Res earc her Published by CQ Press, a Division of SAGE CQ www.cqresearcher.com U.S.-China Relations

Is a future confrontation looming?

isputes that have bedeviled relations between the United States and China for decades flared up again following President Obama’s decision to D sell weapons to Taiwan and receive Tibet’s revered Dalai Lama. From the U.S. perspective, China’s refusal to raise the value of its currency is undermining America’s — and Europe’s — economic recovery. Beijing also rebuffed Obama’s President Obama meets with Chinese President Hu proposal of “a partnership on the big global issues of our time.” Jintao during his Asian tour in November 2009. Conflict over issues ranging from Iran’s nuclear ambitions to China’s currency to In addition, the Chinese insist on tackling their pollution problems U.S. support for Taiwan have roiled relations between China and the U.S. in their own way, and have been reluctant to support U.S. diplo - matic efforts to impose tough sanctions on nuclear-minded Iran. I With the central bank of China holding more than $800 billion of N THIS REPORT S the U.S. national debt in the form of Treasury notes, and their THE ISSUES ...... 411 I economy speeding along at a 9 percent growth rate, the Chinese BACKGROUND ...... 418 D are in no mood to be accommodating. CHRONOLOGY ...... 419 E CURRENT SITUATION ...... 424 AT ISSUE ...... 425 OUTLOOK ...... 427 CQ Researcher • May 7, 2010 • www.cqresearcher.com Volume 20, Number 18 • Pages 409-432 BIBLIOGRAPHY ...... 430 THE NEXT STEP ...... 431 RECIPIENT OF SOCIETY OF PROFESSIONAL JOURNALISTS AWARD FOR EXCELLENCE N AMERICAN BAR ASSOCIATION SILVER GAVEL AWARD U.S.-C HINA RELATIONS CQ Re search er

May 7, 2010 THE ISSUES China at a Glance Volume 20, Number 18 413 Demographic and economic • Is a U.S.-China partner - data. MANAGING EDITOR: Thomas J. Colin 411 ship actually possible? [email protected] • Is a confrontation with China Sells Most Arms to 415 ASSISTANT MANAGING EDITOR: Kathy Koch China inevitable, as some Pakistan [email protected] predict? Pakistan purchased more ASSOCIATE EDITOR: Kenneth Jost • Has China’s “market than a third of all Chinese conventional arms. authoritarian” model of STAFF WRITERS: Thomas J. Billitteri, Marcia Clemmitt, Peter Katel government emerged as U.S. Trade Deficit With an alternative to Western 416 China Has Surged CONTRIBUTING WRITERS: Rachel Cox, democracy? Sarah Glazer, Alan Greenblatt, Reed Karaim The 2009 shortfall is projected Barbara Mantel, Patrick Marshall, BACKGROUND at $238 billion. Tom Price, Jennifer Weeks 417 China’s U.S. Holdings DESIGN /P RODUCTION EDITOR: Olu B. Davis Presidential Challenges Greatly Increased ASSISTANT EDITOR: Darrell Dela Rosa 418 U.S. presidents have wrestled China now has above with China’s rapid rise. $1.2 trillion in U.S. securities. EDITORIAL INTERNS: Dagny Leonard, Julia Russell All Business 419 Chronology FACT-CHECKING: Eugene J. Gabler, 420 U.S. policy toward China Key events since 1972. Michelle Harris is based on economic Is China Less Welcoming engagement. 420 to U.S. Investors? As Chinese know-how ‘An Edgy Game’ grows, opportunities diminish 424 The economic boom for foreigners. unfolds amidst frequent unrest. 422 ‘Harmonizing’ the Internet A Division of SAGE in China PRESIDENT AND PUBLISHER: China’s love affair with the John A. Jenkins CURRENT SITUATION Net is increasing along with censorship. Copyright © 2010 CQ Press, a Division of SAGE. Tense Beginning 424 At Issue SAGE reserves all copyright and other rights herein, Several issues are roiling 425 Is today’s China a communist unless pre vi ous ly spec i fied in writing. No part of this relations. country? publication may be reproduced electronically or otherwise, without prior written permission. Un- au tho rized re pro duc tion or trans mis sion of SAGE copy - OUTLOOK FOR FURTHER RESEARCH right ed material is a violation of federal law car ry ing civil fines of up to $100,000. The Taiwan Question For More Information 427 What will China do about 429 Organizations to contact. CQ Press is a registered trademark of Congressional U.S. arms sales? Quarterly Inc. Bibliography CQ Researcher (ISSN 1056-2036) is printed on acid- 430 Selected sources used. free paper. Pub lished weekly, except; (Jan. wk. 1) SIDEBARS AND GRAPHICS (May wk. 4) (July wks. 1, 2) (Aug. wks. 2, 3) (Nov. 431 The Next Step wk. 4) and (Dec. wks. 4, 5), by CQ Press, a division Trigger Points in the East Additional articles . of SAGE Publications. Annual full-service subscriptions 412 and the West start at $803. For pricing, call 1-800-834-9020. To pur - Citing CQ Researcher chase a CQ Researcher report in print or electronic China’s support of Pakistan 431 Sample bibliography formats. and naval buildup cause format (PDF), visit www. cqpress.com or call 866-427- concern. 7737. Single reports start at $15. Bulk purchase dis - counts and electronic-rights licensing are also avail - able. Pe ri od i cals post age paid at Wash ing ton, D.C., and ad di tion al mailing of fic es. POST MAST ER: Send ad dress chang es to CQ Re search er , 2300 N St., N.W., Suite 800, Wash ing ton, DC 20037. Cover: AFP/Getty Images/Mandel Ngan

410 CQ Researcher U.S.-China Relations BY ROLAND FLAMINI

Last year, China overtook THE ISSUES Germany as the world’s top exporter. China is now Amer - resident Bill Clinton’s ica’s second-biggest trading trip to China in July partner after Canada, with P 1998 was a splashy, $62.3 billion in trade to date 10-day display of America’s in 2010 (up from $52.5 bil - power and prestige. Clinton lion during the same peri - arrived in Beijing with an en - od in 2009). 3 But China is tourage that included his wife, also the leading trading Hillary, and daughter Chelsea, partner of the European five Cabinet secretaries, Union, Japan, Brazil and more than 500 White House India, reflecting the global staffers, members of Congress reach of its burgeoning com - and security personnel, plus mercial activity. It is second a swarm of journalists. His only to the United States in meetings with China’s lead - energy consumption, has ers turned into vigorous and overtaken the U.S. as the

lively debates. At Beijing z biggest producer of green - e

University, Clinton delivered p house gasses on the planet o L

a forthright speech on human e and is also the No. 1 mar - p p

rights and answered ques - i ket for automobile sales. l i tions from Chinese students, h The string of accomplish - P / all of which was televised s ments has tilted the balance e g live nationwide. The author - a of the world’s most impor - m I ities released a number of tant bilateral relationship in y t t dissidents, and as the Amer - e favor of the Chinese. With G ican visitors toured China’s / America’s economy weak - P F landmarks large crowds A ened, its military mired in turned out to greet them. 1 Bustling Shanghai — with twice the number of high two long and costly wars and But that was then. Presi - rises as Manhattan — reflects China’s phenomenal its trade imbalance with China growth. Some economists worry that China holds nearly dent Obama’s China visit in $900 billion in U.S. Treasury securities, refuses to fairly heavily in the red (-$238 bil - November 2009 was a low- value its currency and maintains an annual trade lion) Obama’s trip was fash - key, four-day affair, part of a advantage over the U.S. of more than $230 billion. ioned to Beijing’s specifica - swing through Southeast Asia. tions — brief and businesslike. Wife Michelle and daughters Malia and bidden City, but only after it was emp - Because China holds more than Sasha remained at home in Washing - tied of tourists. $877 billion of U.S. Treasury secu - ton. His one direct contact with the In the years between the two pres - rities, commentators likened the visit Chinese public, a town meeting with idential visits, China has emerged as to a debtor meeting with his bank 500 Chinese students in Shanghai, was the world’s third-largest economy after manager. deemed a local event and not broad - the United States and Japan, and a Persuading the Chinese to increase cast nationwide. Throughout his stay, force to be reckoned with in global af - the value of their currency was high Obama made no public statement on fairs. And while the United States and on Obama’s talks agenda. Concerned human rights — although he did crit - Europe continue their uphill struggle American manufacturers and unions icize China’s Internet censorship, with - to recover from the world recession, say China deliberately keeps the ren - out mentioning China by name. In Bei - China is back on track, posting a phe - minbi (also referred to as the yuan) jing, his joint press appearance with nomenal 11.9 percent growth rate for low against the dollar, giving China’s his Chinese host, President Hu Jintao, the first quarter of 2010 — well above goods an unfair advantage in U.S. and was limited to a statement from each the annual 8 percent its leaders con - other foreign markets. China’s refusal leader, with no press questions taken. sider crucial to keeping unemployment to adopt a floating currency system, Like Clinton, Obama visited the For - and social unrest at bay. 2 according to experts, leads to so-called

www.cqresearcher.com May 7, 2010 411 U.S.-C HINA RELATIONS

goods “dumping” by Chinese ex - a tit-for-tat tariff battle. The United When — shortly before Obama’s porters — making their goods cheap - States currently imposes special tariffs visit — the United States announced er and undercutting foreign manufac - and duties on 95 categories of goods stiff penalties on $3.2 billion in steel turers. imported from China — the highest pipe from China for use in oil and The dispute over pricing has led to for any country. 4 gas fields, the Ministry of Commerce

412 CQ Researcher But Iran is China’s third-largest crude China at a Glance oil supplier, shipping 460,000 barrels Area: 9.6 million sq. km. (slightly smaller than the U.S.) a day in 2009 and about the same Population: 1.34 billion (July 2009 est.); U.S.: 308 million this year. China’s National Petroleum Corp. also has sizable investments in Birth rate: 14 births/1,000 population (2009 est.); United States: 13.82 Iranian oil production. 7 In Beijing, births/1,000 population (2009 est.) the Chinese shared Obama’s concern Ethnic groups: Han Chinese 91.5%; Zhuang, Manchu, Hui, Miao, that Iran should become a nuclear Uyghur, Tujia, Yi, Mongol, Tibetan, Buyi, Dong, Yao, Korean, and other power but resisted his pressure to co - nationalities 8.5% (2000 census) operate. Since then they have agreed Religions: Mainly Daoist (Taoist) and Buddhist; Christian 3%-4%, Muslim to help in drafting a U.N. resolution 1%-2% — but have said nothing about vot - Languages: Standard Chinese or Mandarin (Putonghua, based on the ing for it. The president also raised Beijing dialect) about 70%; Yue (Cantonese), Wu (Shanghainese), Minbei U.S. concern over China’s lack of re - (Fuzhou), Minnan (Hokkien-Taiwanese), Xiang, Gan, Hakka dialects, spect for copyright laws and patent minority languages rights — a perennial Western com - plaint. Despite some new legislation Government: Communist state. President and vice president elected by to protect intellectual property, the pro - National People’s Congress for five-year terms. Unicameral National duction of knock-offs of famous brand People’s Congress with 2,987 seats; members elected by municipal, names and the piracy of music, films regional and provincial people’s congresses and People’s Liberation Army and electronic game software remains to five-year terms. a full-blown industry. 8 Economy: GDP: $8.8 trillion (2009 est.); United States: $14.43 trillion In China’s latest copyright scandal, (2009 est.) the embarrassed organizers of Shang - Exports: mining and ore processing, iron, steel, aluminum, other metals, hai’s $40 billion Expo 2010, which coal; machine building; armaments; textiles and apparel; petroleum; opened on May 1, recently withdrew cement; chemicals; fertilizers; consumer products, including footwear, the trade fair’s promotional theme toys, electronics; food processing; transportation equipment, including song after being deluged with protests automobiles, rail cars and locomotives, ships and aircraft; telecommunica - that it had been plagiarized from a tions equipment, commercial space launch vehicles, satellites. Japanese pop song. 9 Unemployment rate: 4.3% (Sept. 2009 est.); United States: 9.3% (2009 est.) Such controversies are hardly new, but as China’s economy and military Military expenditures: 4.3% of GDP (2006); United States: 4.06% of have become more robust, so has its GDP (2005 est.) belief that it is operating from a po - sition of strength, and the United Sources: The World Factbook , Central Intelligence Agency States from growing weakness. “I think it is a common perception in the re - denounced the move as “protec - On the foreign-policy front, the gion that U.S. influence has been on tionist” and said it was looking into Obama administration needs China’s help the decline in the last decade, while whether American sedans and big in containing Iran’s nuclear ambitions. Chinese influence has been increasing,” sport utility vehicles on sale in The next planned step in Washington’s Jeffrey Bader, director of Asian affairs China were subsidized by the United high-priority attempt to stymie the rul - at the National Security Council, de - States government. “By not recogniz - ing ayatollahs’ efforts to produce nu - clared prior to Obama’s Asian trip. “And ing China as a market economy, the clear weapons is tight U.N. sanctions to one of the messages that the president U.S. is acting in a discriminatory block Iran from acquiring any more of will be sending in his visit is that we manner,” stated ministry spokesman the technology it still needs. As one of are an Asia-Pacific nation and we’re Yao Jian. 5 the five veto-wielding, permanent mem - there for the long haul.” Coming from Not so, said U.S. Steelworkers Union bers of the U.N. Security Council, China a senior White House adviser the ad - president Leo Gerard. “We’re fed up possesses an indispensable vote need - mission was revealing. 10 with [the Chinese] cheating on our ed to pass any U.N. sanctions resolu - In the end there was very little give trade laws. Penalties for these trans - tion. (The other members are the Unit - by the Chinese leadership on either gressions are long overdue.” 6 ed States, Russia, Britain and France.) trade or Iran. Obama also made a

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pitch to the Chinese for what he de - “It may be a cliché, but there are China — roughly the same number of scribed as “a positive, constructive and issues on which the United States and Chinese currently studying in the comprehensive relationship that opens China have a common interest, and United States. 13 the door to partnership on the big other issues with divergent interests, The Chinese leadership’s determi - global issues of our time: economic and difficulties are going to persist for nation to avoid even the impression recovery, development of clean air en - some time, and occasionally there will of giving in to pressure is almost a ergy, stopping the spread of nuclear be some friction,” says China special - conditioned reflex because this would weapons and the surge of climate ist Bonnie Glaser at Washington’s mean a dreaded loss of face. change, the promotion of peace in Center for Strategic and International Thus when Obama in Beijing held Asia and around the globe.” 11 Studies. “But China does not want to out the prospect of a closer part - Zbigniew Brzezin - nership to tackle the ski, a former U.S. na - major global issues, tional security ad - the response was non - viser who advised committal. Four months the Obama election later, President Hu campaign, described came to Washington to Obama’s proposal attend the Nuclear Se - more succinctly as a curity Summit. In a one- Washington-Beijing on-one with Obama, G-2 partnership. according to the offi - But the Chinese cial Xinhua news seemed lukewarm agency, he put forward R T to Obama’s power- S a five-point proposal / s sharing offer. “China e “to establish a partner - g a

fundamentally has m ship to jointly deal with I

y

not promoted the t common challenges.” t idea that China and e Hu’s overture cov - G / the U.S. will form the P ered much the same F two major powers,” A ground as Obama’s, A February meeting between the Dalai Lama — Tibet’s exiled leader — says Feng Zhongping, and President Obama miffed the Chinese government, which but only up to a point: the head of the Eu - maintains that Tibet is an inherent part of China and The second of his five ropean section of the refuses to recognize Tibetan independence. points stressed that each Beijing-based Chi - country “would respect nese Institute of Contemporary Interna - have an unstable, unhealthy relation - the other’s core interests and major tional Relations. “China believes that the ship with the United States. It’s ex - concerns,” a point not specifically made idea that [China and the United States] tremely important to the Chinese to by Obama, and one that left wide lat - could undertake the responsibility of ad - have good relations.” itude for divergence. Two of these in - ministering the world is incorrect.” 12 To underline this, Chinese officials terests were Tibet and Taiwan, which As experts try to read the tea leaves pointed out to the author that in Bei - “concern China’s sovereignty and terri - on the future of U.S.-China relations, here jing Obama signed 11 bilateral agree - torial integrity and its interests,” Xinhua are some of the questions being asked: ments, including those on nuclear pro - stated, and which the United States liferation, economic cooperation, should “handle with caution.” 14 Is a U.S.-China partnership actu - climate change, participation in multi - This balance-of-interests approach ally possible? national anti-pirate patrols in the Horn by the Chinese is typically — and al - Until the early 1970s, when Presi - of Africa, visits between U.S. and Chi - most cryptically — expressed by dent Richard M. Nixon made his his - nese forces (the U.S. carrier USS Nimitz Kaiser Kuo, an associate researcher at toric trip to China, the two countries visited Hong Kong in February), plus Beijing’s World Politics Institute. “Sino- were virtual enemies — militarily and a joint commitment to strengthen American competition and coopera - ideologically. Today, as China becomes people-to-people exchanges. As part tion are increasingly intertwined,” Kaiser a global powerhouse and a challenge of an enlarged U.S. academic-exchange says. “There is cooperation within to U.S. commercial and political inter - program, Obama has promised to competition, and competition within ests, the relationship is deeply complex. send 100,000 American students to cooperation. There is no absolute

414 CQ Researcher cooperation or competition. Therefore, we should not completely reject China Sells Most Arms to Pakistan competition — and we should strength - en cooperation.” 15 Pakistan purchased more than a third of all Chinese conventional In Washington, President Hu also hint - arms from 2003-2007 — by far the largest share. The second-largest ed that China might be considering a buyer was Sudan, followed by Iran, Saudi Arabia and Egypt. revaluation of its currency, “based on its Percentage purchased own economic and social-development 40% 36% Major Buyers of needs.” In other words, not because 35 Chinese Conventional Arms, 16 Washington is pressing for it. 30 2003-2007 Hu also agreed that Beijing should 25 cooperate on the wording of an Iran 20 sanctions resolution. But in Beijing, 15 Chinese Foreign Ministry spokeswoman 10 7% 6% 6% 6% 4% 4% Jiang Yu repeated China’s position that 5 3% 3% “dialogue and negotiations are the 0 17 Pakistan Sudan Saudi Iran Egypt Burma Sri Nigeria Bangla- best way.” Arabia Lanka desh But some analysts think U.S.- Chinese relations may be less about Source: “Military Power of the People’s Republic of China, 2009,” Office of the cooperation and more about an as - Secretary of Defense cendant China challenging the Unit - ed States in areas once firmly in Amer - Washington’s point of view is Bei - peace effort, without success — at ica’s sphere of influence. “Obama and jing’s increasing involvement in the least so far. his policy makers are required to face Middle East. up to a new reality,” commented the In 2009, exports of Saudi Arabian Is a confrontation with China Seoul-based English-language Korean crude to China were higher than to inevitable, as some predict? Times , “in which China is jockeying the United States, as Beijing courted The Chinese leadership is “gunning for the world’s No. 2 position while the world’s largest oil producer — and for a paradigm shift in geopolitics. In the U.S., the world’s sole superpower, longtime U.S. ally. particular, Beijing has served notice is waning, especially in the aftermath “Saudi Arabia used to be very much that it won’t be shy about playing of the global financial and econom - an American story, but those days are hardball to safeguard what it claims ic crisis.” 18 over,” said Brad Bourland, head re - to be ‘core national interests,’ ” writes Unlike U.S.-Soviet relations during searcher at Jadwa Investment in Riyadh, Willy Lam, a China specialist at the the Cold War, the challenge is not ide - Saudi Arabia. The Saudis “now see Washington-based Jamestown Foun - ological. Still, according to the Con - their relationship with China as very dation think tank. 22 At the top of gressional Research Service, “China’s strategic, and very long term.” 21 those national interests is Taiwan which, growing ‘soft power’ — primarily diplo - In a recent interview, Xu Xueguan, The Economist magazine said recently, matic and economic influence in the director of North American affairs at “has been where the simmering dis - developing world — has become a con - the Chinese Foreign Ministry’s huge trust between China and America most cern among many U.S. policy leaders, headquarters in Beijing, told the au - risks boiling over.” 23 including members of Congress.” 19 thor he couldn’t understand why The chance of a war between China Because of its voracious demand China had not been included in the and the United States is generally re - for raw materials, Chinese trade with so-called Quartet, the coalition of the garded as remote. The Chinese threat Latin America — the United States’ United Nations, European Union, to the United States is indirect — for back yard — grew tenfold between United States and Russia that is seek - example, if China should decide to 2002 and 2007. In 2008, Chinese trade ing a peaceful solution to the Israel- use force to annex Taiwan, and Amer - with Latin America ($142 billion) was Palestine confrontation. When the Quar - ica intercedes — as it is committed to a sixth of U.S. trade with the region tet was set up eight years ago, China do even though the United States does — but growing at a faster rate. China’s did not yet have the clout to insist on not recognize the island as an inde - footprint in Africa is even larger in being included. More recently, Beijing pendent state. terms of both financial aid and in - has expressed interest in becoming the China hands like Elizabeth Economy, vestments. 20 But more significant from fifth member of the U.N.-sponsored director of Asia Studies at the Council on

www.cqresearcher.com May 7, 2010 415 U.S.-C HINA RELATIONS

to Congress on China’s military power, U.S. Trade Deficit With China Has Surged the Pentagon said it was “maintaining the capacity to defend against Beijing’s The United States imports far more from China than it exports, use of force or coercion against Taiwan.” causing a significant and growing trade gap. U.S-China trade rose Beyond the strait, the Pentagon re - rapidly after the two nations reestablished diplomatic relations and ported, “China’s ability to sustain mil - signed a bilateral trade agreement in 1979 and provided mutual itary power . . . remains limited.” 26 most-favored-nation treatment beginning in 1980. In recent years, The Pentagon’s annual report is a source China has been one of the fast-growing U.S. export markets, and it is of irritation to the Chinese, who rou - expected to grow even further as living standards continue to tinely denounce it. This year, the Xin - improve and a sizable Chinese middle class emerges. hua news agency dismissed the as - sessment as “a largely subjective report ($ in billions) U.S. Merchandise Trade with China: with distorted facts and groundless 27 $300 1980-2009 speculation.” 250 Less hypothetical is the threat to 200 U.S. exports the U.S. government’s computer sys - 150 U.S. imports tem. The Pentagon’s 2009 report said 100 U.S. trade balance U.S. government computers had been 50 the target of “intrusions that appear to 0 have originated” in China, although -50 28 -100 not necessarily from the military. -150 And in his annual “Threat Assessment” -200 to the Senate Select Committee on In - -250 telligence, Director of National Intelli - 1980 1985 1990 1995 2000 2005 2009 gence Dennis C. Blair warned in Feb - projection* ruary that “malicious cyber activity is * Based on actual data for January-April 2009 occurring on an unprecedented scale Source: Wayne M. Morrison, “China-U.S. Trade Issues,” Congressional Research with extraordinary sophistication.” Service, June 23, 2009 As a result, Blair added, the United States “cannot be certain that our cyber - Foreign Relations think tank in Washing - Still, looking at the Chinese as the space infrastructure will remain available ton, downplay the new “Red Scare.” Econ - potential aggressors, does China have and reliable during a time of crisis.” Blair omy argues that the West — particular - the capacity for a military confronta - did not refer to China directly at that ly the United States — has “completely tion with the United States? point. However, later in his assessment lost perspective on what constitutes re - In the past five years China has he called “China’s aggressive cyber ac - ality in China today.” Economy concedes spent hundreds of billions of dollars tivities” a major concern. 29 that “there is a lot that is incredible about modernizing its armed forces, with In January, after Google reported China’s economic story, but there is a special emphasis on the navy. China’s that hackers in China had targeted the lot that is not working well on both the 1.7 million Chinese under arms is computers of more than 30 U.S. cor - political and economic fronts,” distorting considerably more than the 1.4 mil - porations, including its own, and that the real picture. lion in the U.S. armed forces, but in the e-mail accounts of human rights In other words, China has enough 2009 the U.S. defense budget was activists had also been hacked, Secre - problems without provoking the chal - $738 billion and China’s estimated at be - tary of State Hillary Rodham Clinton lenge of an international nemesis. The tween $69.5 billion and $150 billion. 25 called on the Chinese government to Chinese leadership appears to worry The government insists it seeks a investigate and to make its findings about a fragile society: A persistent peaceful solution to the issue of uniting public. 30 (See sidebar, p. 422. ) nightmare is that a sudden significant Taiwan to the mainland, but the Chi - U.S. officials and business execu - spike in unemployment, officially kept nese have built up a formidable fleet of tives warn that a trade war could also at 4 percent (but possibly higher submarines and developed anti-ship mis - erupt if the Chinese don’t yield to in - because of the huge, hard-to-track siles to counter a possible U.S. defense ternational pressure and raise the ag - migrant-worker population) could lead of the Taiwan Strait. The Americans will gressive undervaluation of the ren - to widespread unrest. 24 be ready for them. In its annual report minbi, kept artificially low to favor

416 CQ Researcher Chinese exports. China’s cheap cur - like Egypt, Indonesia, Myanmar and rency is a serious problem for the China’s U.S. Holdings Malaysia must find much to envy in global economy by undercutting ex - Greatly Increased a country that has achieved a 9 per - ports throughout the industrial world, cent growth rate yet “managed to con - including the United States, and con - Since the early 2000s, China’s trol its media, the legislature and the tributing to the trade imbalance. (Pres - holdings of U.S. securities — dissident voices, and has achieved glob - ident Obama has contended that if including U.S. Treasury securi - al prominence,” Halper adds. China lets the renminbi appreciate, ties and corporate stocks and The Chinese system “offers a se - U.S. exports would increase.) bonds — have risen above ductive model that is eagerly taken up The Obama administration has so $1.2 trillion — an increase of by the leaders of countries that have far avoided picking a public fight not yet settled on democratic struc - more than 500 percent. While with China over its currency — even tures,” writes Australian China hand to the extent of postponing indefi - China’s U.S. holdings have Rowan Callick in The American , the nitely a Treasury Department report helped the United States meet magazine of the American Enterprise on worldwide currencies originally its investment needs, some Institute, a conservative Washington due out on April 15. Without any policymakers worry they could think tank. The Chinese model attracts movement by Beijing on the cur - give China increased leverage autocrats because “their broader popu - rency front, the report could well over the U.S. on political and lations become content and probably label China a “currency manipula - economic issues. supportive because their living standards tor.” If that happens, Sen. Charles E. are leaping ahead.” 32 Schumer, D-N.Y., is ready with draft China’s Holdings of China, however, has no interest in legislation that would place more exporting its form of government. Its U.S. Securities tariffs on Chinese goods. dealings with the rest of the world Chinese Commerce Minister Chen (June 2002-June 2008) are dominated by the single-minded

Deming recently told The Washington ($ in billions) pursuit of one objective: economic Post that the United States would lose $1,500 $1,205 development. As a ubiquitous lender a trade war with China. “If the Unit - 1,200 and financial aid donor, China finds ed States uses the exchange rate to the door open in developing coun - start a new trade war,” he said, “China 900 tries because Beijing’s money comes will be hurt. But the American peo - 600 with no strings attached about human ple and U.S. companies will be hurt rights and democracy — which is 300 $188 even more.” 31 hardly the case with financial assis - One way for America to increase 0 tance from either the United States or its exports, said Chen, would be to 2002 2008 the European Union. remove the restrictions on high-tech Source: Wayne M. Morrison, “China - Chinese money “is made available goods with possible military applica - U.S. Trade Issues,” Congressional relatively easily and quickly without the tions, which the United States imposed Research Service, June 23, 2009 political, economic, social and envi - following Beijing’s repressive crack - ronmental conditions . . . that U.S. and down on student demonstrations in tor of the Atlantic Studies Program at European donors typically impose,” says 1989 in Tiananmen Square — some - Cambridge University, calls “a market the Congressional Research Service re - thing the Obama administration shows authoritarian form of government, in port on China’s foreign trade. 33 no signs of doing. which the free market is allowed to But envious autocratic leaders operate, but the government holds a should take note: Authoritarian capital - Has China’s “market authoritar - very firm hand on political activity in ism may only work up to a point, writes ian” model of government the country.” Thomas P.M. Barnett, author of the re - emerged as an alternative to In so doing, says Halper, author of cent book Great Powers: America and Western democracy? the recent book The Beijing Consen - the World after Bush. He argues that Despite predictions, China’s emer - sus , the Chinese have produced an al - when an economy starts to mature and gence from isolation and its spectac - ternative to the Western democratic needs to become more efficient, pro - ular economic growth have not led to system that is thought to go hand in ductive and innovative-based — “then democratization. Instead, China has hand with a free-market economy. Non- we’re talking intensive growth . . . some - developed what Stefan Halper, direc - democratic countries around the world thing that nobody ever has been able to

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plan, because it lives and breathes on poverty between 1980 and 2005, about opposed to nearly every international fierce competition, which only a true 70 percent of China’s population of institution, including — until 1971 — the free market, accompanied by democra - 1.3 billion still lives in rural areas, often United Nations. Under Deng Xiaoping, cy, can supply.” 34 in villages with few paved roads and China’s leaders reversed course and em - Moreover, under closer scrutiny, frequent water and power shortages. braced globalization. China’s economic success has fragile An ambitious and costly urbanization Since then successive U.S. presi - underpinnings, with some doubting its program is trying to shift people to dents have wrestled with the chal - long-term sustainability. For example, the cities. lenge of how to deal with China’s for all its progress, China’s per capita State-controlled media limit reports rapid rise. The Clinton administration income is still $6,546, compared to about unrest, but “bottom-up pressures fashioned a policy of “constructive en - $40,208 in the United States. China’s for change in China are intense, spon - gagement,” calling for close bilateral gross domestic product barely reach - taneous and multifaceted,” according to economic and political cooperation, at es $9 trillion, whereas allowing for the a report by Ying Ma, a visiting fellow the same time urging democratization recent volatility of exchange rates, U.S. at the Hoover Institution at Stanford and human rights. GDP exceeds $14 trillion. University. “Every day, Chinese leaders “Seeking to isolate China is clear - Because China’s economic develop - worry about the challenge to regime ly unthinkable,” President Bill Clin - ment is export driven, the world re - stability, but they have responded by ton declared in July 1998, defending cession caused 23 million Chinese work - continuing to exert brutal and sophis - his approach. “We would succeed in - ers to be laid off as Chinese exports ticated top-down control.” 36 stead in isolating ourselves and our dropped by 15-18 percent, says “Riots take place in China every own policy.” 38 Stephen Green, chief economist at the day,” Ying says. The Chinese authori - The George W. Bush administration Sun Trust Bank in Shanghai. By the ties reported 10,000 protests through - used the catchphrase “responsible stake - end of 2009, however, 98 percent of out the country in 1994, and 87,000 holder,” pressing China to become a those had found other work, as the in 2005. Mobile phones and the In - responsible member of the interna - Chinese economy bounced back ternet have given protesters and ac - tional community and to embrace quicker than Western economies, boost - tivists effective new weapons, which democracy. Prior to President Obama’s ed by a 4 trillion renminbi ($586 bil - the regime is battling tooth and nail. November China trip, Deputy Secre - lion) stimulus package. (The U.S. eco - Using the new technology the Chinese tary of State James B. Steinberg mapped nomic stimulus was $874 billion.) people clamor for the government to out a policy of “strategic reassurance” But the lesson to Beijing was that address their grievances on the local towards Beijing, and the phrase — as China can’t export itself to growth. level in increasing numbers: 10 million intended — has stuck. Though exports have picked up, the petitions in 2004 jumped to 30 million “Just as we are prepared to accept Chinese have turned their attention the following year. 37 China’s arrival as a prosperous and to trying to develop a domestic mar - successful power,” Steinberg explained, ket. For example, to stimulate sales the Chinese must “reassure the rest of of domestic appliances in rural areas, the world that its development and the government offered 13 percent BACKGROUND growing global role will not come at rebates to farmers who buy refriger - the expense of the security and well- ators, TV sets and even mobile being of others.” 39 phones. In 2009, Beijing also spent Whatever the label, the fundamen - $755 million to push car sales, cut - Presidential Challenges tal underpinning of American policy ting the purchase tax from around toward China has been economic en - 15 percent to 5 percent. The result hortly after Mao Zedong’s death in gagement. In 2000, for example, Con - was a record 770,000 sales in March S 1976, Chinese leaders took a hard gress granted China permanent nor - alone, a 27 percent jump over the look at their country and didn’t like mal trade relations (PNTR) with the previous month. Banks had instruc - what they saw. China was just emerg - United States. In 2001, the United tions to increase mortgage lending, ing from the Cultural Revolution, a States backed China’s entry into the but the government reined them in decade of mob-led extremism started World Trade Organization, thus plac - again when they started granting loans by Mao himself that had kept the ing the Chinese under international for third homes. 35 country in chaos. China was desper - business rules, which was reassuring Though officials in China say 250 ately poor, deliberately isolated from for would-be foreign investors. million Chinese were lifted out of the world economy and aloof from or Continued on p. 420

418 CQ Researcher Chronology

Chinese leaders following the death. . . . Bush makes first trip to 1970s-1980s Tiananmen Square massacre. China. . . . China joins World Trade After Mao’s death Deng institutes Organization. sweeping reforms, including re - • lations with the United States. 2002 Bush makes second visit to China 1972 1990s-2000s to mark the 30th anniversary of President Richard M. Nixon makes China’s economy welcomes Nixon’s historic trip. . . . Future historic trip to China, meets Mao Western investors; U.S.-China leader Hu Jintao visits White House Zedong and signs Shanghai Joint relations continue to warm. for talks. . . . President Jiang Zemin Communiqué declaring Taiwan visits Bush at his Texas ranch; they part of mainland China. 1992 agree to cooperate on crisis follow - Reversing a decade of U.S. policy, ing North Korea’s announcement 1975 President George H. W. Bush de - that it has nuclear weapons. President Gerald R. Ford visits China, cides to sell Taiwan F-16 combat meets the ailing Mao, who dies the planes, infuriating the Chinese. 2003 next year. With U.S. participation, Beijing 1993 hosts six-party talks on a unified 1978 Newly elected President Bill Clinton approach to North Korea’s nuclear Deng Xiaoping emerges as new establishes policy of “constructive weapons program. leader, launches economic and engagement” with China, meets social reforms. President Jiang Zemin in Seattle. 2006 China’s Great Firewall, or Golden 1979 1996 Shield, Internet censorship system U.S. and China establish diplomatic China tests missiles off Taiwan to goes into service. relations. . . . Congress passes discourage vote for separatist Lee Taiwan Relations Act pledging to Teng-hui in the presidential election; 2008 continue to supply Taiwan with U.S. sends two aircraft carrier battle China closes down Twitter, weapons. . . . Deng visits United groups to area to support Taiwan. YouTube to block discussion on States. 20th anniversary of Tiananmen 1997 massacre. 1982 Britain hands Hong Kong back to In joint U.S.-Chinese communiqué, China after 156 years. . . . Clinton 2009 United States pledges to gradually is first U.S. president to visit China President Obama visits Shanghai reduce arms sales to Taiwan. in a decade; criticizes Tiananmen and Beijing, makes no headway in massacre but strengthens U.S. persuading Chinese to raise value 1984 commitment not to support Tai - of their currency or to back sanc - President Ronald Reagan visits wan independence. tions against Iran. China and meets Deng, who says that Taiwan remains a crucial 2000 2010 problem in bilateral relations. U.S. Senate passes Permanent Nor - President Hu attends summit on mal Trade Relations bill (PNTR) nuclear security in Washington, 1989 giving China the same low-tariff despite tense U.S.-China relations President George H. W. Bush visits access to the American market as over Iran sanctions, currency is - Beijing, invites dissidents to dinner. other trading partners. sues and imminent American . . . People’s Liberation Army weapons sale to Taiwan. . . . crushes student-led pro-democracy 2001 Expo 2010 opens in Shanghai. . . . demonstration in Beijing’s Tianan - China seizes U.S. spy plane after Annual “strategic dialogue” be - men Square, killing hundreds of midair collision with Chinese fighter, tween U.S. and China set for late protesters. . . . White House Nation - hands over 24 American crewmem - May. . . . U.S. and China to attend al Security Adviser Brent Scowcroft bers after President George W. Bush G20 summit in Seoul, South holds secret meeting in Beijing with apologizes for the Chinese pilot’s Korea, in late June.

www.cqresearcher.com May 7, 2010 419 U.S.-C HINA RELATIONS

Is China Less Welcoming to U.S. Investors? As Chinese know-how grows, opportunities diminish for foreigners.

t’s one of the ironies of the U.S. trade deficit with China dow to establish itself on the Chinese market before it is chal - that a sizable portion of the goods exported to America lenged by an emerging local competitor. I are made by Chinese workers for U.S. firms. Earlier this As Chinese industrial know-how grows, the opportunities for for - year, the state-run Xinhua news agency reported that of the eign investors continue to diminish, according to business executives 200 top exporting firms last year, 153 were “foreign funded in Shanghai and Beijing. Recently, the Chinese authorities issued a firms” — up from 141 in 2008. 1 directive encouraging government agencies to buy Chinese goods. It’s estimated that at least a third of those companies are In a country where the state is still a major customer, this U.S.-owned. For example, Shanghai alone has about 3,600 Amer - is a disturbing measure. But investors remain attracted by ican expatriate business executives — although it was around China, argues writer Zachary Karabell, author of the 2009 book 4,000 before the 2008 economic downturn. Chongqinq, China’s Superfusion: How China and America Became One Economy largest city, with a population of 32 million, lists 41 foreign and Why the World’s Prosperity Depends on It. Says Karabell, firms operating there, including Lear, Du Pont, Delphi Packard “There’s really nowhere else to go where you have 10 percent and Pepsi. General Motors, the largest auto maker in China, growth, 300-600 million emerging middle class Chinese who expects to sell 3 million vehicles in the Asian market by 2015 want to buy stuff and an environment where the rule of law from its Chinese plants. In 2009, the 665,000 foreign firms in is increasingly at least adequate in enforcement of contracts China accounted for 28 percent of the nation’s industrial output, and getting your investments out of the country.” 56 percent of its exports and 45 million of its workers. In the Google quit China after its servers were hacked, adds Karabell, first quarter of this year, foreign investment rose 12.1 percent, partly because it wasn’t doing very well in the Chinese market, to $9.4 billion, according to Business Week. 2 and because it could afford not to do business with China. Even so, Google’s recent difficulties with hackers in China The continued uncertain global environment has focused the may be an indication that as the Chinese economy matures the Chinese government’s attention on generating a domestic consumer investment climate may no longer be as welcoming as it once market, so far with mixed results. Parting older-generation Chinese was. One American executive doing business in Beijing says with their money means reversing a culture of saving, but the industrial espionage is rife and that the Chinese are experts at younger generations are avid shoppers. In the modern high rise copying products. A foreign firm has at most a two-year win - that houses the Standard Chartered Bank in Shanghai — one of

Continued from p. 418 more entrenched than ever — helped and the state-held shares of the coun - by a large, efficient and pervasive po - try’s 1,300 companies, many of which All Business lice organization. are listed on the Beijing stock ex - In 2009, the party celebrated its change, are publicly traded. n his inaugural address last year, 60th anniversary, and the state-controlled Challenged to explain exactly how I Obama echoed Clinton’s 1997 state - media took care to trumpet the regime’s Marxism-Leninism fits into the “socialist ment that communist China stood “on economic and political achievements. market system,” Chinese officials quote the wrong side of history.” The con - Yet how much is left of commu - Deng Xiaoping’s famous observation ventional wisdom about China was that nist ideology is open to question: As that it doesn’t matter whether the cat the market forces unleashed by glob - the author discovered during a re - is black or white as long as it kills al trade and investment would in - porting trip to China last November, the mouse. evitably give more people a stake in the huge portrait of Mao still looks Officials today will even quote Con - the economy and open up China po - out over Tiananmen Square, and fucius without first cautiously look - litically, leading to the creation of po - Marxist theory is still taught at the ing over their shoulder. The great litical parties and more democracy and party school for senior officials. But Chinese sage has had his ups and respect for human rights. the old party slogans praising the pro - downs. In the Cultural Revolution he Only it hasn’t happened. In China, letariat class and condemning capital - was reviled as an imperial lackey be - the party’s far from over. China calls ism have disappeared from the walls cause of his position as adviser to its authoritarian capitalism a “socialist and factories. the emperor. market system,” and the ruling Chi - The party has opened membership But Confucius has been rehabilitat - nese Communist Party (CPC) appears to entrepreneurs and business people, ed as a symbol of China’s glorious

420 CQ Researcher g n a L

the thousands that crowd the r the world’s leading toy manufac - e v i

city’s skyline — Stephen Green, l turer, but its citizens buy mainly O

head of research, says older / for very young children. “There’s s e

Chinese stubbornly stick to g no toy culture in China because a

the “rainy day” syndrome — m parents think toys distract children I

y

but “anyone born after 1980 t from their studies,” Woon says over t behaves like an American.” e breakfast in a bustling hotel G /

In the past decade, for ex - P restaurant offering acres of dish - F

ample, Starbucks has opened A es ranging from American pan - more than 350 coffee shops Chinese flock to the 350 Starbucks coffee shops in China, cakes and waffles to wonton in China, where it is flourish - including this one in Shanghai, but customers come for soup. So Woon launched a cam - tea, not coffee, and because Starbucks is considered cool. ing at the same time its U.S. paign in this nation of overachievers business has been hammered by recession. Starbucks’ success is with the message: “Toys are an important part of growing up.” puzzling because the Chinese really don’t drink coffee; China pro - Mary Kay Inc., the Texas-based home-sales cosmetics firm, began duces about 30,000 tons of beans a year but exports most of it. operating in China in 1995. Headquartered in Shanghai, it mar - Caren Li, Starbucks’ spokeswoman at the company’s down - shals about 200,000 independent beauty “consultants,” thanks to a town Chinese headquarters in Shanghai, says Green Tea Frap - skin-care line tailored to the local market, including a four-week puccino is a predictably steady seller, but “we’re promoting a “whitening cream” treatment that sells for the equivalent of $120. coffee culture, offering the Chinese more choices besides tea.” Even so, it’s not really about coffee: The coffee houses with the — Roland Flamini round green logo have become trendy meeting venues (there’s even one in Beijing’s Forbidden City), the chic place to be seen. 1 Xinhua news agency, http://news.xinhuanet.com/english2010/business/2010- In 2009, a former Starbucks executive in China, Eden Woon, 04/20/c_13260044.htm. 2 “Foreign Investment in China Jumped in First Quarter,” Business Week / launched Toys R R Us in China (locally called Toy LiFung), and today Bloomberg, April 14, 2010, www.businessweek.com/news/2010-04-14/foreign- the American retailer has 15 stores in the country. China may be investment-in-china-jumps-in-first-quarter-update1-.html.

past. The Chinese have set up hun - In Kaplan’s view, Beijing “cares little and some demagogue might win by dreds of Confucius institutes world - about the type of regime with which promising to take the money from the wide, including 25 in the United States. it is engaged. It requires stability, not new rich and give it to the poor! “The The institutes promote Chinese lan - virtue as the West conceives it.” 40 ultimate goal is common prosperity,” guage and culture, just as the Goethe As early as 2005, when China for he said, “but we have to let a group institutes promote German culture, the first time was included in the an - of people get rich first.” and the Dante Alighieri institutes do nual economic survey of the Organi - In 2003, looking for places to put the same for Italy. zation for Economic Cooperation and its growing export revenue, China Even so, “China did not take a mis - Development (OECD), it noted, “Well began buying U.S. Treasury bills on a sionary approach to world affairs, seek - over half of China’s GDP is produced large scale. By 2005, China had ac - ing to spread an ideology or a sys - by privately controlled enterprises.” 41 quired $243 billion worth of the U.S. tem of government,” writes Robert D. But while the trend has continued, debt, second only to Japan. In 2006, Kaplan, a senior fellow at the Center communications, transport, infrastructure, China overtook Japan when its hold - for a New American Security. “Moral banking and energy remain under tight ings climbed to $618 billion. In 2009, progress in international affairs is an state supervision. possibly fearing that the global reces - American goal, not a Chinese one. In late November 2009, Xu Kuang - sion would undermine the dollar, China China’s actions abroad are propelled di, a senior adviser to the Chinese sold some $34 billion of its Treasuries by its need to secure energy, metals Communist Party, told this reporter — but was soon back on a buying and strategic materials in order to sup - and other visiting U.S. journalists that spree. By February 2010, China held port the living standards of its im - it would be dangerous to hold free a whopping $877.5 billion in Trea - mense population.” elections because China was “not ready,” suries. 42 Meanwhile, a well-heeled

www.cqresearcher.com May 7, 2010 421 U.S.-C HINA RELATIONS

‘Harmonizing’ the Internet in China China’s love affair with the Net is increasing along with censorship.

hen a website is censored in China, the screen usu - A more recent addition to the list is “Charter 08,” a lengthy ally doesn’t reveal that the government has blocked manifesto calling on the Communist regime to relinquish its W it. Instead, either a fake error message appears or monopoly of power and introduce democratic reforms. Origi - an announcement about the site being unavailable, with an in - nally, Charter 08 was signed by 300 intellectuals and activists. vitation to “Please try again.” After the document appeared briefly on the Internet — and By now, most of China’s estimated 384 million “netizens” before Chinese censors banned it — some 10,000 other sig - (nearly a quarter of the world’s Internet users) are not taken natures were added. in: They know the site has been “harmonized.” 1 U.S. computer giants like Google entered the market know - In China, Internet censorship is often ironically called “har - ing that they would have to comply with the regime’s policy monizing” because “harmony” — the absence of public dissent and exercise content censorship. Ultimately, Google found the — is a key phrase in the government’s propaganda. So as China’s controls too constricting to live with and earlier this year shift - love affair with the Internet increases so does the Communist ed its operations to less restrictive Hong Kong, at the same regime’s censorship effort intensify — possibly because there is time complaining of Chinese hacking into the e-mail accounts so much more material online for the government to worry about. of human rights activists and U.S. corporations. “China’s blocking of overseas websites — including Facebook, Other U.S. Internet companies still operating in China, in - Twitter and thousands of other sites is more extensive and tech - cluding Microsoft and Yahoo!, now face even tougher censor - nically more sophisticated than ever,” Rebecca MacKinnon, a Hong ship restrictions. A new law, adopted on April 29 and set to Kong-based university journalism professor and China Internet take effect Oct. 1, requires them to stop the transmission of expert, tells me via e-mail from Princeton’s Center for Informa - “state secrets” over the Internet, if they “discover” them — ef - tion Technology Policy, where she is currently a visiting fellow. fectively requiring them to act as police informers. 2 “Controls over domestic content have also been tightening.” Some analysts maintain that while flowers were placed The Chinese authorities use a filtering system nicknamed outside Google’s Beijing office by users sorry to see it go, The Great Firewall of China, but officially referred to as Gold - the impact of Google’s departure is limited because the ma - en Shield, to scan Internet content for specific key words and jority of China’s netizens prefer to use homegrown Internet then block, or try to block, Web pages in which such words servers that exercise self-censorship rather than jeopardize are used. their access. A list of blacklisted terms compiled by ConceptDoppler, a Besides, the analysts point out, even with the constraints tool developed for the purpose by the universities of Califor - that grow daily the Internet has given Chinese citizens an un - nia, Davis, and New Mexico includes triggers such as “eighty- precedented voice in the country’s affairs. nine” and “June 4”, the year and date of the Tiananmen Square “We should measure protest in China not by protests on protests, “massacre,” “political dissident,” “Voice of America,” the streets or availability of news on protests, but by the in - “Playboy magazine” and “Xinjiang independence” — a refer - volvement of the Chinese citizens in policy decisions,” says ence to the restive, predominantly Muslim province in north - Yasheng Huang, a China expert at MIT’s Sloan School. “By the western China. Any one of these terms sends a series of three latter yardstick, China had made huge progress, thanks large - reset commands to both the source and the destination, effec - ly to the Internet.” 3 tively breaking the connection, says Jed Crandall, a professor In recent years, Internet-based campaigns have pressured of computer science at the University of New Mexico and one the Chinese government to release political prisoners, launch of the developers of ConceptDoppler, in an e-mail message. investigations into scandals, such as kidnapping boys for slave middle class has emerged in China. now boasts 11 million cardholders, said phy have been sold at auction for mil - Cars create traffic jams in Chinese cities, D.G. “Dicky” Yip, of the Bank of Com - lions of RMB. In a crowded auction and the once ubiquitous bicycles are munications in Shanghai last November. hall in Beijing filled with Chinese bid - now kept by many Chinese for week- China’s new rich have acquired a ders in November, a scroll painting by end country excursions. taste for art as well as luxury cars. First the Ming Dynasty landscape master Wu In Beijing, a five-star hotel is flanked it was contemporary art by artists who Bin sold for the equivalent of $24.7 mil - by two glass-fronted dealerships, one for a decade earlier had been suppressed lion to a Chinese bidder. Maseratis, the other for Lamborghinis. or even jailed because of their avant The bad news for the government Four years ago, the China branch of garde works. More recently, classic tra - has been the widening gap between the HSBC Bank launched a credit card: It ditional paintings and Chinese calligra - urban prosperous and the rural impov -

422 CQ Researcher r e t n a K

g u o D

labor in mines, and convict / are sending their children to s

4 e

corrupt officials. China’s g “boot camp” to cure them of a

version of Facebook, called m “internetitis” — a solution I

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Douban, and YouTube, t which the government first en - t called YouKu, as well as e couraged but later seemed to G /

thousands of Internet bul - g back away from, warning r e

letin boards teem with de - b against too much brutality in

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bate on current events. o rehab methods. o Still, the censorship is l Critics of Chinese Internet B not well-defined, and some Mounting concerns over security and censorship by the censorship, including MacKin - well-known dissident blog - government led Google to leave mainland China in non, say the regime uses such gers don’t know when they March and relocate in Hong Kong. arguments to justify tightening have crossed the line until control over the Net. there is a knock at the door. But Qian claims “the Chinese But mainly, it works by suggestion: “Many Internet users government assumes a very important responsibility in manag - only have access to public computers at Internet cafes or uni - ing the Internet. America is a mature society. At this stage Chi - versities, and just the existence of censorship might cause them nese society is still not — and besides, different people have dif - to avoid topics they know they’re not supposed to access, ferent interpretations of freedom.” changing their online behavior,” says Crandall. For those who prefer the Internet censor-free, the United The government maintains that censorship is partly a secu - States is leading the effort to produce circumvention software rity measure and partly a responsibility to protect the public that connects to blocked websites via proxy computers outside from what it sees as the negative side of the Internet’s rapid the country. Programs like Psiphon, Tor and the Global Inter - growth. net Freedom Consortium have been increasingly successful at Qian Xiaoqian, vice minister at the Chinese State Council breaching the wall. 6 information office, whose functions include deciding what gets blocked, says that while the government intervenes when a site — Roland Flamini is seen as plotting to overthrow the state, on another level it is also responding to public worry about the addictive nature 1 David Talbot, “China’s Internet Paradox,” MIT Technology Review , May/June of the Net. 2010, www.technologyreview.com/web/25032/page1/. 2 Mike Elgan, “New Chinese law may force Microsoft, Yahoo, to follow Google,” “There is a discussion going on in this country about the ITWorld , April 29, 2010, www.itworld.com/internet/106191/new-chinese-law- potential negative influences of the Internet,” Qian said last De - may-force-microsoft-yahoo-follow-google-out, and Jonathan Ansfield, “Amend - cember over cups of tea, invariably served to visitors to any ment Tightens Law on State Secrets in China,” The New York Times , April 30, 2010, p. A9. Chinese office. “Chinese parents are worried about the pornog - 3 Quoted in Talbot, op. cit. raphy; but not just the pornography.” The government blames 4 Ibid. “Internet addiction” for youthful alienation. 5 The information is from a Chinese television news “magazine” show, with A recently published survey by the Chinese National Peo - a translation provided to the author. ple’s Congress found that 10 percent of Chinese youth were 6 For example, www.FreeGate.com, the Freedom Consortium’s software de - addicted to the Internet, Qian says. Many Chinese parents veloped by a group of Chinese expatriates in the United States. erished. China’s poor are a restive ma - To make matters worse for the The social system also needs to jority running into the hundreds of mil - poor, the government has been slow catch up with the aging Chinese popu - lions. In 2008, the average income of a to reform a social system that cuts lation, which is getting older faster than rural worker was $690, compared to a off the medical and other benefits of in the United States. The problem is city average of $2,290 — and higher in China’s millions of internal migrant exacerbated by a relatively high life Shanghai and Beijing. 43 But the annu - workers once they quit their home - expectancy — about 73 — versus 77 in al salary of a chief executive in China towns. As things now stand many im - the United States. By 2040 demogra - is around $100,000, a fraction of cor - migrants are left to fend for them - phers say that each Chinese worker will porate salaries in the United States but selves — even when they find be forced to support two parents and still astronomical in Chinese terms. employment. four grandparents.

www.cqresearcher.com May 7, 2010 423 U.S.-C HINA RELATIONS

ample, no doubt to the chagrin of There is unresolved business on the An ‘Edgy’ Game HSBC officials, 80 percent of the bank’s currency front, on Iran sanctions, on credit card holders avoid interest the issue of U.S. weapons sales to Tai - ith the economic boom un - charges by paying their whole bill wan and on the broader question of W folding against a background of every month — compared to the na - how the two countries should engage frequent unrest, “The No. 1 challenge tional U.S. average of 20 percent. in the future. for China is to maintain domestic sta - Commenting on the government’s The Obama administration has put bility and at the same time sustain - combination of a market economy and a lot of effort into trying to convince able economic development,” says Yang tight control, Halper at Cambridge Uni - the Chinese government that it is in Jiemian, director of the Shanghai In - versity says, “This is an edgy game, both sides’ interest to move toward stitute of International Studies. and things could go seriously wrong. what Obama calls “a more market - The Internet, oriented exchange rate” which has gone from for the renminbi. Fol - 620,000 users in lowing a meeting be - China in 1997 to 370 tween President Obama million users today and President Hu Jintao — more people in Washington in April, than the entire U.S. during the Nuclear Se - population — has curity Summit, it seemed become a forum for clear that the Chinese n i J online dissent. The had not budged on u i authorities crack L revaluing their curren - / s down on the deluge e cy. Any change would g a not come from U.S. pres -

of cyber-dissent using m I

45

y sure, Hu said.

a (patchy at best) t t online censorship, e In New York, the five G / ironically known as P permanent members of F the Great Firewall of A the U.N. Security Coun - More than 150 nations and 50 international organizations have cil are working on an China — which also registered for the Shanghai World Expo, and 70 million visitors are tries to block porno - anticipated, making the six-month-long world’s fair the largest ever. Iran-sanctions resolu - graphic sites. ( See The Expo’s theme — “Better City — Better Life” — is intended to tion. “The Chinese sidebar, p. 422. ) Per - showcase Shanghai as the next great world city in the 21st century. were very clear they sistent blogging about share our concern about subjects deemed subversive can lead to Just trying to control the Internet is the Iranian nuclear program,” said imprisonment. (There are 20 million blog - really tough work. The glue that holds Bader at the National Security Coun - gers in China.) For example, Chinese the whole thing together is a fero - cil. 46 Still, the Chinese government writer Liu Xiaobo was jailed for 11 years ciously powerful security service.” has not said that it will vote for a on Dec. 25 after co-drafting and post - U.N. resolution and still insists pub - ing “Charter ’09,” a lengthy manifesto licly that diplomacy and negotiation calling on the government to introduce are the way to go. democratic reforms. CURRENT Cooperation on climate control seems The regime’s biggest nightmare re - at a stalemate after Hu told the De - mains large-scale unemployment. To cember Copenhagen summit that China’s keep it at the current 4 percent level SITUATION own emissions control program would China needs to ensure continued not be subject to U.N. supervision. For growth generating 24 million new its part, the United States rejected a jobs every year. 44 Hence the need Tense Beginning Chinese request that developing coun - to buttress its current dependence on tries should be compensated for cutting exports by boosting consumer demand his is a period of waiting for the carbon emissions. at home. But the Chinese are not only T other shoe to drop in U.S.-China Yu Qintgou, the official responsible great savers but also traditionally have relations following a tense first quar - for climate change at China’s Ministry an aversion to being in debt. For ex - ter of 2010. Continued on p. 426

424 CQ Researcher At Issue:

Is tyoes day’s China a communist country?

XU KUANGDI STEFAN HALPER PRESIDENT , C HINESE ACADEMY OF DIRECTOR , A TLANTIC STUDIES PROGRAM , ENGINEERING IN BEIJING , FORMER CAMBRIDGE UNIVERSITY ’ SHANGHAI MAYOR AUTHOR , THE BEIJING CONSENSUS : H OW CHINA ’S AUTHORITARIAN MODEL WILL WRITTEN FOR CQ RESEARCHER , MAY 2010 DOMINATE THE TWENTY -F IRST CENTURY

he Chinese Communist Party (CPC) has never done WRITTEN FOR CQ RESEARCHER , APRIL 2010 things by the book. In the early days, some party members, following the lead of the Soviet Union, here’s a wonderful comment by the legendary U.S. t diplomat and Russia expert George F. Kennan, who launched the workers’ movement in the cities. But the party shifted its focus to the rural areas where government control t said, “Let’s not ask what communism has done to Russia, was relatively weak. We mobilized the peasants; we devel - but rather what Russia has done to communism.” Much the oped land reform. same didactic is applicable to today’s China. Today, we don’t do things according to what Karl Marx Mao and Stalin would be spinning in their graves if they wrote or Vladimir Lenin said 80 years ago. We’re doing saw what was happening in China in the name of commu - things to advance the development of productive forces, and nism. China has shed any remnants of Marxist ideology, we are doing things to serve the interests of the vast majority even to the point of directly addressing the question of of people. who owns the land, a serious point of contention in the Marx is still widely respected by the party. He is a great recent People’s Congress. It is now accepted that land can mind and a very great thinker on the development of civi - be privately owned and houses built on it. lization. His ytheories on ceapitalism ins pired us on how to China is nont expansionist, it odoes not seek to undermine overcome the current financial crisis. But Marx lived 100 the Western system: instead, its market-authoritarian system years ago; he couldn’t predict how science and technology provides an example for the world beyond the West where would develop. That is why our new ideology is to keep growing numbers of leaders admire China, see China as a pace with the times. That doesn’t mean we have forgotten Third World nation at the pinnacle of world power and Marx. Marxism is still our long-term goal. wish to emulate China’s progress. The CPC is committed to building a society in which So while China may continue to call itself communist, it property and well-being can be enjoyed by all, a society of certainly isn’t communism as we know it, but more of a harmony between rich and poor. Today, we have a prob - form of state capitalism; the role of state is market authori - lem of a widening gap between rich and poor, which we tarian, not Marxist-Leninism. A Marxist economy is the are trying our best to narrow. But it will not be solved by polar opposite of the dynamic market economy China is dividing the property of the rich among the poor. developing today. Our previous lessons showed us that the division of The Chinese leadership is highly practical, opportunistic property is not the answer. Nor is Western democracy the and focused on economic growth and stability. The only answer. If we introduced Western democracy, we may have remnants of communism are the single party rule of the turbulence in the society. party, a general embrace of socialist principles and the A Western friend told me that he would only go to various structures that the party employs to govern the church three times in his lifetime. The first time is to be country: a politburo, a people’s congress and a central baptized, the second for his marriage and the third for his committee. funeral. It doesn’t follow that he doesn’t have God in his Of course, it still calls itself communist, but it’s just as heart. It’s the same for us with Communism. much a corporatist state, even a form of fascism in its To live up to our beliefs we sometimes have to take classical, Mussolini-type form, which is to say a process different paths. As [former CPC leader] Deng Xiaoping has that coordinates the interest of the state and large corpora - put it: The ultimate goal is common prosperity, but we tions. Put another way, the business of China is business. have tno let some people get rich first.

www.cqresearcher.com May 7, 2010 425 U.S.-C HINA RELATIONS

Continued from p. 424 moves calculated to anger the Chinese. added advanced F-16 jet fighters to of Foreign Affairs, explained the fa - First, in February the president received the sale. 49 miliar Chinese position in an interview Tibet’s exiled spiritual leader, the Dalai The Chinese went still further. Bei - in Beijing on Dec. 1. Simply put, Yu Lama, after Beijing had expressly jing threatened to sanction U.S. firms said, the world’s climate change prob - asked him not to do so. involved in the deal. And then it lem was not the making of China or The meeting drew a protest from showed off its military prowess by suc - India but of the developed countries. Beijing even though the White House cessfully testing — without warning — The United States and the other in - kept the visit private and carefully an advanced missile interception sys - dustrialized nations should “acknowl - avoided showing pictures of Obama tem. The timing also seemed a further edge their historic responsibility” as and the Dalai Lama together. demonstration of Beijing’s ire. “The peo - emitters of greenhouse gases and not In a second affront, Obama approved ple who tied the knot should untie the put so great a bur - knot,” said Chinese For - den on the emerg - eign Ministry spokesman ing nations that it Qin Gang. 50 would set back Commentators attrib - their development, uted China’s new tough he said. and uncompromising The latest ten - attitude to more than one sion had its origins factor. They said China’s in November, when seemingly quick recov - Obama’s Chinese ery from the global fi - n hosts insisted on a i

J nancial crisis while the

u low-key visit that i West continues to strug - L / minimized his con - s gle has vindicated the e g tact with the public. a Chinese development m I “It’s a mystery,” model in Chinese eyes y t t

David Shamburgh, a e and the weakness of the G professor of Chinese / less-disciplined Western P F studies at George - A approach. town University, told China spends more than 4 percent of its gross domestic product (GDP) A second explana - The Wall Street Jour - on its military, about the same ratio as the United States. The country’s tion, though, was the rising military spending, including the beefing up of key naval bases nal during the pres - near Taiwan, has caused concern in Washington. jostling for position in idential visit. “[Obama the leadership in ad - is] a populist politi - vance of the 2012 Com - cian, but he’s not getting any interac - a long-delayed $6.4 billion weapons munist Party Congress, an event that tion with Chinese people.” 47 It’s not sale to Taiwan, which China continues spurs aspiring candidates to display such a mystery, perhaps, when one con - to threaten with hundreds of missiles their nationalist credentials. Behind siders Obama’s popularity worldwide, in while at the same time insisting that it the united front China’s leadership contrast to a Chinese leadership with wants a peaceful solution to the is - shows to the world, deep divisions limited contact with its own people. land’s claims of independence. The exist between the hard-line “realists” Indeed, on the morning following package includes 114 Patriot missiles and those who favor openness in Obama’s arrival in Shanghai, the city’s worth $2.2 billion, and 60 Blackhawk China’s international dealings — and government-controlled English-language helicopters worth $3.1 billion. the hard-liners currently have the paper carried a large front-page photo Beijing promptly ratcheted up its upper hand. According to another of Hu with the prime minister of Cana - rhetoric, and U.S.-Chinese relations took explanation, the regime’s aggressive - da, who was in China at the time. A “a nosedive,” The Washington Post ness toward the outside world stems one-column photo of Obama appeared said. 48 A senior Chinese Defense Min - from the government’s desire to find below the fold. In a country where istry official, Huang Xueping, said China a distraction from socioeconomic much importance is attached to not was resolved to punish the United problems at home. losing face, such signals matter. States if the weapons were delivered After all, this is the Year of the Tiger The tension had escalated two and that the U.S. could expect even — always turbulent and often unpre - months later when Obama made two greater consequences if Washington dictable. 51

426 CQ Researcher policy issues are rarely prominent in U.S. cy manipulation would be unacceptable elections, but at a time of high unem - even in good economic times,” Schumer OUTLOOK ployment and economic uncertainty, some said in a recent statement. “At a time of analysts believe China’s currency seems 10 percent unemployment, we simply set to become a thorny question in No - will not stand for it.” The Taiwan Question vember’s mid-term elections, possibly There is an obvious political edge to creating anti-Chinese public sentiment. Schumer’s bill: The senator is up for re- t remains to be seen how the Chi - Given the upcoming elections, some election. But others also feel the time I nese will react, if or when the Unit - analysts say a slight currency revalu - has come to confront the Chinese. The ed States begins delivery of the weapons ation designed to take the dispute out Obama administration “needs to draw a sold to Taiwan. of the campaign is in the offing. But, line in the sand, and say to the Chinese: Analysts say the recently proposed says Glaser at the Center for Strategic ‘You’re exporting unemployment by un - (but not finalized) additional sale of and International Studies, “The Chi - dervaluing your currency by 20 percent F-16s would raise the level of China’s nese are not going to revalue their to 40 percent,’ ” says Cambridge Uni - objections even further. Although the currency because we tell them to. versity’s Halper. If the Chinese don’t reval - original weapons deal drew protests, it They will choose their own time.” ue, “we should impose similar tariffs.” had initially been negotiated by the Bush administration and was well-known to the Chinese. But Jean-Pierre Cabestan, a professor of international studies at Hong Kong Baptist University, predicts Despite its protests over Taiwan, Beijing at the same that “if an F-16 sale moves forward, we can expect another wave of difficulties time is committed to working with Washington and between the U.S. and China.” other governments in securing vital sea lanes The outlook is hard to forecast with any accuracy because of the ongoing co - and enforcing regional stability. operation-competition dance between China and the U.S. For example, despite its protests over Taiwan, Beijing at the same time is committed to working with Washington and other governments in One reason: Chinese leaders cannot It was out of consideration for Hu’s securing vital sea lanes and enforcing re - afford seeming to act in response to visit in April that Treasury Secretary gional stability. Early in 2010, China agreed pressure from the “foreign devils” ( qwai Timothy Geithner postponed publica - to take a lead role in anti-piracy patrols lo ) — which to the Chinese is just tion of the Treasury report, which is off Somalia. Chinese navy units had not about everybody including the United normally released on April 15. No new strayed outside Chinese waters for cen - States — without serious loss of face date has been announced, but analysts turies, but today 80 percent of China’s in the eyes of their own people. say the delay is strategic, giving the Chi - oil imports are shipped through the nar - The United States has a risky card of nese more time for further reflection. row Straits of Malacca that connect the sorts to play in the shape of the annu - Two important dates are coming up Indian Ocean and the South China Sea. al U.S. Treasury analysis (mandated by for possible further discussion — the There is no indication that China the 1988 Omnibus Trade and Competi - U.S.-China yearly “strategic dialogue” would actually support sanctions against tiveness Act) of the currencies of foreign in late May, and the broader forum of Iran. In the past, China had signed on countries to determine whether they are the G20 summit in Seoul, South Korea, to three previous U.N. sanctions reso - manipulating the currency to gain un - in late June. lutions — and the Chinese eventually fair trade advantage. To Congress’ exas - The Chinese, however, are focused delayed and weakened every one of peration, the Treasury has so far not on another event they hope will boost them, said Iran expert Flynt Leverett, a labeled China a “currency manipulator.” their prestige, much as the 2008 Summer senior fellow at the centrist New Amer - If and when it does, New York’s Sen. Olympics had done: The Shanghai Expo ica Foundation think tank. 52 Schumer has a draft bill waiting that 2010, which the city expects will attract Also casting a shadow over the next would impose stiff penalties on coun - over 70 million visitors. Its theme re - few months is the thorny question of tries that manipulate their currencies, in - flects China’s hopes and aspirations — China’s undervalued renminbi. Foreign- cluding possible tariffs. “China’s curren - “Better city, better life.”

www.cqresearcher.com May 7, 2010 427 U.S.-C HINA RELATIONS

conference-call-presidents-trip-asia . March 19, 2010, www.nytimes.com/2010/03/ Notes 11 “Commentary: China, U.S. sail in one boat 20/business/energy-environment/20saudi.html. amid global issues,” Xinhua news service, 22 Willy Lam, “Beijing Seeks Paradigm Shift 1 “Clinton in China,” BBC Special Report, Nov. 16, 2009; http://news.xinhuanet.com/ in Geopolitics, “The Jamestown Foundation, July 3, 1998, http://news.bbc.co.uk/2/hi/ english/2009-11/16/content_12463881.htm. March 5, 2010, www.jamestown.org/programs/ special_report/1998/06/98/clinton_in_china/11 12 Martin Walker, “Walker’s World: Haiku Her - chinabrief/single/?tx_ttnews%5Btt_news%5D= 8430.stm . Also Lin Kim, “Sino-American Re - man’s G2,” United Press International, Dec 7, 36120&tx_ttnews%5BbackPid%5D=25&cHash= lations: a new stage?” New Zealand Interna - 2009, www.spacewar.com/reports/Walkers_ a9b9a1117e. 23 tional Review , Vol. 23, 1998, www.questia.com/ World_Haiku_Hermans_G2_999.html. “Facing up to China,” The Economist , Feb. 4, googleScholar.qst;jsessionid=LY2JTpnRvl29qy 13 U.S.-China Joint Statement, U.S. Embassy, 2010, www.economist.com/PrinterFriendly.cfm? D1ByfHwVQxJtmVQQ7bcyJ6RW47LJJnw6 Beijing, http://beijing.usembassy-china.org.cn/ story_id=15452821. WmnYwg!555708061!-1331918248?docId=5001 111709.html. 24 Nicholas D. Kristof, “China, Concubines, 372599 . 14 “Hu presents 5-point proposal for boost - and Google,” The New York Times , March 31, 2 “China’s economy grew 11.9 pct y/y in Q1 ing China-U.S. ties,” Xinhua, April 13, 2010, 2010, www.nytimes.com/2010/04/01/opinion/ — sources,” The Guardian , April 14, 2010. http://english.cctv.com/20100413/102277.shtml. 01kristof.html . www.guardian.co.uk/business/feedarticle/903 15 Kaiser Kuo, “The Intertwining of Sino- 25 Drew Thompson, “Think Again: China’s 1081 . American Cooperation and Competition,” Military,” Foreign Policy , March/April 2010, www. 3 U.S. Census Bureau, www.census.gov/foreign- China Geeks Translation and Analysis of foreignpolicy.com/articles/2010/02/22/think_ trade/balance/c5700.html#2010 . Modern China, February 2010, http://china again_chinas_military . 4 Howard Schneider, “U.S. sets tariff of up geeks.org/2010/02/the-intertwining-of-sino- 26 “Annual Report to Congress: Military Power to 90 percent on imports of Chinese oilfield american-competition-and-cooperation/. of the People’s Republic of China, 2009,” De - 16 pipes,” The Washington Post , April 10, 2010. Edwin Chen and Rob Delaney, “Hu Tells partment of Defense, www.defense.gov/pubs/ 5 Wang Yanlin and Jin Jing, “Trade dispute Obama China Will Follow Its Own Path on pdfs/China_Military_Power_Report_2009.pdf . 27 heats up while Obama visit nears,” Shanghai Yuan,” Bloomberg, April 13, 2010, www.bloom “Pentagon issues annual report on China’s Daily.com , Nov. 7, 2009, www.shanghaidaily. berg.com/apps/news?pid=20601070&sid=a07ps military power,” Xinhuanet, March 26, 2009, com/sp/article/2009/200911/20091107/article_ M9uKD6g. www.news.xinhuanet.com/english/2009-08/26/ 418781.htm . 17 “China-U.S. agreement sends warning to content_11079173.htm . 28 6 Schneider, op. cit. Iran,” The National , April 13, 2010, www.the Pentagon report to Congress, op. cit. 7 “China, India, Japan Iran’s Top Partners in national.ae/apps/pbcs.dll/article?AID=/20100413/ 29 Dennis Blair, “Annual Threat Assessment Crude Oil Trade,” Moinews.com, April 14, FOREIGN/704139996/1014. of the U.S. Intelligence Community for the 2010, www.mojnews.com/en/Miscellaneous/ 18 “Obama’s Asia Visit,” editorial, Korea Times , Senate Select Committee on Intelligence,” ViewContents.aspx?Contract=cms_Contents_I_ Nov. 10, 2009, www.koreatimes.co.kr/www/ February 2010, www.dni.gov/testimonies/2010 News&r=485205. news/opinon/2010/04/202_55210.html . 0202_testimony.pdf . 8 For background see Alan Greenblatt, “At - 19 Thomas Lunn, et al. , China’s Foreign Aid 30 Cecilia Kang, “Hillary Clinton calls for Web tacking Piracy,” CQ Global Researcher , August Activities in Africa, Latin America, and South - freedom, demands China investigate Google 2009, pp. 205-232. east Asia, Feb. 25, 2009, www.fas.org/sgp/crs/ attack,” The Washington Post , Jan. 22, 2010, www. 9 “China Must Protect Intellectual Property,” row/R40361.pdf. Report is based largely on washingtonpost.com/wp-dyn/content/article/ Korea Herald , April 22, 2010, www.koreaherald. research by New York University’s Robert F. 2010/01/21/AR2010012101699.html . co.kr/national/Detail.jsp?newsMLId=20100422 Wagner Graduate School of Public Service. 31 John Pomfret, “China’s Commerce Minis - 000363. 20 Ibid. ter: U.S. has most to lose in a trade war,” 10 White House transcript, Nov. 9. 2009, 21 Jad Mouawad, “China’s Growth Shifts the The Washington Post , March 22, 2010, www. www.whitehouse.gov/the-press-office/briefing- Geopolitics of Oil,” The New York Times , washingtonpost.com/wp-dyn/content/article/ 2010/03/21/AR2010032101111.html . 32 Rowan Callick, “The China Model,” The About the Author American , November/December 2007, www.american.com/archive/2007/november- Roland Flamini is a Washington-based correspondent december-magazine-contents/the-china-model . who writes on foreign-affairs for CQ Weekly , The New Re - 33 Lunn, et al. , op. cit. public and other publications. Fluent in six languages, 34 Thomas P.M. Barnett, “The New Rules: he served as Time bureau chief in Rome, Bonn, Beirut, Why China Will Not Bury America,” World Jerusalem and the European Common Market and later Politics Review , Feb. 1, 2010, www.worldpolitics served as international editor at United Press Interna - review.com/articles/5031/the-new-rules-why- tional. His previous reports for CQ Researcher were on china-will-not-bury-america . Afghanistan, NATO, Latin America, Nuclear Proliferation 35 Wieland Wagne, “How China is battling and U.S.-Russia Relations. His most recent reporting trip global economic crisis,” San Francisco Sen - to China was in November-December 2009. tinel , May 23, 2009, www.sanfranciscosentinel. com/?p=28287 .

428 CQ Researcher 36 Ma Ying, “China’s Stubborn Anti-Democracy,” Hoover Institution Policy Review, February/March 2007, www.hoover.org/publications/policyreview/ FOR MORE INFORMATION 5513661.html . 37 American Enterprise Institute , 1150 17th St., N.W., Washington, DC 20036 ; Ibid. (202) 862-5800 ; www.aei.org . A nonpartisan think tank dedicated to research and 38 Brian Knowlton, “Citing ‘Constructive En - education on government, politics, economics and social welfare. gagement,’ He Acts to Counter Critics in Con - gress: Clinton Widens Defense of China Visit,” Brookings Institution , 1775 Massachusetts Ave., N.W., Washington, DC 20036 ; The New York Times , July 12, 1998, www.ny (202) 797-6000 ; www.brookings.edu . Non-profit public policy institution working times.com/1998/06/12/news/12iht-prexy.t.html? for a more cooperative international system. pagewanted=1 . 39 Evan Osnos, “Despatches from Evan Center for a New American Security , 1301 Pennsylvania Ave., N.W., Suite 403, Osnos: Strategic Reassurance,” The New York - Washington, DC 20004 ; (202) 457-9400 ; www.snas.org . An independent, nonpartisan er Online , Oct 6, 2009, www.newyorker.com/ think tank established in 2007 dedicated to developing strong, pragmatic and principled national security and defense policies that promote and protect Ameri - online/blogs/evanosnos/2009/10/strategic- can interests and values. reassurance.html. 40 Robert D. Kaplan, “The Geography of Chi - Center for Strategic and International Studies , 1800 K St., N.W., Washington, nese Power,” Foreign Affairs , May/June 2010. DC 20006 ; (202) 887-0200 ; www.csis.org . A nonpartisan think tank that provides 41 “China could become World’s largest ex - strategic insights and policy solutions to decision-makers in government, interna - porter by 2010,” Organization for Economic tional institutions, the private sector and civil society. Cooperation and Development, Sept. 16, 2005, www.oecd.org/document/29/0,3343,en_2649_ Center for U.S.-China Relations , Tsinghua University, Beijing, China 100084 ; 201185_35363023_1_1_1_1,00.html. (86-10) 62794360 ; www.chinausa.org.cn . First research institute specializing in U.S.- 42 U.S. Department of Treasury, www.ustreas. China relations established by a Chinese institute of higher education. gov/tic/mfh.txt. 43 http://news.bbc.co.uk/2/hi/asia-pacific/ China Institute , 125 E. 65th St., New York, NY 10065 ; (212) 744-8181 ; www.china institute.org . Promoting a better understanding of China through programs in edu - 7833779.stm. cation, culture and business. 44 Li Beodong, head of China’s delegation to the United Nations in Geneva, official tran - China Institute of International Studies , 3 Toutiao, Taijichang, Beijing, China script of speech in 2009. 100005 ; (86-10) 85119547 ; www.ciis.org.cn . Think tank and research institution 45 The Associated Press, “China’s Hu rebuffs arm of the Chinese Ministry of Foreign Affairs. Obama on yuan,” Minneapolis Star Tribune , April 13, 2010, www.startribune.com/business/ China-United States Exchange Foundation , 15/f Shun Ho Tower, 24-30 Ice 90728804.html. House Street, Hong Kong ; (852) 25232083 ; www.cusf.hk . Fostering dialogue be - 46 Transcript of White House press briefing, tween Chinese and U.S. individuals from the media, academic, think tank and April 12, 2010, www.whitehouse.gov/the-press- business environments. office/press-briefing-jeff-bader-nsc-senior- director-asian-affairs . Confucius Institute , 0134 Holzapfel Hall, University of Maryland, College Park, MD 20742 ; (301) 405-0213 ; www.international.umd.edu/cim . One of more than 47 Ian Johnson and Jonathan Wiseman, “Bei - 60 Chinese cultural institutes established on U.S. campuses by the Chinese gov - jing limits Obama’s exposure,” The Wall Street ernment, offering language courses and cultural programs. Journal Online, Nov. 17, 2009, http://online. wsj.com/article/SB125835068967050099.html. National Security Council , www.whitehouse.gov/administration/eop/nsc . The NSC 48 John Pomfret and Jon Cohen, “Many Amer - is the president’s principal forum for considering national security and foreign policy icans see U.S. influence waning as that of matters with his senior national security advisors and Cabinet officials. China grows,” The Washington Post , Feb. 25, 2010, p. A11. Nottingham University China Policy Institute , International House, Jubilee 49 Andrew Jacobs, “China Warns U.S. Against Campus, Nottingham NG8 1B8, England, United Kingdom ; (44-115) 8467769 ; Selling F-16s to Taiwan,” www.nottingham.ac.uk/cpi . Think tank aimed at expanding knowledge and under - 50 Ibid. standing of contemporary China. 51 David Shambaugh, “The Year China Showed Shanghai Institute for International Studies , 195-15 Tianlin Rd., Shanghai, its Claws,” Financial Times , Feb. 16, 2010, China 200233 ; (86-21) 54614900 ; www.siis.org.cn . Research organization focusing on www.ft.com/cms/s/0/7503a600-1b30-11df-953 international politics, economy, security strategy and China’s international relations. f-00144feab49a.html . 52 Corey Flintoff, “Will China Help Sanction U.S.-China Policy Foundation , 316 Pennsylvania Ave., S.E., Suites 201-203, Iran’s Nuke Program?” NPR, April 14, 2010, Washington, DC 20003 ; (202) 547-8615 ; www.uscpf.org . Works to broaden aware - www.npr.org/templates/story/story.php?story ness of China and U.S.-China relations within the Washington policy community. Id=125991589&ft=1&f=1004 .

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Mann , James , The China Fantasy: How Our Leaders Ex - “Annual Report to Congress: Military Power of the Peo - plain Away Chinese Repression , Viking , 2007 . ple’s Republic of China — 2009,” Office of the Secretary A veteran China reporter files a passionate complaint that of Defense , 2009 , www.defense.gov/pubs/pdfs/China_ U.S. elites are misleading the American public to boost trade Military_ Power_Report_2009.pdf . with a hostile regime. The Pentagon’s annual assessment of the People’s Liberation Army invariably draws criticism from Beijing. Shirk , Susan , China: Fragile Superpower: How China’s Internal Politics Could Derail Its Peaceful Rise , Oxford Godement , Francois , et al. , “No Rush to Marriage: University Press , 2007 . China’s Response to the G2,” China Analysis, European A former top State Department official says understanding the Council on Foreign Relations and the Asia Center of fears that drive China’s leadership is essential to managing the the Sciences Po , June 2009 , ecfr.3cdn.net/d40ce525f765f U.S.-China relationship without military confrontation. 638c4_bfm6ivg3l.pdf . An East Asian historian and analyst says that while Euro - Tyler , Patrick , A Great Wall: Six Presidents and China , peans worry about an emerging U.S.-Chinese global duopoly, Public Affairs , 1999 . the Chinese are still examining their options. An investigative reporter describes the struggles of six presi - dential administrations in shaping a sustainable China policy. Green , Michael J. , “U.S.-China Relations Under President Obama,” July 14-15, 2009 , Brookings Institution, Articles iir.nccu.edu.tw/attachments/news/modify/Green.pdf . A scholar at the centrist think tank examines whether the Mufson , Stephen , and John Pomfret , “There’s a New Red administration’s cooperative China policy will work. Scare, but is China Really So Scary?” The Washington Post , Feb. 28, 2010 , www.washingtonpost.com/wp-dyn/ Huang , Ping , et al. , “China-U.S. Relations Tending Towards content/article/2010/02/26/AR2010022602601.html . Maturity,” Institute of American Studies, Chinese Academy Two Post correspondents argue that America’s reading of of Social Sciences , June 2009 , ias.cass.cn/en/show_project_ China is an insight into America’s collective psyche. ls.asp?id=1012 . Four analysts offer a Chinese perspective on relations be - Talbot , David , “China’s Internet Paradox,” MIT Technology tween the United States and their country. Review , May-June 2010 , www.technologyreview.com/web/ 25032 /. Lunn , Thomas , “Human Rights in China: Trends and Pol - China’s Internet usage is not as restricted as the regime icy Implications,” Congressional Research Service , Jan. 25, would wish despite intense censorship efforts. 2010 , www.fas.org/sgp/crs/row/RL34729.pdf . The nonpartisan research agency offers the most current Wong , Edward , “Chinese Military to Extend its Naval periodic report to Congress on human rights in China.

430 CQ Researcher The Next Step: Additional Articles from Current Periodicals

Censorship Guynn , Jessica , “Chinese Hacking Risk Seen As Dire,” Los Angeles Times , Jan. 15, 2010 , p. A1 . “Google Stops Web Censoring for China, Shifts Search En - The scale and sophistication of cyber attacks on Google gine,” Lewiston (Idaho) Morning Tribune , March 23, 2010 . by hackers in China is raising America’s national security Google ceased censoring the Internet in China after mov - concerns. ing its search engine operations off of the mainland. Matthews , William , “China Is Most Formidable Cyber Acohido , Byron , and Kathy Chu , “Google and China Play Foe, Experts Warn,” Federal Times , Jan. 25, 2010 , p. 13 . Hardball Over Search Services,” USA Today , Jan. 14, 2010 , Experts believe that China has steadily improved its ability p. 3B . to break into U.S. military networks. As Google threatens to pull out of China, experts say the country is not likely to back down on its censorship policies. Nakashima , Ellen , “Large Worldwide Cyber Attack Is Un - covered,” The Washington Post , Feb. 18, 2010 , p. A3 . Kopytoff , Verne , “China Cuts Off Web Sites,” The San More and more criminal groups are targeting cyber attacks Francisco Chronicle , June 3, 2009 , p. 1C . toward emerging nations such as China and Russia. The Chinese government is blocking access to Twitter, Flickr and Microsoft Hotmail in an effort to quell dissent around U.S. National Debt the 20th anniversary of the military attacks in Tiananmen Square. “A Risk of Indebtedness: Two Views,” Atlanta Journal- Constitution , Feb. 14, 2010 , p. 6A . Currency Dispute Senator Johnny Isakson, R-Ga., says that the security of the country and its citizens is threatened by the increase of U.S. Bradsher , Keith , “China Uses Rule On Global Trade to Its debt to China. Advantage,” The New York Times , March 15, 2010 , p. 1A . Evidence suggests that China is using international trade “We Owe, We Owe,” Houston Chronicle , Jan. 7, 2010 , p. B8 . rule inconsistencies to stimulate its own economy at the ex - The government must rise over political partisanship if the pense of the United States and other countries. country wants to control its national debt and reduce its re - liance on borrowing from China. Kaplan , Robert D. , “The Geography of Chinese Power,” Foreign Affairs , May-June 2010 , p. 22 . Schmid , John , “National Debt Makes U.S. Vulnerable, China is shifting the balance of power in the Eastern Hemi - Experts Say,” Milwaukee Journal Sentinel , June 30, 2008 , sphere by securing its economic needs. p. 1A . China and several other countries are financing the U.S. Pierson , David , “Currency; China May Let Yuan Go Up national debt, which has made the country vulnerable. A Bit,” Los Angeles Times , April 2, 2010 , p. 1B . Analysts say that China is likely to gradually strengthen its CITING CQ RESEARCHER currency, rather than continue to use a weak currency to Sample formats for citing these reports in a bibliography protect its exports as it has historically done. include the ones listed below. Preferred styles and formats Schneider , Howard , “U.S. Avoids Chinese Currency Battle,” vary, so please check with your instructor or professor. The Washington Post , April 4, 2010 , p. 3A . The Obama administration is delaying confrontation with MLA STYLE China’s currency manipulation amid upcoming meetings in - Jost, Kenneth. “Rethinking the Death Penalty.” CQ Researcher tended to address a series of disagreements. 16 Nov. 2001: 945-68.

Cyber Attacks APA S TYLE Jost, K. (2001, November 16). Rethinking the death penalty. Bay , Austin , “Will the Chinese Shut Down Our Electric Grid?” Providence (Rhode Island) Journal-Bulletin , CQ Researcher, 11 , 945-968. March 27, 2010 , p. 6 . HICAGO TYLE A Chinese engineering student addresses known weak - C S nesses in the U.S. power grid that make it vulnerable to at - Jost, Kenneth. “Rethinking the Death Penalty.” CQ Researcher , tacks by hackers in his country. November 16, 2001, 945-968.

www.cqresearcher.com May 7, 2010 431 In-depth Reports on Issues in the News

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CQ Researcher Online offers a backfile from 1991 and a number of tools to simplify research. For pricing information, call 800-834-9020, or e-mail [email protected]. Updated May 24, 2011 www.cqresearcher.com U.S.-China Relations Here are key events, legislation and court rulings since publication of the CQ Researcher report by Roland Flamini, “U.S.-China Relations,” May 7, 2010.

n early May, the Chinese embassy the third in two years — was not in Washington opened the doors expected to produce any major I of its vast I. M. Pei-designed build - decisions but did end with agree - ing to more than 800 prominent diplo - ment on some key economic is -

mats, officials and Washingtonians for sues, which could represent “very b e o

the annual Opera Ball, one of the cap - promising shifts in the direction L

l ital’s premier social and fund-raising of China’s economic policy,” ac - u a S /

events. The embassy’s large public cording to U.S. Treasury Secretary s e g

rooms were lavishly transformed for Timothy F. Geithner. Cui Tiankai, a m I

the occasion. The main auditorium be - China’s vice minister of foreign af - y t came an ancient tea house for danc - fairs, put it more poetically: “As t e G ing (to a Western orchestra); another we say in China, spiritual things / P room was turned into “The Peking can be turned into material ones.” F A Duck Gallery,” where 10 chefs served Chinese President Hu Jintao addresses corporate and China’s national dish. And hundreds Currency Concerns policy leaders at a meeting in Washington on Jan. 20, 2011, sponsored by the U.S.-China Business Council of red Chinese lanterns were hung for The Obama administration worked and the National Committee on U.S.-China Relations. good luck. from an agenda that seemed frozen Hu acknowledged during his visit that “a lot still needs Hosting this year’s event was a sig - in time — protecting human rights, to be done” with regard to human rights in China. nificant first for China’s once-reclusive curbing Chinese cyber attacks on institutions better access to China’s diplomats, and another sign of China’s corporations, raising the value of China’s state-controlled financial markets. growing global confidence. renminbi currency against the U.S. dol - The longstanding issue over the un - A week later, a bilateral meeting lar, dealing with North Korea. The ad - dervalued renminbi (also known as the in Washington between top U.S. and ministration agreed, for example, to yuan ) was less contentious than in the Chinese officials presented a less friv - look into easing tariffs on Chinese past because the Chinese have allowed olous symbol of the priority both goods and easing the ban on selling their currency to rise about 5 percent sides place on their sometimes bumpy China high-tech items with potential against the dollar since June 2010 — relationship. defense uses. The Chinese govern - double that when adjusted for infla - Hundreds of Chinese officials, gen - ment agreed to eliminate the prefer - tion. While this has helped reduce the erals and businessmen came to Wash - ential treatment it gives to Chinese price advantage of Chinese exports in ington for the two -day Strategic and companies on government contracts. U.S. and other foreign markets, con - Economic Dialogue. The meeting — China also would allow U.S. financial cerned members of Congress and U.S.

PUBLISHED BY CQ PRESS, A DIVISION OF SAGE WWW.CQPRESS.COM U.S.-C HINA RELATIONS

manufacturers still consider China’s cur - Joseph R. Biden publicly expressed what China expert Elizabeth Econo - rency greatly undervalued. American “concern” over the recent my, director of Asia studies at the Coun - crackdown in China, including at - cil on Foreign Relations think tank in Focus on Human Rights tacks, arrests and the “disappearance New York City, calls China’s “virtual The strategic dialogue was held of journalists, lawyers, bloggers and political system.” 57 A new, home - against the background of a tough artists.” Biden said he recognized that grown Twitter-like service called QQ crackdown on Chinese activists who “some in China see our advocacy as has more than 90 million users . 58 News had tried to organize a nonviolent an intrusion and Lord only knows of government corruption and cover- pro-democracy Jasmine Revolution in what else. But President Obama and ups goes viral in a matter of minutes, China, inspired by the so-called Arab I believe strongly in protecting fun - and the regime is forced to react with Spring in the Middle East. 53 Human- damental rights and freedom.” 55 uncharacteristic speed. Nevertheless, China has become increasingly sophisticated at censor - ing undesirable websites. In February, “jasmine” was added to the list of pro - scribed key words that trigger a block - age. Others include “Hillary Clinton” and “Dalai Lama.” The U.S. State De - partment has undertaken a $19 mil - lion program to develop software to circumvent Chinese censorship of web - sites and searches using terms the government deems subversive. The g n

o software will be made available free W to anyone in the world wanting to x e l download it. A / s

e Given the uptick in China’s diplo - g a matic and military assertiveness, the m I

y United States must manage an in - t t

e creasingly complex and challenging G Chinese and American officials meeting in Washington in May for the Strategic relationship. For the first time, at U.S. and Economic Dialogue at the State Department include, from left: Vice Premier insistence, representatives of the Chi - Wang Qishan, State Councilor Dai Bingguo, Secretary of State Hillary Rodham nese military (the People’s Liberation Clinton, Treasury Secretary Timothy Geithner and Defense Secretary Robert Gates. Army, or PLA) participated in the two- day talks in Washington, and both sides agreed to resume regular mili - rights groups said the government’s Secretary of State Hillary Rodham tary contacts, broken off last year after reaction was the most severely re - Clinton has been tougher still. In an the Obama administration agreed to pressive in a decade. 54 When online interview in The Atlantic , she called sell $6.4 billion in arms — including calls went out for demonstrations, China’s human rights record “de - missiles and 60 Black Hawk helicopters Chinese security officers quickly locked plorable” and said the regime was liv - — to Taiwan, over Beijing’s strong ob - down the proposed venues and ar - ing on borrowed time. Ultimately, she jections. Despite its enormous size and rested dozens of activists, even those said, China’s communist leadership rapid technical development, the PLA with only a loose connection to the faced the same destiny as the Arab remains inferior to U.S. forces in unrest. Florists were even discouraged world’s dictators. “They’re worried and equipment and capability, even from selling jasmine, because of its they are trying to stop history, which though the United States contends the link to the planned dissent. is a fool’s errand,” she told the maga - PLA needs to be closely watched. In the past, the Obama adminis - zine. “They cannot do it.” 56 tration has taken a low-key approach With more than 450 million Chinese ‘Welcome Air of Reality’ to Chinese human rights violations. accessing the Internet, 230 million blog - For Jeffrey Bader, a former Obama But as he opened the bilateral con - gers and 120 million micro bloggers security adviser on Asian affairs and ference on May 9, Vice President (Twitterers), the web has become now a visiting scholar at the centrist Chronology

Geithner hold talks with their complaining that the slow pace 2010 counterparts in China. Topping the of China’s proposed currency agenda is a discussion of tensions reforms was affecting both the Jan. 6 — President Barack created when North Korea global and U.S. economies. Obama approves $6.4 billion in torpedoed a South Korean navy weapon sales to Taiwan despite ship in March, killing 46 sailors. • strong protests from Beijing. Deal includes missiles, ships Aug. 16 — Pentagon reports and helicopters. that Chinese military is 2011 increasing spending on long- Jan. 26 — In retaliation for the range missiles, submarines, Jan. 18 — Chinese President Hu U.S. arms deal with Taiwan, aircraft carriers and cyber Jintao, visiting Washington, China suspends military contact warfare. The activities could acknowledges for first time that with the United States, imposes alter East Asian military balances “a lot still needs to be done” with sanctions on companies selling and enable China to conduct a regard to human rights in China. weapons to Taiwan. range of military operations in Asia well beyond Taiwan. April 6 — Chinese authorities Feb. 17 — President Obama suppress nascent Jasmine receives exiled Tibetan spiritual Sept. 24 — President Obama Revolution, inspired by the Arab leader, the Dalai Lama. China and China’s Prime Minister Wen Spring, arrest many activists. “resolutely opposes” the meeting. Jiabao hold two-hour meeting on the sidelines of the U.N. May 9-10 — Third meeting of May 24 — Secretary of State General Assembly in New York. U.S.-China Strategic and Hillary Rodham Clinton and Obama urges China to speed up Economic Dialogue is held in Treasury Secretary Timothy F. the revaluation of the renminbi , Washington, D.C.

Brookings Institution think tank in In Washington, the Chinese lec - ports by $11.43 billion, primarily in Washington, the two sides “have de - tured administration officials on re - trade with the European Union, Unit - veloped reasonable expectations ducing the U.S. deficit, reflecting ed States and Japan. 61 about both the possibilities and limits Beijing’s concern that the United Normally, the United States responds of cooperation, which will reduce the States might run into problems meet - by pressing the Chinese to enlarge chances of future miscalculation.” ing its debt obligations. China is the their domestic consumer base, there - Economy says when it comes to re - largest foreign holder of U.S. debt by reducing their heavy dependence lations with China, “a welcome air of — some $1.7 trillion, according to on exports, and grant foreign manu - reality is blowing through Washington economists testifying recently be - facturers more access to the Chinese these days.” fore the bipartisan U.S.-China Eco - market. In fact, the Beijing government As a rule, the Chinese cooperate nomic and Security Review Com - began boosting domestic consumption with Washington when it is not against mission. 59 In 2010, the United in 2008, when the global financial their interests to do so. For example, States imported $365 billion worth meltdown first hit China’s exports. China was persuaded not to veto the of goods from China but exported China’s rapidly growing middle class recent U.N. Security Council resolu - only $92 billion worth. 60 is expected to reach 700 million peo - tion on Libya, even though it did not As the talks proceeded, Beijing ple by 2020, or 48 percent of the pop - favor NATO intervention. But it has drove home the point of its growing ulation. 62 The country aims to in - been less helpful with sanctions against accumulation of U.S. dollars by pub - crease domestic spending from today’s Iran, where it has sizeable commer - lishing export data for April showing 36 percent of GDP to 42-45 percent cial interests. its worldwide exports exceeded im - by 2015. 63 But first the regime must U.S.-C HINA RELATIONS

transform the Chinese — by long tra - com/en/news/international/1680-us-criticizes- 59 “China holds more U.S. debt than indi - dition a nation of savers — into a na - china-again-for-poor-human-rights-record . cated,” The Washington Times , March 2, 2010, tion of spenders. 56 Jeffrey Goldberg, “Hillary Clinton — Chi - www.washingtontimes.com/news/2010/mar/02/ nese System Is Doomed, Leaders on a ‘Fool’s chinas-debt-to-us-treasury-more-than-indicated /. — Roland Flamini Errand,’ ” The Atlantic , May 10 2011, www.the 60 “US-China Trade Statistics and China’s World atlantic.com/international/archive/2011/05/hillary - Trade Statistics,” U.S.-China Business Council , clinton-chinese-system-is-doomed-leaders-on- www.uschina.org/statistics/tradetable.html . a-fools-errand/238591 /. 61 “China Exports Hit Record in April,” Fi - Notes 57 “450 million Chinese use internet,” Xin - nance Business News , May 10, 2011, www. huanet , Dec. 31, 2010, http--//news.xinhuanet. financebusinessnews.net/chinese-exports-hit- 53 For background, see Roland Flamini, “Tur - com/english2010/china/2010-12/31/c_136716 record-for-april /. moil in the Arab World,” CQ Global Researcher , 84.htm. See also “Human Rights lecture not 62 Malbritt Christiansen, “Open Seminar on the May 3, 2011, pp. 209-236. needed,” statement by Embassy of China in Chinese Consumer Market,” Renmin Shimbin , 54 Jamil Anderlini and Richard McGregor, London in China Daily , April 29, 2011 , www. March 27, 2011, http--//news.asianstudies.dk/ “China elite faces curbs on US visas,” FT.com , chinadaily.com.cn/opinion/2011-04/29/content_ 2011/03/open-seminar-on-the-chinese-consumer- April 26, 2011, www.ft.com/cms/s/0/02bfc8cc- 12418153.htm . market /. 702e-11e0-bea7- 58 Michal Kan, “Chinese Top Microblog Hits 63 Alan Wheatley, “Analysis — For China, 00144feabdc0.html#axzz1LzE8BL9v . Over 90 Million Active Users,” PCWorld , May 11 , new plan is a question of balance,” Reuters, 55 Cornelius Lundsgaard, “US Criticizes China 2011, www.pcworld.com/article/227608/chinese_ March 14, 2011, http--//uk.reuters.com/article/ Again for Poor Human Rights Record,” The top_microblog_hits_over_90_million_active_users. 2011/03/14/us-china-economy-rebalancing-id Tibet Post , May 10, 2011, www.thetibetpost. html . UKTRE72D4JF20110314 . Update