sentiments.(8)

The United States and China: Cooperation and Conflict

In the post Cold War era, relations with China have emerged as one of the most complex and problematic areas of foreign policy for the United States. The US is an important economic partner for China and the two countries have been able to pursue some common interests in regional and international security but their relationship has also been marked by conflict and suspicion.

The United States' relations with the People's Republic of China have moved through three major phases since 1949. For over two decades after the inauguration of the People's Republic in October 1949, the US and China viewed each other with mutual antipathy. The US had sympathised with and supported the ousted Kuomintang regime, refused to recognise the PRC, and continued to maintain diplomatic relations with the KMT regime when it withdrew to Taiwan. US and Chinese forces fought each other in the Korean war and US concern about China's influence in Southeast Asia was a primary motivation for its involvement in the war in Vietnam.

The concerns which the US and China both held about the policies and influence of the Soviet Union sponsored a second phase in relations from 1972, when President Nixon made his historic visit. Chairman Mao Zedong told US Secretary of State Kissinger at the time that the two countries could overcome their profound ideological differences by working together 'against a common bastard' - the Soviet Union.(9) Relations were normalised in 1978 and the US and China continued to cooperate through the 1980s, particularly in opposing Soviet influence in Asia which they saw as being advanced by Vietnam's presence (with Soviet assistance) in Cambodia after 1979.

However the changes in Soviet policies under President Gorbachev after 1985 and then the demise of the Soviet Union itself, created a new strategic environment for both the US and China. For the US, the decline and fall of the Soviet Union and its allies in Eastern Europe was a watershed development which greatly improved the overall security position of the US and left it as the sole superpower. The end of the Cold War, however, also posed new challenges for the US. The US government has had a wide range of foreign policy interests it has wished to pursue - for example, in promoting international security and arms control, economic relations and human rights. But US policymakers in the post Cold War environment have not had the Soviet challenge to act as a pressure to help them assign priorities to the wide range of US interests. As Michael Yahuda has observed:

Without the priorities imposed by opposition to Soviet communism and its alleged expansion there was no longer an agreed basis for harnessing domestic affairs to serve long term foreign policy goals... Amid these new uncertainties domestic forces acting primarily through Congress began to impinge more on foreign policy, both in the parochial sense of strengthening the pressure for protectionism and in the idealistic sense of calling for greater priority to be given to promoting human rights and democracy in the world.(10)

These developments have been clearly evident in US relations with China. With the end of the Soviet Union as a common enemy, the geopolitical logic for the US-China strategic alliance was removed and underlying tensions and conflicts of interests, which had been dormant during much of the 1970s and 1980s, began to emerge. A second major catalyst for change was the massacre of dissidents in Tiananmen Square in June 1989 which brought strong criticism from the US along with many other countries and raised the profile in the US of human rights issues in China.

The Bush Administration censured China after Tiananmen but also sought to maintain a policy of communication and engagement. However in the new post Cold War environment Bill Clinton, during the 1992 presidential campaign, felt free to challenge the Bush Administration on its China policies. During the campaign, Clinton was critical of the Bush Administration for an allegedly 'soft' position on issues including human rights and labour rights. Clinton remarked during the campaign that it 'no longer made any sense to play the China card' and show 'forbearance' towards Beijing because America's Soviet opponents had 'thrown in their hand'. Clinton accused Bush of 'coddling ageing rulers with undisguised contempt for democracy, for human rights' and promised that in office he would withdraw all trading privileges from China as long as human rights abuses continued.(11)

In office from 1993, the Clinton Administration attempted to implement its commitments by linking trade relations with China, particularly its access to 'Most Favoured Nation' status(12), to improvements in human rights performance. The Chinese government predictably reacted negatively and refused to make concessions. The administration was forced to abandon its policy in May 1994. In 1995 a second area of substantial policy disagreement emerged over Taiwan. The decision of the Clinton Administration to allow Taiwan's President Lee Teng-hui to make a private but highly publicised visit in June 1995 brought a strongly critical reaction from China, which conducted a series of missile tests near Taiwan and cancelled a number of agreements and exchanges with the US.

By the end of 1995, in the words of the American specialist Jonathan Pollack (RAND Corporation) '...there was neither warmth nor trust in the bilateral relationship'.(13) The Lee visit acted as a catalyst to underscore a series of concerns among Chinese leaders and senior officials about the US. While there is no uniform view among China's senior leaders about the US, David Shambaugh (editor of the China Quarterly, writing in late 1995) has argued that there have been widespread suspicions among China's leadership about US intentions in the post Cold War environment. To many Chinese leaders, he suggested:

...the United States is pursuing a hostile policy comprised of four inter-related components. First, it is believed that the United States is trying to contain China strategically. Second, it is believed that the United States seeks to frustrate China's emergence as a world economic power. Third, it is thought that the United States wants to permanently divide Taiwan from China, and is fuelling pro-independence sentiments on the island. Fourth, Beijing sees evidence of a concerted policy to destabilise and undermine the regime and communist Party rule in China, with the intent of bringing about the collapse of the People's Republic itself. Having disposed of the Soviet Union and other former Communist party-states, Beijing believes that America's cold warriors now have their sights on consigning Communist China to the proverbial dustbin of history.(14)

In the context of the existence of reservations and suspicions about US policies in China, the relationship has probably been inhibited since 1993 by the relatively limited contact between senior Chinese and US leaders. While Secretary of State Christopher has held a number of meetings with his counterpart Qian Qichen, President Clinton and President Jiang Zemin have had just three occasions to meet; during the 1993 and 1994 APEC summits and in New York in October 1995. The need for more regular dialogue at senior levels appears to have been recognised by the US, and the relevance of this issue is clear in the light of the range of complex policy areas in which the two countries have disagreements.

Bilateral and multi-lateral issues

The US-China relationship is characterised by both cooperation and friction. China is already very deeply involved in the international economy and has received large amounts of foreign investment. In the Asia- Pacific region, China along with the US is a member of both APEC, the primary vehicle for regional trade and investment liberalisation, and the ASEAN Regional Forum, the most important consultative body on regional security issues. Chinese officials are also constantly involved in consultative groups in the 'second track' of discussions on economic and political cooperation issues. Nonetheless, the US and China have to contend with five areas of major existing and potential conflict of interests: Taiwan, economic relations, arms control, Hong Kong, and human rights.


The status and future of Taiwan and of its relations with the PRC have been by far the most significant recent source of China-US tensions and are likely to continue to pose a difficult set of problems for all three governments.

The existence of an alternative government on Taiwan claiming to represent China was a legacy of the Chinese civil war up to 1949. The defeated Kuomintang forces withdrew to the island in October 1949 and their administration, the Republic of China, retained international recognition by many countries including the US. The People's Republic, however, always maintained its right to sovereignly over Taiwan. When the US extended recognition to the People's Republic in 1978, it ended diplomatic recognition of the Republic of China, withdrew its remaining military forces and terminated the security treaty which had been in force since 1954. However an understanding was reached that while Beijing would not renounce the use of force against Taiwan, the US would support Taiwan's position by continuing to sell it arms. This was followed in April 1979 by the Taiwan Relations Act, adopted by Congress against the wishes of President Carter, by which the US executive government was obliged to regard any use of force against Taiwan as a threat to the security of the Western Pacific and as of 'great concern' to the US. The Act also committed the US to supplying 'arms of a defensive character' to Taiwan.(15) Discord between the US and China over Taiwan was muted after the two countries pursued their anti-Soviet strategic alliance after 1972 while the Cold War was in progress, but has increased markedly in the 1990s.

For China's leaders the status of Taiwan is a matter of national sovereignty which cannot be compromised. If Taiwan were to remain separate from the mainland in the long-term, then China's power and influence could well be seen by its leaders to be inhibited. China's leaders have accepted as a temporary aberration the rule of the authorities on Taiwan on the basis that reunification will ultimately be achieved. They have seen the substantial development of trade and investment between Taiwan and the mainland as contributing to this long-term goal.

However these assumptions have been brought into question by the process of change in Taiwan itself. Taiwan has become a highly successful economy and a major source of investment in East and Southeast Asia. Taiwan's economic status and credibility have given it an increased international profile and it has been able to participate in international groups including the Asian Development Bank and APEC. Since the mid 1980s, Taiwan has also moved to adopt a democratic political system, a process which reached a new stage in March 1996 with the holding of the first fully competitive national presidential elections. The government on Taiwan considers itself to represent the whole of China and as such has not sought to claim representation just of the territory of Taiwan. However the Taiwan government has sought to gain increased international acceptance of its existence so that Taiwan's economic and political interests can be safeguarded. It has been these trends which have made the PRC especially sensitive about the recent presidential elections.

These developments have had important implications for US-China relations. Taiwan's move towards a democratic system of government has given it an additional source of credibility and popularity in the US and especially in the US Congress. The democratic political trends in Taiwan have clearly contrasted with those in China since the Tiananmen massacre. Taiwan has also had a highly effective lobbying capacity in the US Congress.

The potential for discord between the US and China over Taiwan have been clearly evident in 1995 and 1996. In early 1995 pressures emerged to allow President Lee Teng-hui to visit the US to accept an honorary degree from his alma mater, Cornell University. The Clinton Administration initially indicated to the Chinese government that a visit would not be approved but after almost unanimous support was given in Congress to resolutions supporting President Lee's request, the Administration was forced to change its position and accept the visit. China was highly critical of the decision and took a number of retaliatory steps including conducting a series of missile tests near Taiwan in July and August, reversing agreements with the US on protection of intellectual copyright and cancelling a series of exchanges and dialogues.(16)

The lead up to the Taiwanese elections on 23 March 1996 saw additional tension between China and the US over Taiwan. Chinese military exercises in March in the Straits of Taiwan forced the re-routing of major shipping and air lanes and brought regional security issues into sharp relief. The exercises included firing of live ammunition and of M-9 missiles close to Taiwan's major ports, Kaohsiung and Keelung. The tactics did not succeed in intimidating the candidates in the elections, which President Lee won convincingly with 54 per cent of the vote. Since the main runner up candidate opposed reunification with the mainland, about 75 pe rcent of the electorate in effect supported maintenance of Taiwan's autonomous status. The dispatch by the US of two aircraft carrier groups to stand by, underscored the US geopolitical interests in Taiwan's stability and in the success of its elections.(17)

In his inaugural address on 20 May, President Lee indicated his wish for continued close contacts with the PRC and announced his willingness to visit if this would assist in this. While the situation in the Taiwan straits had stabilised by June, the potential for discord continues. Although the US does not support a declaration of independence by Taiwan it will not accept pressure or what is perceived as bullying by the PRC in support of its goal of reunification. The US would also oppose forcible reunification. It is this US commitment to what the PRC sees as a party to an internal dispute which provides the basis for further disagreement and conflict.

Economic Relations

The growth of economic relations between the US and China has been one of the most striking developments in the Asia-Pacific region in the past decade. The US market has been very important to China at a time when its industrial development has proceeded rapidly (see Table 3). The US too has been able to develop important export markets especially in certain sectors, including commercial aircraft (symbolised by the decision of Boeing to hold its 1996 annual general meeting in Beijing). However the rapid integration of China into the international economy has been accompanied by friction with the US over issues including the balance of trade, market access for US products, Chinese policies on protection of intellectual property rights, and China's access to membership of the World Trade Organisation.

The development of trade has been heavily in favour of China although the extent of the imbalance is in dispute. US Department of Commerce figures calculate China's exports to the US in 1995 at $US45.8 billion and imports at $US11.8 billion. However the US counts goods transhipped through Hong Kong while China does not; China argues that its exports to the US in 1995 amounted to $US24.7 billion.(18)

Whatever the precise figures, while both the US government and business have welcomed the increased trade between the two countries, the US has also been highly concerned by the issue of market access for its goods and protection of intellectual property rights. In a speech in Hong Kong in November 1995, US Deputy Trade Representative, Charlene Barshefsky, said that market access remained a key stumbling block to improved US-China relations:

China continues to maintain one of the most protectionist trade regimes in the world. While the US accepts 40 per cent of China's exports, China accounts for less than 2 per cent of US exports. China blocks access to its markets for many US goods, especially capital goods, limits investment opportunity and discriminates against foreign business. In areas of increasing comparative advantage, especially services, China keeps its markets closed while Chinese companies scramble to monopolise it.(19)

One key focus for dispute has been US concern over lack of protection for the intellectual copyright held by US corporations. Tensions over alleged 'pirating' of US-owned computer software and recordings have been longstanding. The US and China concluded an agreement on protection for intellectual property in February 1995 but after the dispute over President Lee's visit in June, China reversed some of the actions it had taken through the agreement; for example, a number of pirate compact disc factories which had been closed were allowed to reopen. Continuing concerns by the relevant US industries over the issue resulted in a US threat in early 1996 to impose sanctions on a range of Chinese goods About 90 per cent of the tens of millions of compact discs which China produces annually are estimated to be pirated. After intense negotiations an agreement was reached on 17 June 1996 by which the US withdrew the threatened sanctions in return for Chinese commitments to close a number of pirate factories, impose other controls, and increase access for foreign producers of sound recordings. While the agreement was seen as a valuable step forward by US negotiators it is unlikely to have resolved the vexed issues involved particularly because in the very rapidly growing coastal regions of China, the central government cannot easily control the operations of individual enterprises who enjoy the support and involvement of local authorities.(20)

Issues of market access are also crucial in the attitude of the US to China's desire to join the World Trade Organisation. To join the WTO a signatory must agree to uphold the basic requirements of membership: transparency of the trade regime, and uniform, non-discriminatory applications of trade rules and treatment for goods and, to a more limited extent, services providers. Many countries have encountered difficulties in these areas in trade with China. The substantial differences in rates of development in different regions of China also raises the question of whether China should be allowed to join the WTO as a developing country, as China's government demands, or as a country considered to be already developed. The US has pressed China for a series of further changes in its trading regimes and practices before it will accept China's membership in the WTO.(21) Chinese leaders see this resistance as another manifestation of an unwillingness by the US to accord China the recognition in economic terms which they regard as already fully merited. Negotiation of China's entry into the WTO is likely to be a long-drawn out process, with many issues to be clarified, but its entry would enable both China and the US to handle their frictions in trade relations in a wider, multi-lateral context(22)

A further source of contention in economic relations has been that China does not enjoy access to Most Favoured Nation (MFN) trading status on a permanent basis, as do the great majority of the US's economic partners. Although trade tensions continue, there appears to be a growing consensus that China's MFN status should not be placed under continuing threat of revocation. President Clinton announced his support for extension on 20 May 1996 for MFN for China for the year 1996/97. While there was criticism from a number of members of Congress in the lead up to the vote in the House of Representatives, the key decision by the House on 27 June was taken by a margin of 286 to 141. Members supporting extension of MFN argued that while they might deplore many Chinese practices in areas including political repression of dissidents, pirating of US software and recordings and alleged transfers of arms and weapons-making materials to countries such as Pakistan (see below), they did not consider that denial of MFN would be effective in advancing US interests. The extension of MFN for a further year was also accompanied by renewed calls for China to be granted MFN status on a permanent basis like all the US's other major trading partners, a step which would do a great deal to improve the climate and character of economic relations.(23)

Arms Control and Proliferation

In the post Cold War environment, proliferation of arms and of weapons making capacities remain substantial problems and the US and China have clashed over these issues. Two key issues have recently been contentious: China's testing of nuclear devices and its approach towards the negotiations for a Comprehensive Test Ban Treaty (CTBT), and China's alleged exports of nuclear-weapons related technology and equipment.

The US has supported strongly the development of a CTBT while China, along with India, has been one of the major countries expressing reservations. China's principal area of concern has been in relation to the issue of on-site inspections of alleged breaches of the Treaty. China argued that international seismic, atmospheric and hydro-acoustic monitoring were adequate to ensure that nuclear capable states do not carry out explosions. China also argued for a two thirds majority for approval of on-site inspections while a number of other major powers (including the US) wanted to have a simple majority for approval. The climate for negotiations on nuclear non-proliferation efforts was improved by China's announcement at the end of July 1996 that it would cease nuclear testing, a step taken after it conducted what it said would be its last test (on 29 July). Further progress was announced in early August, when a compromise between the US and China on the issue of approval for on-site inspections cleared the way for China to endorse adoption of the Treaty, although the fate of the Treaty itself still remains in doubt, principally because of the continuing reservations held by India.(24)

China's exports of weapons and nuclear-related equipment (for example to Pakistan) has been another area of contention. In early 1996 the US criticised what it saw as the sale by China of ring magnets to Pakistan which could be used in the enriching of uranium and the US threatened both sanctions and suspension of prospective loans from the Export-Import Bank. After four months of negotiations, an agreement was reached by which China promised to monitor exports of such technologies and to refrain from future sales to Pakistan.

A further controversy was publicised in June 1996 with reports of sales by China of M-11 missiles to Pakistan. The Washington Post reported deployment of the missiles by Pakistan and also suggested that Pakistan may now have developed nuclear warheads for the missiles. Under the Missile Technology Control Regime (MTCR) concluded in 1987, 28 nations agreed not to export missiles capable of carrying a payload of more than 500 kilograms more than 300 kilometres. China has not been a signatory to the MTCR but it has agreed to act in accordance with its provisions. After the reports appeared, US government officials were reported to be concerned that the provision of M-11 missiles would constitute a violation of the MTCR and by law the US government would be required to impose sanctions on a violator, whether that country is a formal signatory or not. At the time of writing, this issue was still under investigation.(25)

Hong Kong

China's resumption of control over Hong Kong has not so far been a significant issue of contention in US-China relations but it could easily become one. Under agreements concluded with Britain in 1984 (the Joint Declaration) China will resume full sovereignty over Hong Kong on 1 July 1997 when the British lease on the New Territories expires. Under the terms of the Joint Declaration, China has agreed that Hong Kong will be constituted as a Special Administrative Region for a period of 50 years: it will retain its status as a free port and the Region's social and economic system will remain unchanged; freedom of speech, of association, of travel and of religion will be guaranteed by law.

China's legal right to assume full control of Hong Kong is unquestioned internationally. However the manner in which Chinese authorities assert that control could produce discord. China has consistently indicated its opposition to the political reforms promoted by Hong Kong Governor, Chris Patten, in 1992 which introduced elections for the Legislative Council. China has already announced its intention to dissolve the current Legislative Council and replace it with a provisional legislature on 1 July 1997. China has not been willing to accept any dissent among members of the Preparatory Committee, which is the body which China has established to be responsible for matters relating to the resumption of sovereignty. The Democratic Party, which has a significant presence on the Legislative Council, has not been given representation in the provisional legislature.

China will also have difficulties in dealing with groups in Hong Kong which have protested against the restrictions on dissent in China and especially the suppression of protest at Tiananmen Square in 1989. The Chinese government is concerned that such groups should not be able to spread their ideas within China itself. If members of these groups, or prominent Hong Kong democrats, such as Martin Lee, are seen to suffer discrimination after the resumption of sovereignty then this seems certain to become an issue in relations with the US. By the provisions of the Hong Kong Relations Act, the US government is required to monitor China's adherence to the Joint Declaration with the UK after the resumption of Chinese sovereignty in 1997. Hong Kong may thus join the series of issues over which the US and China have substantial disagreements.

Human rights

Human rights have been, and are likely to continue to be, a substantial focus for discord in the relationship. The end of the Cold War and the collapse of most of the former Communist regimes have left China among the few remaining avowedly Communist systems. While Communist ideology has been de-emphasised in the process of economic reform, the continuation of the dominant political role of the Chinese Communist Party remains a paramount goal of China's leaders. The Chinese government has continued to reject western attempts to promote universal human rights standards in relations to China and has indicated a determination to maintain firm control over dissent. China has argued that 'the issue of human rights can only be studied in the context of the economic development, history and cultural traditions of a particular country. The right to development represents a most basic human right'.(26)

China has not been willing to soften its stance on political dissent. The prison sentence given to China's most prominent dissident, Wei Jingsheng, in December 1995 was a clear illustration of the Chinese government's determination to control dissent. Human rights issues are a source of ongoing suspicion of China's government in many sectors of US opinion. The espousal by the US government of adherence to human rights standards, and its explicit endorsement of democracy as a political philosophy whose promotion is a key declared principle of US foreign policy, are a source of irritation and concern to China's leaders.

Developments since March 1996

China's military exercises in the Taiwan Straits, and the extent of the US response, produced widespread unease in East Asia. The Taiwan Straits exercises influenced the discussions held between the US and Japan in April 1996 in which the security relationship between the two countries was reaffirmed and was declared to be relevant to the wider security interests of both countries in the Asia-Pacific region. The US-Japan talks were, in turn, greeted with disquiet by China which retains longstanding suspicions about Japan and opposes strongly any move by Japan to assume a wider role in regional security.(27) Overall, the developments in early 1996 illustrated the potential for the Taiwan issue to affect the security climate in the whole East Asian region and to exacerbate difficulties in US-China relations.

Since March 1996 both the US and China have moved to try to stabilise their relations. Progress was made during the visit to China by the US National Security Adviser, Anthony Lake, in early July. However the relationship remains a difficult one both in the US, where it may be an issue for debate during the Presidential election campaign, and in China.

The US Policy Review and the Lake Visit

The disruption to relations with China caused by President Lee's visit in June 1995 and the Taiwan Straits confrontation in March 1996 prompted a policy review by the Clinton Administration. As the former head of the National Security Council, Stanley Roth, commented in mid 1996: 'by the end of last year, the White House had recognised that it was going to have to manage China policy very carefully to prevent it from falling off the cliff'.(28) As a result the Clinton Administration took steps to reaffirm more precisely the goals of its China policies.

In a major statement on US policy towards China on 18 May 1996, Secretary of State Warren Christopher noted the widespread uncertainty which recent developments in China had aroused. Christopher stressed the great challenges China faces in maintaining growth and stability. Rapid economic change has been accompanied by internal pressures for China including inequalities in growth and development and the advent of mass population movements from countryside to urban areas by people in search of jobs and opportunities. China's leaders, he noted, have also had to face the collapse of Communism as an international force and an impending leadership transition as the Deng Xiaoping era draws to a close. In this situation, Secretary Christopher argued, China's leaders:

are turning to nationalism to rally their country and legitimate their hold on power. This, in turn, has prompted fears that an increasingly nationalistic China might exert its growing power and influence in ways that challenge the security and prosperity of its Pacific neighbours.

Christopher rejected the view that China should be seen as a fundamental threat to US interests. He also rejected the view which he argued is held by some Chinese that 'despite our public assurances the United States really seeks to contain and weaken China'. China, he argued, should not be isolated or demonised. Christopher then set out three tenets for US policy:

[W]e believe that China's development as a secure, open, and successful nation is profoundly in the interests of the United States. Second, we support China's full integration and its active participation in the international community. Third, while we seek dialogue and engagement to manage our differences with China, we will not hesitate to take the action necessary to protect our interests.

In developing areas of common interest, Secretary Christopher suggested that the time had come for more regular dialogue with China. He proposed that periodic cabinet level consultations be held in each other's capitals to facilitate a candid exchange of views and that regular summits should also be held between the countries' leaders.

As a step towards the improved dialogue and communication which Christopher's statement had recommended, National Security Adviser Anthony Lake visited China between 9 and 11 July. Lake said that his visit was designed to facilitate an exchange of 'state visits over the next couple of years'. The visit did not lead to any discernible major developments in any of the areas of major contention in the relationship but both sides were able to comment positively. Defence Minister Chi Haotian said that 'The engagement policy is being very productive... with the level of engagement being raised'. For his part, Lake expressed his satisfaction with the 'very candid and direct exchanges on issues' in his talks and he indicated that the US was keen to place consideration of contentious issues in the context of a long-term process of dialogue. Lake's comments on human rights indicated the distance the Clinton Administration has come since its attempt in 1993 to link explicitly human rights and trade. He said that the US was not softening its approach to human rights issues but, 'We have to understand that this is a long term issue. In my judgement, its very unlikely that one meeting, or an effort to devise a trade-off between one issue and human rights, is going to produce a giant step forward'.(29)

Continuing Controversy

While the Lake visit has clearly been a positive contribution to US-China relations, developments since March 1996 have also illustrated continuing uncertainties and tensions.

In the US, the Clinton Administration's policies towards China have been criticised by Republican presidential candidate Bob Dole and may well figure during the campaign itself. Dole devoted a considerable part of a major address on foreign policy on 9 May to China and US-China relations. Dole called China's emergence 'the most important international challenge the US faces as we enter the 21st century' and he supported the maintenance of Most Favoured Nation status by China, a position he has held consistently since 1980. However, Dole argued that the Clinton Administration 'lacked a strategic policy towards China. The bottom line is that American credibility in Asia is low and still declining and American interests are challenged throughout the region'.

Dole also announced some policies which would not be welcome to China. He argued that a system of anti-ballistic missiles should be developed by the US in the East Asia region in cooperation with Japan, South Korea and Taiwan. The system, which he called the Pacific Democracy Defence Program, had the appearance of being aimed primarily at potential threats from Chinese missiles. The proposal opened up a further area of disagreement with the Clinton Administration. Dole has argued that America and its allies 'are under direct threat of missile attack today.' The Clinton Administration, by contrast, has supported the development of such systems but at a slower pace and without the emphasis on a concerted system for East Asia.(30)

The concept of an 'Asian star wars' system has produced divided reactions. While some observers supported the proposal, it has also aroused concerns that it will add to suspicions in China that key figures in the US do see China as a longterm challenge that needs to be 'contained'. The precise rationale for the system also remains unclear. Although China does have a program to develop long range missiles, it has only deployed four such missiles so far and their capabilities (including accuracy) are regarded as being limited.(31)

On China's part, signs of continuing reservations about US policies have been clearly evident. In July attention was raised by a book widely circulated and publicised in China called The China that can say no. The book, written by five young writers, has chapters with titles including 'Don't Be Worried about saying "be prepared for war"', 'Trade Minister Wu Yi, the Chinese Iron Lady Who Says No To America', and 'The Shameful Anti-China Plot Won't Succeed'. One of the co-authors, Zhang Xiaobao, said that, 'In the past we've said yes too often. The West is engaged in a plot to contain our progress. Because China has a totally different ideology, we have been cast in the role of the new evil empire'. Another co-author, Song Qiang, commented that, 'Its not that we don't need the US any more, its just that we don't want the Americans to isolate us and make us dependent on them.'(32) The experience of China's athletes at the Atlanta Olympics also came in for highly critical comment in China with allegations that US spectators were unduly partisan and that the food provided did not suit Chinese tastes.(33)

In early August, additional controversy also arose over the issue of Taiwan. The US had allowed a transit visit by Taiwan's Vice President Lien Chan, who was due to stopover in the US on 12 August on his way to the Dominican Republic. China's Foreign Ministry said that it had made its opposition to the stopover visit known to the US and called on the US 'to honour the solemn commitment it has made on the question of Taiwan so as to prevent new damages occurring in Sino-US relations'.(34)

Australia's interests

Australia's alliance with the US, its extensive relationship with China and the high priority given by successive Australian governments to the development of security and economic cooperation in the Asia-Pacific region make the health of the US-China relationship of major foreign policy interest. Developments since 1995 have illustrated that tensions in the US-China relationship are of substantial potential significance for Australia.

Professor Colin Mackerras (Griffith University) has observed that:

For Australia, China's enormous population and area, its economic growth, which has now been going on at a generally consistent and impressive level since the late 1970s, its growing military power and the controversial nature of much of what it does; as well as the fact that so large a nation is in the same region, give China a necessarily high priority in Australia's foreign relations.(35)

Australia's approach towards the PRC developed in the context of the Cold War and Australia's alliance with the US, concluded in 1951. However Australia's status as an ally of the US has not prevented it from pursuing independent policies towards China reflecting Australia's national interests. Along with the US, Australia did not recognise the People's Republic in 1949 but, unlike the US, did trade with China through the 1950s and 1960s. Australia recognised the PRC in December 1972, six years before the US. Since the late 1970s and the process of economic reform and rapid growth, Australia's economic relationship with the PRC has expanded greatly, although Australia's overall share in China's rapidly growing trade has declined since the early 1980s (see Table 3). In 1995 China was Australia's sixth largest trade partner and Australian trade with China reached $A6.98 billion, an increase of 12.8 per cent from 1994. In the first four months of 1996 Australia became China's tenth largest trading partner with Australian exports having increased by 27 per cent over the equivalent period in 1995.(36)

After 1972 successive Australian governments enjoyed close diplomatic and political relations with China but Australia, like the US, was very concerned at the suppression of dissidents in Tiananmen Square in June 1989 and for a time suspended some contacts. Australia continued to pursue human rights issues in its relations with China but after 1993 the Australian government expressed its opposition to the Clinton Administration's attempt to link human rights issues with access to Most Favoured Nation status. Australia's position on this issue is considered to have had some influence in the Clinton Administration's decision in May 1994 to change this policy.(37)

Australia welcomed the improvement in US-China relations which followed the change in policy on MFN but Australian relations with China have been affected by the rise in tensions between the US and China since 1995 over Taiwan. Australia has followed a 'one China' policy since it recognised the PRC in 1972 but has also developed an extensive economic relationship with Taiwan: in 1995 Taiwan was Australia's ninth most important trade partner, with exports and imports valued at $A3.3 billion and $A2.6 billion respectively. The effect of the tension over the Lee visit to the US was to raise China's sensitivities over the general issue of interactions with Taiwan by many countries and so the issue of Australia's non-official associations with Taiwan became more contentious. As a result, in October 1995 the Chinese Embassy in Australia protested about what it saw as a series of visits to Australia by Taiwanese leaders, including the Governor of Taipei, who was in Australia at the time. A confidential Department of Foreign Affairs and Trade report, publicised in January 1996, was reported to state that 'China had threatened to downgrade ties with Australia last year because Beijing believed Australia was becoming too close to Taiwan'.(38) The newly-elected Coalition Government thus has come into office in a climate of heightened sensitivities in relations with China.

The Howard Government since March 1996 has reaffirmed the importance of a secure and prosperous Asia Pacific region for Australia and of the role of bilateral relationships and regional cooperation between Australia, the US and the countries in the region.(39) The Foreign Minister, Mr Downer, has emphasised the significance of China's role in the region and the importance of engagement with it. Speaking on 20 February, Mr Downer said that, 'In our region, China is emerging as a major power both economically and strategically. The challenge for the region is to ensure that we fully engage China in regional affairs and in playing its proper part in contributing to regional development and security'.(40)

In comments since 2 March, Mr Downer has supported both the maintenance of a secure regional environment and endorsed the role the US as central to its achievement. During the tension between China and Taiwan in March, Mr Downer urged both sides to avoid misunderstanding or miscalculation. He said that 'we have called for restraint on the part of the Chinese. We will be making similar points to Taiwan'. In relation to the US role at the time, the Minister said 'I think what we have seen in the last few days is a very clear demonstration by the United States that it is interested in maintaining its involvement in the security of the region and we obviously welcome that.'(41) The government also called on China to support attempts to secure a Comprehensive Test Ban Treaty and criticised the nuclear tests conducted by China in early June and late July.(42)

The new Australian Government has continued to emphasise the value of Australia's growing economic relationship with China. However its decision to cancel the 'soft loans' provided under the Development Import Financing Facility (DIFF) scheme has proved an irritant. China has been the second largest beneficiary under the scheme and has received about 30 per cent of funds allocated since 1984/85; in 1996 there were reported to be 19 DIFF-supported projects in China to a total value of $140 million. In May, China's Ambassador to Australia, Hua Junduo, criticised the decision to cancel the scheme and said that 'We hope that the Australian government will follow internationally accepted practices and continue to support the projects in the pipeline and implement these projects on time'.(43)

In a speech in Hong Kong on 4 July 1996, Mr Downer reaffirmed that 'Strategically, China, and our longterm relationship with it, is of vital importance in Australian foreign policy'.(44) However, recent developments have underscored the current political sensitivity of this relationship in the wider context of US-China relations. One reflection of this has been that issues which have been able to be handled with limited levels of contention or difficulty in the recent past, are now causing more difficulty. With China now highly sensitive about Taiwan in the wake of developments since mid 1995, the issue of non-official visits to Taiwan by Australian political figures is proving to be more potentially contentious. China has expressed concern about the planned visit in early September to Taiwan of Minister for Primary Industry, John Anderson, although ministers in the former Labor government made similar such non-official visits. The impending visit to Australia by the Dalai Lama is also a focus for disagreement: the Dalai Lama last visited Australia in 1992 and he met privately with then Prime Minister Keating but China has expressed its displeasure at the prospect of a meeting with Prime Minister Howard.(45)

Alliance relations between Australia and the US have also attracted some critical comment from the Chinese media. The annual 'Ausmin' talks between Australia and the US saw a strong reaffirmation of the alliance relationship and an enhanced program of military exercises was announced. The communique from the talks noted the 'fluid' and 'unpredictable' security environment and also endorsed pursuit of comprehensive and open engagement with China. The communique stated:

Both sides noted the profound impact of the U.S.-China relationship on the future security and prosperity of the Asia Pacific region. Both sides underlined the importance of pursuing a policy of comprehensive engagement with China and of supporting China's development as a secure, open and successful nation and as a strong and constructive member of the international community. Both sides agreed that a 'one China' policy best served the region's interest in stability and prosperity.(46)

However, an article in the official People's Daily reacted critically to recent trends in US and Australian policies. The editorial accused the US of using its military ties with Japan and Australia in a bid to 'entrap' China. Referring to a recent comment by Defense Secretary William Perry that Japan and Australia were the northern and southern 'anchors' of the US security engagement in Asia, the article said, 'From this we can see that the United States is really thinking about using these two "anchors" as the claws of a crab'.(47)

Foreign Minister Downer immediately rejected the interpretation carried by the article. He said on 7 August that he had recently raised with Foreign Minister Qian Qichen, the fact that Australia was pursuing a new security declaration with the US (when the two ministers were attending the annual ASEAN meetings in July):

He didn't object at all to that when I mentioned that to him before the AUSMIN talks took place. But I did go out of my way to make sure that I briefed the Chinese in advance. I have said to Qian Qichen privately, and I have often said publicly, that the Australian government does not support a policy of containment of China. We support a policy of engagement with China... We think it is fundamentally important to the future security of the region that China is fully engaged in the architecture of the region..(48)

At the time of writing (mid August), the Australian government was preparing to hold further talks with China during the visits by Foreign Minister Downer from 22 August and the Minister for Trade, Mr Fischer, from 27 August. Mr Downer was reported to have reaffirmed Australia's high priority on relations with China which ha said are 'broad based, positive and mutually of benefit'.(49) On 15 August, the Minister for Immigration, Mr Ruddock, after discussions in Beijing with the director general of the foreign affairs committee of the State Council, Liu Huaqiu, said that Mr Liu had nominated four issues which China wished to discuss with Australia: the forthcoming visit of the Dalai Lama, Mr Anderson's impending visit to Taiwan, the cancellation of loans under the DIFF scheme, and Australia's recent alliance discussions with the US.(50) The outcome of these forthcoming discussions in Beijing will provide further indications of how Australia's interests may be affected by the recent trends in China's wider foreign relations, especially with the US.


As this paper has suggested, many of the problems being experienced in relations between China and the United States stem from the fact that China is an emerging major power in the early phases of the post Cold War era. China is undergoing a remarkable period of economic growth which is simultaneously improving living conditions for most Chinese while placing the country's economic and political institutions under stress. The ruling Communist Party's legitimacy has been bolstered by the record of growth since 1978 but its capacity to control China has been made more difficult by the declining salience of Communism as an ideology and by the development of a more complex and decentralised society. While continuing economic growth is drawing China into a wide range of closer associations with its major trading partners, this is occurring at a time when the leadership is especially sensitive about issues of territorial sovereignty. China's foreign policy is thus reflecting a country undergoing rapid change, while its leadership is strained by the demands of maintaining an effective administration, amid contests for influence in the struggle for political succession.

In this context, it is not surprising that the US-China relationship has experienced difficulties. As Winston Lord (Assistant Secretary of State for East Asia and Pacific Affairs) has recently observed:

We are dealing with a complex, difficult and prickly partner whose power is growing, whose leadership is in transition and whose government is turning increasingly to a nationalism that is conditioned by thousands of years of experience as the Middle Kingdom, followed by more than a century of humiliation by foreigners.(51)

The US has also had its own problems in policy making. In the post Cold War environment, the US has a wide range of economic, political and security interests to pursue with China. However, without the discipline formerly imposed by the strategic contest with the Soviet Union, it has proven difficult to establish clear and consistent priorities for those interests and US policies have appeared both to China and to Western observers to be ill-coordinated and sometimes contradictory. The appearance of inconsistency has helped fuel suspicions among Chinese officials that while the US professes to seek 'engagement' with China, it actually seeks rather to contain the rise of a potential rival superpower.

Given these factors, pursuit of the US-China relationship is likely to continue to involve both strain and some conflict. As this paper has argued, the US and China have substantial areas of disagreement in human rights, arms control, economic relations and especially over Taiwan. Hong Kong may join these issues as a focus for dispute in the near future. Some disputation and conflict may be hard to avoid over these issues. However, the US could improve the prospects for handling its relations with China by adding additional substance and depth to its own declared policy of engagement. The policy could be enhanced by more regular dialogues of the kind suggested by Secretary Christopher in May. The basis for engagement could also be bolstered by moving to extend permanent MFN status to China. These steps would help remove the image of China being a 'special case' in US foreign policy and help alleviate concerns in China that the US harbours a desire to 'contain' or limit China's rise in national strength and international significance.

The future of US-China relations cannot be predicted with confidence. Both sides have recently taken steps to improve management of their relations, especially through the Lake visit in July, but no immediate breakthroughs appear likely. The US, in particular, seems unlikely to move to renew its dialogue with China at head of state level until after the Presidential elections. In the medium term, the future of the relationship will depend both on development of an enhanced process of dialogue and on the process of economic and social change and political succession in China. Improved dialogue could clearly help increase communication and confidence in the relationship. However, until the outcome of that process of transition in China is clarified, Chinese foreign policy and its key bilateral relationship with the US, are likely to continue to be a factor for uncertainty in the Asia-Pacific region.


  1. Chalmers Johnson, Nationalism and the market: China as a Superpower, Japan Policy Research Institute, Working Paper No 22, July 1996, p 2. Alternative methods of measuring China's GDP, using estimates of 'real purchasing power' or 'purchasing power parity' suggest that its per capita GDP should be higher than official estimates: the Asia Pacific Economic Group, for example, calculates China's per capita GDP in 1995 at $US1678 (see Table 1).
  2. 'China's politics of crime', The Economist, 10 August 1996.
  3. Michael Yahuda, The International Politics of the Asia Pacific , London, Routledge, 1996, p 218-219.
  4. 'China's Communists: Great leap backwards', International Herald Tribune, 3 July 1996.
  5. Nayan Chanda and Karl Huus, 'The New Nationalism', Far Eastern Economic Review, 9 November 1995.
  6. Strategic Survey 1995/96, International Institute of Strategic and International Studies, 1996, p 175. A survey of China's military capabilities and the implications of its program of military modernisation is provided by Gary Brown, China as a Military Power: Peril or Paper Tiger?, Research Paper No 1, Parliamentary Research Service, 15 August 1996.
  7. 'China's push for sea control angers ASEAN', The Australian, 23 July 1996.
  8. Yahuda, op cit, p 219.
  9. Michael Dobbs, 'US focuses on better ties to China: Policy flip-flops roil mercurial relationship', The Washington Post, 9 July 1996.
  10. Yahuda, op cit, p 142.
  11. Michael Dobbs, 'US focuses on better ties to China: Policy flip-flops roil mercurial relationship', The Washington Post, 9 July 1996.
  12. 'Most Favoured Nation' status essentially confers normal trading rights to countries trading with the US. Under the Jackson-Vanik ammendment to the Trade Act of 1974, MFN status can be extended to non-market economies only if the President grants a waiver certifying that the country does not impede emigration. This measure was adopted to encourage the Soviet Unon to permit the emigration of Soviet Jews. China first gained MFN status under the Jackson-Vanik ammendment in 1980 and its annual renewal was regarded as routine until the Tainanmen massacre in 1989: see Marcus Noland, US-China Economic Relations, Working Papers Series on Asia Pacific Economic Cooperation, Washington, Institute for International Economics, June 1996, p 11.
  13. Jonathan D. Pollack, 'The United States in Asia in 1995: The case of the missing President', Asian Survey, XXXVI, 1, January 1996, p 6.
  14. David Shambaugh, 'The United States and China: a new Cold War?', Current History, September 1995, p 244.
  15. Yahuda, op cit, p 138.
  16. Shambaugh, loc cit .
  17. Economist Intelligence Unit, Country Report: China, Mongolia, 2nd quarter 1996, p 14.
  18. 'Damned Lies and statistics', Far Eastern Economic Review, 30 May 1996.
  19. David Lague, 'In Search of Harmony and a Stable Asia', Sydney Morning Herald, 18 November 1995.
  20. 'US withdraws its threat of sanctions against China; trade war averted; officials cite Beijing crackdown on pirated goods', Washington Post, 18 June 1996.
  21. Noland, op cit, p 25-27.
  22. See Lu Weiguo, Reform of China's Foreign Trade Policies, Research Paper No 19, Parliamentary Research Service, 30 November 1996.
  23. 'House supports China MFN renewal; to hold further hearings on China', BNA International Trade Daily, 1 July 1996.
  24. David Anderson, Touch and go for a comprehensive test ban: the 28 June deadline, Current Issues Brief, No 19 1995-96, Parliamentary Research Service, 25 June 1996; 'Safeguard vow on nuclear arms', Sydney Morning Herald, 2 August 1996; 'Chairman of talks proposes four word "refnement" to CTBT text', USIS Washington File, 9 August 1996..
  25. 'Going Ballistic', Far Eastern Economic Review, 27 June 1996.
  26. Xinhua newsagency, 18 July and 25 December 1993, quoted in Sheldon Simon, 'East Asian Security: the Playing Field has Changed', Asian Survey, XXXIV, 12, December 1994, p 1052.
  27. 'Cracks in the armour', Far Eastern Economic Review, 2 May 1996.
  28. Michael Dobbs, 'US focuses on better ties to China: Policy flip-flops roil mercurial relationship', The Washington Post, 9 July 1996.
  29. The Washington Post, 11 July 1996.
  30. 'On the offensive', Far Eastern Economic Review, 23 May 1996.
  31. See Brown, China as a Military Power, p 22.
  32. 'Chinese warned of showdown with US', Sydney Morning Herald, 13 July 1996.
  33. Steven Mufson, 'China puts forward consistent, caustic anti-US themes: Diversity of complaints hints at resevoir of grievances', The Washington Post, 13 August 1996.
  34. 'China says Taiwan VP's trip may hurt US ties', Reuters, 7 August 1996.
  35. Colin Mackerras, 'China' in Russsell Trood and Deborah McNamara, eds, The Asia-Australia Survey 1996-97, Melbourne, MacMillan, 1996 (forthcomng), p 57.
  36. 'Australia rises to 10th on China's trade list', The Age, 24 June 1996.
  37. Mackerras, loc cit, p 57.
  38. ibid, p 59.
  39. 'Security through Cooperation', Address by the Minister for Foreign Affairs, Mr Alexander Downer, to the Conference on "The New Security Agenda in the Asia Pacific Region", co-sponsored by International Institute for Strategic and International Studies and the Strategic and Defence Studies Centre of the Australian National University, Canberra, 2 May 1996.
  40. 'Engage emerging giant, China, Downer argues', Canberra Times, 21 February 1996.
  41. 'Downer warns China over war games', The Australian, 13 March 1996.
  42. 'Australia calls on China to end nuclear test program', The Australian, 9 June 1996.
  43. Ravi Tomar, A DIFFerence of Opinion: Cancellation of the Development Import Finance Facility, Current Isues Brief No 20, 1995/96, Parliamentary Research Service, 25 June 1996, p 8, 13.
  44. 'Australia, North East Asia and China: Opportunities in a changn world', Address by the Hon Alexander Downer MP, Minister for Foreign Affairs of Australia, at a joint Asia House/Austcham luncheon, Hong Kong, 4 July 1996.
  45. 'China demands PM snub Dalai Lama', Sydney Morning Herald, 13 August 1996.
  46. Australia-United States Ministerial Consultations: Joint Communique, p 2.
  47. 'Australia and Japan are the claws US will use to entrap us, says China', Australian Financial Review, 8 August 1996.
  48. ibid.
  49. 'Downer courts Chinese', The Australian, 16 August 1996.
  50. 'Beijing concerned by the mood in Canberra', Canberra Times, 15 August 1996.
  51. 'US-Sino spats could turn into something nasty', Australian Financial Review, 21 June 1996.