= -.3&8_ _= *1&9.438=.3=9-*=++*9-=43,7*88a= 88:*8=&3)=251.(&9.438=+47=_ _=41.(>= *77>=:2'&:,-= 5*(.&1.89=.3= 8.&3= ++&.78= *'7:&7>=+*`=,**3= 43,7*88.43&1= *8*&7(-=*7;.(*= 18/1**= <<<_(78_,4;= --211= =*5479=+47=43,7*88 Prepared for Members and Committees of Congress -.3&8_ _= *1&9.438=.3=9-*=++*9-=43,7*88a=88:*8=&3)=251.(&9.438=+47=_ _=41.(>= = :22&7>= This report deals with U.S.-China relations during the 110th Congress (2007-2008) and with a number of key events involving China during the two-year period. These events included: China’s anti-satellite weapon test (January 2007); the 17th Party Congress (October 2007); a crackdown against demonstrations in Tibet (March 2008); the election of a new, pro-engagement government in Taiwan (March 2008); the massive Sichuan earthquake (May 2008); and Beijing’s hosting of the 2008 Olympics (August 2008). U.S.-China relations were remarkably smooth for much of the 110th, although there were signs that U.S. China policy had become subject to competing reassessments as the Bush Administration drew to a close in 2008. The White House continued to follow the policy of engagement it had unveiled in 2005 as a new framework for the relationship, one in which the United States was willing to work cooperatively with China while encouraging Beijing to become a “responsible stakeholder” in the global system. U.S. officials also continued to hold a series of regular senior dialogues the White House had established with Beijing, such as the U.S.-China Strategic Economic Dialogue. But other U.S. policymakers began to raise concerns on issues involving China and U.S.-China relations. They cited concerns about the impact of the PRC’s strong economic growth and a more assertive PRC diplomacy in the international arena; failures in procedures to assure the quality of Chinese pharmaceuticals, food, and other products being imported into the United States; repeated PRC inabilities to protect U.S. intellectual property rights; and trade practices and policies in China that contributed to a growing U.S. trade deficit with China ($256 billion in 2007 and projected to hit $267 billion in 2008). With total U.S.-China trade in 2007 reaching $387 billion, China during the 110th Congress was the second-largest U.S. trading partner. Beijing also was positioned to play an important potential role in efforts to resolve the global financial crisis that developed late in 2008, with China’s central bank a major purchaser of U.S. debt. China was the second largest holder of U.S. securities and the largest holder of U.S. Treasuries used to finance the federal budget deficit. Taiwan, over which China claims sovereignty, remained the most sensitive bilateral issue in the 110th Congress, exacerbated by the pro-independence Taiwan administration that held power in 2007 and early 2008. But a March 2008 leadership change in Taiwan presented an opportunity to begin to lay a new framework in Taiwan-PRC relations—one moving away from the more confrontational policies of the past. As a result, tn June 2008, the first PRC-Taiwan talks in a decade were held in Beijing. The political status of Tibet also re-emerged as an issue in the 110th when monks in Lhasa launched a protest against PRC rule on March 11, 2008. The protests, at times resulting in violent clashes with police, spread to several other cities in the Tibetan Autonomous Region and beyond. Beijing’s assertive response added to a drive urging a boycott of the Summer Olympic Games being hosted by Beijing in August 2008. But Beijing hosted a largely successful Games, and President Bush attended the opening ceremony in August 2008. Other concerns about China appeared driven by security calculations, where U.S. officials question the motivations behind China’s expanding military budget. One congressionally mandated report by the Defense Department concluded Beijing is greatly understating its military expenditures and is developing anti-satellite (ASAT) systems—a claim that gained more credence when the PRC used a ballistic missile to destroy one of its own orbiting satellites in January 2007. This report will not be updated. Current issues and actions in U.S.-China relations are covered in other CRS reports. 43,7*88.43&1= *8*&7(-= *7;.(*= -.3&8_ _= *1&9.438=.3=9-*=++*9-=43,7*88a=88:*8=&3)=251.(&9.438=+47=__=41.(>= = 439*398= Background and Overview.............................................................................................................. 1 Introduction............................................................................................................................... 1 Issues and Developments ................................................................................................................ 1 Global Financial Crisis.............................................................................................................. 1 Concerns About Product Safety ................................................................................................ 2 Beijing Summer Olympic Games 2008 .................................................................................... 3 Issues Involving Tibet ............................................................................................................... 5 The Dalai Lama and the Congressional Gold Medal.......................................................... 5 Demonstrations in Tibet in March 2008 ............................................................................. 6 China’s New “Reincarnation Law”..................................................................................... 9 Sino-Tibetan Negotiations .................................................................................................. 9 Sichuan Earthquake................................................................................................................. 10 Human Casualties, Property Damage, and Foreign Aid ....................................................11 Questions about School Construction................................................................................11 Military and National Security Issues ..................................................................................... 12 Espionage Charges............................................................................................................ 13 China’s Growing Military Power...................................................................................... 13 PRC Anti-Satellite Test and Space Activities.................................................................... 14 Military Contacts..................................................................................................................... 14 U.S. Ship Visit Denials in Hong Kong.............................................................................. 15 Economic and Trade Issues..................................................................................................... 18 China’s Sovereign Wealth Fund........................................................................................ 18 Currency Valuations.......................................................................................................... 19 Unfair Trade Subsidies...................................................................................................... 20 Intellectual Property Rights .............................................................................................. 20 Ongoing U.S.-China Senior-level Dialogues .......................................................................... 20 The Strategic Economic Dialogue (SED) ......................................................................... 20 The Senior Dialogue ......................................................................................................... 21 Taiwan..................................................................................................................................... 22 U.S. Taiwan Policy and U.S. Arms Sales.......................................................................... 23 Taiwan’s Bid for U.N. Membership.................................................................................. 24 Resumption of PRC-Taiwan Talks.................................................................................... 25 China’s Growing Global Reach............................................................................................... 26 Environmental Issues .............................................................................................................. 27 Domestic Political Issues ........................................................................................................ 27 th 17 Party Congress, October 15-21, 2007 ........................................................................ 27 Social Stability.................................................................................................................. 28 Internet and Media Restrictions........................................................................................ 29 Human Rights.......................................................................................................................... 30 Religious Freedom............................................................................................................ 30 Family Planning Policies .................................................................................................. 31 Charter 08 ........................................................................................................................