U.S. Department of State
Background Notes: China, April 1998
Released by the Bureau of East Asian and Pacific Affairs

Official Name: People's Republic of China

PROFILE

Geography

Total area: 9,596,960 sq. km. (approximately 3.7 million sq. mi.).
Cities: Capital--Beijing. Other major cities--Shanghai, Tianjin, 
Shenyang, Wuhan, Guangzhou, Chongqing, Harbin, Chengdu.
Terrain: Plains, deltas, and hills in east; mountains, high plateaus, 
deserts in west.
Climate: Tropical in south to subarctic in north.

People

Nationality: Noun and adjective--Chinese (singular and plural).
Population (1997 est.): 1.22 billion.
Population growth rate (1997 est.): 0.93%.
Health (1997 est.): Infant mortality rate--37.9/1,000. Life expectancy--
70.0 years (overall); 68.6 years for males, 71.5 years for females. 
Literacy rate: 82%.
Ethnic groups: Han Chinese--91.9%; Zhuang, Manchu, Hui, Miao, Uygur, Yi, 
Mongolian, Tibetan, Buyi, Korean, and other nationalities--8.1%.
Religions: Officially atheist; Taoism, Buddhism, Islam, Christianity.
Language: Mandarin (Putonghua), plus many local dialects.
Education: Years compulsory-- 9. Literacy--81.5%.
Work force (699 million): Agriculture and forestry--60%. Industry and 
commerce--25%. Other--15%.

Government

Type: Communist party-led state.
Constitution: December 4, 1982.
Independence: Unification under the Qin (Ch'in) Dynasty 221 BC; Qing 
(Ch'ing or Manchu) Dynasty replaced by a republic on February 12, 1912; 
People's Republic established October 1, 1949.
Branches: Executive--president, vice president, State Council, premier. 
Legislative--unicameral National People's Congress. Judicial--Supreme 
People's Court.
Administrative divisions: 23 provinces (the PRC considers Taiwan to be 
its 23rd province); 5 autonomous regions, including Tibet; 4 
municipalities directly under the State Council.
Political parties: Chinese Communist Party, over 58 million members; 8 
minor parties under Communist supervision.
Suffrage: Universal at 18.

Economy

GDP (1997 est.): $890 billion (exchange rate based).
Per capita GDP (1997 est.): $700 (exchange rate based).
GDP real growth rate: 8.8%.
Natural resources: Coal, iron ore, crude oil, mercury, tin, tungsten, 
antimony, manganese, molybdenum, vanadium, magnetite, aluminum, lead, 
zinc, uranium, hydropower potential (world's largest).
Agriculture: Among the world's largest producers of rice, potatoes, 
sorghum, peanuts, tea, millet, barley; commercial crops include cotton, 
other fibers, and oilseeds; produces variety of livestock products.
Industry: Types--iron, steel, coal, machinery, light industrial 
products, armaments, petroleum.
Trade (1997): Exports--$182.7 billion: mainly textiles, garments, 
electrical machinery, foodstuffs, chemicals, footwear, minerals.
Main partners--Hong Kong, Japan, U.S., South Korea, Germany, Singapore, 
Netherlands.
Imports--$142.36 billion: mainly industrial machinery, electrical 
equipment, chemicals, textiles, steel. Main partners--Japan, Taiwan, 
U.S., South Korea, Hong Kong, Germany, Russia.

PEOPLE

Ethnic Groups

The largest ethnic group is the Han Chinese, who constitute about 91.9% 
of the total population. The remaining 8.1% are Zhuang (16 million), 
Manchu (10 million), Hui (9 million), Miao (8 million), Uygur (7 
million), Yi (7 million), Mongolian (5 million), Tibetan (5 million), 
Buyi (3 million), Korean (2 million), and other ethnic minorities.

Language

There are seven major Chinese dialects and many subdialects. Mandarin 
(or Putonghua), the predominant dialect, is spoken by over 70% of the 
population. It is taught in all schools and is the medium of government. 
Only about two-thirds of the Han ethnic group are native speakers of 
Mandarin; the rest, concentrated in southwest and southeast China, speak 
one of the six other major Chinese dialects. Non-Chinese languages 
spoken widely by ethnic minorities include Mongolian, Tibetan, Uygur and 
other Turkic languages (in Xinjiang), and Korean (in the Northeast).

The Pinyin System of Romanization

On January 1, 1979, the Chinese Government officially adopted the pinyin 
system for spelling Chinese names and places in Roman letters. A system 
of Romanization invented by the Chinese, pinyin has long been widely 
used in China on street and commercial signs as well as in elementary 
Chinese textbooks as an aid in learning Chinese characters. Variations 
of pinyin are also used as the written forms of several minority 
languages.

Pinyin has now replaced other conventional spellings in China's English-
language publications. The U.S. Government has also adopted the pinyin 
system for all names and places in China. For example, the capital of 
China is now spelled "Beijing" rather than "Peking."

In the pinyin system, letters are pronounced much as they would be in 
American English with the following exceptions.

Complex initial sounds:

c -- like the t's in it's
q -- like the ch in cheap
x -- like the sh in she
z -- like the ds in lids
zh -- like the j in just

Final Sounds:

e -- Pronounced like "uh"
eng -- like the ung in lung
ai -- as in aisle
ui -- pronounced way
uai -- like the wi in wide
i -- like the i in skin
ua -- like the wa in waft
ao -- like the ow in now
ian -- pronounced yen
ou -- like the ow in know
uan -- pronounced when

*When zh, ch, sh, zh are followed by an "i," the "i" is pronounced like 
an r.

Religion

Religion plays a significant part in the life of many Chinese. Buddhism 
is most widely practiced, with an estimated 100 million adherents. 
Traditional Taoism also is practiced. Official figures indicate there 
are 18 million Muslims, 4 million Catholics, and 10 million Protestants; 
unofficial estimates are much higher.

While the Chinese Constitution affirms religious toleration, the Chinese 
Government places restrictions on religious practice outside officially 
recognized organizations. Only two Christian organizations--a Catholic 
church without ties to Rome and the "Three-Self-Patriotic" Protestant 
church--are sanctioned by the Chinese Government. Unauthorized churches 
have sprung up in many parts of the country. In some regions authorities 
have tried to control activities of these unregistered churches. In 
other regions registered and unregistered groups are treated similarly 
by authorities and congregates worship in both types of churches.

Population Policy

With a population of over 1.22 billion and an estimated growth rate of 
0.93%, China is very concerned about its population growth and has 
attempted to implement a strict population control policy. The 
government's goal is one child per family, with exceptions in rural 
areas and for ethnic minorities. This policy is often ignored in the 
countryside and also by many urban dwellers. The government states that 
it opposes physical compulsion to submit to abortion or sterilization, 
but instances of coercion have continued as local officials strive to 
meet population targets. The government's goal is to stabilize the 
population early in the 21st century, although some current projections 
estimate a population of 1.6 billion by 2025.

GOVERNMENT

State Structure

The Chinese Government has always been subordinate to the Chinese 
Communist Party (CCP); its role is to implement party policies. The 
primary organs of state power are the National People's Congress (NPC), 
the President, and the State Council. Members of the State Council 
include Premier Zhu Rongji, a variable number of vice premiers (now 
four), five state councilors (protocol equal of vice premiers but with 
narrower portfolios), and 29 ministers and heads of State Council 
commissions.

Under the Chinese Constitution, the NPC is the highest organ of state 
power in China. It meets annually for about 2 weeks to review and 
approve major new policy directions, laws, the budget, and major 
personnel changes. These initiatives are presented to the NPC for 
consideration by the State Council after previous endorsement by the 
Communist Party's Central Committee. Although the NPC generally approves 
State Council policy and personnel recommendations, various NPC 
committees hold active debate in closed sessions, and changes may be 
made to accommodate alternate views.

When the NPC is not in session, its permanent organ, the Standing 
Committee, exercises state power.

Chinese Communist Party

The 58 million member CCP, authoritarian in structure and ideology, 
continues to dominate government and society. Nevertheless, China's 
population, geographical vastness, and social diversity frustrate 
attempts to rule by fiat from Beijing. Central leaders must increasingly 
build consensus for new policies among party members, local and regional 
leaders, influential non-party members, and the population at large.

In periods of relative liberalization, the influence of people and 
organizations outside the formal party structure has tended to increase, 
particularly in the economic realm. This phenomenon is apparent today in 
the rapidly developing coastal region. Nevertheless, in all important 
government, economic, and cultural institutions in China, party 
committees work to see that party and state policy guidance is followed 
and that non-party members do not create autonomous organizations that 
could challenge party rule. Party control is tightest in government 
offices and in urban economic, industrial, and cultural settings; it is 
considerably looser in the rural areas, where the majority of the people 
live.

Theoretically, the party's highest body is the Party Congress, which is 
supposed to meet at least once every 5 years. The primary organs of 
power in the Communist Party include:

-- The seven-member Politburo Standing Committee;
-- The Politburo, consisting of 22 full members (including the members 
of the Politburo Standing Committee);
-- The Secretariat, the principal administrative mechanism of the CCP, 
headed by the General Secretary;
-- The Military Commission;
-- The Discipline Inspection Commission, which is charged with rooting 
out corruption and malfeasance among party cadres.

Principal Government and Party Officials

President--Jiang Zemin
Vice President--Hu Jintao
Premier, State Council--Zhu Rongji

Vice Premiers

Li Lanqing
Qian Qichen
Wu Bangguo
Wen Jiabao

Politburo Standing Committee

Jiang Zemin (General Secretary)
Li Peng
Zhu Rongji
Li Ruihuan
Hu Jintao
Wei Jianxing
Li Lanqing

Full Politburo Members

Chi Haotian
Ding Guangen
Huang Ju
Jia Qinglin
Jiang Chunyun
Li Changchun
Li Tieying
Luo Gan
Qian Qichen
Tian Jiyun
Wen Jiabao
Wu Bangguo
Wu Guangzheng
Xie Fei
Zhang Wannian

Alternate Politburo Members

Wu Yi
Zeng Qinghong

HISTORY

Dynastic Period

China is the oldest continuous major world civilization, with records 
dating back about 3,500 years. Successive dynasties developed a system 
of bureaucratic control which gave the agrarian-based Chinese an 
advantage over neighboring nomadic and hill cultures. Chinese 
civilization was further strengthened by the development of a Confucian 
state ideology and a common written language that bridged the gaps among 
the country's many local languages and dialects. Whenever China was 
conquered by nomadic tribes, as it was by the Mongols in the 13th 
century, the conquerors sooner or later adopted the ways of the "higher" 
Chinese civilization and staffed the bureaucracy with Chinese.

The last dynasty was established in 1644, when the nomadic Manchus 
overthrew the native Ming dynasty and established the Qing (Ch'ing) 
dynasty with Beijing as its capital. At great expense in blood and 
treasure, the Manchus over the next half century gained control of many 
border areas, including Xinjiang, Yunnan, Tibet, Mongolia, and Taiwan. 
The success of the early Qing period was based on the combination of 
Manchu martial prowess and traditional Chinese bureaucratic skills.

During the 19th century, Qing control weakened, and prosperity 
diminished. China suffered massive social strife, economic stagnation, 
explosive population growth, and Western penetration and influence. The 
Taiping and Nian rebellions, along with a Russian-supported Muslim 
separatist movement in Xinjiang, drained Chinese resources and almost 
toppled the dynasty. Britain's desire to continue its illegal opium 
trade with China collided with imperial edicts prohibiting the addictive 
drug, and the First Opium War erupted in 1840. China lost the war; 
subsequently, Britain and other Western powers, including the United 
States, forcibly occupied "concessions" and gained special commercial 
privileges. Hong Kong was ceded to Britain in 1842 under the Treaty of 
Nanking, and in 1898, when the Opium Wars finally ended, Britain 
executed a 99-year lease of the New Territories, significantly expanding 
the size of the Hong Kong colony.

As time went on, the Western powers, wielding superior military 
technology, gained more economic and political privileges. Reformist 
Chinese officials argued for the adoption of Western technology to 
strengthen the dynasty and counter Western advances, but the Qing court 
played down both the Western threat and the benefits of Western 
technology.

Early 20th Century China

Frustrated by the Qing court's resistance to reform, young officials, 
military officers, and students--inspired by the revolutionary ideas of 
Sun Yat-sen--began to advocate the overthrow of the Qing dynasty and 
creation of a republic. A revolutionary military uprising on October 10, 
1911, led to the abdication of the last Qing monarch. As part of a 
compromise to overthrow the dynasty without a civil war, the 
revolutionaries and reformers allowed high Qing officials to retain 
prominent positions in the new republic. One of these figures, General 
Yuan Shikai, was chosen as the republic's first president. Before his 
death in 1916, Yuan unsuccessfully attempted to name himself emperor. 
His death left the republican government all but shattered, ushering in 
the era of the "warlords" during which China was ruled and ravaged by 
shifting coalitions of competing provincial military leaders.

In the 1920s, Sun Yat-sen established a revolutionary base in south 
China and set out to unite the fragmented nation. With Soviet 
assistance, he organized the Kuomintang (KMT or "Chinese Nationalist 
People's Party"), and entered into an alliance with the fledgling 
Chinese Communist Party (CCP). After Sun's death in 1925, one of his 
proteges, Chiang Kai-shek, seized control of the KMT and succeeded in 
bringing most of south and central China under its rule. In 1927, Chiang 
turned on the CCP and executed many of its leaders. The remnants fled 
into the mountains of eastern China. In 1934, driven out of their 
mountain bases, the CCP's forces embarked on a "Long March" across 
China's most desolate terrain to the northwest, where they established a 
guerrilla base at Yan'an in Shaanxi Province.

During the "Long March," the Communists reorganized under a new leader, 
Mao Zedong (Mao Tse-tung). The bitter struggle between the KMT and the 
CCP continued openly or clandestinely through the 14-year long Japanese 
invasion (1931-45), even though the two parties nominally formed a 
united front to oppose the Japanese invaders in 1937. The war between 
the two parties resumed after the Japanese defeat in 1945. By 1949, the 
CCP occupied most of the country.

Chiang Kai-shek fled with the remnants of his KMT government and 
military forces to Taiwan, where he proclaimed Taipei to be China's 
"provisional capital" and vowed to reconquer the Chinese mainland. The 
KMT authorities on Taiwan still call themselves the "Republic of China."

The People's Republic of China

In Beijing, on October 1, 1949, Mao Zedong proclaimed the founding of 
the People's Republic of China. The new government assumed control of a 
people exhausted by two generations of war and social conflict, and an 
economy ravaged by high inflation and disrupted transportation links. A 
new political and economic order modeled on the Soviet example was 
quickly installed.

In the early 1950s, China undertook a massive economic and social 
reconstruction. The new leaders gained popular support by curbing 
inflation, restoring the economy, and rebuilding many war-damaged 
industrial plants. The CCP's authority reached into almost every phase 
of Chinese life. Party control was assured by large, politically loyal 
security and military forces; a government apparatus responsive to party 
direction; and ranks of party members in labor, women's, and other mass 
organizations.

The "Great Leap Forward" and the Sino-Soviet Split

In 1958, Mao broke with the Soviet model and announced a new economic 
program, the "Great Leap Forward," aimed at rapidly raising industrial 
and agricultural production. Giant cooperatives (communes) were formed, 
and "backyard factories" dotted the Chinese landscape. The results were 
disastrous. Normal market mechanisms were disrupted, agricultural 
production fell behind, and China's people exhausted themselves 
producing what turned out to be shoddy, unsalable goods. Within a year, 
starvation appeared even in fertile agricultural areas. From 1960 to 
1961, the combination of poor planning during the Great Leap Forward and 
bad weather resulted in famine.

The already strained Sino-Soviet relationship deteriorated sharply in 
1959, when the Soviets started to restrict the flow of scientific and 
technological information to China. The dispute escalated, and the 
Soviets withdrew all of their personnel from China in August 1960. In 
1960, the Soviets and the Chinese began to have disputes openly in 
international forums.

The Cultural Revolution

In the early 1960s, State President Liu Shaoqi and his protege, Party 
General Secretary Deng Xiaoping, took over direction of the party and 
adopted pragmatic economic policies at odds with Mao's revolutionary 
vision. Dissatisfied with China's new direction and his own reduced 
authority, Party Chairman Mao launched a massive political attack on 
Liu, Deng, and other pragmatists in the spring of 1966. The new 
movement, the "Great Proletarian Cultural Revolution," was unprecedented 
in Communist history. For the first time, a section of the Chinese 
Communist leadership sought to rally popular opposition against another 
leadership group. China was set on a course of political and social 
anarchy which lasted the better part of a decade.

In the early stages of the Cultural Revolution, Mao and his "closest 
comrade in arms," National Defense Minister Lin Biao, charged Liu, Deng, 
and other top party leaders with dragging China back toward capitalism. 
Radical youth organizations, called Red Guards, attacked party and state 
organizations at all levels, seeking out leaders who would not bend to 
the radical wind. In reaction to this turmoil, some local People's 
Liberation Army (PLA) commanders and other officials maneuvered to 
outwardly back Mao and the radicals while actually taking steps to rein 
in local radical activity.

Gradually, Red Guard and other radical activity subsided, and the 
Chinese political situation stabilized along complex factional lines. 
The leadership conflict came to a head in September 1971, when Party 
Vice Chairman and Defense Minister Lin Biao reportedly tried to stage a 
coup against Mao; Lin Biao allegedly later died in a plane crash in 
Mongolia.

In the aftermath of the Lin Biao incident, many officials criticized and 
dismissed during 1966-69 were reinstated. Chief among these was Deng 
Xiaoping, who reemerged in 1973 and was confirmed in 1975 in the 
concurrent posts of Politburo Standing Committee member, PLA Chief of 
Staff, and Vice Premier.

The ideological struggle between more pragmatic, veteran party officials 
and the radicals re-emerged with a vengeance in late 1975. Mao's wife, 
Jiang Qing, and three close Cultural Revolution associates (later dubbed 
the "Gang of Four") launched a media campaign against Deng. In January 
of 1976, Premier Zhou Enlai, a popular political figure, died of cancer. 
On April 5, Beijing citizens staged a spontaneous demonstration in 
Tiananmen Square in Zhou's memory, with strong political overtones in 
support of Deng. The authorities forcibly suppressed the demonstration. 
Deng was blamed for the disorder and stripped of all official positions, 
although he retained his party membership.

The Post-Mao Era

Mao's death in September 1976 removed a towering figure from Chinese 
politics and set off a scramble for succession. Former Minister of Pubic 
Security Hua Guofeng was quickly confirmed as Party Chairman and 
Premier. A month after Mao's death, Hua, backed by the PLA, arrested 
Jiang Qing and other members of the "Gang of Four." After extensive 
deliberations, the Chinese Communist Party leadership reinstated Deng 
Xiaoping to all of his previous posts at the 11th Party Congress in 
August 1977. Deng then led the effort to place government control in the 
hands of veteran party officials opposed to the radical excesses of the 
previous two decades.

The new, pragmatic leadership emphasized economic development and 
renounced mass political movements. At the pivotal December 1978 Third 
Plenum (of the 11th Party Congress Central Committee), the leadership 
adopted economic reform policies aimed at expanding rural income and 
incentives, encouraging experiments in enterprise autonomy, reducing 
central planning, and establishing direct foreign investment in China. 
The plenum also decided to accelerate the pace of legal reform, 
culminating in the passage of several new legal codes by the National 
People's Congress in June 1979.

After 1979, the Chinese leadership moved toward more pragmatic positions 
in almost all fields. The party encouraged artists, writers, and 
journalists to adopt more critical approaches, although open attacks on 
party authority were not permitted. In late 1980, Mao's Cultural 
Revolution was officially proclaimed a catastrophe. Hua Guofeng, a 
protege of Mao, was replaced as Premier in 1980 by reformist Sichuan 
party chief Zhao Ziyang and as party General Secretary in 1981 by the 
even more reformist Communist Youth League chairman Hu Yaobang.

Reform policies brought great improvements in the standard of living, 
especially for urban workers and for farmers who took advantage of 
opportunities to diversify crops and establish village industries. 
Literature and the arts blossomed, and Chinese intellectuals established 
extensive links with scholars in other countries.

At the same time, however, political dissent as well as social problems 
such as inflation, urban migration, and prostitution emerged. Although 
students and intellectuals urged greater reforms, some party elders 
increasingly questioned the pace and the ultimate goals of the reform 
program. In December of 1986, student demonstrators, taking advantage of 
the loosening political atmosphere, staged protests against the slow 
pace of reform, confirming party elders' fear that the current reform 
program was leading to social instability. Hu Yaobang, a protege of Deng 
and a leading advocate of reform, was blamed for the protests and forced 
to resign as CCP General Secretary in January 1987. Premier Zhao Ziyang 
was made General Secretary and Li Peng, former Vice Premier and Minister 
of Electric Power and Water Conservancy, was made Premier.

1989 Student Movement and Tiananmen Square

After Zhao became the party General Secretary, the economic and 
political reforms he had championed came under increasing attack. His 
proposal in May 1988 to accelerate price reform led to widespread 
popular complaints about rampant inflation and gave opponents of rapid 
reform the opening to call for greater centralization of economic 
controls and stricter prohibitions against Western influence. This 
precipitated a political debate which grew more heated through the 
winter of 1988-89.

The death of Hu Yaobang on April 15, 1989, coupled with growing economic 
hardship caused by high inflation, provided the backdrop for a large 
scale protest movement by students, intellectuals, and other parts of a 
disaffected urban population. University students and other citizens in 
Beijing camped out at Tiananmen Square to mourn Hu's death and to 
protest against those who would slow reform. Their protests, which grew 
despite government efforts to contain them, called for an end to 
official corruption and for defense of freedoms guaranteed by the 
Chinese Constitution. Protests also spread through many other cities, 
including Shanghai and Guangzhou.

After failing to persuade the demonstrators to abandon the streets, 
Zhao's strategy of reasoning with the demonstrators was overruled, and 
martial law was declared on May 20, 1989. Late on July 3 and early on 
the morning of June 4, military units were brought into Beijing. They 
used armed force to clear demonstrators from the streets. There are no 
official estimates of deaths in Beijing, but most observers believe that 
casualties numbered in the many hundreds.

After June 4, while foreign governments expressed horror at the brutal 
suppression of the demonstrators, the central government eliminated 
remaining sources of organized opposition, detained large numbers of 
protesters, removed Zhao supporters from office, and required political 
reeducation not only for students but also for large numbers of party 
cadre and government officials.

Following the resurgence of conservatives in the aftermath of June 4, 
economic reform slowed until given new impetus by Deng Xiaoping's 
dramatic visit to southern China in early 1992. Deng's renewed push for 
a market-oriented economy received official sanction at the 14th Party 
Congress later in the year as a number of younger, reform-minded leaders 
began their rise to top positions. Deng and his supporters argued that 
managing the economy in a way that increased living standards should be 
China's primary policy objective, even if "capitalist" measures were 
adopted. Subsequent to the visit, the Communist Party Politburo publicly 
issued an endorsement of Deng's policies of economic openness. Though 
not completely eschewing political reform, China has consistently placed 
overwhelming priority on the opening of its economy.

Third Generation of Leaders

Deng's health deteriorated in the years prior to his death in 1997. 
During that time, President Jiang Zemin and other members of his 
generation gradually assumed control of the day-to-day functions of 
government. This "third generation" leadership governs collectively with 
President Jiang at the center.

In March 1998, Jiang was re-elected President during the 9th National 
People's Congress. Premier Li Peng was constitutionally required to step 
down from that post. He was elected to the chairmanship of the National 
People's Congress. Zhu Rongji was selected to replace Li as Premier. 
Prior to his election, Zhu was widely credited with overseeing ongoing 
economic reforms while controlling inflation.

China is firmly committed to economic reform and opening to the outside 
world. The Chinese leadership has identified reform of state industries 
as a government priority. Government strategies for achieving that goal 
include large-scale privatization of unprofitable state-owned 
enterprises and the layoff of workers. The leadership has also downsized 
the government bureaucracy.

POLITICAL CONDITIONS

Legal System

After the Cultural Revolution, China's leaders aimed to develop a legal 
system to restrain abuses of official authority and revolutionary 
excesses. In 1982, the National People's Congress adopted a new state 
constitution that emphasized the rule of law under which even party 
leaders are theoretically held accountable. In keeping with this 
emphasis on predictability and the rule of law, the NPC delegates also 
passed a number of new statutes. Some were designed to assure foreigners 
doing business with China that agreements and contracts would be honored 
and that arbitrary behavior would not be tolerated.

In other legal developments, the first civil procedure law in the 
history of the People's Republic of China was promulgated for 
provisional use in 1982, filling a major gap in the legal system. Since 
1979, when the drive to establish a functioning legal system began, more 
than 300 laws and regulations, most of them in the economic area, have 
been promulgated. The use of mediation committees--informed groups of 
citizens who resolve about 90% of China's civil disputes and some minor 
criminal cases at no cost to the parties--is one innovative device. 
There are more than 800,000 such committees in both rural and urban 
areas.

Legal reform became a government priority in the 1990's. Legislation 
designed to modernize and professionalize the nation's lawyers, judges, 
and prisons was enacted. The 1994 Administrative Procedure Law allows 
citizens to sue officials for abuse of authority or malfeasance. In 
addition, the criminal law and the criminal procedures laws were amended 
to introduce significant reforms. The criminal law amendments abolished 
the crime of "counter-revolutionary" activity, while criminal procedures 
reforms encouraged establishment of a more transparent, adversarial 
trial process. The Chinese Constitution and laws provide for fundamental 
human rights, including due process, but theses are often ignored in 
practice. However, the government's efforts to promote rule of law are 
significant and ongoing.

Human Rights

China has acknowledged in principle the importance of protection of 
human rights and has taken steps to bring its human rights practices 
into conformity with international norms. Among these steps are 
signature in October 1997 of the International Covenant on Economic, 
Social, and Cultural Rights and its announcement in March 1998 that it 
intends to sign the International Covenant on Civil and Political 
Rights. The latter document codifies human rights principles embodied in 
the Universal Declaration of Human Rights. China has also expanded 
dialogue with its foreign critics. However, its human rights practices 
remain repressive. The government restricts freedom of assembly, 
expression, and the press and represses dissent.

Although China attempts to control religion through state-sponsored 
organizations, unofficial religious practice is flourishing. Catholics 
and Protestants have been prosecuted for maintaining foreign ties, 
proselytizing, or conducting "illegal" religious services. China hosted 
a delegation of distinguished American religious leaders in February 
1998. The religious leaders met with President Jiang Zemin, conveyed 
concerns about religious freedom, and traveled to numerous sites, 
including Tibet.

ECONOMY

Agriculture

Most of China's labor force is engaged in agriculture, even though only 
10% of the land is suitable for cultivation. Virtually all arable land 
is used for food crops, and China is among the world's largest producers 
of rice, potatoes, sorghum, millet, barley, peanuts, tea, and pork. 
Major non-food crops, including cotton, other fibers, and oil seeds, 
furnish China with a large proportion of its foreign trade revenue. 
Agricultural exports, such as vegetables and fruits, fish and shellfish, 
grain and grain products, and meat and meat products, are exported to 
Hong Kong. Yields are high because of intensive cultivation, but China 
hopes to further increase agricultural production through improved plant 
stocks, fertilizers, and technology.

Industry

Major state industries are iron, steel, coal, machine building, light 
industrial products, armaments, and textiles. These industries completed 
a decade of reform (1979-89) with little substantial management change. 
The 1996 industrial census revealed that there were 7,342,000 industrial 
enterprises at the end of 1995; total employment in industrial 
enterprises was approximately 147 million. The automobile industry is 
expected to grow rapidly, as is electric power generation. Machinery and 
electronic products have become China's main exports.

Economic Reforms

Since 1979, China has been engaged in an effort to reform its economy. 
The Chinese leadership has adopted a pragmatic perspective on many 
political and socioeconomic problems, and has sharply reduced the role 
of ideology in economic policy. Consumer welfare, economic productivity, 
and political stability are considered indivisible. The government has 
emphasized raising personal income and consumption and introducing new 
management systems to help increase productivity. The government has 
also focused on foreign trade as a major vehicle for economic growth.

In the 1980s, China tried to combine central planning with market-
oriented reforms to increase productivity, living standards, and 
technological quality without exacerbating inflation, unemployment, and 
budget deficits. China pursued agricultural reforms, dismantling the 
commune system and introducing the household responsibility system that 
provided peasants greater decision-making in agricultural activities. 
The government also encouraged non-agricultural activities such as 
village enterprises in rural areas, and promoted more self-management 
for state-owned enterprises, increased competition in the marketplace, 
and facilitated direct contact between Chinese and foreign trading 
enterprises. China also relied more upon foreign financing and imports.

During the 1980s, these reforms led to average annual rates of growth of 
10% in agricultural and industrial output. Rural per capita real income 
doubled. China became self-sufficient in grain production; rural 
industries accounted for 23% of agricultural output, helping absorb 
surplus labor in the countryside. The variety of light industrial and 
consumer goods increased. Reforms began in the fiscal, financial, 
banking, price setting, and labor systems.

However, by the late 1980s, the economy had become overheated with 
increasing rates of inflation. At the end of 1988, in reaction to a 
surge of inflation caused by accelerated price reforms, the leadership 
introduced an austerity program.

China's economy regained momentum in the early 1990s. Deng Xiaoping's 
Chinese New Year's visit to southern China in 1992 gave economic reforms 
new impetus. The 14th Party Congress later in the year backed up Deng's 
renewed push for market reforms, stating that China's key task in the 
1990s was to create a "socialist market economy." Continuity in the 
political system but bolder reform in the economic system were announced 
as the hallmarks of the 10-year development plan for the 1990s.

During 1993, output and prices were accelerating, investment outside the 
state budget was soaring, and economic expansion was fueled by the 
introduction of more than 2,000 special economic zones (SEZs) and the 
influx of foreign capital that the SEZs facilitated. Fearing 
hyperinflation, Chinese authorities called in speculative loans, raised 
interest rates, and re-evaluated investment projects. The growth rate 
was thus tempered, and the inflation rate dropped from over 17% in 1995 
to 8% in early 1996. By early 1997, the Chinese economy was growing at a 
rate of 9.5%, accompanied by low inflation.

Despite China's impressive economic development during the past two 
decades, reforming the state sector remains a major hurdle. Over half of 
China's state-owned enterprises are inefficient and reporting losses. 
During the 15th National Congress of the Chinese Communist Party that 
met in September 1997, President Jiang Zemin announced plans to sell, 
merge, or close the vast majority of SOEs in his call for increased 
"public ownership" (privatization in euphemistic terms). The 9th 
National People's Congress endorsed the plans at its March 1998 session.

Energy and Mineral Resources

The Chinese have high energy needs but limited capital. As in other 
sectors of the state-owned economy, the energy sector suffers from low 
utilization and inefficiencies in production, transport, conversion, and 
consumption. Other problems include declining real prices, rising taxes 
and production costs, spiraling losses, high debt burden, insufficient 
investment, low productivity, poor management structure, environmental 
pollution, and inadequate technological development. Demand for energy 
has risen steadily in response to the rapid expansion of the economy 
over the last 10 years. In order to keep pace with demand, China seeks 
to increase electric generating capacity to a target level of 290 
gigawatts by 2000. An estimated 15,000 megawatts of generating capacity 
will be added each year, at an annual cost of about $15 billion. China 
has imported new power plants from the West to increase its generation 
capacity, and these units account for approximately 20% of total 
generating capacity.

Environment

A harmful by-product of China's rapid industrial development in the 
1980s has been increased pollution. Although China has passed 
environmental legislation and has participated in some international 
anti-pollution conventions, pollution will be a serious problem in China 
for years to come.

China is an active participant in the UN Environment Program and a 
signatory to the Basel Convention governing the transport and disposal 
of hazardous waste. China also signed the Montreal Convention for the 
Protection of the Ozone Layer in 1991.

The head of China's National Environmental Protection Agency (NEPA) 
proclaimed in 1991 that environmental protection was one of China's 
basic national policies, at the same time cautioning that environmental 
protection must be coordinated with economic development. According to 
NEPA, $3.2 billion was spent on pollution prevention and environmental 
rehabilitation from 1981-85, $8.8 billion from 1986-1990, and about $15 
billion for the eighth five-year plan (1991-95). The National Action 
Program for Environmental Publicity and Education, announced at the 
Fifth Plenary Session of the 14th Central Committee in 1992, seeks to 
"do a better job of publicity and education in environmental protection 
and enhance the environmental consciousness of the entire nation."

China has sought to contain its increasing industrial pollution largely 
through administrative procedures and efforts to increase public 
awareness. The heavily polluted Pearl River delta is one of the first 
major industrialized areas targeted for clean-up. Officials hope that 
new sewage treatment plants for cities in the delta area will enable the 
river to support an edible fish population by the year 2000. A small 
environmental protection industry has also emerged. However, in some 
areas of China, pollution has long been considered as one of the costs 
associated with economic development.

The question of environmental damage associated with the hydroelectric 
Three Gorges Dam project concerns NEPA officials. While conceding that 
erosion and silting of the Yangtze River threaten several endangered 
species, officials say the hydroelectric power generated by the project 
will enable the region to lower its dependence on coal, thus lessening 
air pollution.

In March 1998, NEPA was officially upgraded to a ministry-level agency, 
and renamed the State Environment Protection Agency, reflecting the 
growing importance the Chinese government places on environmental 
protection. At this point, however, even SEPA recognizes that the 
environmental situation in China is grim and that increasing water and 
air pollution, as well as deforestation and desertification, will 
threaten the base of China's economic development.

Science and Technology

At the end of 1996, China had 5,434 state-owned independent research and 
development institutions at and above the county level. There were 
another 3,400 research institutions affiliated with universities, 13,744 
affiliated with medium and large industrial enterprises, and 726 
affiliated with medium and large construction enterprises. A total of 
2.8 million people were engaged in scientific and technological 
activities in these institutions.

Scientific and technological modernization has been a growing priority 
for Chinese leaders. They aim to achieve 1980s Western levels by the 
year 2000 by rebuilding the educational structure, sending students 
abroad, negotiating technological purchases and transfer arrangements 
with the U.S. and others, and by developing ways to disseminate 
scientific and technological information. Areas of most critical 
interest include microelectronics, telecommunications, computers, 
automated manufacturing, and energy. China also has had a space program 
since the 1960s and has successfully launched 27 satellites. One 
particularly effective program plans to reinvest military resources in 
the civilian sector and emphasizes bio-space information, laser and 
automation technology, and research in energy and advanced materials.

Although China has been funding its ambitious science programs at a rate 
slightly higher than that accorded other priority programs, the amount 
spent is still not commensurate with need. Consequently, the Chinese are 
encouraging local industrial entities to finance and support research 
groups; they also have sought to encourage foreign investors to pump 
money and technology into joint equity and cooperative ventures. China 
has made rapid progress in some areas and is starting to accept that it 
does not always need state-of-the-art technology, since a lesser 
technology may prove to be more appropriate, useful, and profitable.

The U.S. has continued to extend the Agreement on Cooperation in Science 
and Technology (originally signed in 1979). A five-year agreement to 
extend and amend the accord, including provisions for the protection of 
intellectual property rights, was signed in May 1991, and the Agreement 
was again extended for five years in April 1996. There are currently 
over 30 active protocols under the Agreement, leading to cooperation in 
areas such as marine conservation, high energy physics, renewable 
energy, and health. Japan has also continued to increase science and 
technology cooperation with China.

Trade and Investment

China's current leadership has recognized that foreign trade and 
technology play critical roles in the country's modernization and has 
promulgated measures to improve the investment climate.

China has experimented with decentralizing its foreign trading system 
and has sought to integrate itself into the world trading system. In 
November 1991, China joined the Asia Pacific Economic Cooperation (APEC) 
group, which promotes free trade and cooperation in economic, trade, 
investment, and technology issues.

China is now in its 11th year of negotiations for accession to the World 
Trade Organization (WTO)--formerly the General Agreement on Tariffs and 
Trade (GATT). China has significantly reduced import tariffs. In 1996, 
China introduced cuts to more than 4,000 tariff lines, reducing average 
tariffs from 35% to 23%; further tariff cuts that took effect October 1, 
1997 decreased average tariffs to 17%.

To gain WTO entry, all prospective WTO members are required to comply 
with certain fundamental trading disciplines and offer substantially 
expanded market access to other members of the organization. Many major 
trading entities--among them the United States, the European Union, and 
Japan--have shared concerns with respect to China's accession. These 
concerns include obtaining satisfactory market access offers for both 
goods and services, full trading rights for all potential Chinese 
consumers and end-users, nondiscrimination between foreign and local 
commercial operations in China, the reduction of monopolistic state 
trading practices, and the elimination of arbitrary or non-scientific 
technical standards. The United States continues to work with China and 
other WTO members to achieve a commercially viable accession protocol.

According to preliminary Chinese statistics, China's global trade 
totaled $325 billion in 1997; the trade surplus stood at $40.0 billion. 
China's primary trading partners include Japan, Taiwan, the U.S., South 
Korea, Hong Kong, Germany, Singapore, Russia, and the Netherlands. In 
1997, according to U.S. statistics, China had a trade surplus with the 
U.S. of $49.7 billion.

To increase exports, China has pursued policies such as fostering the 
rapid development of foreign-invested factories which assemble imported 
components into consumer goods for export.

The U.S. is one of China's primary suppliers of power generating 
equipment, aircraft and parts, computers and industrial machinery, raw 
materials, and chemical and agricultural products. However, U.S. 
exporters continue to have concerns about fair market access due to 
China's restrictive trade policies.

Foreign Investment

Foreign investment stalled in late 1989 in the aftermath of Tiananmen. 
In response, the government introduced legislation and regulations 
designed to encourage foreigners to invest in high-priority sectors and 
regions.

In 1990, the government eliminated time restrictions on the 
establishment of joint ventures, provided some assurances against 
nationalization, and allowed foreign partners to become chairs of joint 
venture boards. In 1991, China granted more preferential tax treatment 
for wholly foreign-owned businesses and contractual ventures and for 
foreign companies which invest in selected economic zones or in projects 
encouraged by the state, such as energy, communications, and 
transportation. It also authorized some foreign banks to open branches 
in Shanghai and allowed foreign investors to purchase special "B" shares 
of stock in selected companies listed on the Shanghai and Shenzhen 
Securities Exchanges. These "B" shares are sold to foreigners but carry 
no ownership rights in a company. In 1996, China approved 24,673 foreign 
investment projects and received over $42 billion in foreign direct 
investment, second only to the United States.

Opening to the outside remains central to China's development. Foreign-
invested enterprises produce about 40% of China's exports, and China 
continues to attract large investment inflows. Foreign exchange reserves 
total about $140 billion.

FOREIGN RELATIONS

Since its establishment, the People's Republic has worked vigorously to 
win international support for its position that it is the sole 
legitimate government of all China, including Hong Kong, Macao, and 
Taiwan. In the early 1970s, Beijing was recognized diplomatically by 
most world powers. Beijing assumed the China seat in the United Nations 
in 1971 and became increasingly active in multilateral organizations. 
Japan established diplomatic relations with China in 1972, and the U.S. 
did so in 1979. The number of countries that have established diplomatic 
relations with Beijing has risen to 156, while 28 have diplomatic 
relations with Taiwan.

After the founding of the PRC, China's foreign policy initially focused 
on solidarity with the Soviet Union and other communist countries. In 
1950, China sent the People's Liberation Army into North Korea as 
"volunteers" to help North Korea halt the UN offensive which was 
approaching the Yalu River. After the conclusion of the Korean conflict, 
China sought to balance its identification as a member of the Soviet 
bloc by establishing friendly relations with Pakistan and Third World 
countries, particularly in Southeast Asia.

In the 1960s, due to disenchantment with the Soviet Union, Beijing 
competed with Moscow for political influence among communist parties and 
in the developing world generally. Following the 1968 Soviet invasion of 
Czechoslovakia and clashes in 1969 on the Sino-Soviet border, Chinese 
opposition to the Soviet Union increasingly reflected concern over 
China's own strategic position.

In late 1978, the Chinese also became concerned over Vietnam's efforts 
to establish open control over Laos and Cambodia. In response to the 
Soviet-backed Vietnamese invasion of Cambodia, China fought a brief 
border war with Vietnam (February-March 1979) with the stated purpose of 
"teaching Vietnam a lesson."

Chinese anxiety about Soviet strategic advances was heightened following 
the Soviet Union's December 1979 invasion of Afghanistan. Sharp 
differences between China and the Soviet Union persisted over Soviet 
support for Vietnam's continued occupation of Cambodia, the Soviet 
invasion of Afghanistan, and Soviet troops along the Sino-Soviet border 
and in Mongolia--the so-called "three obstacles" to improved Sino-Soviet 
relations.

In the 1970s and 1980s China sought to create a secure regional and 
global environment for itself and to foster good relations with 
countries that could aid its economic development. To this end, China 
looked to the West for assistance with its modernization drive and for 
help in countering Soviet expansionism--which it characterized as the 
greatest threat to its national security and to world peace.

China maintained its consistent opposition to "superpower hegemonism," 
focusing almost exclusively on the expansionist actions of the Soviet 
Union and Soviet proxies such as Vietnam and Cuba, but it also placed 
growing emphasis on a foreign policy independent of both the U.S. and 
the Soviet Union. While improving ties with the West, China continued to 
follow closely economic and other positions of the Third World 
nonaligned movement, although China was not a formal member.

In the late 1980s, China's need for stability on its northern border 
coincided with the Soviet Union's interest in reducing the military 
burden of its border confrontation with China. The resulting relaxation 
in tensions between the two countries led to the May 1989 visit by 
Soviet Communist Party General Secretary Gorbachev to Beijing, which 
attracted world-wide media coverage. However, reporters, including large 
numbers from the U.S., found themselves in the middle of pro-democracy 
demonstrations prompted by the death of former Communist Party General 
Secretary Hu Yaobang. The violent suppression of the demonstrations on 
June 4 provoked a world-wide condemnation of the Chinese government's 
actions.

In the immediate aftermath of June 4, many countries reduced their 
diplomatic contacts with China as well as their economic assistance 
programs. China countered with a sustained effort to encourage 
resumption of normal relations. In the fall of 1990, this led to the 
resumption of Japan's third yen loan to China. China also worked 
vigorously to expand its relations with the countries of Southeast Asia. 
By late 1990, China had reestablished normal relations with almost all 
nations. Following the collapse of the Soviet Union in late 1991, China 
also opened diplomatic relations with the republics of the former Soviet 
Union.

Recently, China has become a more internationally visible actor. Chinese 
leaders are regular travelers to all parts of the globe, and China has 
sought a higher profile in the UN and other multilateral organizations. 
Closer to home, China seeks to reduce tensions in Asia; it has 
contributed to stability on the Korean Peninsula, cultivated a more 
cooperative relationship with members of the Association of Southeast 
Asian Nations (Brunei, Burma, Indonesia, Laos, Malaysia, Philippines, 
Singapore, Thailand, Vietnam), participated in the ASEAN Regional Forum, 
and increased nonpolitical exchanges with India. These efforts flowed in 
part from China's perception of itself as the historic great power in 
East Asia and as the world's largest developing country. Beijing has 
also moved to improve ties with Russia. President Yeltsin and President 
Jiang announced a "strategic partnership" during Yeltsin's 1997 visit to 
Beijing.

China has a number of border and maritime disputes, including with 
Vietnam in the Gulf of Tonkin, with a number of countries in the South 
China Sea, as well as with Japan, Pakistan and India. Beijing has 
resolved many of these disputes, notably including a November 1997 
agreement with Russia that resolved almost all outstanding border 
issues.

U.S.-CHINA RELATIONS

From Liberation to the Shanghai Communique

As the PLA armies moved south to complete the Communist conquest of 
China in 1949, the American embassy followed the Nationalist government 
headed by Chiang Kai-shek, finally moving to Taipei later that year. 
U.S. consular officials remained in mainland China. The new P.R.C. 
Government was hostile to this official American presence, and all U.S. 
personnel were withdrawn from the mainland in early 1950. Any remaining 
hope of normalizing relations ended when U.S. and Chinese Communist 
forces fought on opposing sides in the Korean conflict.

Beginning in 1954 and continuing until 1970, the United States and China 
held 136 meetings at the ambassadorial level, first at Geneva and later 
at Warsaw. In the late 1960s, U.S. and Chinese political leaders decided 
that improved bilateral relations were in their common interest. In 
1969, the United States initiated measures to relax trade restrictions 
and other impediments to bilateral contact. On July 15, 1971, President 
Nixon announced that his Assistant for National Security Affairs, Dr. 
Henry Kissinger, had made a secret trip to Beijing to initiate direct 
contact with the Chinese leadership and that he, the President, had been 
invited to visit China.

In February 1972, President Nixon traveled to Beijing, Hangzhou, and 
Shanghai. At the conclusion of his trip, the U.S. and Chinese 
Governments issued the "Shanghai Communique," a statement of their 
foreign policy views. (For the complete text of the Shanghai Communique, 
see the Department of State Bulletin, March 20, 1972).

In the Communique, both nations pledged to work toward the full 
normalization of diplomatic relations. The U.S. acknowledged the Chinese 
position that all Chinese on both sides of the Taiwan Strait maintain 
that there is only one China and that Taiwan is part of China. The 
statement enabled the U.S. and China to temporarily set aside the 
"crucial question obstructing the normalization of relations"--Taiwan--
and to open trade and other contacts.

Liaison Office, 1973-78

In May 1973, in an effort to build toward the establishment of formal 
diplomatic relations, the U.S. and China established the United States 
Liaison Office (USLO) in Beijing and a counterpart Chinese office in 
Washington, D.C. In the years between 1973 and 1978, such distinguished 
Americans as David Bruce, George Bush, Thomas Gates, and Leonard 
Woodcock served as chiefs of the USLO with the personal rank of 
Ambassador.

President Ford visited China in 1975 and reaffirmed the U.S. interest in 
normalizing relations with Beijing. Shortly after taking office in 1977, 
President Carter again reaffirmed the interest expressed in the Shanghai 
Communique. The United States and China announced on December 15, 1978, 
that the two governments would establish diplomatic relations on January 
1, 1979.

Normalization

In the Joint Communique on the Establishment of Diplomatic Relations 
dated January 1, 1979, the United States transferred diplomatic 
recognition from Taipei to Beijing. The U.S. reiterated the Shanghai 
Communique's acknowledgment of the Chinese position that there is only 
one China and that Taiwan is a part of China; Beijing acknowledged that 
the American people would continue to carry on commercial, cultural, and 
other unofficial contacts with the people of Taiwan. The Taiwan 
Relations Act made the necessary changes in U.S. domestic law to permit 
such unofficial relations with Taiwan to flourish.

U.S.-China Relations Since Normalization

Vice Premier Deng Xiaoping's January 1979 visit to Washington, D.C. 
initiated a series of important, high-level exchanges, which continued 
until the spring of 1989. This resulted in many bilateral agreements--
especially in the fields of scientific, technological, and cultural 
interchange and trade relations. Since early 1979, the United States and 
China have initiated hundreds of joint research projects and cooperative 
programs under the Agreement on Cooperation in Science and Technology, 
the largest bilateral program.

On March 1, 1979, the United States and China formally established 
embassies in Beijing and Washington, D.C. During 1979, outstanding 
private claims were resolved, and a bilateral trade agreement was 
concluded. Vice President Walter Mondale reciprocated Vice Premier 
Deng's visit with an August 1979 trip to China. This visit led to 
agreements in September 1980 on maritime affairs, civil aviation links, 
and textile matters, as well as a bilateral consular convention.

As a consequence of high-level and working-level contacts initiated in 
1980, our dialogue with China broadened to cover a wide range of issues, 
including global and regional strategic problems, politico-military 
questions, including arms control, UN and other multilateral 
organization affairs, and international narcotics matters.

The expanding relationship that followed normalization was threatened in 
1981 by Chinese objections to the level of U.S. arms sales to Taiwan. 
Secretary of State Alexander Haig visited China in June 1981 in an 
effort to resolve Chinese questions about America's unofficial relations 
with Taiwan. Eight months of negotiations produced the U.S.-China joint 
communique of August 17, 1982. In this third communique, the U.S. stated 
its intention to reduce gradually the level of arms sales to Taiwan, and 
the Chinese described as a fundamental policy their effort to strive for 
a peaceful resolution to the Taiwan question. Meanwhile, Vice President 
Bush visited China in May 1982.

High-level exchanges continued to be a significant means for developing 
U.S.-China relations in the 1980s. President Reagan and Premier Zhao 
Ziyang made reciprocal visits in 1984. In July 1985, President Li 
Xiannian traveled to the United States, the first such visit by a 
Chinese head of state. Vice President Bush visited China in October 1985 
and opened the U.S. Consulate General in Chengdu, the U.S.'s fourth 
consular post in China. Further exchanges of cabinet-level officials 
occurred from 1985-89, capped by President Bush's visit to Beijing in 
February 1989.

In the period before the June 3-4, 1989 crackdown, a large and growing 
number of cultural exchange activities undertaken at all levels gave the 
American and Chinese peoples broad exposure to each other's cultural, 
artistic, and educational achievements. Numerous Chinese professional 
and official delegations visited the United States each month. Many of 
these exchanges continued after Tiananmen.

Bilateral Relations After Tiananmen

Following the Chinese authorities' brutal suppression of demonstrators 
in June 1989, the U.S. and other governments enacted a number of 
measures to express their condemnation of Chinese action that violated 
the basic human rights of its citizens. The U.S. suspended high-level 
official exchanges with China and weapons exports from the U.S. to 
China. The U.S. also imposed a series of economic sanctions. In the 
summer of 1990, at the G-7 Houston summit, Western nations called for 
renewed political and economic reforms in China, particularly in the 
field of human rights.

The U.S.-China trade relationship was disrupted by Tiananmen, and U.S. 
investors' interest in China dropped dramatically. The U.S. Government 
also responded to the political repression by suspending certain trade 
and investment programs on June 5 and 20, 1989. Some sanctions were 
legislated; others were executive actions. Examples include:

-- The Trade and Development Agency (TDA) and Overseas Private Insurance 
Corporation (OPIC) -- New activities suspended since June 1989.

-- Development Bank Lending/IMF Credits -- The United States does not 
support development bank lending and will not support IMF credits to 
China except for projects which meet basic human needs.

-- Munitions List Exports -- Subject to certain exceptions, no licenses 
may be issued for the export of any defense article on the U.S. 
Munitions List. This restriction may be waived upon a Presidential 
national interest determination.

-- Arms Imports -- Import of defense articles from China was banned 
after the imposition of the ban on arms exports to China. The import ban 
was subsequently waived by the Administration and re-imposed on May 26, 
1994. It covers all items on the Bureau of Alcohol, Tobacco, and 
Firearms' Munitions Import List.

In 1996, the PRC conducted military exercises in waters close to Taiwan 
in an apparent effort at intimidation. The United States dispatched two 
aircraft carrier battle groups to the region. Subsequently, tensions in 
the Taiwan Strait diminished and relations between U.S. and China have 
improved, with increased high-level exchanges and progress on numerous 
bilateral issues, including human rights, nonproliferation and trade. 
Chinese President Jiang Zemin visited the United States in the fall of 
1997, the first state visit to the U.S. by a Chinese president since 
1985. In connection with that visit, the two sides reached agreement on 
implementation of their 1985 agreement on the Peaceful Uses of Nuclear 
Energy, as well as a number of other issues. President Clinton will pay 
a reciprocal visit to China in June 1998.

U.S.-Chinese Economic Relations

U.S. direct investment in China covers a wide range of manufacturing 
sectors, several large hotel projects, and a heavy concentration in 
offshore oil and gas development in the South China Sea. U.S. companies 
have entered agreements establishing more than 20,000 equity joint 
ventures, contractual joint ventures, and wholly foreign-owned 
enterprises in China. Over 100 U.S.-based multinationals have projects, 
some with multiple investments.

The 1997 trade deficit of $49.7 billion with China was the United 
States' second largest. Some of the factors that influence the U.S. 
deficit with China include:

-- The strength of the U.S. economy.

-- A shift of export industries to China from the newly industrialized 
economies (NIEs) in Asia. China has increasingly become the last link in 
a long chain of value-added production.

-- China's restrictive trade practices, which include a wide array of 
barriers to foreign goods and services, often aimed at protecting state-
owned enterprises. These practices include: high tariffs, lack of 
transparency, requiring firms to obtain special permission to import 
goods, unevenness of application of laws and regulations, and leveraging 
technology from foreign firms in return for market access.

-- China's domestic output of labor-intensive goods exceeds China's 
demand, while U.S. demand for labor intensive goods exceeds domestic 
output.

The increasingly important U.S. economic and trade relations with China 
are an important element of the Administration's engagement policy 
toward China. In economics and trade, there are two main elements to the 
U.S. approach:

-- First, the United States seeks to fully integrate China into the 
global, market-based economic and trading system. China's participation 
in the global economy will nurture the process of economic reform and 
increase China's stake in the stability and prosperity of East Asia.

-- Second, the United States seeks to expand U.S. exporters' and 
investors' access to the Chinese market. As China grows and develops, 
its needs for imported goods and services will grow even more rapidly.

The United States and China maintain a very active dialogue on bilateral 
trade issues. In 1995, agreements were concluded on the protection of 
intellectual property rights (IPR), textiles, and satellite launches. As 
a result of the IPR agreement, more than 10 million illegal or 
unauthorized LDs, CDs, and other publications were seized, and 250 
"major criminals" were arrested for their involvement in IPR-related 
activities in 1996. The United States is China's largest export market 
for textile and apparel products. A new four-year U.S.-China Bilateral 
Agreement on Textile Trade was signed in February 1997. In addition, the 
two countries held their first Sustainable Development Forum in March 
1997, which sought to expand cooperation in the environmental arena.

At the September 1997 Joint Economic Committee meeting in Beijing, the 
U.S. continued dialogue with the Chinese on macroeconomic issues. The 
Joint Commission on Commerce and Trade, hosted in Beijing in October 
1997, discussed expansion of long-term economic and business ties 
between China and the United States. Agreements were made to set up 
seminars on project finance and export controls, to establish a series 
of exchanges on commercial law, and to further explore ways to assist 
small and medium-sized U.S. businesses export to China.

At the October 1997 summit, China agreed to purchase 50 Boeing aircraft 
valued at approximately $3 billion, participate in the Information 
Technology Agreement which cuts to zero tariffs on computers, 
semiconductors, and telecommunications, and allow U.S. financial news 
services providers to operate on acceptable terms in China.

Economic Relations With Hong Kong

Under the 1984 Sino-British Joint Declaration, Hong Kong became a 
Special Administrative Region (SAR) of the P.R.C. on July 1, 1997. Hong 
Kong has autonomy in its international trade and economic relations. The 
United States has substantial economic and social ties with Hong Kong, 
with an estimated $16 billion invested there. There are 1,100 U.S. firms 
and 50,000 American residents in Hong Kong. The United States was Hong 
Kong's second-largest market in 1997--the U.S. imported $10.2 billion. 
Hong Kong took $15.1 billion in U.S. exports in that year.

China's Most Favored Nation (MFN) Status

There has been debate in the U.S. regarding the extension of China's 
most-favored-nation status, which allows non-discriminatory tariff 
treatment for Chinese exports to the U.S. The reciprocal granting of MFN 
treatment was the main pillar of the U.S.-China Trade Agreement signed 
in 1979, which marked the beginning of normal commercial relations 
between the two countries. As a non-market-economy country, China's MFN 
status must be renewed annually by a U.S. presidential waiver 
stipulating that China meets the freedom of emigration requirements set 
forth in the Jackson-Vanik amendment to the Trade Act of 1974. China had 
received the waiver routinely prior to 1989, but after Tiananmen, 
although the presidential waiver continued, Congress began to exert 
strong pressure to oppose MFN renewal. In 1991 and 1992, Congress voted 
to place conditions on MFN renewal for China, but those conditions were 
vetoed by the Bush Administration, which stressed the importance of our 
relationship with China and the belief that MFN was not the correct tool 
to exert pressure on China and would only result in isolating it.

In 1994, President Clinton decided to delink the annual MFN process from 
China's human rights record. At the same time, the President decided to 
adopt a new human rights strategy, maintaining human rights concerns as 
an essential part of the U.S. engagement with China but in a broader 
context. The President also ordered several additional steps to support 
those seeking to foster the rule of law and a more open civil society in 
China.

Revoking or conditioning Most Favored Nation (MFN) trading status and 
tariff treatment would remove a beneficial influence for creating a more 
open China. It would undermine American leadership in the region and the 
confidence of our Asian allies. It would damage our economy, harm Taiwan 
and especially Hong Kong, whose economies are closely intertwined with 
that of the P.R.C.; and it would damage our ability to work with China 
on vital regional security issues such as North Korea and global 
security concerns such as nonproliferation. Continuation of MFN status 
for China will help further integrate it into the international system 
and promote the interests of the American people.

DEFENSE

Establishment of a professional military force equipped with modern 
weapons and doctrine was the last of the "Four Modernizations" announced 
by Zhou Enlai and supported by Deng Xiaoping. In keeping with Deng's 
mandate to reform, the People's Liberation Army (PLA), which includes 
the strategic nuclear forces, army, navy, and air force, has demobilized 
about 3 million men and women since 1978 and has introduced modern 
methods in such areas as recruitment and manpower, strategy, and 
education and training.

Following the June 1989 Tiananmen crackdown, ideological correctness was 
temporarily revived as the dominant theme in Chinese military affairs. 
Reform and modernization appear to have since resumed their position as 
the PLA's priority objectives, although the armed forces' political 
loyalty to the CCP remains a leading concern.

The Chinese military is trying to transform itself from a land-based 
power, centered on a vast ground force, to a smaller, mobile, high-tech 
military capable of mounting defensive operations beyond its coastal 
borders.

China's power-projection capability is limited. China has acquired some 
advanced weapons systems, including SU-27 aircrafts and Kilo-class 
diesel submarines from Russia. However, the mainstay of the air force 
continues to be the 1960s-vintage F-7, and naval forces still consist 
primarily of 1960s-era technology.

Nuclear Weapons and Arms Control Policy

Nuclear Weapons

In 1955, Mao Zedong's Chinese Communist Party decided to proceed with a 
nuclear weapons program; it was developed with Soviet assistance until 
1960. After its first nuclear test in October 1964, Beijing deployed a 
modest but potent ballistic missile force, including land and sea-based 
intermediate-range and intercontinental ballistic missiles.

China became a major international arms exporter during the 1980s. 
Beijing joined the Middle East arms control talks, which began in July 
1991 to establish global guidelines for conventional arms transfers, but 
announced in September 1992 that it would no longer participate because 
of the U.S. decision to sell F-16A/B aircraft to Taiwan.

China was the first state to pledge "no first use" of nuclear weapons. 
It joined the International Atomic Energy Agency (IAEA) in 1984 and 
pledged to abstain from further atmospheric testing of nuclear weapons 
in 1986. China acceded to the Nuclear Nonproliferation Treaty (NPT) in 
1992 and supported its indefinite and unconditional extension in 1995. 
In 1996, it signed the Comprehensive Test Ban Treaty and agreed to seek 
an international ban on the production of fissile nuclear weapons 
material.

In 1996, China committed not to provide assistance to unsafeguarded 
nuclear facilities. China attended the May 1997 meeting of the NPT 
Exporters (Zangger) Committee as an observer and became a full member in 
October 1997. The Zangger Committee is a group which meets to list items 
that should be subject to IAEA inspections if exported by countries 
which have, as China has, signed the Non-Proliferation Treaty. In 
September 1997, China issued detailed nuclear export control 
regulations. China is implementing regulations establishing controls 
over nuclear-related dual-use items in 1998. China also has decided not 
to engage in new nuclear cooperation with Iran (even under safeguards), 
and will complete existing cooperation, which is not of proliferation 
concern, within a relatively short period.

Based on significant, tangible progress with China on nuclear 
nonproliferation, President Clinton in 1998 took steps to bring into 
force the 1985 U.S.-China Agreement on Peaceful Nuclear Cooperation. 
Implementation of this agreement, which establishes a mechanism that 
will enable the U.S. and China to continue discussing export controls 
and China's nuclear cooperation with other countries, will give the U.S. 
an effective basis for continuing to promote progress by China on 
nonproliferation.

Chemical Weapons

China is not a member of the Australia Group, an informal and voluntary 
arrangement made in 1985 to monitor developments in the proliferation of 
dual-use chemicals and to coordinate export controls on key dual-use 
chemicals and equipment with weapons applications. In April 1997, 
however, China ratified the Chemical Weapons Convention (CWC) and, in 
September 1997, promulgated a new chemical weapons export control 
directive.

Missiles

In March of 1992, China formally undertook to abide by the guidelines 
and parameters of the Missile Technology Control Regime (MTCR), the 
multinational effort to restrict the proliferation of missiles capable 
of delivering weapons of mass destruction. China reaffirmed this 
commitment in 1994.

CHINESE DIPLOMATIC REPRESENTATION

Ambassador--Li Zhaoxing

Chancery address:

2300 Connecticut Avenue NW
Washington, D.C. 20008
Tel.: (202) 328-2500

There are Chinese Consulates General in Chicago, Houston, Los Angeles, 
New York, and San Francisco.

U.S. DIPLOMATIC REPRESENTATION

Ambassador--James R. Sasser

Embassy address:

Xiu Shui Bei Jie 3
Beijing 100600
Tel.: (86) (1) 532-3831

(Mailing address from U.S.: PSC 461, Box 50, FPO AP 96521-0002--use U.S. 
domestic postage rates.)

There are U.S. Consulates General in Chengdu, Guangzhou, Shanghai, and 
Shenyang.

FURTHER INFORMATION

The Department of Commerce publishes the Overseas Business Reports and 
Foreign Economic Trends Reports, which contain information on market 
research, foreign trade corporations, contract negotiations, shipping 
and insurance, PRC tariffs, a section on travel in China, and other 
topics of interest to Americans who want to do business with China. The 
report may be obtained free of charge from the Department of Commerce.

Other U.S. Government documents on China include: the Annual Human 
Rights Report and the National Trade Estimate.

U.S. Offices

Office of Chinese & Mongolian Affairs, U.S. Department of State
Washington, DC 20520
Tel.: (202) 647-6300
FAX: (202) 647-6820

American Embassy Beijing
Xiu Shui Bei Jie 3
Beijing 100600
People's Republic of China
Tel.: (86) (1) 6532-3831
FAX: (86) (1) 6532-3178

American Consulate General Guangzhou
No. 1 South Shamian Street
Guangzhou 200031
People's Republic of China
Tel.: (86) (20) 8188-8911
FAX: (86) (20) 8186-2341

American Consulate General Shanghai
1469 Huai Hai Zhong Lu
Shanghai 200031
People's Republic of China
Tel.: (86) (21) 6433-6880
FAX: (86) (21) 6433-4122

American Consulate General Shenyang
52 14th Wei Road
Heping District
Shenyang, Liaonong 110003
People's Republic of China
Tel.: (86) (24) 322-1198
FAX: (86) (24) 322-2374

American Consulate General Chengdu
4 Lingshiguan Road
Chengdu, Sichuan 610041
People's Republic of China
Tel.: (86) (28) 558-3992
FAX: (86) (28) 558-3520

When calling the phone or fax numbers of a post in another province from 
within the country, replace the country code (86) with a 0.

Chinese Offices

Embassy of the People's Republic of China
2300 Connecticut Avenue
NW Washington, DC 20008
Tel.: (202) 328-2500

Consulate General of the People's Republic of China, New York
520 12th Avenue
New York, New York 10036
Tel.: (212) 868-7752

Consulate General of the People's Republic of China, San Francisco
1450 Laguna Street
San Francisco, California 94115
Tel.: (415) 563-4885

Consulate General of the People's Republic of China, Houston
3417 Montrose Blvd.
Houston, Texas 77006
Tel.: (713) 524-4311

Consulate General of the People's Republic of China, Chicago
100 West Erie St.
Chicago, Illinois 60610
Tel.: (312) 803-0098

Consulate General of the People's Republic of China, Los Angeles
502 Shatto Place, Suite 300
Los Angeles, California 90020
Tel.: (213) 807-8088

U.S.-China Trade Advice

U.S. Department of Commerce
International Trade Administration, Office of China and Hong Kong 
Affairs
14th and E Streets NW
Rm. 2317 Washington, D.C. 20230
Tel.: (800) 872-8723; (202) 482-0543

U.S.-China Business Council
1818 N Street NW, Suite 500
Washington, D.C. 20036
Tel.: (202) 429-0340

Cultural Exchange

National Association for Foreign Student Affairs Special Projects
1860 19th Street, NW
Washington, D.C. 20009
Tel.: (202) 462-4811

National Committee on U.S.-China Relations
777 United Nations Plaza, Room 9B
New York, New York 10017
Tel.: (212) 645-9677

Electronic Information

Consular Affairs Bulletin Board (CABB). Available by modem, the CABB 
provides Consular Information Sheets, Travel Warnings, and helpful 
information for travelers. Access at (301) 946-4400 is free of charge to 
anyone with a personal computer, modem, telecommunications software, and 
a telephone line.

Department of State Foreign Affairs Network. Available on the Internet, 
DOSFAN provides timely, global access to official U.S. foreign policy 
information. Updated daily, DOSFAN includes Background Notes; Dispatch, 
the official magazine of U.S. foreign policy; daily press briefings; 
Country Commercial Guides; directories of key officers of foreign 
service posts; etc. DOSFAN's World Wide Web site is at 
http://www.state.gov.

U.S. Foreign Affairs on CD-ROM (USFAC). Published on an annual basis by 
the U.S. Department of State, USFAC archives information on the 
Department of State Foreign Affairs Network, and includes an array of 
official foreign policy information from 1990 to the present. Contact 
the Superintendent of Documents, U.S. Government Printing Office, P.O. 
Box 371954, Pittsburgh, PA 15250-7954. To order, call (202) 512-1800 or 
fax (202) 512-2250.

National Trade Data Bank (NTDB). Operated by the U.S. Department of 
Commerce, the NTDB contains a wealth of trade-related information. It is 
available on the Internet (www.stat-usa.gov) and on CD-ROM. Call the 
NTDB Help-Line at (202) 482-1986 for more information.

Following are some other useful web sites.

Department of State:
-- China homepage at http://www.state.gov/www/current/debate/china.html

Non-Department of State:
-- China Internet Information Center homepage at 
http://www.chinanews.org
-- Chinese Embassy homepage at http://www.china-embassy.org

TRAVEL NOTES

Visas

To enter the People's Republic of China, a U.S. citizen must have a 
visa. You may apply for a visa either in person or by mail at the 
Chinese Embassy in Washington, D.C., or at a Chinese consulate in 
Chicago, Houston, Los Angeles, New York, or San Francisco.

Visas can take up to 10 working days to process. An additional fee of 
$30 may be paid for one-day service, $20 for two-day service, and $10 
for three-day service.

To apply for a visa, the following items are necessary: a completed visa 
application form, a valid passport, a passport-sized photograph (2" x 
2", either black-and-white or color), and the appropriate fee. Contact 
the Embassy or nearest consulate for detailed payment information. Proof 
of intended travel, such as airline tickets or hotel reservations, is 
also required.

Visas for tour group members are usually obtained by the travel agencies 
as part of the tour package. China International Travel Service (CITS) 
has exclusive responsibility for all foreign tourism in China. You may 
book a CITS tour through a number of travel agencies and airlines in the 
United States and abroad. You may contact the China National Tourist 
Office at: 354 5th Avenue, Room 6413; Empire State Building; New York, 
NY 10118; (212) 760-9700. Tour members with special interests, such as 
visits to hospitals or universities, should notify the tour organizer to 
arrange such visits.

Business visas are issued on the basis of an invitation from one of the 
Chinese foreign trade organizations. Should you wish to visit China for 
business purposes, correspond directly with the appropriate organization 
in China.

Persons transiting China must have in their possession a valid Chinese 
visa, even if they do not leave the airport or carrier; otherwise, they 
may be subject to a $1,000 fine.

Further visa information is available from China's embassy on the 
Internet at: http://www.china-embassy.org/visa/visa.htm.

AIDS Test

In addition to the requirements above, long-term (6 months or longer) 
visitors to China must have an AIDS test. Tests can be given in China. 
If you have the test done in the United States, the results must 
indicate the test was given by a government facility such as your 
state's health department; if done at a private health facility, the 
results must be notarized by a notary public.

Immunizations

Information on health precautions for travelers can be obtained in the 
United States from the Centers for Disease Control (888) 232-3228, the 
U.S. Public Health Service, private physicians, and inoculation centers.

The U.S. Public Health Service recommends diphtheria/tetanus and polio 
vaccines for all travelers abroad. For China, most health warnings are 
directed at those who plan extended travel or travel outside major urban 
areas.

A Hepatitis A vaccine or a dose of immune globulin (IG) is recommended 
before travel for person two years of age or older. In addition, 
immunizations for Japanese B encephalitis (JE) are recommended during 
the epidemic summer months for visitors planning to stay in rural 
farming areas for four weeks or more.

Depending on the season and destination, you may need to use insect 
repellent and take other measures to reduce contact with mosquitoes. A 
yellow fever vaccination certificate is required from travelers coming 
from infected areas.

Visitors are advised not to drink tap water in China. Hotel rooms are 
almost always supplied with boiled water, which is safe to drink. Water 
purification tablets might also prove useful in other situations.

General Travel Information

The U.S. Department of State's Consular Information Program (see 
http://travel.state.gov) provides Travel Warnings and Consular 
Information Sheets. Travel Warnings are issued when the State Department 
recommends that Americans avoid travel to a certain country. Consular 
Information Sheets exist for all countries and include information on 
immigration practices, currency regulations, health conditions, areas of 
instability, crime and security, political disturbances, and the 
addresses of the U.S. posts in the subject country. A booklet entitled 
Health Information for International Travel (HHS publication number CDC-
95-8280, price $14.00) and publications on obtaining passports and 
planning a safe trip are available from the Superintendent of Documents, 
U.S. Government Printing Office, Washington, D.C. 20402, tel. (202) 512-
1800.

Travelers can check the latest health information with the U.S. Centers 
for Disease Control and Prevention in Atlanta, Georgia. A hotline at 
(404) 332-4559 provides (via recorded voice or fax) the most recent 
health advisories, immunization recommendations or requirements, and 
advice on food and drinking water safety for regions and countries. 
Information is also available on the Internet at: http://www.cdc.gov.

Upon their arrival in a country, U.S. citizens are encouraged to 
register at the U.S. Embassy or nearest Consulate General. This may help 
family members contact you in case of an emergency. Emergency 
information concerning Americans traveling abroad may be obtained from 
the Office of Overseas Citizens Services at (202) 647-5225.

NOTE: Inclusion of non-U.S. Government links does not imply endorsement 
of contents.

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