Background

Historically China has been a nation that prefers its doors closed. Before 1911, the fall of the Qin dynasty, the last of all imperial dynasties, China was governed by feudalism. Its economy, though heavily based on agriculture, was nonetheless self-sufficient. Materially, China was a rich land, with its abundance of natural resources. For most of the Qin dynasty, food was plenty and people generally saw a surplus. Chinese arts and crafts, in comparison to its contemporaries in the West, was much more advanced. Thus when the English royal delegate visited China during the time of the Emperor Qian Long, he was astonished with by the prosperity of China. However, when he made his request to the emperor to open up several of China’s coastal cities for commerce, Qian Long promptly rejected such proposal. Before he left for England, the delegate was showered with lavish gifts to be taken back to Her Majesty for the purpose of showing off China’s material wealth. Ironically, though, when the delegate presented Qian Long with a personal gift of two rifles that were made in England, the emperor placed them in a luxurious case for display, ignoring its future significance.

It took some while before England could find articles worth bartering and trade for in the eyes of the Chinese. Opium, however, produced devastating effects on the country and its economy. Chinese gold and silver started to flow incessantly to the West. When the emperor Dao Guang (Qian Long’s grandson) attempted to stop the lucrative opium trade with the West, war broke out. 1842’s Opium War served as a wake up call to the regime of China when the combined forces of eight nations (mostly Western but also including Japan) stormed the capital Beijing and frightened the imperial family. China simply lacked the gunpowder to combat the invading troops in modern warfare. Although China is known as the place where gunpowder was invented, the West made significant use of it in the form of constructing weapons of mass destruction that served as the tools for colonization. In order to prevent further disgrace to the country, the emperor was forced to sign a series of treaties which opened China’s doors to commerce, and correspondingly, to influence from the West.

Between the Opium War and the fall of the Qin dynasty, western influences permeated China’s coastal cities. Westerners further took advantage of the situation when China’s warlords ruled the country during the chaos following the collapse of the Qin dynasty. Western influences were especially dominant in places such as Shanghai and Guang Zhou. Each country’s embassies rounded up huge pieces of land to themselves within the bounds of the cities and used its own troops for protection. Although China was on the victorious side during the First World War, it did not receive any spoils of victory. On the contrary, the control of Shangdong, a material rich northern province bordering the cost, was transferred from Germany to Japan. Not long after, Japan occupied most of northern China, and even tried to set up a puppet regime called Man Zhou Guo (the country of Manchuria). In other major cities, Western businesses thrived. In the city of Shanghai, for example, foreigners controlled large portions of all business transactions. European culture also permeated the city in the form of clubs, restaurants, banks, sports, and schools. Within a short period of time, Shanghai was considered the trendiest and most modern city of China.

Everything changed, however, when the communist forces, led by Mao Ze Dong (Mao Tse Tong), took over the country in 1949. Many actually considered such result inevitable given the circumstances of the day. Western influences in the coastal cities along with the traditional Chinese feudalism have created a sharp social imbalance. The lives of Chinese farmers had become extremely harsh, and many families were separated by the course of war, migration, and foreign invasion. Many young people were forced to leave their homes in search of better lives. Nevertheless they were soon trapped in a country torn between war and massive socio-economic change. Some parts of the country were still ignorant that the Qin dynasty had fallen. In short, too much change came too quickly. It was then when they found the communist principle of equality appealing. Many yearned for the day when their country could be returned to them and young people could return to lives of peace and harmony. Mao quickly found a large group of loyal followers who have pledged their lives and fortune to the greater cause. The communists were successful at driving out the nationalists, led by Jiang Jie Shi (Chiang Kai Shek) who was in favor of opening China to the West. And once the communists seized control, they once again closed the doors of China, in the same manner as that previous emperors have done. They focused on stabilizing the country and eliminating chaos. Wealth was redistributed, and all foreigners (Japan surrendered to the Allied Forces in 1945) fled.

Nixon

Once its doors were closed, China was hesitant to reopen them, with lingering memories of the traumatic effects experienced earlier. Internationally, many refused to accept the People’s Republic of China as a legitimate regime. Consequently, China did not join the United Nations until 1971. In 1972, however, the U.S. made a giant diplomatic leap forward by having President Richard Nixon visit China. Although change did not happen overnight, Nixon made huge progress during his visit. The U.S. and China established roots for future interaction.

Deng Xiao Ping

Drastic change took place in the 1980s. President Deng Xiao Ping of the Chinese Communist party revolutionized the country once again with his open door policy. Following his actions, a wealth of goods from the U.S., Europe, and Japan flowed into China. Subsequently, many foreign and joint ventures were established in China. The government even offered financial incentives to those businesses who have set up centers in China. Deng specifically targeted a set of large cities such as Beijing, Tianjing, Shanghai, and Guang Zhou, as leaders in this process of modernization. In the U.S., people saw goods with “made in China” stamped on them as more businesses outsourced to China to take advantage of lower labor costs. Major foreign brands such as Nike, Coca-Cola, and Sony gained immense popularity while continuing to enjoy the cheaper Chinese labor. For the Chinese, as a result of rising wages due to the influx of foreign businesses, people possessed more money to spend. The balance of trade, however, goes heavily in favor of China despite the fact that the items that were exported to China from foreign countries generally cost more per unit. Electronics, cars, and industrial equipment were the high-ticket items of the day. Having an open door policy meant that students of higher education started going abroad to study in the U.S. and Europe. Some have returned with invaluable knowledge that helped to shape the areas of technology, commerce, medicine, and academia. Most importantly, the 1980s set the tone for what is to follow in the next decade.

Tian An Men (Tiananmen) Square

Say the words "Tiananmen Square" to a Chinese, and he or she will probably think first of the place where modern China was born, of a must-see stop on every tourist's itinerary or simply of a place to fly kites. "When I come here, I feel the dignity of our history and the pride of China," said Zhang Li, a clerk with a state company. "It occupies a sacred place in our hearts. It is the place where China stood up." Her last sentence echoes the words Chairman Mao used when he came to the square on Oct. 1, 1949, to declare the birth of the People's Republic of China to a cheering crowd of hundreds of thousands. In 1966, Mao stood there again to rally another huge crowd behind the destructive chaos of the Cultural Revolution. A decade later, the square again was thronged with people, who came to mourn the death of Premier Chou En-lai and to protest the power of the Gang of Four. Yet another decade later, the square was filled with students demanding democracy and political reform. The Tian An Men Square incident shocked the international community as thousands of Chinese university students protested in front of Tian An Men Square in June of 1989. With the killings of students by the government, the words "Tiananmen Square" were etched into the minds of an American public probably largely unfamiliar with the square or its role in Chinese history until then. "Just these three syllables, Tian-an-men, are associated with the massacres in American minds," said Carma Hinton, an American born and raised in China who made a seminal documentary on the student protests, "Gate of Heavenly Peace," reportedly watched by Clinton before he left for China. "To most Chinese, June 4 is a moment . . . the moment when the government shot at the people." It also is a moment that isn't mentioned these days. An official veil of silence has since been drawn over what is euphemistically referred to, if at all, as the June 4 "incident." That doesn't mean the massacre has been forgotten. "I believe even a lot of the higher-ups in government don't agree with what happened," Hinton said. "But there's a deadlock in Chinese politics. It's something seen as so dangerous, so volatile, that nobody dares opening it up." "No one talks about it because if there is talk there must be some conflict," said Mao Yu-shi, head of the Unirule Institute, an independent think tank. "Both sides made mistakes. Both sides didn't reconcile, didn't talk, didn't negotiate.” Yet to this day, the words June 4 stand as a wedge between the government and its people, between those who have excused the party's decision to use force and those who cannot forgive or forget. "That's a long time ago. Let it pass," said Zhou Yi Ren, 26, a graduate student. "Maybe some Americans pay too much attention to what happened. Look at what China has achieved. Our living standards are improving. We want to focus on our economy and our development."

Clinton

During the 1990s, U.S. and China’s trade relation blossomed. Despite China's poor non-proliferation record, President Clinton certified that China was a reliable partner despite various political issues. As Hong Kong passed from British to Chinese rule, former Secretary of State Albright vowed the administration would be vigilant in watching whether Beijing kept its pledge of "one country, two systems." Since the transfer, Beijing and its hand-picked administration in Hong Kong have disbanded the city's popularly-elected legislature, crafted a new electoral system that virtually guarantees that the new legislature will be controlled by pro-PRC political and business elites, imposed new limits on public demonstrations, and passed retroactive legislation exempting Beijing-based entities from a host of Hong Kong's laws. Nevertheless, according to the State Department's recent report to Congress on developments in Hong Kong, the transition from British to Chinese rule "has gone smoothly." Seeking to move ties between the U.S. and China "forward," the Clinton Administration used a trip to Taiwan by a group of former high-ranking national security officials to pressure the government of Taiwan to reopen talks with China. The message to the democratic and free-market Taiwan was that it could not count on the U.S. to help it militarily if it insisted on permanent political independence from mainland China. Ignoring the fundamental question of whether it would be in America's geo-strategic interest for China to govern Taiwan, to say nothing of the principles of justice and self-determination, the administration has increased Taiwan’s isolation to the benefit of the People's Republic own ambitions in the region. In February, despite an on-going criminal investigation of Loral Space and Communications and Hughes Electronics for passing to the Chinese secret information related to ballistic missile technology and guidance, President Clinton approved a national security waiver for Loral to launch one of its satellites on a Chinese rocket — allowing, in effect, Loral to provide China with the same kind of information that led to the investigation in the first place. As the New York Times pointedly remarked, "instead of responding firmly" to this possible security breach, "the White House has all but endorsed" it. Why Clinton issued this waiver over the objections of Justice and State has yet to be adequately explained. Certainly the Clinton Administration's history of placing political and commercial interests above those of national security invites Congressional inquiry.

Bush

The Bush Administration’s policy toward China was generally tougher. Funds are aggressively allocated toward defense spending. Washington’s policy calculations toward China have shifted to reflect the Bush administration’s aggressive recalibration of U.S. foreign policy. The reorientation places U.S. security interests at the center and elevates the war on terrorism to the uppermost rung of the foreign policy ladder. As such, it also extends the policy’s conceptual reach to include the threat of force to remove the current regime in Iraq as well as Washington’s interest in a diplomatic resolution to the crisis ignited when North Korea announced it had a nuclear weapons program. The new policy framework acknowledges the role of exceptional U.S. military, political and economic power on the international stage and American feelings of unprecedented vulnerability in the face of an inchoate enemy called terrorism. Up to a point, the shift also reflects the rising influence of the Defense Department and national security organizations on U.S. foreign policy generally. At the same time, there is the suggestion that the administration has matured while in office, as demonstrated by its recent willingness to intertangle its instinct to follow the lead of the conservative unilateralism. This is where China comes in. The intellectual consistency between the two poles in the administration’s foreign-policy thinking is its emphasis on managing the relationships with global players it deems critical to U.S. interests.

Aptly, the administration’s catchwords are seeking common ground and respecting differences. In other words, the approach to U.S.-Sino relations is part and parcel of a larger framework that reflects the implications of global threat. It is neither indicative of a closer relationship on the order of that shared with more traditional allies, nor does it hold out the prospect of fewer opportunities for misunderstanding. Rather, Washington’s approach will continue to emphasize selectivity when choosing issues it hopes will enhance American objectives in the war on terrorism and, in the process, avoid sacrificing strategic interests in the region, notably Taiwan.

Furthermore, the administration of George W. Bush took office in January 2001 with a view of China as a strategic competitor and promising a tougher approach than either the administration of the senior George Bush (the President’s father) or Bill Clinton. Bush intended to broaden the focus of U.S. policy in Asia, concentrate on other U.S. interests in the region—especially Japan and South Asia—and, in the process, de-emphasize U.S.-Sino relations.

An early test of the fledgling administration’s policy occurred in April 2001, when a U.S. Navy reconnaissance plane collided with a Chinese jet over the South China Sea, killing the Chinese pilot and leading to the 11-day detention of the U.S. crew. A tense stand-off resulted in strained relations amid Chinese accusations that U.S. reconnaissance activities are unfriendly acts directed at a sovereign nation. Five months later, the September terrorist attacks against the United States provided the grist for a change in the policy calculus not only in Washington but also in Beijing. After 9/11, Beijing began taking a different tack when the potential for differences with Washington arose. It assumed a more pragmatic than ideological profile when addressing its interests. For example, official statements made clear Beijing’s wariness about the precedent set by U.S. troops with their presence in Central and South Asia but avoided earlier prickliness. In the process, Beijing appeared intent on avoiding U.S. provocation. One frequently cited observation suggested Beijing would continue in this mode as long as it is engaged in a generational transition in its leadership plus a sweeping restructuring of its economy. Further, the approach was viewed as belonging to the legacy of the gradually departing leader, Jiang Zemin, who has been head of China’s government for the last 13 years. In the meantime, Beijing also undertook a more nuanced approach to the island it considers a renegade province. In contrast to 1995 and 1996, when Beijing used its missiles to fire warning shots at Taipei, Beijing now emphasizes political and economic solutions to differences with Taiwan while continuing to strengthen its capacity for military coercion with 350 to 400 short-range ballistic missiles arrayed across the Taiwan Strait.

According to a report published in the Washington Post, during the October Summit at the Bush ranch in Crawford, Texas, Jiang Zemin went so far as to suggest that Beijing might reconsider its substantial missile deployment directed at Taiwan in return for U.S. restraint on arms sales to the Taiwanese military. Bush reportedly showed little interest in the offer while administration officials subsequently vigorously reasserted U.S. policy toward mainland China and Taiwan both at home and in Beijing. Washington declared it intended to continue to supply Taiwan with the weapons it needs to meet legitimate defense needs under the 1979 Taiwan Relations Act. The administration also reiterated that it respects the One China policy and the three communiqués on which that policy is based. Despite the potential for recurring tensions in the U.S.-Sino relationship—or perhaps because of it—there have been more senior-level visits and contacts during the Bush administration than in previous U.S. administrations.

In addition to three high-profile meetings between Bush and Jiang and others in the upper echelons of the two governments, the contacts include military-to-military talks that were restarted last November. The decision to restart the talks was made during the October summit. The talks had been put on hold by the Pentagon following the spy plane incident in April 2001. While there has been progress with confidence-building measures, a casualty of closer cooperation on the counterterrorism front has been U.S. insistence on Beijing’s respect for human rights, particularly long-standing American sensitivities in the arena of religious freedoms and minority and ethnic rights. “It is clear to me leverage on the human rights issue has been a casualty of closer cooperation on counterterrorism,” James Lilly, U.S. ambassador to China from 1989 to 1991, was quoted as saying in the Dec. 17 editions of the Boston Globe. The U.S. China Commission, a 120-member body set up in 2000 to review security implications of U.S. economic and trade ties with China, also reported for the first time last year. With a single dissenting opinion, the Commission offered more than 40 recommendations to remedy what it saw as deficiencies and weaknesses in the U.S. policy approach toward China. No one can predict whether and how fast these circumstances could change were there a repeat of the accidental bombing of a Chinese embassy by NATO jets or an event reminiscent of the 1989 Tiananmen Square massacre or real saber-rattling in the Taiwan Strait. The window of opportunity may be no longer than from now until 2008, which is when this U.S. president would step down from a second term of office, presuming his popularity holds with the American people. That is also the year that Beijing plays host to the Olympic Games. A lot can happen between now and then to strengthen U.S.-China ties beyond the current tactical approach each now has toward the other—or to set it back. Clearly, the latter outcome would not be a desirable one.

The Present And The Future

In December of 2001, China successfully joined the WTO. China's formal membership comes exactly one month after the 142 members of the World Trade Organization ratified its application at the world trade talks in Doha in the Gulf state of Qatar, and the Chinese government formally approved the deal. But it comes after a long set of negotiations in which China has had to satisfy its trading partners, notably the United States and the European Union, that it is doing enough to open its economy to international competition. The key turning point came in November 1999, when the United States and China signed a trade deal that was narrowly endorsed by the US Congress. China hopes its membership of the WTO, the body that sets the rules for world trade, will ensure that its reformed and market-oriented economic system continues to flourish. "This is a historic moment in China's reform and opening-up and the process of modernization," said the government newspaper, The People's Daily, in a front page editorial. China has already threatened to use its powers as a WTO member in a trade dispute with Japan over the export of shiitake mushrooms. Membership of the WTO will lead to major changes in China. The restrictions on its capital markets will eventually have to be lifted and market access for foreign goods and firms will be improved.

Bringing order to the economy had become an urgent task, Li Rongrong, Minister for the State Economic and Trade Commission said. To deal with this new world, China has opted to lift restrictions on the movement of people dating from the days of Communist central planning. Western companies will be free to set up joint ventures, even in sensitive areas like mobile phones, insurance and banking. But the accession should ensure that foreign investment continues to flood into China, acting as a spur for economic growth. And it could make China even more competitive as an exporter to industrialized countries. It is already overtaking Japan as the largest exporter to the United States. Meanwhile, consumers in China are hoping for greater access to Western goods for their as-yet non-convertible currency. China's formal membership of the WTO was the top headline in all the country's main newspapers. Many papers carried surveys stressing that consumers are hoping it will bring them new choices in everything from cheaper imported cars to more Hollywoold movies in their cinemas. In November, trade ministers at the WTO summit unanimously approved the accession of the world's largest country into membership. Loud applause and hugs between the Chinese delegation and the head of the WTO, Mike Moore, greeted the decision in the glittering conference hall in Doha, Qatar, where trade ministers were meeting to launch a new trade round. But China put the WTO on notice that a trade round could only succeed if it addressed the gap between rich and poor nations, and ensured that all countries would gain from globalization, as it staked its claim to lead the group of developing countries. Chinese Trade Minister Shi Guangsheng said his country supported a new round of trade negotiations "on the basis of full consideration of the interests and reasonable requests of developing countries." China could become a significant new player in world trade negotiations - and other traditional leaders of developing countries, like India, are wary. Some other Asian countries fear China may take away export markets as it expands its trade. The problem is particularly intense in the light of the global slowdown, which is affecting electronics production throughout South-east Asia. "Of course China is going to be very competitive, but having China competitive under rules, under a binding dispute mechanism, is, I would have thought, in the whole world's interests," Mike Moore, the head of the WTO, said at that time. Industrial countries, who have negotiated a wide range of deals opening Chinese markets in agriculture, telecoms and financial services, are hoping that China will live up to its commitments. China, however, insists that it will meet its obligations. "As long as our market is open to the outside, the more economic growth we have and the better for the world," China's trade negotiator Long Yongtu told reporters.

China has enjoyed a favorable balance of trade with the U.S. and the European Union. China is also fortunate enough to spend most of its surplus from long-term manufacturing deals on setting up the infrastructure for internal improvements. Because funds are highly concentrated in the hands of the government, China’s large-scale business ventures possess the resources to purchase high-ticket items. The specific example of aircraft deals with the manufacturing giants Boeing and Airbus clearly illustrate this phenomenon. The lucrative aircraft market has direct influence on the economy of the U.S. Currently, Boeing and Airbus strive to penetrate into the Chinese market. Boeing is an American company while Airbus is based in Europe. Because China aims to expand its transportation infrastructure, it has plans to make large purchases such as the decision to buy 20 new aircrafts at once from Airbus, which it signed in 2001.

With its winning of the pledge for hosting the 2008 Olympics in its capital Beijing, China has further plans to make large purchases that can result in very profitable business deals for foreign companies. For example, China has announced that it expects to purchase the 555-seat jumbo jet A380 for the 2008 Summer Olympics. A380 is revolutionary in its design. It’s dubbed “the Titanic of airplanes.” The plane features a true double-deck construction with unprecedented luxury offered to the increased number of first and business class passengers. And experts said that demand for new fleets in China would rise due to the Games. Airbus has also provided China with more than 178 Airbus planes in total.

China’s airline carrier market also holds great potential for the future. Currently only three U.S. airlines are authorized to occupy airspace in China, Northwestern, United Airlines, and UPS. China, however, has shown willingness in allowing more foreign airlines to be its carriers by planning to sign a forth airline. For the most part though, the market remains a lucrative target for the U.S. companies since a country with more than 1 billion potential travelers is too good of a market to pass up. Also China has explicitly stated that it will need 1,600 planes in the next two decades. In the year 2002, $200 million worth of aircraft components have been produced, compared to the $10 million in 2001. This serves to illustrate how there is a rapid demand for aircrafts. Interestingly, China is already making 25 per cent of all the parts in aircrafts, and this number is expected to climb rapidly during the next 5 to 10 years.

BIBLIOGRAPHY

Lawson, Eugene K. U.S. China Trade – Probelems and Prospects. Praeger Publishers. New York. 1988.

Fairbank, John, and May, Earnest. America’s China Trade In Historical Perspective. Harvard University. Cambridge. 1986.

Tung, Rosalie L. U.S.-China Trade Negotiations. Pergamon Policy Studies. New York. 1982.

http://news.bbc.co.uk/1/hi/business

http://www.chinaonline.com/commentary_analysis

http://www.newamericancentury.org

http://news.airwise.com/stories/2002/02

http://www.boeing.com/companyoffices/financial/finreports/annual/01annual report