U.S.-China Relations Enter the 21st Century
James Sasser, U.S. Ambassador to China

March 31, 1998
Asia Society, New York

During my two years as ambassador to China, I have often been reminded of Disraeli's observation that "there is no education like adversity." And boy have I received an education. Even before I set out on assignment to China in early 1996, our bilateral relationship was at low tide. Taiwan President Lee Teng Hui had visited Cornell the previous fall and Beijing was still alarmed about what it believed was Lee's attempt to elicit American support for a "two China policy." By the time I finally arrived at post – after getting a different kind of education in adversity in Washington, known as the confirmation process – the Chinese military was conducting exercises and firing missiles in the straits off the coast of Taiwan.

I wish I could lay claim that Jim Sasser rescued both sides from folly, but, in fact, our leaders had already made a clear-headed assessment of the "straits" we were in. And recognized there were better alternatives. If we learned anything from the adversity of that period, it was the need to break the cycle of confrontation followed by grudging civility that defined our relationship in the early 1990s. Our relationship has come far in two years.

Today we can work cooperatively with the Chinese on a number of important issues – and press them candidly on our differences when we cannot. And they have learned, in turn, that ours is a policy of engagement, not containment. But as Secretary Albright has emphasized, engagement is not endorsement. No one should think that our concerns about such vital matters as human rights or proliferation have been either satisfied or swept under the rug. We continue to press the Chinese on these matters. And while problems clearly remain, the recent track record shows our approach is working.

For America, the strategic benefits of our official dialogue are tangible, clear and growing. We are not yet where we want to be, nor has China evolved as rapidly or thoroughly as some had hoped. But the direction we are going is clear: greater interaction, based on China's acceptance of – and adherence to – international norms. As a result, in the past two years, China and America have entered into serious discussions about how we can build toward a constructive strategic partnership for the 21st century. And about how we can cooperate as responsible members of a rules-based international community.

At the summit meeting in Washington in October, our two presidents had frank public and private exchanges and our leaders were able to make some very important commitments:

• to work together to halt the spread of nuclear weapons and weapons of mass destruction
• to cooperate on the peaceful uses of nuclear energy. I am pleased that the president's certification was recently approved by Congress without amendment
• to develop cooperative programs on the rule of law
• to advance new energy and environmental projects; of course commitments are not accomplishments

In the months since the summit, we have accelerated our efforts to address – as Presidents Clinton and Jiang said in their summit statement – the challenges confronting us – "cooperatively where possible, with candor and a determination to achieve progress."

In recent weeks, the Embassy in Beijing has hosted a number of delegations dedicated to furthering bilateral dialogue. They signal a return to normalcy in the way we engage one another. A checklist of visitors would include, among others:

• American religious leaders – the self-dubbed three wise men
• the coordinator for the president's rule of law initiative
• the deputy secretary of the treasury
• officials from the trade representative's office
• our chief arms control official
• another dozen or so members of the congress plus a few governors and state legislators thrown into the mix
• the secretary of defense

Secretary Cohen's visit and his signing of a military maritime agreement – which will reduce the risk of incidents at sea – was an important outgrowth of the summit, it was also a further illustration that America's security – in Asia and elsewhere – depends, in part, on our respective militaries having a better understanding of one another's strategic doctrines and concerns.

A host of Chinese visitors have also been traveling to America, including the minister of justice who was recently appointed China's chief judge. We would like to see even more visits by Chinese at all levels. Invariably, direct exposure to our society impresses visitors. They come away understanding that America works. Not just in the sense of producing goods and services but also as a society dedicated to educating people to take responsibility for their own lives and giving them the tools and opportunities to do so.

What was so noteworthy about the private visit of the religious leaders was that they were able to convey directly to their Chinese hosts the importance we attach to freedom of conscience and freedom of religion. The administration's strong support for the religious leaders' visit showed that we remain steadfast in our conviction that human rights encompass more than the freedom from want.

A major area of disagreement between the United States and China has been human rights. We recognize that the Chinese people today possess many more options in their daily lives than did their parents. Progress has also been made in revising civil and criminal law and permitting a degree of choice in village elections. China is changing; but the government's repression of political dissent has not been changed. China's release of Wei Jinsheng was a major step in the right direction, cheered throughout the world. Another encouraging sign is Beijing's recent pledge to sign the U.N. covenant on political and civil rights. Of course, what it does in practice is more important than what it does on parchment. But such declarations have their own value in setting standards that the international community has reason to hope will someday be met. Consider how, for instance, the 1975 Helsinki Final Act has helped transform another part of the world that today is hardly recognizable.

In a changing China, the people today enjoy more, higher incomes, more economic freedoms, increased access to outside sources of information, and greater individual choice. According to an October Gallup Poll survey of 3,700 Chinese households nationwide, the Chinese people expect even more of policies which have produced a veritable explosion of activity – which if not full-fledged capitalism is clearly market-based. They expect dramatic improvement in the quality of their lives over the next five years.

The survey found that many people want better products and services. Better educational opportunities for their children. And they want better government and less corruption. Key issues addressed at the recent People's Congress. Within the limits imposed by state censorship, China's 2,200 newspapers keep these themes in the forefront. While they rarely dissent from the political orthodoxy, the Chinese media today are as apt to print an article or broadcast a report about the need for good governance as on the importance of observing political discipline. These are remaining clear signals of the governments need to deliver on more than just its economic agenda to remain in power.

The recently concluded National People's Congress put its stamp of approval to personnel changes and institutional reorganization to streamline government and strengthen accountability and responsibility. Reducing the number of governmental ministries – primarily economic ones - by one-quarter, and eliminating one-third to one-half of central government bureaucrats – are steps that would warm the heart of anyone who believes in downsizing, especially in our nation's capital.

In this instance, at least in principle, China is trying to develop what some, like Brookings scholar Harry Harding, have called "small government in a big society" – that is, reducing administrative fiat in economic decision-making and removing government institutions from direct management of enterprises. The key, of course, will be whether changes in ministerial names and responsibilities signal real changes in the way government does business. The question is easy to pose. The answer is less easy. Given the challenges this new leadership – competent but cautious - faces, I suspect that progress in the political realm over the next few years will be carefully orchestrated to ensure that the foundations of one party rule remain unshaken. Clearly, the economic successes of the past two decades provide a good case for China's loosening central control and restraints of all kinds.

It is too early to predict what effect the financial crisis in Asia will have on China, but China's leaders have expressed concern that the growth of exports and contracted investment, the most dynamic sectors of the economy in recent years, will decline. China's plan to pump a trillion dollars into much needed infrastructure projects in the next few years likely signals a recognition that domestic investment may help fuel the next round of economic prosperity. The key questions are – can growth be maintained while moving forward on the state-owned enterprise and banking reforms necessary to restructure the economy? And can displaced – and disaffected – workers be provided for in the process? It is a difficult balancing act, to be sure – between maintaining stability and sustaining reform – but it is one that we hope the leadership will tackle now.

The domestic challenges confronting China are compounded externally – by changing world trade patterns and the financial tension gripping much of Asia today. One sign that China understands its responsibilities is its decision not to devalue its currency. Every single one of China's leaders has made this commitment. The people's Congress again reaffirmed the country's determination not to devalue. Such an action, China's leaders recognize, would not have been in China's interest. It would have created problems for the Hong Kong dollar, fueled a round of inflation in China, and weakened investor confidence in China's economy. China's leaders are inflation fighters first and fiscal reformers second. Such an action also would have fueled a round of competitive devaluations in the region, undermining the recovery of fragile economies committed to austerity programs. These are economies to which China would like to increase its exports and from which China wants to attract investment.

In addition, as part of its growing responsibility in the region – and recognition that it's own economic development cannot proceed in a vacuum – China has contributed to International Monetary Fund efforts to bail out Thailand. It has also participated – or will participate – in meetings in Washington to help strengthen the international financial system and to find ways to reduce the risks posed by the globalization of financial services.

We welcome China's responsive actions on regional financial issues. China's leaders have some experience with economic crises. In 1992, when high inflation threatened to short-circuit China's growth, they acted to sustain economic growth, attract new capital flows, and enhance financial stability. As successful as they were then, they were still unable to address well three key issues.

• First, how to speed up the conversion of the non-competitive state-owned enterprise sector.
  
  
• Second, how to reform the banking sector. The current issuance of USD 32 billion in government bonds to shore up the state-owned commercial banks will not be enough.
  
  
• Third, when to make the renminbi or Chinese dollar fully convertible. That is a key step toward turning China into a full market economy.

America has much to offer China as it tries to reach those objectives. As China integrates its economy more fully with the world's we look forward to an economic dialogue as vigorous and varied as the one that now defines our strategic engagement. As China searches for new models of economic organization to replace its old state-owned enterprise system, it could do no better than to look at how America's small and medium-sized enterprises have helped sustain the dynamism of our seven trillion dollar economy.

Already, the U.S. Council of Economic Advisers, the Federal Reserve Board, the Treasury Department and the Department of Commerce are engaged in wide-ranging discussions with their Chinese counterparts. And we know that China is working to convert the People's Bank of China into a more independent and effective institution, drawing on some of the features of our own Federal Reserve System. One of the best compliments you can pay to Premier Zhu is that he has the fiscal instincts of Alan Greenspan – and then to hear the premier reply, with a smile, that he is more conservative than that. He is so intent on ensuring that China's leaders get the economic fundamentals right this time around that he has become the chief loan officer of China.

As we pursue our economic dialogue, one question keeps coming up – when will China accede to the World Trade Organization? I wish I knew the answer. We have stated that we need a commercially meaningful protocol of accession to close out our discussions with China. That means we want to be able to compete in this huge economy. The WTO is about even-handed rules and fair competition; you don't join and then decide that the rules apply to most everyone else but not, until further notice, to you.

The administration is committed to working with China's WTO negotiating team anywhere, anytime to come up with strategies to promote our mutual interests. But we must end up with a detailed agreement – a contract – that responds to U.S. business interests.

We are traveling in the right direction toward the same destination, but there are bumps along the way. I would hope that we will see real progress prior to the president's visit. That visit, I am persuaded, will define our relationship during the last few years of the Clinton administration and into the 21st century. It should accomplish a number of things. First, just as President Jiang's visit to the United States in October laid the groundwork for a more formal relationship, I believe President Clinton's trip will create the framework needed to build upon in the coming decades. A program of cooperation for and into the 21st century, if you will. A program of cooperation in health care, the environment, and energy. A program of cooperation that will increase the flow of scholars, journalists, professionals, and ordinary citizens. A program that will enrich our relationship.

Second, Presidents Clinton and Jiang will have substantive discussions not only of the economic issues I've outlined today, but on matters of national security as well. They will work to promote what President Jiang called our joint responsibility to ensure the peace of the world in the 21st century.

Finally, just as the people of China came to appreciate the richness of American life during President Jiang's trip to the United States, so will the people of the United States be able to view the richness of China – a great culture and a changing society – during President Clinton's trip.

The media images will help shorten the distance between us. As the president reaches out to the Chinese, we will meet a people who in many respects are like ourselves – proud of their heritage, hard-working, patriotic, and family-oriented, people seeking a better life for themselves and their children, and looking optimistically to the future. I know of no better kind of exchange than on at this high level to dispel the misperceptions that had grown up between us about who we are and what we want.

Let me conclude with a few thoughts about the new country. First new forms of communication, transportation and technology will make it even more imperative that we address problems in non-traditional ways. The forum on energy and the environment which Vice President Gore helped inaugurate in China last year and discussions we have had with China on climate change are new ways of thinking about how we can enhance the quality of life for our people.

Second, despite what has happened in Asia since last July, and despite the storm clouds that currently hang over Asia's future, the 21st century will still be a century of great achievement for the Asia-Pacific, including China. And the lessons learned – adversity, if you will, the subject I started with – will mean stronger and even more dynamic economies for the nations of the region.

Third, the 21st century will also be the second American century. Our democratic values and democratic vision will continue to attract those who know that the best societies are those in which individuals can choose for themselves who will govern and what kind of lives they will lead.

Finally, what of China and America in the 21st century? Much will depend – as I said earlier – on how was as an established power engage China as an emerging one. We are both societies in transition, changing to meet the demands of a shrinking world. We likely won't always see eye-to-eye about the implications of those changes and how they will affect us, but the quality of our dialogue over the next few years will have certainly been enhanced by the wisdom of the policy we have pursued in the last few.