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

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 P.R.C. 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.  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."

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 and unofficial religious practice is 
flourishing.  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.

China hosted a delegation of distinguished American religious 
leaders in February 1998.  The religious leaders met with 
President Jiang Zemin, conveyed U.S. views on religious freedom, 
and traveled to numerous sites, including Tibet.

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.  The 
government states that it opposes physical compulsion to submit 
to abortion or sterilization, but instances of coercion have 
reportedly 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.

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.

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 
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, 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.

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.  The leadership has also 
downsized the government bureaucracy.

GOVERNMENT

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.

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.

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

POLITICAL CONDITIONS

Legal System

The government's efforts to promote rule of law are significant 
and ongoing. 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.

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 1990s.  
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.

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 signature in October 
1998 of the International Covenant on Civil and Political Rights. 
China has also expanded dialogue with foreign governments.  These 
positive steps not withstanding, serious problems remain. The 
government restricts freedom of assembly, expression, and the 
press and represses dissent.

ECONOMY

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.

Asian Financial Crisis

The regional crisis has affected China at the margin, mainly 
through decreased foreign direct investment and a sharp drop in 
the growth of its exports.  However, China has huge reserves, a 
currency that is not freely convertible, and capital inflows that 
consist overwhelmingly of long-term investment.  For these 
reasons it has remained largely insulated from the regional 
crisis and its commitment not to devalue has been a major 
stabilizing  factor for the region.  However, China faces slowing 
growth and rising unemployment based on internal problems, 
including a financial system burdened by huge amounts of bad 
loans, and massive layoffs stemming from aggressive efforts to 
reform state-owned-enterprises (SOEs).

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.

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).

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.  The Chinese government recognizes 
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

Scientific and technological modernization has been a growing 
priority for Chinese leaders. They plan to rebuild the 
educational structure, continue sending students abroad, 
negotiate technological purchases and transfer arrangements with 
the U.S. and others, and develop 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.

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.

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

According to U.S. statistics, China's global trade totaled $324 
billion in 1997 and $151 billion in the first half of 1998; 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.  According to 
U.S. statistics, China had a trade surplus with the U.S. of $49.7 
billion in 1997 and $36.4 billion in 1998 (January-August).

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 12th 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.

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 1997, China approved 21,046 
foreign investment projects and received over $45 billion in 
foreign direct investment.

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 $145 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 P.R.C., 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, 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 
competition with 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 immediate aftermath of Tiananmem crackdown in June 1989, 
many countries reduced their diplomatic contacts with China as 
well as their economic assistance programs.  In response, China 
worked vigorously to expand its relations with foreign countries, 
and by late 1990, 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.

In recent years, 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), and participated in the ASEAN 
Regional Forum.  The Chinese improved 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.

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.

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, DC. 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, DC 
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, DC. 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 P.R.C. 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 visited China in June 1998.  He 
traveled extensively in China and direct interaction with the 
Chinese people included live speeches and a radio show, allowing 
the President to convey first hand to the Chinese people a sense 
of American ideals and values.

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 4-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. (See 
separate Background Notes on Hong Kong for additional 
information.)

China's Normal Trade Status

There has been debate in the U.S. regarding the extension of 
China's normal trade status, which allows non-discriminatory 
tariff treatment for Chinese exports to the U.S. The reciprocal 
granting of normal trade 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 normal trade 
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 
normal trade status renewal. In 1991 and 1992, Congress voted to 
place conditions on normal trade status 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 normal trade status 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 normal 
trade status 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 normal trade 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 normal trade status for China 
will help further integrate it into the international system and 
promote the interests of the American people.

Chinese Diplomatic Representation in the U.S.

Ambassador--Li Zhaoxing

In addition to China's embassy in Washington, DC, there are 
Chinese Consulates General in Chicago, Houston, Los Angeles, New 
York, and San Francisco.

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. Diplomatic Representation in China

Ambassador--James R. Sasser

In addition to the U.S. embassy in Beijing, there are U.S. 
Consulates General in Chengdu, Guangzhou, Shanghai, and Shenyang.

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

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

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

Note: 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.

CONTACTS FOR 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, P.R.C. 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. Department of State Contact

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

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, DC 20230
Tel.: (800) 872-8723; (202) 482-0543

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

Cultural Exchange

National Association for Foreign Student Affairs Special Projects
1860 19th Street, NW
Washington, DC 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

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 AND BUSINESS INFORMATION

The U.S. Department of State's Consular Information Program 
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 country. Public 
Announcements are issued as a means to disseminate information 
quickly about terrorist threats and other relatively short-term 
conditions overseas which pose significant risks to the security 
of American travelers. Free copies of this information are 
available by calling the Bureau of Consular Affairs at 202-647-
5225 or via the fax-on-demand system: 202-647-3000. Travel 
Warnings and Consular Information Sheets also are available on 
the Consular Affairs Internet home page: http://travel.state.gov 
and the Consular Affairs Bulletin Board (CABB). To access CABB, 
dial the modem number: 301-946-4400 (it will accommodate up to 
33,600 bps), set terminal communications program to N-8-1(no 
parity, 8 bits, 1 stop bit); and terminal emulation to VT100. The 
login is travel and the password is info. (Note: Lower case is 
required). The CABB also carries international security 
information from the Overseas Security Advisory Council and 
Department's Bureau of Diplomatic Security. Consular Affairs 
Trips for Travelers publication series, which contain information 
on obtaining passports and planning a safe trip abroad, can be 
purchased from the Superintendent of Documents, U.S. Government 
Printing Office, P.O. Box 371954, Pittsburgh, PA 15250-7954; 
telephone: 202-512-1800; fax 202-512-2250.

Emergency information concerning Americans traveling abroad may 
be obtained from the Office of Overseas Citizens Services at 
(202) 647-5225. For after-hours emergencies, Sundays and 
holidays, call 202-647-4000.

Passport Services information can be obtained by calling the 24-
hour, 7-day a week automated system ($.35 per minute) or live 
operators 8 a.m. to 8 p.m. (EST) Monday-Friday ($1.05 per 
minute). The number is 1-900-225-5674 (TDD: 1-900-225-7778). 
Major credit card users (for a flat rate of $4.95) may call 1-
888-362-8668 (TDD: 1-888-498-3648).

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 gives the most recent health 
advisories, immunization recommendations or requirements, and 
advice on food and drinking water safety for regions and 
countries. A booklet entitled Health Information for 
International Travel (HHS publication number CDC-95-8280) is 
available from the U.S. Government Printing Office, Washington, 
DC 20402, tel. (202) 512-1800.

Information on travel conditions, visa requirements, currency and 
customs regulations, legal holidays, and other items of interest 
to travelers also may be obtained before your departure from a 
country's embassy and/or consulates in the U.S. (for this 
country, see "Chinese Diplomatic Representation in the U.S." 
listing in this publication).

U.S. citizens who are long-term visitors or traveling in 
dangerous areas are encouraged to register at the U.S. embassy 
upon arrival in a country (see "U.S. Diplomatic Representation in 
China" listing in this publication). This may help family members 
contact you in case of an emergency.

Further Electronic Information

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.

SPECIFIC NOTES ON TRAVEL TO CHINA

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, DC, 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.

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