Barbara Hackman Franklin is the former U.S. Secretary of
Commerce, and spoke at The
Heritage Foundation, on June 20, 1996.
China has always held a special fascination for Westerners. This
vast, populous country is thought by many to have the oldest
culture on Earth. Certainly it was the center of Eastern
civilization. China was already a sophisticated society when Marco
Polo traveled there in the 14th century, bringing back such
treasures as silk, tea, spices, noodles, fireworks, exquisite
porcelain, jade, and wood block printing.
But our captivation with China has not translated into a smooth
and predictable relationship over the past few centuries. To us,
China has been alternately open, then closed, and then reopened
again. The result is that we Americans do not understand China very
well--its ancient roots, its history, its people, its way of life,
political structure, or place in today's world. Nor do the Chinese
understand us. To them, the West has seemed imperialistic and
exploitive, caught up with colonial designs on their territory and
disrespectful of China as a great nation.
But it is imperative--even urgent--that we learn to understand
each other better. I believe the U.S.-China relationship is one of
the most important--perhaps the most important--of all the
bilateral strategic relationships in the world today and that we
have reached a defining moment in that relationship.
China's Place in the World Today
Today, China is a country in transition. Much change is
occurring, and it is occurring at a phenomenal pace.
This was brought home to me forcefully when President Bush sent
me to China in December of 1992 to normalize commercial relations
that had been disrupted with the imposition of sanctions on China
after the crackdown at Tiananmen Square on June 4, 1989. I was the
first Cabinet Secretary to visit the country officially since that
sad day, and my mission removed one of the sanctions--the one
prohibiting ministerial contacts between our two governments.
Together, my then counterpart, Minister of Foreign Economics and
Trade Li Lanqing (now Vice Premier), and I reconvened the nearly
moribund Joint Commission on Commerce and Trade. In addition, $1
billion worth of new contracts for U.S. companies were signed, and
much additional business followed.
During this trip, I saw firsthand the hunger of the Chinese for
prosperity, their intense desire to move quickly into the ranks of
the world's strongest economies, and the fervor with which they
were applying themselves to achieving this goal. Since that trip in
December of 1992, I have been back to China regularly. Each time, I
am struck again by the rapid progress the Chinese are making toward
Of course, the path of dramatic change is never smooth;
semi-controlled chaos might be one way to describe it. Nor is such
change always clearly discernible to those outside the country. But
the outcome in China has tremendous significance for us in the
United States, for the whole of Asia, and indeed for the rest of
the world. There are many reasons why.
- China is an emerging great power. It is the world's most
populous country--1.2 billion people.
- It is strategically positioned as the geographic center of
Asia. China shares a border with 14 different countries. It has
more common borders than any other country in the world.
- China has the world's largest standing army, and it holds one
of the seven permanent seats on the United Nations Security
Council. This means that China has a voice in-- and a veto
over--the decisions made by this organization.
- Finally--and most importantly, given my view of the world today
that economic concerns are primary drivers of global politics--we
now have China's growing economic clout. China's economy is the
fastest-growing large economy in the world. The World Bank already
ranks China as the third-largest economy in the world behind the
United States and Japan. Predictions are that China's economy will
grow somewhere between 8 and 10 percent this year, and economists
expect China's economy to continue growing at least 6 to 8 percent
annually for the foreseeable future. That means China is well on
the way to becoming the world's largest economy within the next 15
- China is the largest market in the world for aircraft, for
telephones, for construction equipment, for agricultural products,
and increasingly for consumer goods. The country needs virtually
everything we produce and sell. And demand is growing rapidly. In
cities like Shenzhen in the south of China, the first of the
Special Economic Zones created by Deng Xiaoping's reform drive, one
can stand on the street corner and feel the dynamism and the energy
as the Chinese people build another Hong Kong. The same can be said
for Shanghai, reportedly sporting nearly 25 percent of the world's
cranes, or Tianjin or Zhuhai. The whirlwind pace of growth and
change is awe-inspiring.
Now for the flip side.
Despite the dynamic economic growth, GDP per capita in China is
only about $300. Some parts of China, especially in the north and
the west, have not yet been touched by the freedom of the Special
Economic Zones and are still very poor. In contrast, GDP per capita
is much greater--probably far higher than $300--for people living
along the coast and in the south of China, where the change has
been the greatest.
China--A Place of Contradictions
China today is, in some ways, hard to describe. Contradictions
abound, starting with the government's self-description of the
country as a "socialist market economy." Such contradictions pop up
constantly as the leadership tries to put a Communist rationale and
a Chinese face on activities that would make Karl Marx turn over in
China today is not a police state like Stalin's Russia; nor is
there the indiscriminate violence and intolerance of the Cultural
Revolution. But neither is it a democracy. There is a ruling elite
in Beijing, but the central government is no longer as powerful as
it once was. The provinces are flexing their muscles, and some
officials are candid about wanting "Beijing off our backs." Besides
the greater economic freedoms in China today, there is greater
mobility, the beginnings of better job opportunities, greater
tolerance for and interest in education, and greater freedom of
China is governed by a collective leadership in Beijing. Deng
Xiaoping, the paramount leader, is still alive but not active in
governing. His hand-picked successor, President and General
Secretary Jiang Zemin, seems to have consolidated his power for the
near term. But his word is not law; he must gain consensus among
the others in the collective leadership. That is sometimes
difficult and makes for erratic reactions, arrogant posturing, slow
decisions, or no decisions on occasion.
Some people seem to believe that when Deng finally passes away
there will be a great skirmish for power. I think not. I think the
post-Deng era has already begun and that the collective leadership
will stay in place at least for awhile.
One indicator of the course China may take in the near future
will come within the next year to 18 months. Premier Li Peng is due
to move out of the premiership, according to Party rules, and the
Party Congress will choose his replacement. Who the Congress
chooses could be an important signal. Much jockeying is going on
now behind the scenes. From the U.S. perspective, the best choice
would be someone committed to reform and familiar with the United
States to replace the more nationalistic Li Peng.
Longer term, the real questions are: Will the Communist Party
continue to enjoy legitimacy among the populace? Will it continue
to satisfy the growing appetite for prosperity? Will there be
another paramount leader, such as Deng and Mao? Or will China have
opened up too much for one person to be able to command so much
respect and power? And if there is no paramount leader, will a
collective leadership survive? If not, what form will the
leadership structure take, and how will the leadership be chosen?
Or will China regress? Will there be a leadership change by force?
What role might the military play?
History is little help to us here. Despite the tendency of China
to have "paramount leaders" throughout its long civilization, the
paradigm has changed significantly, thanks to the new economic
freedoms, the march of technology, instantaneous communication
globally, and a more closely integrated world.
Within China, the central government and the provinces are
attempting to deal with myriad problems and issues. They are
working now with the Ninth Five Year Plan. This one stresses a
number of goals, including strengthening China's agriculture and
bringing prosperity to the rural economy; creating infrastructure
and building basic industries to address such needs as water
conservation, greater energy production, and reliable
communications; promoting science and technology; reforming state
enterprises; expanding education; and moving toward a rule of
A big concern is the migration of people from rural areas to the
cities in search of prosperity with the attendant possibility of
social unrest. There are potential shortages of water and of oil.
There is corruption. There is pollution. And these are just a few
of the challenges and obstacles confronting China's leadership
What happens in China will bear close watching. I believe the
drive to free the economy may well be irreversible. The Chinese
people want prosperity and material things. They want to get rich.
Political freedom and democracy seem not to be at the top of most
people's agendas--prosperity is. Perhaps as material needs are
better met, the Chinese people's desires will change. We will just
have to see.
However, I believe that the U.S. posture toward China and the
tone of the U.S.-China governmental relationship can have an
influence on which way things go. It will also help determine
whether China is an ally, a belligerent friend, or an enemy.
The U.S.-China Relationship
Our relationship with China is anchored on three communiques,
signed between 1972 and 1982, and the Taiwan Relations Act that was
passed in 1979. The 1972 communique--the Shanghai Communique--was
agreed to by President Richard Nixon and Chairman Mao Zedong. This
was when the "one China" policy was first articulated. It has been
the bedrock of the United States' diplomatic posture toward China
Currently, the relationship between our two governments is at
the lowest point it has been in many years. It is characterized by
distrust and misunderstanding on both sides. Let's just review what
has happened since the Clinton Administration took over management
of this critical relationship.
After charging President Bush with "coddling dictators" during
the 1992 campaign, candidate Clinton changed his tune once he
became President. Following an entertaining spectacle of dithering
and public hand-wringing of the sort that has characterized this
Administration, President Clinton adopted the very same
"engagement" policy espoused by President Bush. Funny how one's
perspective changes after one becomes the leader of the free world,
The problem with President Clinton's change of heart and new
policy began when the Administration didn't follow it. Three years
later, the policy has become so muddled by ad hoc decisions and
inconsistent actions that it is hard to ascertain what it is. And
because of the mixed signals sent by Clinton and his Cabinet, many
Chinese now have come to believe that our policy is the
"containment" of China--an idea they deeply resent.
The big turnaround on President Clinton's part occurred during
the 1994 annual battle over renewing most-favored-nation (MFN)
status for China. The President announced that he would certify MFN
renewal without the conditions regarding human rights that he had
attached the preceding year. His decision was correct on the
merits; trade and human rights should not be linked. Punishing
trade does nothing to correct human rights abuses. But because the
Administration made this decision unilaterally, without first
gaining concessions on other trade issues from the Chinese, the
policy change actually created confusion and caused the Chinese to
think they had "won," that the Clinton Administration had backed
down in the face of business pressure, and that they did not have
to do anything else to satisfy the U.S. on trade. In fact, the
Administration did give China a big victory--and got nothing in
Currently, from the Chinese perspective, the greatest obstacle
to improving relations between our two countries probably is the
question of Taiwan. One of the biggest flaps over this issue was
sparked by something that to many here seemed rather
unimportant--the granting of a visa to Lee Teng-hui, the President
of Taiwan, in June of last year so that he could attend a reunion
at Cornell University.
Again, this situation was badly handled. After promises had been
made to China that such a visa would not be issued, President
Clinton apparently changed his mind (what a surprise). He reversed
this decision, thus pulling the rug out from under his own
Secretary of State, who had made assurances to his counterpart,
China's Foreign Minister Qian Qichen, that the visa would not be
granted. Needless to say, Beijing reacted angrily and promptly
recalled its ambassador. The decision to allow President Lee to
visit the U.S. was interpreted by the Chinese as a violation of the
spirit of the "one China" policy, and therefore an infringement on
Chinese sovereignty. Sovereignty is a gut issue with the Chinese
and has been ever since the "one China" policy was first
Another strain on the relationship was added earlier this year.
Our country was incensed at the saber-rattling missile exercises
and military maneuvers the Chinese government carried out in the
Taiwan Straits prior to the Taiwan elections. In response, the U.S.
sent aircraft carriers to the region. Now, in the aftermath of the
Taiwan election, tensions have been lowered, but some here in the
United States are still distrustful of China's intentions toward
Countless other examples could be cited to illustrate the
inconsistency of U.S. policy, the mixed signals, and the escalating
tensions which have characterized the Clinton Administration
approach toward China. And although the two presidents have met on
more than one occasion, they have not established anything that
resembles a personal or a working relationship.
Renewal of Most-Favored-Nation Trading
And now here we are again, debating the subject of
most-favored-nation (MFN) renewal for China one more time. The
annual discussion is under the Jackson-Vanik Amendment to the Trade
Act of 1974. The amendment denies MFN to any "non-market" economy
which restricts free emigration unless the President makes the
determination to waive the restrictions. This amendment was aimed
originally at the USSR during the Cold War era. But in recent
years, since Tiananmen Square, the annual MFN debate has become the
vehicle through which a variety of discontents with China have been
raised. This year is no different, except that the number of issues
with China has increased.
The President has certified to Congress his desire to renew MFN
without conditions. Senator Dole, the presumed Republican
presidential nominee, has stated his strong pro-MFN position. The
Republican leadership in Congress agrees. Now the action is with
Congress, which has 60 days to debate and vote. Congress should
concur with renewing MFN for China. Denying it or attaching
unrelated conditions makes no sense.
- First, the economic consequences would be profound. Denial of
MFN would impede trade, raise tariffs, and make it more costly to
do business in China. At least 170,000 U.S. manufacturing jobs were
directly dependent on U.S. exports to China last year, and
thousands of others in such areas as transportation and finance are
indirectly linked. Denying MFN would slow China's reform progress
- Second, such action would send a negative message to the
Asia-Pacific region, a place where some countries already are
concerned that the United States is planning to withdraw despite
the fact that our presence is viewed as critical to ensuring
stability in that part of the world.
- Third, denial of MFN to China would harm the economies of Hong
Kong and Taiwan, the two largest investors in the mainland--and
both places in which we have a considerable stake.
- Finally, denial of MFN will not correct or erase any of the
concerns we have with China, whether they be human rights, nuclear
proliferation, anti-Taiwan saber-rattling, or something else.
Seeking to punish China through this vehicle simply does not serve
our national interest.
Furthermore, I think the time has come, before MFN renewal comes
up again next year, to make MFN for China permanent. After all, we
accord permanent MFN status to most other countries, including some
considered rogue states, such as Iraq and Libya. Our strategic and
economic relationship with the world's most populous country is too
important to continue engaging in an annual mud-wrestling event
around this issue. Doing this means changing or repealing the
Jackson-Vanik Amendment, an action that should be high on the
agenda of the President and Congress next year.
There are challenges to getting this done. Many people have
serious and very real concerns about China.
- First, the issue of human rights, which has cropped up every
year since the crackdown at Tiananmen Square, raises everyone's
sympathy and creates outrage among all of us who value personal
liberty and freedom. All of us flinch at the reports about the
detention of some dissidents, Chinese methods of population
control, and allegedly poor treatment of children at orphanages.
Needless to say, we disagree with the way in which China deals with
many of these matters, but using trade as a weapon to try to force
the Chinese into adopting more respect for human rights is not the
way to make progress.
- Second, nuclear proliferation looms as a major worry.
Intelligence reports over the past few years--some apparently
substantiated, some not--indicate that China has shipped missile
technology and parts to Pakistan and Iran. Most recently,
allegations that China shipped ring magnets to Pakistan caused some
people to claim that China had violated the Nuclear
Non-Proliferation Act of 1994. This act calls for mandatory
sanctions once a finding of violation has been made. Specifically,
this means that the U.S. Export-Import Bank could not make or
guarantee any loans for projects in China. The Administration
recently declined to make such a finding, in exchange for China's
assurance that it would strictly observe its obligations under the
Treaty on Non-Proliferation of Nuclear Weapons.
Once again, using trade as a weapon to address these concerns
will not eliminate the problems. In addition, we have to question
whether this sort of law punishes U.S. exports, and therefore U.S.
jobs and well-being, more than it punishes the offending nation.
This is a law which ought to be revised in the next Congress as
- Third is the issue of intellectual property rights. A trade war
was just averted on Monday by an 11th-hour finding by acting U.S.
Trade Representative Charlene Barshefsky that China had made
substantial progress in complying with a 1995 agreement to protect
intellectual property rights. The Administration had threatened
sanctions if the Chinese did not take concrete steps to enforce the
agreement; the Chinese had threatened to retaliate. So the good
news is that we found that China had closed 15 factories that had
been producing 30 to 50 million pirated CDs and videos yearly,
shuttered six distribution centers, and instituted a ban on the
importation of equipment needed to produce these products. The bad
news is that this action does not solve the problem. It is a step
in the right direction, but it is just a step and an incremental
one at that. We are going to have to keep consistent pressure on
the Chinese to continue making progress on the matter of
safeguarding intellectual property rights until the rule of law is
firmly established in China.
- Fourth is another commercial dispute--our mounting trade
deficit with China. The deficit, growing at nearly 20 percent
annually in recent years, could reach nearly $40 billion this year.
The worry is that China's market is still too closed and that U.S.
jobs are disappearing to places around the world, like China, where
labor is much cheaper.
- Fifth is the question of Taiwan. Some Taiwan advocates want to
punish China for the recent saber-rattling and for other things.
Despite this--maybe even because of it--President Lee Teng-hui won
handily, making Taiwan a shining example of economic freedom
leading to political freedom. The United States does indeed have
commitments to Taiwan, and we should honor them. But we need to be
careful not to overstep and involve ourselves in the Beijing-Taipei
debate when we have no reason to be there. It should be noted that
the Independence Party candidate garnered barely 20 percent of the
vote in the March election.
- Then there is Hong Kong, which reverts to China on June 30 next
year. How Beijing handles this situation will be viewed by many as
a precursor to the way in which reunification with Taiwan, if it is
to occur, would be handled. Already Beijing is making many people
uneasy with such actions as announcing its intention to close down
the Hong Kong Legislative Council and replace it with another body
and issuing confusing statements about its intentions to respect
freedom of the press in Hong Kong.
- Finally, another strategic concern is the intentions of China's
military. Some people also worry that U.S. products now sold in
China could be diverted for military uses.
Finding ways to deal with all of these very tough issues in a
constructive manner is the challenge before us today.
One interesting obstacle to getting this done is posed by the
fact that the majority of the American people are viewing China
through an old stereotype. They either envision a Stalinist-type
police state or think of peasants and water buffalo in rice
paddies. Part of the challenge for those in China--and I believe
there are many--who want to have a better relationship with the
United States is to make Americans understand how China is changing
and what the Chinese people want in their future.
So where do we want our relationship with China to go from
Currently, the U.S. policy--or, more accurately, non-policy--is
fraught with inconsistencies. This has led to confusion on the part
of the Chinese about what we really mean. They, in turn, often
behave in ways that we have difficulty understanding, and seem
sometimes to be both arrogant and paranoid.
The business relationships, however, between the two countries
are much more cordial and productive. That is good and it is
However, the tension in the governmental relationship can and
does negatively affect some commercial activity. Every time
tensions increase, there are large projects which are held up. Some
contracts U.S. firms hope to get go to other countries. The
approval of licenses and branches, particularly in the financial
services area, has slowed. All of this creates a climate of
uncertainty and heightens the risk for American businesses.
There is one clear example of where Administration policy, which
some think politically motivated in this election year, has hurt
U.S. business prospects: the enormous Three Gorges Dam project,
which the Chinese have been talking about for 50 years.
Administration objections to this project on environmental grounds
have caused the Export-Import Bank to announce that it will not
help finance U.S. companies bidding on the project.
None of this helps our overall relationship with China.
Therefore, it is incumbent upon the Administration to get its act
together and make every effort to improve the bilateral
relationship. The President and the executive branch must do it.
Congress has a say, but Congress is not empowered or equipped to
manage foreign relations day to day.
Engagement with China is the right policy. But the policy must
be more than just words. Consistent actions speak far louder than
What we urgently need is a strategic framework for our
relationship. This does not mean that we are going to be soft on
China. It does mean that we have to define a clear set of goals,
objectives, and expectations for our relationship and clearly
articulate this to the Chinese. And they must have the opportunity
to do the same. This is what has been missing from our relationship
for the past three-and-a-half years. We must have a meaningful
dialogue at the highest levels in order to push for what we want to
In putting this framework in place, we should concentrate first
on areas where we have common interests and some agreement. The
commercial sector is a good place to start.
Currently, thousands of U.S. companies are doing business in
China. That number has increased significantly between my mission
in 1992 and now. U.S. companies have about $26 billion invested in
China, making the United States the third-largest investor after
Hong Kong and Taiwan. Eighty percent of this investment was made
since 1992. And, of course, the U.S. has considerable investment in
Hong Kong as well--$12 billion at last count. In fact, the American
Chamber of Commerce in Hong Kong is the largest AmCham in the
The U.S. needs to work with the Chinese to bring about increased
market access; to enforce intellectual property rights--a crucial
issue for us; to reduce the overemphasis the Chinese government
currently places on technology transfer and exporting by investor
companies; and to help bring about a consistent rule of law.
The U.S. also needs to work with China to bring that country
into the World Trade Organization (WTO) on reasonable terms. We
need to help find a way around the current impasse: that China
claims to be a developing country while we maintain she is not
because of the clout associated with her sheer size. It is in our
interest to have China join the WTO, on acceptable terms; that way,
we could pursue our trade agenda multilaterally and would have
added support for getting China to conform to the rules governing
Let me digress a moment and comment further on that. I think the
Clinton Administration generally has been too unilateral in its
approach to trade and often has been too knee-jerk confrontational
in its style--a style which has not achieved results commensurate
with its bluster. I suggest that we change our approach to trade
negotiating. We should concentrate on a desired objective and then
decide which tools and which negotiating style will best achieve
the results we want. Talking tough to win political points at home
is hardly a rational trade policy.
I also believe that the Chinese want a peaceful, stable world.
Their primary objective right now is to industrialize and spread
prosperity throughout their land. Wars and conflicts divert
resources from this objective. Here is another area where I believe
there is room for us to work with the Chinese, on non-proliferation
concerns as well as on other strategic issues.
For other matters about which we have had disagreements in the
past, we could look for items where we have a common interest and
where we could agree. In those places where we cannot agree, we
should still maintain a dialogue and make every effort to manage
Some predict the U.S. and China will become enemies over time.
This is, of course, possible. But if it occurs, and I hope it does
not, let us hope our policies--or lack thereof--do not contribute
to such an outcome. Instead, our vision of the U.S.-China
relationship ought to be rooted in making allies and friends of the
Chinese. Withdrawing or doing nothing is simply not an option. An
American presence is critical to maintaining a balance in Asia.
Thus, the United States must remain engaged, both militarily and
economically, in that part of the world.
We must keep in mind, too, that many in China are concerned
about the deteriorating relationship with the U.S. Despite what we
might think some days, the Chinese people admire America. They
covet our products and much about our way of life. This is
underscored by the fact that so many of them want to come here and
send their children here to school.
Much work needs to be done to repair the U.S.-China
relationship. The best way to promote progress is to stay engaged,
to encourage China's economic reform and integration into the world
community. To do this, we need to exercise the best diplomatic
judgment and skills, to disagree with the Chinese when we must, be
tough-minded when necessary, but do so in the context of fostering
an important friendship. We need to encourage, cajole, and coax the
Chinese forward instead of blustering, threatening, and shouting at
them in public as the Clinton Administration has been doing. Above
all, we need to treat our Chinese friends as we would any other
friends: with dignity and fairness.
The road will not be easy. The Chinese, caught up in the process
of great change, at times will be difficult. They will do things we
do not agree with. We need to handle these matters in the context
of our broader objective.
China has made astonishing progress in the past 17 years. If
that progress toward economic reforms, prosperity, and a general
opening up of the country continues for the next 17 years, China
will indeed be perceived as a great power. The American people need
to learn this. They must become better educated and more aware of
what is going on in China today.
We cannot turn our back on the possibility of helping free
markets and democracy along in China. If we are short-sighted and
fail to adopt a long-term vision about our relationship, if we
continue our current schizophrenic approach to China policy, who
knows what direction change could take? The U.S. and the world
cannot afford to take this risk.