Order Code RL32804
CRS Report for Congress
Received through the CRS Web
China-U.S. Relations: Current Issues
and Implications for U.S. Policy
Updated July 8, 2005
Kerry Dumbaugh
Specialist in Asian Affairs
Foreign Affairs, Defense, and Trade Division
Congressional Research Service ˜ The Library of Congress

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China-U.S. Relations:
Current Issues and Implications for U.S. Policy
Summary
In 2005, some U.S. policymakers in the Administration and in Congress appear
to be adopting somewhat tougher stances on issues involving China and U.S.-China
relations. Throughout much of the George W. Bush Administration, U.S.-China
relations remained unusually smooth and stable, with informed observers often
referring to bilateral relations as the best they had ever been since the establishment
of official Sino-U.S. relations in 1979. U.S. companies are investing heavily in
China, and some PRC companies now are investing in the United States. The United
States continues to rely on Beijing’s diplomacy in addressing North Korea’s nuclear
weapons program. But a number of new developments and statements since late
2004 suggest that U.S. policymakers are reassessing the relationship in light of strong
PRC economic growth and a more assertive PRC international posture.
Taiwan, which the PRC considers a “renegade province,” remains the most
sensitive issue the two countries face and the one many observers fear could lead to
potential Sino-U.S. conflict. While Beijing has long maintained it has the right to use
force to “reunify” with Taiwan, late in 2004 Chinese officials launched an effort to
codify this assertion with an “anti-secession” law (adopted in March 2005) aimed at
curbing Taiwan independence. U.S. officials regarded the action as provocative,
saying it was unconstructive for regional stability.
Another matter of U.S. concern is China’s increasing global “reach” in recent
years and the consequences that Beijing’s growing economic and political influence
has for U.S. interests. To feed its appetite for resources, China is steadily signing
trade agreements, oil and gas contracts, scientific and technological cooperation, and
multilateral security arrangements with countries around the world, some of which
are key U.S. allies. Some U.S. observers view these activities as a threat to the United
States. Even if these trends are simply the consequences of China’s benign economic
development and growth, they may pose critical future challenges for U.S. economic
and political interests.
Much of current concern about China appears driven by security calculations at
the Pentagon and in Congress. In remarks at a Singapore Conference in June 2005,
Secretary of Defense Donald Rumsfeld questioned the motivations behind China’s
expanding military budget and stated that a congressionally mandated DOD report
in 2005 concludes Beijing is greatly understating its military expenditures. The DOD
report referred to has been delayed for some weeks, apparently the result of
bureaucratic in-fighting about the report’s conclusions. In the February 2005 State
Department Country Reports on Human Rights Practices, U.S. officials again
classified China’s human rights record as poor. Beijing continues its crackdown on
independent religious organizations, citizens accused of leaking state secrets, and
other political activists. Bilateral economic and trade issues remain matters of
concern, with U.S. officials and Members of Congress this year particularly
criticizing China’s failure to halt piracy of U.S. intellectual property rights (IPR)
products and China’s continued artificially low peg of its currency to the U.S. dollar.

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Contents
Most Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Background and Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Key Current Issues
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Unocal: PRC Bids to Purchase U.S. Companies . . . . . . . . . . . . . . . . . . . . . 4
Taiwan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
PRC Anti-Secession Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Opposition Party Visits to China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
U.S. Taiwan Policy and U.S. Arms Sales . . . . . . . . . . . . . . . . . . . . . . . 7
Taiwan and the World Health Organization (WHO) . . . . . . . . . . . . . . . 8
Official Taiwan-PRC Contacts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
China’s Growing Global Reach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
European Union . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Middle East and Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Western Hemisphere . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Economic Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Intellectual Property Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Currency Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
National Security Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
North Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Weapons Proliferation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Military Contacts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Human Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Religious Freedom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Tibet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Separatists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Family Planning Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Social Stability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Hong Kong Democratization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
U.S. Policy Implications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Major Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Chronology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Appendix I: Selected Visits by U.S. and PRC Officials . . . . . . . . . . . . . . . . . . . 30
Appendix II: Selected U.S. Government Reporting Requirements . . . . . . . . . . . 31

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China-U.S. Relations: Current Issues and
Implications for U.S. Policy
Most Recent Developments
July 7, 2005 — Questioned at the G-8 summit in Scotland, President Bush said
it was best for him not to comment on or get involved in the official process for
reviewing CNOOC’s bid for Unocal.
June 21, 2005 — CNOOC made an unsolicited $18.5 billion cash bid for
American energy company Unocal.
June 16, 2005 — U.S. and PRC trade officials negotiated via video link to reach
a compromise on Chinese textile imports. Also, according to Japanese newspaper
Yomiuri Shimbun, China test-fired a new long-range submarine-launched ballistic
missile (SLBM), the Ju-Lang 2, a modified version of the Dong Feng-31.
June 14, 2005 — The Congressional China Caucus was formally launched at a
news conference.
June 13, 2005 — Taiwan Premier Frank Hsieh announced that the government
was authorizing three key policy initiatives to promote civilian and business
exchanges with China: negotiations on beginning direct cross-strait charter cargo
flights; negotiations on Taiwan agricultural exports to China; and bilateral talks to
allow PRC citizens to sightsee in Taiwan.
June 5, 2005 — AFP reported that in recent months, Taiwan had successfully
test-fired its first “Hsiung-Feng” cruise missile, with a range of 1,000 miles.
Background and Overview
Introduction
In 2005, some U.S. policymakers in the Administration and in Congress appear
to be adopting somewhat tougher stances on issues involving China and U.S.-China
relations. Throughout much of the George W. Bush Administration, U.S.-China
relations were smoother than they had been at any time since the Tiananmen Square
crackdown in 1989. The two governments resumed regular high-level visits and
exchanges of working level officials, resumed military-to-military relations,
cooperated on anti-terror initiatives, and worked closely to restrain and eliminate
North Korea’s nuclear weapons activities. U.S. companies continued to invest
heavily in China, and some PRC companies began investing in the United States.

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Despite this, thorny problems continue to be factors in the relationship,
including difficulties over China’s intentions toward and U.S. commitments to
democratic Taiwan, and various disputes over China’s failure to protect U.S.
intellectual property rights, the economic advantage it gains from pegging its
currency to the U.S. dollar, and other trade issues. In addition, China’s accelerating
rise in the world has significant implications for U.S. power and influence around the
globe. In pursuit of its economic development agenda, China’s enormous and
growing appetite for energy, raw materials, and other resources has led it to seek and
conclude an increasing number of economic and energy-related agreements around
the world, many of them with key U.S. allies. But a number of new developments
and statements since late 2004 suggest that U.S. policymakers are reassessing the
relationship in light of strong PRC economic growth and a more assertive PRC
international posture.
Background
For much of the 1990s, a number of factors combined to ensure that U.S.
congressional interest in the People’s Republic of China (PRC) increased year by
year. In the years after the 1989 Tiananmen Square crackdown, Members often felt
that they were neither consulted nor listened to by the Executive Branch concerning
the appropriate direction for U.S. China policy. Without the strategic imperative that
the Soviet Union had once provided for comprehensive U.S.-China relations,
individual Members began to raise their own more narrowly focused concerns in
China policy, such as efforts on behalf of Taiwan, in favor of human rights, or against
forced sterilization and abortion.
During the later Clinton Administration, when U.S. officials were pursuing a
“strategic partnership” with China, some Members became increasingly concerned
that the U.S. government was not thinking seriously enough about the PRC as a
longer-term threat to U.S. interests, given the PRC’s missile build-up opposite
Taiwan and Beijing’s growing nationalism and economic strength. Members were
particularly concerned about supporting the democratization and growing political
pluralism Taiwan had embraced since abandoning authoritarian rule. Congress in
these years enacted more provisions to accommodate Taiwan’s interests, engaged in
repeated and protracted efforts to further condition or even withdraw the PRC’s
most-favored-nation (MFN) status, held hearings and considered legislation targeting
the PRC’s human rights violations, created two commissions to monitor PRC
developments, and imposed a host of requirements on the U.S. government to
monitor, report on, and restrict certain PRC activities.1
In late 2001, however, U.S.-China relations began to experience a sustained
period of unusual stability, and Congress as a whole became less vocal and less
legislatively active on China-related issues. The reasons for this could not be
attributed to any resolution of entrenched bilateral policy differences — such as those
long held over human rights or on Taiwan’s status — for these differences still
1 In the United States, the term “most-favored-nation” (MFN) status has been replaced by
the term “normal trading relations” (NTR) status.

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CRS-3
existed and are likely to plague the relationship for the foreseeable future. Rather,
other factors and policy trends appeared to be at work:
! Assertiveness on China. The Bush Administration early on sought
to distance itself from the policies of “engagement” favored by
American Presidents since 1979 and instead de-emphasized the
importance of Sino-U.S. relations in American foreign policy. Even
while appearing less solicitous of Beijing’s views, Administration
officials were more open to substantively and symbolically
meaningful dialogue with China at most senior levels.
! Support for Taiwan. The Bush Administration was more
supportive of selling arms to Taiwan and other measures to enhance
Taiwan’s status and security than were any previous U.S.
Administrations. Some suggested that greater support for Taiwan
served to balance U.S. contacts with the PRC and eliminate
recurring White House tensions with Congress, where Taiwan is an
interest of many Members.
! Changing U.S. Priorities. September 11th, the resulting U.S.-led
anti-terrorism war, and U.S. military campaigns in Afghanistan and
Iraq brought about dramatic changes in global and national priorities
— including new agendas within Congress — that took precedence
over many other foreign policy issues, including the PRC.
! Changing PRC Priorities. After 2001, the PRC became
preoccupied with a wholesale transition to a new generation of
leaders who began to put their own stamp on policy decisions. New
PRC leaders remained focused on maintaining social stability,
nurturing China’s growing international economic clout, and
expanding its increasingly modulated and proactive foreign policy.2
This report addresses relevant policy questions in current U.S.-China relations,
discusses trends and key legislation in the 109th Congress, and provides a chronology
of developments and high-level exchanges from January 2005 onward. It will be
updated as events warrant. Additional details on the issues discussed here are
available in other CRS products, noted throughout this report. For background
information and legislative action preceding 2005, see CRS Report RL31815, China-
U.S. Relations During the 108th Congress. CRS products can be found on the CRS
website at [http://www.crs.gov/].
2 At its 16th Party Congress (November 8-14, 2002), the PRC’s Communist Party selected
a new Party General Secretary (Hu Jintao), named a new 24-member Politburo and a new
nine-member Standing Committee, and made substantive changes to the Party constitution.
Further changes in government positions were made during the 10th meeting of the National
People’s Congress in March 2003, and in September 2004. For more on the leadership
transition, see CRS Report RL31661, China’s New Leadership Line-up: Implications for
U.S. Policy, by Kerry Dumbaugh.

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Key Current Issues
Unocal: PRC Bids to Purchase U.S. Companies
Although PRC investment in the United States has been minimal to date, in
recent months PRC companies have made several high-profile purchases and bids for
American companies. In December 2004, the PRC’s Lenovo Group Ltd. purchased
IBM’s personal computer division for $1.25 billion. On June 21, 2005, the Haier
Group, the PRC’s preeminent refrigerator manufacturer, teamed with a consortium
of investors in a $1.28 billion offer for the Maytag Corporation, owner of the Amana,
Jenn-Air, and Hoover brands. In the most sensitive case, China National Offshore
Oil Corporation (CNOOC), one of the PRC’s largest state-controlled companies, on
June 21, 2005, made an unsolicited cash bid of $18.5 billion for the U.S. oil company
Unocal, topping the winning bid of $16.4 billion made two months earlier by
California-based Chevron. The CNOOC bid has set off a spirited debate about the
national security risks of selling American energy assets to the PRC.3
Energy economists and business representatives who see the CNOOC offer as
no economic or security threat to U.S. interests stress that Unocal’s U.S. production
is small — 57,000 barrels a day in a total U.S. output of 7.3 million barrels a day;
point out that most of Unocal’s production assets are in Asia and committed in long-
term supply contracts to the Asian market; and say that Unocal has no technology
that needs to be protected for security reasons.4 Opponents of the deal raise concerns
about U.S. security. They assert that U.S. oil reserves and energy companies are vital
strategic assets, and that the United States would be economically vulnerable if they
were owned by a Communist country; that Unocal platforms in Alaska’s Cook
Islands Inlet and deep-sea exploration platforms in the Gulf of Mexico would provide
ideal vantage points for PRC observation of U.S. military activities; and that sale of
Unocal holdings throughout Asia would push the region further into China’s
economic orbit.5 Chevron executives argue further that CNOOC lacks the deep-
water exploration skills that Chevron brings to the table and would thus be unable to
increase Unocal domestic production as much as Chevron would. Some state
governments are pressing for assurances that the proposed CNOOC purchase would
3 In a June 17, 2005 letter to President Bush, California Congressmen Richard Pombo and
Duncan Hunter urged the President to begin a review of the U.S. security implications of
such a sale. The letter was made available to Reuters.
4 These views are espoused, for instance, by Robert J. Samuelson, economic columnist for
Newsweek (“Let’s Stay Out of This Fight...”, Newsweek, July 11, 2005); ; Philip Verleger,
a specialist in the economics of international energy at the Institute for International
Economics in Washington DC (“Many Oil Experts Unconcerned Over China Unocal Bid,”
Washington Post, July 1, 2005, p. D01); and Paul Magnusson, international trade economist
for BusinessWeek (“Play Fair, and Insist That China Do the Same...” BusinessWeek, July 11,
2005, p. 31.)
5 Similar views, for instance, are held by John Tkacik, senior research expert on China at the
Heritage Foundation (“Say No to CNOOC’s bid for Unocal,” Asian Wall St. Journal, June
29, 2005, p. A5); and Larry Wortzel, member of the congressionally established U.S. China
Security Review Commission (“The Big Tug of War Over Unocal,” The New York Times,
July 6, 2005, p. 1.

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not adversely affect Unocal obligations, such as environmental clean-up and pension
and health care benefits.6 Members of Congress appear most concerned about the
potential security risks in the CNOOC deal. On June 30, 2005, the House approved
an amendment (333-92) by Representative Kilpatrick to H.R. 3058 that prohibits the
Treasury Department from using federal monies to approve the CNOOC bid for
Unocal. The same day, House Members adopted H.Res. 344 (398-15), urging
President Bush to immediately review any CNOOC final agreement to buy Unocal.
Unocal’s shareholders are scheduled to vote on the earlier Chevron bid on August 10,
2005.
Taiwan
Taiwan remains the most sensitive and complex issue that U.S. policymakers
face in bilateral Sino-U.S. relations. It is the issue that many observers most fear
could lead to potential U.S.-China conflict. Beijing continues to lay sovereign claim
to Taiwan and vows that one day Taiwan will be reunified with China either
peacefully or by force. Beijing has long maintained that it has the option to use force
should Taiwan declare independence from China. On December 27, 2004, the PRC
emphasized this point again in its fifth white paper on national security, entitled
“China’s National Defense in 2004.”7 The paper called the Taiwan independence
movement the single biggest threat to China’s sovereignty and to regional peace, and
it vowed to prevent Taiwan independence at all costs. Chinese leaders are supporting
these long-standing claims with more than 500 missiles deployed opposite Taiwan’s
coast and with a program of military modernization and training that defense
specialists believe is based on a “Taiwan scenario.”
Concerns have intensified in recent years because of Taiwan’s unpredictable
political environment, where the balance of political power has teetered precipitously
between two contending political party coalitions. One of these, led by the
Democratic Progressive Party (DPP), controls the presidency and is closely
associated with advocates of Taiwan independence. Taiwan’s President, Chen Shui-
bian, is a DPP member who has spent much of his political career pushing for a
separate international identity for Taiwan and referring to Taiwan as “already” an
independent country. The other party coalition, led by the remnants of the once-
dominant Nationalist Party (KMT), advocates greater policy caution and more
engagement with the PRC. The KMT was returned to its slim majority in the
legislature in December 2004 elections, denying Chen and the DPP the legislative
control they sought to facilitate advancing the party’s policy priorities.
PRC Anti-Secession Law. On March 14, 2005, the PRC’s National
People’s Congress (NPC) officially adopted an “anti-secession law,” aimed at reining
in Taiwan independence advocates and creating a legal basis for possible PRC
6 California, New Mexico, Pennsylvania, Montana, and Texas attorneys general are said to
be seeking Unocal assurances that CNOOC ownership would not undermine Unocal’s
obligations. “States to Weight In on Unocal Offer...” Los Angeles Times, July 6, 2005, p.
C-1.
7 The paper was released by the Information Office of the State Council of the PRC. Full
text is at [http://english.people.com.cn/whitepaper/defense2004/defense2004.html].

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military intervention in Taiwan. Even before its contents were known, American
observers and U.S. officials termed the initiative counterproductive, particularly
given improvements in a range of Taiwan-China contacts since December 2004.
Many fear that the anti-secession law could raise tensions across the Taiwan strait
and increase the possibility of conflict. Critics also fear the law could be used to
harass independence advocates in Taiwan by, for example, labeling them “criminals”
and demanding their extradition from third countries. While many of the new law’s
10 articles appear relatively conciliatory, Article 8 is of special concern because of
its specific authorization of force. Article 8 states:
Article 8. In the event that the ‘Taiwan independence’ secessionist forces should
act under any name or by any means to cause the fact of Taiwan’s secession from
China, or that major incidents entailing Taiwan’s secession from China should
occur, or that possibilities for a peaceful reunification should be completely
exhausted, the state shall employ non-peaceful means and other necessary
measures to protect China’s sovereignty and territorial integrity. The States
Council and the Central Military Commission shall decide on and execute the
non-peaceful means and other necessary measures...8
Opposition Party Visits to China. In the aftermath of the anti-secession
law, PRC officials sought to increase pressure further on the Chen government by
inviting Taiwan’s two key opposition leaders to visit China and meet with PRC
President Hu Jintao in Beijing. Both KMT chairman Lien Chan and PFP chairman
James Soong accepted Beijing’s invitations.
Lien Chan embarked on his eight-day PRC “journey of peace” on April 26,
2005, and received red-carpet treatment throughout his visit. On April 29, 2005, Lien
met with PRC Party General Secretary Hu Jintao, the first visit between the leaders
of the two parties since the end of the civil war in 1949. Following the meeting, the
PRC’s official news agency, Xinhua, issued a press communique saying the two
parties had reached consensus on adhering to the “1992 Consensus” (asserting one
China) and opposing Taiwan independence. PFP head James Soong’s visit to the
PRC, from May 5 - 13, 2005, also included a meeting with PRC Party Secretary Hu.
While many China-watchers described the anticipated dialogues as a positive
development for cross-strait relations, others saw the invitations as Beijing’s effort
to capitalize on and exploit Taiwan’s internal political divisions and further isolate
President Chen Shui-bian and his pro-independence DPP government.9 Other
critics accused Lien and Soong of helping the PRC in its public relations campaign
to “sell” the declared peaceful intentions of its anti-secession law more successfully
8 Full text of the law can be found in the Chinese newspaper China Daily at the following
website: [http://english.people.com.cn/200503/14/eng20050314_176746.html].
9 “It’s classic divide-and-conquer strategy: Assemble the most allies possible and isolate
your enemy.” Jean-Philippe Beja, senior fellow at the Center for International Studies and
Research in Paris. Cited in Magnier, Mark and Tsai Ting-I, “China tries new tactic with
Taiwan,” Los Angeles Times, April 29, 2005, p. A-3.

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CRS-7
to the world.10 U.S. officials and other knowledgeable observers remained highly
concerned both about the intentions (which one U.S. Government official termed
“not benign on either side”) and the policy ramifications of the cross-strait
developments.11 U.S. Government officials warned Beijing against using such visits
to drive a wedge between Taiwan’s political parties and they stressed instead that
PRC officials should be speaking with the democratically elected Taiwan
government.
U.S. Taiwan Policy and U.S. Arms Sales. U.S. policymakers generally
have tried to maintain a delicate balancing act between Taiwan and the PRC,
periodically admonishing each side not to take provocative action that could
destabilize the status quo.12 The George W. Bush Administration is regarded as
having been more solicitous and supportive of Taiwan than any previous U.S.
Administration since 1979.13 Among other steps, the Administration in its first term
did the following:
! Responded to Taiwan’s annual request to purchase specific U.S.
weapons by approving a more robust arms sales package to Taiwan,
including Kidd-class destroyers, diesel submarines, and P-3C Orion
aircraft.14
! Enhanced military-to-military contacts, including meetings between
higher-level officers; cooperation on command, control, and
communications; and training assistance.15
! Approved transit visas for top Taiwan officials to come to the United
States, including Taiwan’s President and Vice-President.
10 According to Shen Dingli, a PRC foreign policy expert at Shanghai’s Fudan University,
“These invitations for Taiwanese to visit help China regain the international high ground in
cross-strait matters. And it deflects international focus from the anti-secession law.” Ibid,
Los Angeles Times, April 29, 2005.
11 Conversation with a U.S. State Department official on April 27, 2005.
12 Since the 1970s, when the United States broke relations with Taiwan in order to normalize
relations with Beijing, U.S. policy toward Taiwan has been shaped by the three U.S.-China
communiqués, the Taiwan Relations Act (P.L. 96-8), and the so-called Six Assurances. See
CRS Report 96-246, Taiwan: Texts of the Taiwan Relations Act, the U.S.-China
Communiques, and the “Six Assurances.”
13 As an example, in an ABC television interview on April 25, 2001, President Bush
responded to a question about what his Administration would do if Taiwan were attacked
by saying that the United States would do “whatever it took” to help Taiwan defend itself.
Critics of the statement said that the United States had no defense alliance with Taiwan and
had remained deliberately ambiguous about its reaction if Taiwan were attacked.
14 See CRS Report RL30957, Taiwan: Major U.S. Arms Sales Since 1990, by Shirley Kan.
15 According to an online journal from Pacific Forum CSIS, at a March 2002 meeting of the
U.S.-Taiwan Business Council in Florida, Deputy Defense Secretary Paul Wolfowitz
emphasized that along with arms sales, helping Taiwan more successfully integrate its
military forces was an important U.S. priority.

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CRS-8
But with political battles between the pro-independence DPP and the status-quo
KMT growing more heated in a series of key election campaigns in Taiwan, in late
2003 Bush Administration officials appeared to ease somewhat their support of the
Taiwan government. On December 9, 2003, while standing next to visiting PRC
Premier Wen Jiabao, President Bush issued a blunt warning to Taiwan, saying “The
comments and actions made by the leader of Taiwan indicate he may be willing to
make decisions unilaterally that change the status quo, which we oppose.”16 In
addition, U.S. officials have expressed increasing frustration in recent years over
Taiwan’s lagging arms purchases from the United States. Political disagreements in
Taiwan so far have kept the government from purchasing much of the weapons
President Bush approved for sale in 2001. To date, these disagreements have stalled
a special $18 billion arms acquisition budget that the DPP government submitted to
Taiwan’s legislature. Opposition KMT lawmakers have blocked consideration of the
bill, arguing that its cost is too high and the weapons do not meet Taiwan’s needs.
Similar controversies occurred over other potential sales — such as the possible
sale of an early-warning radar system to Taiwan to counter the PRC’s missile threat.
Lockheed Martin withdrew its bid to supply such a system after strong criticism of
the deal reportedly prompted Taiwan military authorities to begin re-examining the
proposed purchase.17 Apart from this, other limited arms purchases are continuing.
On January 4, 2005, for instance, the Lockheed Martin Corp. announced that Taiwan
will purchase more than 400 Hellfire missiles from the United States for about $50
million. According to reports citing Lockheed Martin officials, the decision “ensures
[Taiwan’s] military interoperability with the U.S. army, marine corps and special
operations forces deployed worldwide.”18
Taiwan and the World Health Organization (WHO). For eight years,
Taiwan’s application for observer status in the WHO has been defeated — most
recently on May 16, 2005, at the annual meeting of WHO’s administrative arm, the
World Health Assembly (WHA). Opposition from the PRC routinely has blocked
Taiwan’s bids on political grounds. PRC officials have argued that since Taiwan is
not a state but a part of China it cannot be separately admitted to U.N. entities for
which sovereign status is a pre-requisite for membership. Taiwan authorities
maintain that “observer status” in WHO would be an apolitical solution in Taiwan’s
case, since other non-sovereign entities, like the Holy See and the Palestine
Liberation Organization, have been given such status. The U.S. Government is on
record as supporting Taiwan’s membership in organizations “where state-hood is not
an issue.”19
16 For more background information on Taiwan and its history with the PRC, see CRS Issue
Brief IB98034, Taiwan: Recent Developments and U.S. Policy Choices; for background on
developments in U.S.-China relations during the 108th Congress, see CRS Report RL31815,
China-U.S. Relations During the 108th Congress.
17 “Defense Firm Drops Radar Bid for Taipei,” Agence France-Presse, Feb. 7, 2005.
18 “U.S. Army to Sell Hellfire to Taiwan,” Wireless News, January 5, 2005;
19 A State Department spokesman, in response to a press question at the State Department
(continued...)

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CRS-9
Members of Congress often have sought to gain Taiwan observer status in the
WHO. As in past Congresses, the 108th Congress considered and passed legislation
(P.L. 108-28) requiring the Secretary of State to seek Taiwan’s observer status at the
2003 annual WHA meeting.20 In 2004, the 108th Congress made this requirement
permanent, passing legislation requiring the Secretary of State to seek Taiwan’s
observer status at every annual WHA meeting.21
Official Taiwan-PRC Contacts. While the Lien-Soong PRC visits were
conducted in the two party leaders’ private capacities, official talks between China
and Taiwan last occurred in October 1998, when Koo Chen-fu, Chairman of
Taiwan’s Straits Exchange Foundation (SEF) and Wang Daohan, president of the
PRC’s Association for Relations Across the Taiwan Straits (ARATS), held meetings
in Shanghai.22 But while official talks have remained stymied, indirect ties and
unofficial cross-strait contacts have continued to grow and have seen significant
recent breakthroughs.
On January 29, 2005, Taiwan and the PRC launched the first non-stop direct
charter flights flown in 55 years between the two adversaries. While temporary (the
flights were scheduled only to reunite families and friends during the weeks
surrounding the annual Lunar New Year holiday in February), the landmark
agreement to have flights suggested that further momentum is possible. Even with
the official restrictions that Taiwan continues to maintain on investment and trade
with mainland China, Taiwan businesses are increasingly invested across the strait,
although the exact figures remain unclear. Taiwan-China trade has also increased
dramatically over the past decade, so that China now has surpassed the United States
as Taiwan’s most important trading partner. According to one report, statistics show
Taiwan’s total bilateral trade with the PRC rose to $61.64 billion in 2004 — a 33.1%
increase over 2003.23
This increasing economic interconnectedness with the PRC has put pressure on
Taiwan’s DPP government to further accommodate the Taiwan business community
by easing restrictions on direct travel and investment to the PRC. On June 13, 2005,
for instance, Taiwan Premier Frank Hsieh announced that the government was
authorizing three key policy initiatives to promote civilian and business exchanges
19 (...continued)
press briefing of March 20, 2002.
20 Legislation in 2003, H.R. 441/ S. 243, was enacted on May 29, 2003. Ten days earlier,
on May 19, 2003, the World Health Assembly decided not to consider a motion relating to
Taiwan during its annual meeting in Geneva.
21 The bill, S. 2092, was enacted as P.L. 108-235.
22 Koo Chen-fu, Taiwan’s chief negotiator, died on January 2, 2005, at age 87. In what
many interpreted as a conciliatory gesture, the PRC sent two senior officials — Sun Yafu,
deputy director of the PRC’s official Taiwan Affairs Office, and Li Yafei, secretary general
of the semi-official ARATS — to attend Koo’s funeral in Taiwan.
23 According to the Foreign Board of Trade, cited by Agence-France Presse in Taiwan News
online, March 3, 2005, [http://www.etaiwannews.com]. See also CRS Report RL31749,
Foreign Direct Investment in China, by Dick Nanto and Radha Sinha.

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CRS-10
with China: negotiations on beginning direct cross-strait charter cargo flights;
negotiations on Taiwan agricultural exports to China; and bilateral talks to allow
PRC citizens to sightsee in Taiwan. But such accommodations are worrisome to the
DPP’s pro-independence political base in Taiwan, who believe that further economic
ties to the mainland will erode Taiwan’s autonomy and lead to a “hollowing out” of
Taiwan’s industrial base.24 Thus, each Taiwan government decision on economic
links with the PRC represents an uneasy political compromise.
China’s Growing Global Reach
Many observers have begun to focus on the critical implications that China’s
economic growth and increasing international engagement could have for U.S.
economic and strategic interests. To feed its voracious appetite for resources, capital,
and technology, China has steadily and successfully sought trade agreements, oil and
gas contracts, scientific and technological cooperation, and even multilateral security
arrangements with countries both around its periphery and around the world. Dubbed
the “charm offensive” by some observers, China’s growing international economic
engagement has gone hand-in-hand with expanding political influence. Although
some believe that PRC officials appear more comfortable working with undemocratic
or authoritarian governments, PRC outreach also has extended to key U.S. allies or
to regions where U.S. dominance to date has been unparalleled and unquestioned.
A brief survey of China’s recent international engagement hints at the potential for
increasing Sino-U.S. competition for resources, power, and influence around the
world.
Asia. China’s improved relationships with its regional neighbors are
particularly visible in Beijing’s relations with the ten countries of the Association of
Southeast Asian Nations, or ASEAN.25 For decades prior to the mid-1990s, Sino-
ASEAN relations were characterized by recurring clashes over territorial disputes,
diplomatic deadlocks, and deep ASEAN concerns about China’s military ambitions
and its regional economic competitiveness.26 But Sino-ASEAN regional cooperation
has grown substantially since then. In addition to being part of an economic
partnership in the ASEAN Plus Three (APT) grouping (including also Japan and
South Korea, two U.S. military allies), China signed a free trade agreement with
ASEAN in November 2004. Under the agreement, beginning July 1, 2005, all parties
pledge to start lowering or cancelling tariffs on 7,000 kinds of items, with the goal
of reaching full mutual free trade by 2010. Within ASEAN, China’s relations with
Burma are unique, as Beijing has provided Rangoon with substantial military,
economic, and infrastructure development assistance. According to a reported
24 For instance, there are reportedly 300,000 Taiwan citizens now residing and working in
Shanghai.
25 First established in 1967, ASEAN in 2005 includes Brunei-Darassalam, Cambodia,
Indonesia, Laos, Malaysia, Myanmar (Burma), the Philippines, Singapore, Thailand, and
Vietnam. The United States maintains military alliances with the Philippines and Thailand,
and has significant naval and air base arrangements with Singapore.
26 For background, see CRS Report RL31183, China’s Maritime Territorial Claims:
Implications for U.S. Interests.

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CRS-11
internal Department of Defense (DOD) document, Beijing is building naval bases in
Burma that will give China its only access to the Indian Ocean.27
In addition to ASEAN, China has also improved its relationship with India, with
which it fought several border wars in the 1960s, and with Central Asia. On January
24, 2005, China and India began a “strategic dialogue,” discussing terrorism,
resource competition, and the U.S. role in Asia. During a visit to South Asia in early
April, 2005, PRC Premier Wen Jiabao alluded to his stop in India (on April 9) as his
“most important agenda item” in 2005.28 With the Central Asian countries of the
former Soviet Union, China has pursued both economic and security arrangements
through the Shanghai Cooperation Organization (SCO), founded in 2001.29 Within
the SCO context, China has cooperated on border enforcement, signed pipeline and
rail link agreements, and conducted joint military maneuvers. China also has
negotiated energy deals with Australia, another U.S. regional ally, to supply liquid
natural gas to southern China, and is expecting this year the completion of a
feasibility study relating to a Sino-Australian free trade agreement.
Japan. Japan, considered the most important American ally in Asia, is a
notable exception to China’s recent regional diplomatic achievements. As with other
Asian countries, China’s trading relations with Japan have expanded; in 2004, China
(including Hong Kong) surpassed the United States as Japan’s largest trading
partner,30 but the political relationship remains hampered by the residual resentments
of Japan’s conquest and occupation of China during World War II. China routinely
protests Japanese Prime Minister Koizumi’s annual visits to pay tribute to Japanese
war dead at the Yaksukuni Shinto Shrine, where war criminals are also enshrined.
Since Koizumi first visited the shrine in 2001, China has used the issue to justify its
refusal to engage in bilateral summitry, except as part of multilateral meetings.
Historical animosities also plagued China’s loss to Japan in an August 2004 soccer
match, when Chinese fans rioted and spat on the visiting Japanese team and its fans.
Furthermore, since 2004 China’s growing economic competitiveness and
expanding regional presence have helped exacerbate its relations with Tokyo. China
and Japan competed ferociously for access to Siberian oil, with Japan emerging the
major winner in a contract to have a main pipeline built to Japan, with a smaller
branch running to China. As a result of China’s exploration activities in the
Chunxiao Gas Field, in waters where Japan and Taiwan also have territorial claims,
Tokyo has begun its own exploration activities in and around the Senkakus.
Japanese officials have cut Overseas Development Aid (ODA) to China by
around half since 2000. In December 2004, Japan for the first time defined China as
27 The internal DOD report was cited by a Washington Times reporter. Gertz, Bill, “China
Builds up Strategic Sea Lanes,” Washington Times, January 18, 2005.
28 U.S. relations with India also have been improving in recent years.
29 The SCO is a more recent expansion of the “Shanghai Five” formed in 1997. SCO
members include China, Russia, Uzbekistan, Kazakhstan, Kyrgyzstan, and Tajikistan.
30 In 2004, China did $213 billion in trade with Japan. Sato, Shigeru, “Cooperate with
Japan, Don’t Compete,” Dow Jones Chinese Financial Wire, February 3, 2005.

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CRS-12
a potential security threat, and the following month Tokyo hosted a visit by Lee
Teng-hui, a former president of Taiwan who is anathema to Beijing. These tensions
appear to have brought Japan closer to U.S. policy positions in recent months.
Japanese officials publicly have supported U.S. opposition to European Union (EU)
plans to end an arms embargo to China, and on February 19, 2005, U.S. and Japanese
officials issued a joint statement declaring a number of common strategic objectives
for the first time in decades. These common objectives specifically included peaceful
resolution of the Taiwan issue. In a further controversy, a Chinese internet-based
campaign claimed to have collected millions of signatures from PRC citizens in an
effort to oppose Japan’s bid for a permanent seat on the United Nations Security
Council. Accompanying the Internet campaign, widespread anti-Japanese
demonstrations occurred in several major Chinese cities. At first apparently
encouraged by PRC officials, the demonstrations appear now to concern Beijing,
which has assertively attempted to prevent further demonstrations. 31
Russia. Energy resources and security issues also factor heavily into China’s
relations with Russia, where as noted above Beijing lost out to Japan in securing a
monopoly pipeline supply from Siberian oil fields. Russia also meets regularly with
PRC leaders through the forum of the Shanghai Cooperation Organization, where
Russia is one of the six members. On February 2, 2005, Russia’s President Vladimir
Putin and visiting PRC State Councillor Tang Jiaxuan announced that their two
countries would begin holding regular security consultations and at some point will
hold joint military exercises.32 According to Councillor Tang, China considers
Russia its “main partner for strategic cooperation,” and he emphasized that this was
the first time that China had ever established national security consultations with a
foreign government. Despite lingering historical tensions between the two, the PRC
and Russia are widely thought to be seeking mutual common ground as a
counterweight to U.S. global power.
European Union. In recent years, China has courted the European Union
(EU) intensively, and Sino-EU contacts have broadened significantly as a result. On
December 8, 2004, China and the EU held their 7th Annual EU-China Summit in The
Hague, with Premier Wen Jiabao leading the PRC delegation. According to a
statement at the time by European Commission President Jose Manuel Barroso, the
EU considers China a “strategic partner” and has made developing Sino-EU ties “one
of our top foreign policy objectives in the years to come.”33
Perhaps nothing illustrates China’s growing importance in Europe as much as
the growing EU campaign over the last year to lift the arms embargo that it (along
with the United States) has maintained against China since the Tiananmen Square
crackdown in 1989. Momentum to lift the embargo appeared to accelerate early in
2005 despite a number of American efforts to derail it on the grounds that China has
not made sufficient improvements in its human rights record . On February 2, 2005,
31 McGregor, Richard, “China web opposition to Japan’s UN hopes targets Beijing,” in
Financial Times, Asia, April 4, 2005, p. 6.
32 “Russia, China Tighten Security Links,” China Daily, Feb. 3, 2005.
33 [http://europa.eu.int/comm/external_relations/china/summit_1204/ip04_1440.htm].

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CRS-13
the U.S. House of Representatives acted on a measure urging the EU to maintain the
embargo, passing H.Res. 57 by a vote of 411-3. Senator Lugar, Chairman of the
Senate Foreign Relations Committee, has been quoted as saying he would support
curbs on sales of advanced military technology to EU countries unless the EU could
give strong assurances that advanced technologies would not be diverted to China
should the embargo be lifted.34
Until China’s passage of the anti-secession law on March 14, 2005, EU
governments tended to dismiss American arguments that the PRC military, equipped
with improved EU-provided defense technologies, could use those technologies to
threaten Taiwan and U.S. forces in Asia. But these American arguments appeared
strengthened by the PRC’s anti-secession law, and the EU’s campaign to lift the
China arms embargo appears to have abated for the present.
Middle East and Africa. For years, China has sold missile technology and
other sensitive materials to countries of security concern to the United States, such
as Iran, Syria, Libya, and Iraq. More recently, China also is becoming a major energy
player in the Middle East with some of these same countries. PRC negotiators, for
instance, were able to sign significant oil deals with Iran in 2004, including a
proposal that allows a Chinese company develop Iran’s Yadavarn oil field in
exchange for China’s agreeing to buy Iranian liquified natural gas.35 In addition,
China’s trade with the six Gulf Cooperation Council (GCC) countries has steadily
increased in the last few years, reaching $20 billion in 2004 (although this is still
small by comparison with the United States, whose trade with Saudi Arabia alone in
2004 was $26 billion).36
In 2000, China and African countries formed the China-Africa Cooperation
Forum (CACF), proposing that the CACF meet every three years to seek mutual
economic development and cooperation. Representatives from 45 of Africa’s 55
countries attended the CACF’s first Ministerial Conference in October of that same
year. China has also targeted resource-rich African nations such as Sudan and
Angola for energy-related development.37 Senior Chinese leaders in 2004 visited
oil-producing states, including Algeria and Gabon, and news reports early in 2005
alleged that a state-owned PRC energy company, China Shine, planned to drill
exploratory wells in a Namibian concession that was once held by Occidental
Petroleum.38 China has also shown an interest in iron ore deposits in Liberia and
34 In an interview with the Financial Times, February 21, 2005, p. 8.
35 Lee, Don, “China Barrels Ahead in Oil Market...,” Los Angeles Times, November 14,
2004, p. C-1.
36 The six GCC countries are the United Arab Emirates (UAE), Saudi Arabia, Bahrain,
Kuwait, Qatar, and Oman. Statistics for two-way U.S.-Saudi Arabia trade are from the U.S.
Census Bureau, Foreign Trade Statistics.
37 China objected to the U.N. vote threatening oil sanctions against Sudan unless it ceased
atrocities in the Darfur region. Ultimately, the PRC abstained on the September 19, 2004
vote, but promised to veto any future sanctions.
38 Boxell, James, “Circle Oil in Dollars 50m Africa Drilling Deal with Chinese Group,”
(continued...)

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Gabon. In addition to resource-related imperatives, some observers have suggested
that there is a political dynamic to China’s push into Africa, as 7 of the 25 countries
that still maintain official diplomatic relations with Taiwan are on the African
continent.39
Western Hemisphere.40 There is also a political dynamic in China’s
expanding economic and trade relationships with Latin America and the Caribbean,
where another 12 countries still maintain official diplomatic relations with Taiwan.41
In addition, China’s growing presence in the region also may have political and
economic consequences for the United States. In September 2004, China sent a
“special police” contingent to Haiti — one of Taiwan’s official relationships —
marking Beijing’s first deployment of forces ever in the Western Hemisphere. A
primary focus in the U.S.-Latin America debate over the U.S.-Central America Free
Trade Agreement (CAFTA) is how to keep Latin American textile manufacturing in
the region viable in the face of the expected surge in Chinese textile industry exports
with the end of the Multi-Fiber Arrangement on December 31, 2004. On January
25, 2005, Chile became the first Latin American county to hold bilateral negotiations
with China to craft a Sino-Chilean Free Trade Agreement. A second round is
expected in April 2005. According to a PRC news source, Beijing hopes that the
Sino-Chile agreement can become a model for future similar agreements with other
Latin American countries.42
Energy concerns also play a role in China’s Latin-American diplomacy,
particularly in Venezuela, which now accounts for almost 15% of U.S. oil imports,
and in Brazil, with whom China announced a $10 billion energy deal in November
2004.43 As a consequence of Venezuelan President Hugo Chavez’s visit to Beijing
in December 2004 and PRC Vice-President Zeng Qinghong’s visit to Venezuela in
January 2005, the two countries reportedly signed a series of agreements that
committed the China National Petroleum Corporation to spend over $400 million to
38 (...continued)
Financial Times (London edition), January 28, 2005, p. 25.
39 In 2005, Taiwan maintains official relations with Burkina Faso, Chad, the Gambia,
Malawi, Sao Tome and Principe, Senegal, and Swaziland.
40 See CRS Report RS22119, China’s Growing Interest in Latin America.
41 Taiwan’s official relations in the region include Belize, Costa Rica, the Dominican
Republic, El Salvador, Guatemala, Haiti, Honduras, Nicaragua, Panama, Paraguay, St. Kitts
and Nevis, and St. Vincent and the Grenadines. On January 20, 2005, Grenada formally
ended its diplomatic relations with Taiwan and established diplomatic relations with the
PRC.
42 Jiang Wei, “China-Chile FTA Talks Smooth,” China Daily, January 31, 2005, online at
[http://www.bilaterals.org/article.php3?id_article=1237].
43 The PRC is also investing in energy deals in Ecuador and in offshore projects in
Argentina, according to the New York Times, “China’s Oil Diplomacy in Latin America,”
March 1, 2005, p. 6.

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develop Venezuelan oil and gas reserves.44 Given the current poor state of U.S.-
Venezuelan relations under the Chavez government, some American observers worry
that Venezuelan energy agreements with China ultimately may serve to divert oil
from the United States.
Chinese economic and energy concerns extend also to Canada. On January 20,
2005, at the conclusion of Canadian Prime Minister Paul Martin’s visit to China, the
two governments signed a series of agreements to promote international cooperation
on a range of issues and to make energy issues in particular — including gas, nuclear,
clean energy, and oil sources, primarily massive “oil sands” in Alberta — into
“priority areas” of mutual cooperation. Energy discussions are to be maintained
through the Canada-China Joint Working Group on Energy Cooperation, formed
under a 2001 memorandum of understanding. A major Canadian oil-pipeline
company, Enbridge, is said to be planning a major ($2.2 billion) pipeline project to
transport oil from Alberta’s oil-sands deposits to the west coast for shipment to wider
markets including China.45
Economic Issues
The PRC is now the third-largest U.S. trading partner, with total U.S.-China
trade in 2004 estimated at $232 billion. Ongoing issues in U.S.-China economic
relations include the substantial and growing U.S. trade deficit with China ($162
billion in 2004), repeated PRC failures to protect U.S. intellectual property rights,
and the PRC’s continuing restrictive trade practices, such as its refusal to date to float
its currency.46 In addition, some policymakers have focused recent attention on
efforts by PRC companies to buy American assets.
Intellectual Property Rights. China’s lack of protection for intellectual
property rights (IPR) has become one of the most important issues in U.S.-China
bilateral trade. According to calculations from U.S. industry sources, IPR piracy has
cost U.S. firms $2.5 billion in lost sales, and the IPR piracy-rate in China for U.S.
products is estimated at around 90%.47 U.S. officials routinely have urged Beijing
to crack down on IPR piracy, and Secretary of Commerce Don Evans stressed in his
last official visit to China in January 2005 that China needed to do better at IPR
protection.
Currency Valuation. Another ongoing concern that arose in the 108th
Congress involved the PRC’s decision to keep the value of its currency low with
44 Bajpaee, Chietigi “China’s Quest for Energy Security,” Power and Interest News Report,
February 25, 2005, online at [http://www.pinr.com/].
45 Mortished, Carl, “Chinese Chase Canadian Oil,” The Times (London), March 5, 2005, p.
36
46 See CRS Issue Brief IB91121, China-U.S. Trade Issues, by Wayne Morrison, for further
details.
47 International Intellectual Property Alliance, 2004 Special 301 Report: People’s Republic
of China, February 2005, cited in CRS Issue Brief IB91121, China-U.S. Trade Issues, by
Wayne Morrison.

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CRS-16
respect to the dollar, and indirectly with the yen and euro. Since 1994, the PRC has
pegged its currency, the renminbi (RMB), to the U.S. dollar at a rate of about 8.3
RMB to the dollar. In 2003, many U.S. policymakers concluded that this
RMB/dollar peg kept the PRC’s currency artificially undervalued, making PRC
exports artificially cheap and making it harder for U.S. producers to compete. U.S.
critics of the PRC’s currency peg charged that the PRC unfairly manipulated its
currency, and they urged Beijing either to raise the RMB’s value or to make it freely
convertible subject to market forces. Members of the 108th Congress introduced
multiple bills (such as H.R. 3058) to require the U.S. Secretary of the Treasury to
analyze the PRC’s exchange rate policies and, depending on the results of that
analysis, to impose tariffs on PRC products to offset the price advantage the PRC is
believed to gain from its currency policies. On December 3, 2004, the U.S. Treasury
Department issued its biannual report on global foreign exchange, reporting that no
major U.S. trading partner — most notably the PRC — had met the technical
definition of currency manipulation.
National Security Issues
North Korea. North Korea’s announcement on February 10, 2005 — that it
possessed nuclear weapons and would no longer be participating in the six-party talks
hosted by China — not only could affect U.S.-China relations but could significantly
complicate U.S. policy on the Korean Peninsula. The road to the current stand-off
began in October 2002, when Pyongyang told visiting U.S. officials that it was
conducting a uranium enrichment program in violation of its pledges under the 1994
U.S.-North Korean Agreed Framework. The crisis continued to escalate as the
United States, Japan, South Korea, and other member nations of KEDO (the Korean
Peninsula Energy Development Organization) suspended energy assistance to North
Korea and as North Korea withdrew from the Nuclear Non-Proliferation Treaty and
restarted its mothballed nuclear reactor at Yongbyon. The Bush Administration
rejected North Korean demands for bilateral talks to resolve the crisis, and instead
consented only to six-party talks involving North and South Korea, the United States,
the PRC, Japan, and Russia. By the end of the 108th Congress, three rounds of six-
party talks had produced no progress on the North Korea nuclear issue.
As North Korea’s sole military ally, the PRC could be drawn into any armed
conflict involving North Korea — meaning the possibility of U.S.-China military
confrontation, an ally of South Korea. In addition, since the PRC is North Korea’s
principal trade partner, any decision by the international community to impose
sweeping economic sanctions against North Korea would appear to require PRC
support. Lack of that support would undermine any sanctions effort and also damage
U.S.-China relations. By the same token, collapse of the fragile North Korean regime
could have equally unhappy consequences for the PRC, leading to floods of North
Korean refugees into China and to the possible advance of U.S. military forces from
the South Korean side of the demilitarized zone to the PRC border.
PRC officials have repeatedly emphasized that China supports a non-nuclear
Korean peninsula. This support is thought to be genuine, since an unpredictable
North Korea armed with nuclear weapons could have unpleasant consequences for
Beijing — such as the creation of nuclear weapons programs in currently non-nuclear
neighbors like Taiwan, Japan, and South Korea, or an accelerated U.S. commitment

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for a regional missile defense program, to name only two. But Beijing has stopped
short of promising to put further pressure on North Korea, and in fact continues to
prop up the North Korean regime with supplies of food and fuel and to advocate
bilateral U.S.-North Korean dialogue.48
Weapons Proliferation. For many years, U.S. officials and Members of
Congress have been concerned about the PRC’s track record of weapons sales,
technology transfers, and nuclear energy assistance to certain countries in the Middle
East and South Asia, particularly to Iran and Pakistan. While some U.S. officials
have grown more confident that the PRC is changing its proliferation policies,
congressional and other critics charge that such confidence is misplaced.49 They
point out that for years, reputable sources have reported China to be selling ballistic
missiles and technology for weapons of mass destruction (WMD) in the international
market, primarily in the Middle East.50 Although these allegations have always
created problems in Sino-U.S. relations, they have taken on new and potentially
significant implications given the Administration’s entrenched suspicions about
Iraq’s WMD program as well as later disclosures that both Iran and North Korea are
actively pursuing nuclear weapons programs. The PRC has had close relationships
with all three countries in the past, including sales of military equipment that could
threaten U.S. forces in the region and missiles that could enhance a nuclear weapons
capability.51
Military Contacts. Once one of the stronger components of the relationship,
U.S.-China military relations have never fully recovered after they were suspended
following the 1989 Tiananmen Square crackdown. Nevertheless, both countries
cautiously resumed military contacts during the 108th Congress, although efforts to
reenergize military ties met with repeated setbacks. In January 2005, several news
accounts tentatively reported that U.S. Secretary of Defense Donald Rumsfeld is
considering making his first trip as Secretary to China later this year.52 (See appendix
at the end of this report for a list of recent U.S.-China official talks.)
48 “U.S. Rebuffs Direct Talks with North Korea,” Korea Times, March 9, 2005; “China
Envoy Heads to U.S. for North Korea Nuclear Talks,” Reuters, March 8, 2005.
49 As reasons for such confidence, some point to the past decade, when the PRC has: 1992
— promised to abide by the Missile Technology Control Regime (MTCR) and acceded to
the Nuclear Non-Proliferation Treaty (NPT); 1993 — signed the Chemical Weapons
Convention (CWC); 1996 — signed the Comprehensive Test Ban Treaty; and 1997 —
joined the Zangger Committee of NPT exporters.
50 For details, see CRS Report RL31555, China and Proliferation of Weapons of Mass
Destruction and Missiles: Policy Issues, by Shirley Kan.
51 Iran, for instance, has purchased from the PRC small numbers of SA-2 surface-to-air
missiles, F-7 combat aircraft, fast-attack patrol boats, and C-802 anti-ship cruise missiles.
Some Members of Congress have questioned whether Iran’s possession of C-802s violates
the Iran-Iraq Arms Non-Proliferation Act of 1992 (50 U.S.C. § 1701), which requires
sanctions on countries that sell destabilizing weapons to Iran or Iraq.
52 See CRS Report RL32496, U.S.-China Military Contacts: Issues for Congress, by Shirley
Kan.

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Human Rights
The George W. Bush Administration generally has shifted away from the broad
and generalized approach U.S. Administrations traditionally have followed on human
rights in China. The White House approach instead appears to favor more selective,
intense pressure on individual cases involving human rights and on rule of law.
During the 108th Congress, the PRC government periodically acceded to this U.S.
pressure and released early from prison political dissidents, usually citing health
reasons. On March 4, 2004, for instance, the PRC released on medical parole one of
its best-known political prisoners, Wang Youcai, a co-founder of the short-lived
China Democracy Party. Days earlier, the PRC released an imprisoned Tibetan nun
and announced that the prison sentence of Uighur businesswoman Rebiya Kadeer
would be reduced by one year, making her eligible for release in 2006. The
Congressional-Executive Commission on China (CECC), a body created by P.L. 106-
286 and consisting of U.S. government officials and Members of Congress, maintains
a “Political Prisoner Database” on such prisoners in the PRC. The registry can be
found on the CECC website, [http://www.cecc.gov/].
In a development found unusual by some observers, on January 25, 2005, the
PRC released a list of political prisoners (variously reported as a list of either 51 or
56 names) who were granted reductions in their sentences or who were being
considered for early release. The list, originally given to the U.S.-based human rights
group the Dui Hua Foundation, was notable because the PRC rarely volunteers
information about prisoners and because some names on the list reportedly were
previously unknown detainees.53 On February 8, 2005, a U.S. State Department
official said that the United States had no comment on the list at this time. Skeptics
have suggested that the list is a PRC effort to dissuade the U.S. government from
introducing a resolution criticizing China’s human rights record at the 61st Session
of the U.N. Commission on Human Rights in Geneva from March 14 to April 22,
2005.
Religious Freedom. In recent years, the PRC has continued to crack down
on unauthorized religious groups and to restrict the freedoms of ethnic communities
that seek greater religious autonomy. Much of this repression focuses on what PRC
officials have classified as illegal religious “cults” such as the Falun Gong and the
Three Grades of Servants Church. Reports about religious freedom in China suggest
that state persecution of some religious and spiritual groups will likely continue as
long as the Chinese Communist Party (CCP) perceives these groups to be threatening
to its political control. However, religions in the PRC have also attracted increasing
numbers of adherents as well.
In the China section of its most recent annual International Religious Freedom
Report, released September 15, 2004, the U.S. Department of State judged China’s
record on religious freedom to be poor and substantially the same as during recent
years. The Secretary of State again designated China as a country of particular
53 The Dui Hua Foundation, headed by John Kamm, is a San Francisco-based human rights
organization. It refers to the prisoner list on its website, [http://www.duihua.org].

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CRS-19
concern in 2003 — a designation the PRC has earned each year since 1999. The
State Administration for Religious Affairs, SARA, (formerly known as the Religious
Affairs Bureau, or RAB) continues to require churches to register with the
government. Churches that are unregistered — so-called “house churches” —
continue to be technically illegal and often repressed by the government. As in the
past, however, treatment of unregistered churches varies widely from locality to
locality, with some local officials highly repressive and others surprisingly tolerant.
Some suggest that in the 21st century the Communist Party has sought ways to
recognize religion as an integral part of Chinese society and to support religious
practices that it deems to perform positive social and political functions. At a
national work conference on religion in 2001, for instance, then-Party Secretary Jiang
Zemin stressed religion’s positive role in society. On the other hand, by 2004 it
appeared that Party officials had grown more concerned about religion’s “de-
stabilizing” effects. In January 2004, SARA held a national work conference on
religion that instead emphasized what it saw as negative and destabilizing aspects of
religious observance, including cults and the growing circulation of foreign religious
materials. As they have in the past, Communist Party officials continue now to stress
that religious belief is incompatible with Party membership.
Tibet. The political and cultural status of Tibet remains a difficult issue in
U.S.-China relations and a matter of debate among U.S. policymakers. Controversy
continues over Tibet’s current political status as part of China, the role of the Dalai
Lama and his Tibetan government-in-exile, and the impact of Chinese control on
Tibetan culture and religious traditions. The U.S. government recognizes Tibet as
part of China and has always done so, although some dispute the historical
consistency of this U.S. position. But the Dalai Lama, Tibet’s exiled spiritual leader,
has long had strong supporters in the U.S. Congress who have continued to pressure
the White House to protect Tibetan culture and give Tibet greater status in U.S. law.
It was largely because of this congressional pressure that in 1997, U.S. officials
created the position of Special Coordinator for Tibetan issues, tasked with the
specific mission of helping to promote talks between the Dalai Lama and Beijing.
The current Special Coordinator — Paula Dobriansky, Under Secretary of State for
Global Affairs — is the highest-ranking U.S. official to have held this position.54
Although dialogue between the PRC and the Tibetan exile community remains
officially stalled, hopes for renewed momentum were raised by a number of unusual
developments in 2002-2003 that are outside the scope of what has come to be
expected of Beijing’s relations with the Dalai Lama’s representatives. In 2002, the
Dalai Lama’s older brother, Gyalo Thondup, accepted a PRC invitation to spend
several weeks in Tibet on a private visit. On at least three occasions since then, the
PRC government invited to China and to Lhasa (Tibet’s capital) delegations from the
Tibetan community led by the Dalai Lama’s special envoy in the United States, Lodi
Gyari. Further contacts and developments along these lines would reinforce the view
that a quiet dialogue and perhaps compromise may be underway.
54 For background and details, see CRS Report RL30983, Tibet, China, and the 107th
Congress: Issues for U.S. Policy.

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CRS-20
Separatists. For years, the PRC government also has maintained a repressive
crackdown against Tibetans and Muslims, particularly against Uighur separatists in
the Xinjiang-Uighur Autonomous Region. Although U.S. officials warned after
September 11th, 2001 that the global anti-terror campaign should not be used to
persecute Uighurs or other minorities with political grievances against Beijing, some
believe that the U.S. government made a concession to the PRC on August 26, 2002,
when it announced that it was placing one small group in China, the East Turkestan
Islamic Movement, on the U.S. list of terrorist groups.
U.S. policies on Uighurs and on terrorism faced a unique test during the 108th
Congress, when it became known that approximately 22 Uighur Muslims were being
held by U.S. forces at Guantanamo Bay after having been apprehended during the
U.S. strikes against the Taliban in Afghanistan. By May of 2004, international
human rights groups were reporting their concerns about the planned release of
Uighur prisoners that U.S. forces had decided were of “no intelligence value.” These
prisoners, they feared, if repatriated to China, would be executed or imprisoned as
terrorists.55 In October 2004, in an interview with the Far Eastern Economic Review,
Secretary of State Colin Powell said that U.S. officials were still reviewing the status
of the Uighur prisoners because of U.S. fears that returning them to possible
persecution in China would “be inconsistent...with our obligations to comply with
international law and consistent with [the] Geneva Convention...”56 Later press
reports said that a number of U.S. allies had refused requests to accept the prisoners.57

Family Planning Policies. Because of allegations of forced abortions and
sterilizations in PRC family planning programs, direct and indirect U.S. funding for
coercive family planning practices is prohibited in provisions of several U.S. laws.
In addition, legislation in recent years has expanded these restrictions to include U.S.
funding for international and multilateral family planning programs, such as the U.N.
Population Fund (UNFPA), that have programs in China. In the 108th Congress,
section 560(d) of H.R. 4818 (P.L. 108-447), the Consolidated Appropriations Act,
2005, prohibited U.S. funds from being made available to UNFPA for a country
program in China.
While the PRC has maintained its restrictive and at times coercive “one-child”
policy for several decades, there are growing indications that the government may be
re-thinking this policy. Early in 2004, China’s new leadership appointed a task force
to study the country’s demographic trends and their implications for economic
development. In October 2004, reports surfaced that Beijing was considering at least
one proposal to eventually scrap the one-child policy because of currently low PRC
birth rates and the economic implications this has for supporting China’s huge aging
population. On January 6, 2005, the director of China’s National Population and
55 James, Ian, “Guantanamo Prisoners from China’s Muslim Northwest Face Danger If
Returned Home, Human Rights Groups Warn,” Associated Press Newswires, May 28, 2004.
56 Heibert, Murray, and Susan Lawrence, in an interview with Colin Powell, Far Eastern
Economic Review, cited in Political Transcripts by Federal Document Clearing House,
October 19, 2004.
57 Sevastopulo, Demetri, “U.S. Fails to Find Countries to Take Uighurs,” Financial Times,
October 28, 2004, p. 5.

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CRS-21
Family Planning Commission stated that the government intended to modify criminal
law to make it illegal to selectively identify and abort female fetuses.58 And on
January 21, 2005, an official from the PRC Ministry of Education stated that the
government would be lifting the long-standing ban on marriage and childbearing for
college and graduate students.
Social Stability. The far-reaching economic changes the PRC continues to
undergo have led to increasing disgruntlement among a number of social groups.
Peasants and farmers in rapidly developing parts of China are under heavy tax
burdens and falling farther behind their urban contemporaries in income. Some have
had their farmland confiscated by local government and Party officials. Officials
then sell the confiscated land for development, often reportedly offering little or no
compensation to the peasants from which the land was seized, resulting in sometimes
sizable protests. In an effort to address rising rural complaints, the government early
in 2005 proposed a new measure — the “2005 Number 1 Document” — to reduce
taxes on rural peasants, increase farm subsidies, and address the widening income
gap between urban and rural residents. Rising labor unrest, particularly in northern
and interior cities, is another particularly troubling issue for Beijing, a regime
founded on communist-inspired notions of a workers’ paradise. Increasing labor
unrest also has placed greater pressure on the authority and credibility of the All-
China Federation of Trade Unions (ACFTU), China’s only legal labor organization.59

Hong Kong Democratization
On June 21, 2005, following his selection to the post by the 800-member Hong
Kong Election Committee, Donald Tsang was formally appointed Chief Executive
of Hong Kong by the PRC State Council. Tsang has promised more consultative
leadership, including expanding the 22-member Executive Council (the cabinet) and
reforming high-level committees and advisory groups such as the Commission on
Strategic Development. He replaces Hong Kong’s unpopular Chief Executive, Tung
Chee-hwa, who submitted his resignation on March 10, 2005, two years before his
term was to expire. In a controversial decision, Beijing ruled that Mr. Tsang will fill
out the remaining two years of Mr. Tung’s term rather than begin a new five-year
term. Critics of this decision say that the Basic Law, Hong Kong’s de-facto
constitution, only makes provision for five-year terms.
Controversy has grown steadily in Hong Kong since late summer 2003, when
Mr. Tung’s administration attempted to enact anti-sedition laws required by Article
23 of the Basic Law. These, known as the “Article 23” proposals, ultimately were
withdrawn in September 2003, after massive public protests were held to oppose
them. As a consequence of the protests, Mr. Tung pledged to lay out a timetable for
public consultations on democratic reforms in 2007. The withdrawal of the Article
58 PRC statistics show that nearly 120 boys are born for every 100 girls — a gender ratio
suggesting selective abortion of female fetuses. The “natural” male-female gender ratio is
about 105-100, according to a United Nations estimate. “Analysts View Problems with
Huge PRC Gender Gap,” South China Morning Post, January 7, 2005.
59 The ACFTU is controlled by the Communist Party. For background and further details,
see CRS Report RL31164, China: Labor Conditions and Unrest.

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CRS-22
23 proposals was widely seen as a victory for Hong Kong autonomy and a setback
for the Tung government and the PRC, which had publicly supported the Article 23
proposals. This controversy was followed in January 2004, by peaceful
demonstrations involving tens of thousands of Hong Kong people in favor of
implementing universal suffrage to elect the next Chief Executive in 2007 and the
next Legislative Council in 2008.
In his annual policy address on January 7, 2004, Mr. Tung announced that
instead of following through on his 2003 promise for public consultations in Hong
Kong, he was appointing a task force to hold consultations with Beijing on the
subject of democratic reform. Immediately following the Tung address, the PRC’s
official news agency, Xinhua, announced that Hong Kong must consult Beijing prior
to moving forward on any democratic reform development. PRC rhetoric continued
to strengthen in subsequent months.

In April 2004, Beijing dealt Hong Kong’s democratic aspirations a stinging
setback by initiating an “interpretation” of the Basic Law to the effect that universal
suffrage not only was not allowed as early as 2007, but that Beijing, and not Hong
Kong, would determine the proper pace for democratic reforms. Critics maintained
that the Beijing decisions contravened provisions in Hong Kong’s Basic Law leaving
decisions on democracy development up to Hong Kong. Despite widespread public
sentiment against the PRC decisions, public disaffection did not appear to translate
into significant gains for democracy proponents in Hong Kong’s September 12, 2004
legislative elections, in which half of the 60-seat body was elected by universal
suffrage and half by “functional constituencies.”60 Democrats made fewer gains than
the party had hoped, winning 25 of the 60 seats.
Beijing’s decisions on Hong Kong have particular relevance for Taiwan, since
Beijing has held out the “one country, two systems” approach for Hong Kong as a
model for Taiwan’s eventual reunification with mainland China. U.S. policy toward
Hong Kong is set out in the U.S.-Hong Kong Policy Act of 1992 (P.L. 102-383). In
addition to requiring annual U.S. government reports on Hong Kong’s conditions
through 2006, this act allows the United States to treat Hong Kong more leniently
than it treats the PRC on the condition that Hong Kong remains autonomous. Under
the act, the President has the power to halt existing agreements with Hong Kong or
take other steps if he determines that Beijing is interfering unduly in Hong Kong’s
affairs.61
60 Functional constituencies are constituencies of professional groups — doctors, lawyers,
teachers, accountants — each group of which can elect one or more candidates to represent
the group’s interests in the legislature.
61 A specific intention of the Hong Kong Policy Act was to permit the U.S. government to
treat Hong Kong differently from the way it treats the rest of China in U.S. law. Thus, the
United States has an extradition treaty with Hong Kong but not with China; maintains a
liberalized export control regime with Hong Kong but a restrictive one with China; and
gives Hong Kong permanent most-favored-nation (MFN) trade status — or “normal trade
relations” as it is now known — but gave that status to China separately upon its accession
to the WTO.

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CRS-23
U.S. Policy Implications
In the past year, some U.S. observers have become increasingly concerned about
China’s growing reach in the world and what it means for global U.S. economic and
political interests, U.S.-China relations, and concerns for Taiwan’s security. The
109th Congress will be dealing with an emerging debate in U.S. policy and academic
circles about whether U.S. interests would best be served by accommodating China’s
rise or seeking to contain it.
According to one school of thought, China’s economic and political rise in the
world is inevitable and needs to be accommodated. In this view, as China becomes
more economically interdependent with the international community, it will have a
greater stake in pursuing stable international economic relationships. Growing
wealth in the PRC is likely to encourage Chinese society to move in directions that
will develop a materially better-off, more educated, and cosmopolitan populace.
Over time, this population could be expected to press its government for greater
political pluralism and democracy — two key U.S. objectives. Therefore, from this
perspective, U.S. policy should seek to work more closely with the PRC, not only to
encourage these positive long-term trends, but to seek ways to mutually benefit by
cooperating on important global issues such as alternative energy sources, climate
change, and scientific and medical advancements. Ultimately, some proponents of
accommodation say, the United States simply will have to make room for the
economic and political appetites of the superpower that China is likely to become.
Viewing the PRC as a “threat” or attempting to contain it, these proponents say,
could produce disastrous policy consequences for U.S. interests. In addition to
possible military conflict with the PRC, they assert, these consequences could include
a breakdown in PRC governance, a fragmentation of the country itself, the creation
of greater Chinese nationalism with a strong anti-American bias, and an increasingly
isolated United States that the international community may see as out of step with
global trends.
Other proponents of the “inevitability” of China’s rise stress the extreme
competitive challenges of China’s growing power which, even if benign, pose
potentially huge consequences for U.S. global interests. Beijing officials, say this
group, view the world as a state-centered, competitive environment where power is
respected, and PRC leaders are determined to use all means at their disposal to
increase their nation’s wealth, power, and influence. A militarily muscular China
with substantial international economic ties will be able to wield considerable
political power that could prompt U.S. friends and allies to make different choices,
eroding U.S. influence around the world. The EU’s inclination to lift its arms
embargo against China despite strong U.S. objections is cited as an example of this
trend. The United States, they argue, should develop a comprehensive strategic plan
in order to counter China’s growing power by strengthen its existing regional
alliances and make new ones, expand overseas investments, sharpen American global
competitiveness, and maintain a robust military presence in Asia and elsewhere as
a counterweight to growing PRC power and influence.
Others in the American policy debate see less benevolent intentions in China’s
growing power. PRC leaders, they argue, may be portraying their growth as a

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CRS-24
“peaceful rise” with no harmful consequences, but actually they are biding their time,
simply conforming to many international norms as a strategy while China is still
weak. In reality, these proponents say, Beijing seeks at least to erode and at best to
supplant U.S. international power and influence. In conducting their international
relations, they maintain, Chinese leaders seek to cause rifts in U.S. alliances, create
economic interdependence with U.S. friends, and arm U.S. enemies. Despite the
statements of support for the U.S. anti-terrorism campaign, according to this view,
the PRC’s repeated violations of its non-proliferation commitments have actually
contributed to strengthening nations that harbor global terrorists. Furthermore, they
maintain that the PRC under its current repressive form of government is inherently
a threat to U.S. interests, and that the Chinese political system needs to change
dramatically before the United States has any real hope of reaching a constructive
relationship with Beijing. From this perspective, U.S. policy should focus on
mechanisms to change the PRC from within while remaining vigilant and attempting
to contain PRC foreign policy actions and economic relationships around the world
where these threaten U.S. interests.
Major Legislation62
H.Res. 57 (Hyde)
Urging the European Union to maintain its arms embargo on the People’s
Republic of China. Introduced on February 1, 2005; passed House on February 2,
2005, by a vote of 411-3.
H.Res. 244 (Pombo)
A resolution urging the President to immediately review any CNOOC agreement
to buy the American energy company Unocal. Introduced June 29, 2005, referred to
House International Relations and Financial Services Committees. Considered under
suspension on June 30, 2005, passed by a vote of 398-15.
H.Con.Res. 70 (Chabot)
Expressing the sense of Congress that the United States should strongly oppose
China’s anti-secession law with respect to Taiwan. Introduced on February 17, 2005,
and referred to the House Committee on International Relations.
H.Con.Res. 76 (Miller)
Expressing the sense of Congress that the United States should urge the PRC not
to enact a proposed anti-secession law with respect to Taiwan. Introduced on
February 17, 2005, and referred to the House Committee on International Relations.
H.Con.Res. 83 (Smith)
Urging the United States to introduce a measure at the 61st U.N. Conference on
Human Rights calling on China to end its human rights abuses. Introduced March
3, 2005, and referred to the House Committee on International Relations. Mark-up
held on March 9, 2005.
62 For legislative action during the 108th Congress, see CRS Report RL31815, China-U.S.
Relations During the 108th Congress, by Kerry Dumbaugh

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CRS-25
H.Con.Res. 98 (Hyde)
Expressing the “grave concern” of Congress about China’s passage of an anti-
secession law aimed at Taiwan. Introduced March 15, 2005. The measure passed
on March 16, 2005, by a vote of 424-4. It was referred to the Senate Foreign
Relations Committee on March 17, 2005.
H.R. 728 (Sanders)
To withdraw normal trade relations (NTR — formerly known as most-favored-
nation status, or MFN) from the PRC. Introduced February 9, 2005, referred to
House Ways and Means Committee.
H.R. 1498 (Ryan)
To clarify that PRC currency manipulation is actionable under U.S.
countervailing duty laws and product-specific safeguards. Introduced on April 21,
2005, and referred to House Ways and Means Committee and House Armed Services
Committee. Executive comment was requested from DOD on April 21, 2005.
H.R. 1815 (Hunter)
Authorizing appropriations for the Department of Defense for FY2006.
Introduced April 26, 2005. H.Rept. 109-89. After Committee and Subcommittee
mark-ups, reported (amended) by the House Armed Services Committee on May 20,
2005. Referred to the House on May 25, 2005, and passed by a vote of 390-39.
Section 528 of the bill mandates “at least” one class field study trip annually to both
Taiwan and the People’s Republic of China (PRC) by military education classes of
the National Defense University; Section 1203 requires regular senior U.S. military
exchanges with Taiwan military officials to improve Taiwan’s defenses against
potential submarine and missile attack by the PRC; Section 1212 prohibits the
Secretary of Defense from procuring goods or services from any foreign person, with
some exceptions, who knowingly sells items on the U.S. munitions list to the PRC.
Referred to the Senate on June 6, 2005.
H.R. 3057 (Kolbe)
Appropriations for Foreign Operations, Export Financing, and related programs
for FY2006. Section 560(c) prohibits funds from being made available to the U.N.
Population Fund (UNFPA) for a country program in China; Section 575(b) provides
$4 million in ESF funds to NGOs to promote cultural traditions, sustainable
development, and environmental conservation in Tibet; Section 589 prohibits the
Export-Import Bank from using federal funds to approve an application for a nuclear
project in China. Introduced in House June 24, 2005 (H.Rept. 109-152). House
passed the bill, amended, by a vote of 393-32 on June 28, 2005. Referred to the
Senate Committee on Appropriations on June 29, 2005 and ordered reported,
amended, on June 30, 2005 (S.Rept. 109-96). Placed on Senate calendar.
H.R. 3058 (Knollenberg)
Transportation, Treasury, Housing and Urban Development, the Judiciary, the
District of Columbia, and Independent Agencies Appropriations Act, FY2006.
Section 951 of the bill (the Kilpatrick amendment) prohibits the Department of the
Treasury from using funds to recommend approval of the sale of Unocal to the PRC’s
CNOOC Ltd. The House Appropriations Committee reported the bill as an original

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CRS-26
measure on June 24, 2005 (H.Rept. 109-153). The House passed the bill on June 30,
2005, by a vote of 405-18.
S. 295 (Schumer)
Authorization of a 27.5% import duty on imports of PRC-made goods or
agricultural products unless the President certifies to Congress that China is not
indulging in unfair trade practices. Introduced on February 3, 2005, referred to
Senate Committee on Finance.
S. 1117 (Lieberman)
U.S.-PRC Cultural Engagement Act. To expand U.S. academic, cultural, and
business activities and increase American expertise in Chinese language and culture.
Provides funds to establish Chinese language centers to assist elementary and
secondary schools and institutes of higher learning in offering Chinese language
instruction; and funds to establish exchange programs between U.S. and PRC post-
secondary educational institutions. Introduced May 25, 2005, and referred to the
Committee on Foreign Relations.
Chronology
07/07/05 —
Questioned at the G-8 summit in Scotland, President Bush said it was
best for him not to comment on or get involved in the official process
for reviewing CNOOC’s bid for Unocal.
07/04/05 — According to the Asian Wall St. Journal, China and the European
Union signed a joint declaration on bilateral cooperation in aviation,
including plans to hold talks on transportation policy, infrastructure
and investment, and aviation technology, among other things.
07/04/05 — The PRC Foreign Ministry issued a statement saying “We demand
that the U.S. Congress correct its mistaken ways of politicizing
economic and trade issues and stop interfering in the normal
commercial exchanges between enterprises of the two countries.”
07/01/05 — The Chinese National Offshore Oil Company (CNOOC) asked the
U.S. Committee on Foreign Investment in the United States (CFIUS)
to begin a national security review of its $18.5 bid for UNOCAL.
07/01/05 — Russia and China issued a joint statement, The Declaration on World
Order in the 21st Century, denouncing “aspiration for monopoly and
domination in international affairs” and calling for non-interference
in other countries’ internal affairs. Most interpreted the statement to
be targeting U.S. policy.
06/30/05 — The House voted 333-92 in favor of the Kilpatrick amendment to
H.R. 3058, the FY2006 Appropriations bill for the Departments of
Transportation and others, prohibiting funds from being used to
recommend approval of the sale of UNOCAL to the PRC’s CNOOC.

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CRS-27
06/30/05 — The House voted 398-15 in favor of H.Res. 344, a resolution
introduced by Representative Pombo, expressing the concern of the
House that the Chinese purchase of a U.S. oil company, UNOCAL,
could threaten U.S. security.
06/21/05 — CNOOC made an unsolicited $18.5 billion cash bid for American
energy company Unocal.
06/16/05 — U.S. and PRC trade officials negotiated via video link to reach a
compromise on Chinese textile imports. Also, according to Japanese
newspaper Yomiuri Shimbun, China test-fired a new long-range
submarine-launched ballistic missile (SLBM), the Ju-Lang 2, a
modified version of the Dong Feng-31.
06/14/05 —
The Congressional China Caucus was formally launched at a news
conference.
06/13/05 — Taiwan Premier Frank Hsieh announced the government was
authorizing three key policy initiatives to promote civilian and
business exchanges with China: negotiations on beginning direct
cross-strait charter cargo flights; negotiations on Taiwan agricultural
exports to China; and bilateral talks to allow PRC citizens to sightsee
in Taiwan.
06/07/05 — The BBC reported that by a vote of 248-23, Taiwan’s National
Assembly approved constitutional changes, including one
establishing that future constitutional amendments be decided by an
island-wide referendum instead of by the National Assembly.
06/05/05 — Agence-France Presse reported that in recent months (perhaps
March), Taiwan had successfully test-fired its first “Hsiung-Feng”
cruise missile, with a range of 1,000 miles.
06/04/05 — While in Singapore, Secretary of Defense Rumsfeld said the
Pentagon’s forthcoming 2005 report on China’s military concludes
that military spending in higher than is officially admitted — the third
highest globally.
05/05/05 — PFP Chairman James Soong left for a week-long visit to China.
Several months earlier, Soong had signed a consensus with Taiwan
President Chen Shui-bian to agree on cross-strait policies.
04/26/05 —
KMT Chairman Lien Chan departed for an eight-day “peace journey”
to China. After meeting with PRC President Hu Jintao on April 29,
Lien announced the CCP and KMT had reached “consensus” on
opposing Taiwan independence and on the fact of “one-China.”
04/15/05 —
Ambassador Zhou Wenzhong presented his credentials as new PRC
ambassador to the United States.

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CRS-28
03/22/05 —
North Korean Premier Pak Pong Ju arrived for discussions in Beijing.
A PRC spokesman later said the visit had made “no new
breakthroughs” on resuming Six-Party Talks.
03/20/05 —
Secretary of State Condoleezza Rice began two days of meetings in
Beijing as part of her first trip to Asia as Secretary of State.
03/17/05 —
Taiwan’s cabinet approved a reduced version ($15.5 billion) of the
special defense budget to buy U.S. weapons. The original budget of
$18.2 billion had been criticized as too high by opposition legislators.
03/17/05 —
China released Uighur Muslim businesswoman Rebiya Kadeer, 17
months early in her eight-year sentence for “revealing state secrets.”
03/14/05 —
China’s National People’s Congress adopted an “anti-secession” law
targeted at reining in Taiwan independence advocates. The full text
is at [http://www.china-embassy.org/eng/xw/t187406.htm]
03/10/05 —
Hong Kong’s Chief Executive, Mr. Tung Chee-hwa, announced he
would be resigning his post after eight years. His second and final
term was to have been up in June 2007.
02/24/05 — Taiwan’s President Chen and PFP opposition leader James Soong
agreed to relax restrictions on business ties with China.
02/22/05 —
Speaking in Europe, President Bush expressed “deep concern” that
the EU was contemplating lifting its arms embargo against China.
02/21/05 —
In an interview in the Financial Times, Senator Richard Lugar said he
would support curbing sales of advanced military technology to EU
countries if they lifted the arms embargo against China.
02/21/05 — According to the Asian Wall St. Journal, the U.S. Export-Import
Bank made a preliminary commitment to provide Westinghouse
Electric with a $5 billion package to build 4 nuclear plants in China.
02/19/05 — The United States and Japan issued a joint statement describing
mutual security concerns, including Taiwan.
02/10/05 —
For the first time, North Korea publicly declared it had manufactured
nuclear weapons and said it would not be returning to six-party talks.
02/09/05 —
The U.S. Chamber of Commerce asked the Administration to initiate
legal proceedings against China in the WTO for failing to do more to
end intellectual property rights violations.
02/03/05 —
By a vote of 411-3, the U.S. House of Representatives passed a non-
binding measure condemning the EU’s plans to lift the arms embargo
against China imposed after the Tiananmen crackdown of 1989.

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CRS-29
02/01/05 —
Two senior PRC officials attended the Taiwan funeral of Koo Chen-
fu, Taiwan’s chief cross-strait negotiator.
01/08/05 —
According to the Los Angeles Times (p. C-3), the United States and
China agreed to a new, multi-entry visa policy to facilitate business
and tourist visits. The policy is to take effect on January 15, 2005.
01/08/05 — A report in the Financial Times said Taiwan last year successful
tested an anti-ship cruise missile, the Hsiung Feng III.
01/02/05 —
Former Taiwan President Lee Teng-hui returned from a six-day trip
to Japan, a trip that brought strong protests from the PRC. Japan’s
decision to grant Lee a visa was regarded as a policy change and
evidence of its recently more assertive stance toward Beijing.
01/01/05 —
Koo Chen-fu, Taiwan’s chief negotiator with China on cross-strait
talks, died of cancer at age 87.

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CRS-30
Appendix I:
Selected Visits by U.S. and PRC Officials
July 8, 2005 — Secretary of State Condoleezza Rice, Secretary of Commerce
Luis Gutierrez, Secretary of Agriculture Mike Johanns, and U.S. Trade
Representative Rob Portman left for a visit to the PRC for discussions about North
Korea’s nuclear program, tougher enforcement of anti-piracy laws for intellectual
property, and other issues. The visit includes a meeting of the U.S.-China Joint
Commission on Commerce and Trade (JCCT).
June 6, 2005 — Secretary of Commerce Luis Gutierrez arrived in Beijing for
meetings with his counterpart, Chinese Commerce Minister Bo Xilai. Gutierrez
urged the PRC to crack down on IPR piracy, calling IPR violations “a crime.”
March 20- 21, 2005 — Secretary of State Condoleezza Rice held talks in
Beijing with PRC officials as part of a visit to Asia, including stops in India,
Pakistan, Afghanistan, Japan, and South Korea. Her discussions included North
Korea and the Six-Party talks, Taiwan, and human rights.
February 2, 2005 — U.S. officials from the National Security Council, Michael
J. Green and William Tobey, presented evidence to officials in Japan, South Korea,
and China that North Korea may have exported uranium to Libya. Mr. Green also
delivered a letter from President Bush to President Hu Jintao underscoring the
urgency of North Korea’s possible sale of nuclear materials.
January 31, 2005 — U.S. Deputy Assistant Secretary for Defense Richard
Lawless held talks in Beijing to discuss U.S.-China security cooperation.
January 12, 2005 — Secretary of Commerce Don Evans began a two-day visit
to China — his fourth and last as Secretary — telling his Chinese hosts that the PRC
needed to move to a floating exchange rate and do a better job protecting intellectual
property rights.
January 4, 2005 — Chen Yunlin, the PRC’s senior cross-strait official as head
of the cabinet-level Taiwan Affairs Office, began a U.S. visit to discuss China’s
proposed anti-secession law. While in Washington, Chen met with Deputy Secretary
of State Richard Armitage, new National Security Advisor Stephen Hadley, and U.S.
Asian affairs official Michael Green.

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CRS-31
Appendix II:
Selected U.S. Government Reporting Requirements
International Religious Freedom Report, China (annual report)
Most recent date available: September 15, 2004
Agency: U.S. Department of State, Bureau of Democracy, Human Rights, and
Labor
Legislative authority: P.L. 105-292, the International Religious Freedom Act
(IRFA) of 1998, Section 102(b)
Full text: [http://www.state.gov/g/drl/rls/irf/2004/]
U.S. Commission on International Religious Freedom (annual report)
Most recent date available: May 2005
Agency: U.S. Commission on International Religious Freedom (USCIRF)
Legislative authority: P.L. 105-292, the International Religious Freedom Act
(IRFA) of 1998, Section 203
Full text:
[http://www.uscirf.gov/countries/publications/currentreport/2005annualRpt.pdf
#page=1]
Reports on Human Rights Practices, China (annual report)
Most recent date available: February 28, 2005
Agency: U.S. Department of State, Bureau of Democracy, Human Rights, and
Labor
Legislative authority: The Foreign Assistance Act of 1961 (FAA), as amended,
Sections 116(d) and 502(b); and the Trade Act of 1974, as amended, Section
504
Full text: [http://www.state.gov/g/drl/rls/hrrpt/2004/index.htm]
Military Power of the People’s Republic of China (annual report)
Most recent date available: May 28, 2004 (The 2005 report has been delayed
due to bureaucratic in-fighting over its conclusions)
Agency: U.S. Department of Defense
Legislative authority: P.L. 106-65, the National Defense Authorization Act for
FY2000, Section 1202
Full text: [http://www.defenselink.mil/pubs/d20040528PRC.pdf]
Unclassified Report to Congress on the Acquisition of Technology Relating
to Weapons of Mass Destruction and Advanced Conventional Munitions
(semi-annual report)
Most recent date available: July 1 through December 31, 2003
Agency: Director of Central Intelligence
Legislative authority: FY1997 Intelligence Authorization Act, Section 721
Full text: [http://www.cia.gov/cia/reports/721_reports/july_dec2003.htm]
International Narcotics Control Strategy Report, 2005 (annual report)
Most recent date available: March 2005
Agency: U.S. Department of State, Bureau for International Narcotics and Law
Enforcement Matters

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CRS-32
Legislative authority: Section 489 of the Foreign Assistance Act of 1961, as
amended (the “FAA,” 22 U.S.C. § 2291); sections 481(d)(2) and 484(c) of
the FAA; and section 804 of the Narcotics Control Trade Act of 1974, as
amended). Also provides the factual basis for designations in the President’s
report to Congress on major drug-transit or major illicit drug producing
countries pursuant to P.L. 107-115, the Kenneth M. Ludden Foreign
Operations, Export Financing, and Related Programs Appropriations Act,
2002, Section 591
Full text: [http://www.state.gov/g/inl/rls/nrcrpt/2005/]
Report to Congress on China’s WTO Compliance (annual report)
Most recent date available: December 11, 2004
Agency: United States Trade Representative
Legislative authority: P.L. 106-186, the U.S.-China Relations Act of 2000,
authorizing extension of Permanent Normal Trade Relations to the PRC,
Section 421
Full text:
[http://www.ustr.gov/assets/Document_Library/Reports_Publications/200
4/asset_upload_file281_6986.pdf]
Report Monitoring to Congress on Implementation of the 1979 U.S.-PRC
Agreement on Cooperation in Science and Technology (biannual report)
Most recent date available: April 15, 2005
Agency: U.S. Department of State, Office of Science and Technology Cooperation
Legislative Authority: P.L. 107-314, Bob Stump National Defense Authorization
Act Section for FY2003, Section 1207
Full text: [http://www.state.gov/g/oes/rls/or/44681.htm]
Report on Tibet Negotiations (annual report)
Most recent date available: June 2005
Agency: U.S. Department of State, Bureau of East Asian and Pacific Affairs
Legislative Authority: P.L. 107-228, Foreign Relations Authorization Act, 2003,
Section 613
Full text: [http://www.state.gov/p/eap/rls/rpt/45015.htm]

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