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
Total area: 9,596,960 sq. km. (approximately 3.7 million sq.
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.
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
Religions: Officially atheist; Taoism, Buddhism, Islam,
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%.
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.
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
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
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.
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
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
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
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.
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.
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
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
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
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
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
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.
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
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.
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
When the NPC is not in session, its permanent organ, the Standing
Committee, exercises state power.
Principal Government and Party Officials
Vice President--Hu Jintao
Premier, State Council--Zhu Rongji
Politburo Standing Committee
Jiang Zemin (General Secretary)
Full Politburo Members
Alternate Politburo Members
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.
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.
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
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).
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.
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.
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
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
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
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
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
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
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 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.
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.
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
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
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
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.
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.
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.
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
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
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,
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
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
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
-- 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
-- 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
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
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
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
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
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.
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
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
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
People's Republic of China
Tel.: (86) (20) 8188-8911
FAX: (86) (20) 8186-2341
American Consulate General Shanghai
1469 Huai Hai Zhong Lu
People's Republic of China
Tel.: (86) (21) 6433-6880
FAX: (86) (21) 6433-4122
American Consulate General Shenyang
52 14th Wei Road
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
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
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
Department of State:
-- China homepage at
Non-Department of State:
-- China Internet Information Center homepage at
-- 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
SPECIFIC NOTES ON TRAVEL TO CHINA
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.
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
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
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
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