By Hamilton, Lee H.
The China Business Review , Vol. 30, No. 2
Lessons from the post, questions for the future
The US-China relationship is the most complex bilateral relationship for the United States. Over the last 30 years, Sino-American relations have undergone an impressive transformation from animosity and conflict to candid dialogue and constructive cooperation. These two vast and complicated countries have found common ground on issues of trade, investment and, more recently, security. But key issues remain unresolved, and the potential for troubling divergence is real as China becomes an economic powerhouse, a military force in Asia, and a potential rival to US hegemony.
The future of Sino-American relations is fraught with questions. Will Taiwan declare its independence, or will it be integrated into the People's Republic of China? Will American missile defense trigger a Chinese arms buildup, or will the two militaries strengthen their ties and cooperation? Can China's one-party system sustain itself in a market economy, or will China undergo drastic political change? Will China prove hospitable to human rights, or will it remain a rigid, state-controlled society? Uncertainty about these and other crucial questions is real, and momentous choices remain for Chinese and American leaders. If the last 30 years are taken as a guide, the leaders of tomorrow can best face these challenges by constructively engaging in pursuit of common interests.
The economic ties that bind
Overlapping interests between the United States and China have been predominantly in the economic sphere. China's drive to become an economic power has been simply astonishing. Growth rates have frequently approached 10 percent per year over the past 10 years, and in 2002 China was the recipient of more than $50 billion in foreign investment. There are now 2 million private companies in China, an emerging middle class, and ambitious infrastructure development projects. China is a global center for manufacturing and a regional economic power, particularly since the Japanese economy has stalled. This level of economic openness and growth in China was unthinkable 30 years ago and owes much to the relationship between the United States and China.
On trade and investment, there has been considerable common ground and many areas of mutual interest between the two countries. The United States has pursued commercial opportunities, exports, and profits in China; China has sought US investment, technology, and support for Chinese accession into global trade regimes. US support for trade and investment in China has matured from Most Favored Nation status in the 1980s and 1990s to China's integration into the World Trade Organization (WTO) in 2001. China has in return demonstrated a willingness to open up its state-owned economy, dramatically reducing tariffs, overhauling laws and regulations, and permitting greater private ownership, property rights, and transparency.
China still has a long way to go in reforming its economy, however. China's WTO compliance record so far is mixed, and it must continue to improve protection of intellectual property rights, remove import quotas on agricultural goods, eliminate regulations that discriminate against foreign products, and establish more efficient and vigorous independent regulatory agencies. China is also faced with ongoing problems with inflexible state-owned enterprises, bad loans in state banks, unfunded pension systems, and widespread corruption. But today's vibrant and developing China still bears little resemblance to the economy of the early 1970s. The ties afforded by this development have bolstered Sino-American relations beyond the balance sheet: Americans and Chinese now do business together, travel to each other's countries, indulge in common sports and entertainment, and shop for the same name brands.
Though economic cooperation has been increasingly robust, the lack of political reform in China has proven to be an impediment to strengthening Sino-American ties. …