Order Code RL33877
China-U.S. Relations: Current Issues and
Implications for U.S. Policy
Updated October 1, 2007
Kerry Dumbaugh
Specialist in Asian Affairs
Foreign Affairs, Defense, and Trade Division

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China-U.S. Relations: Current Issues and
Implications for U.S. Policy
Summary
U.S.-China relations have been remarkably smooth since late 2001, although
there are signs that U.S. China policy now is subject to competing reassessments.
State Department officials in 2005 unveiled what they said was a new framework for
the relationship — with the United States willing to work cooperatively with a non-
democratic China while encouraging Beijing to become a “responsible stakeholder”
in the global system. U.S. Treasury Secretary Henry Paulson in December 2006
established a U.S.-China Strategic Economic Dialogue with Beijing, the most senior
regular dialogue yet held with China. But other U.S. policymakers have adopted
tougher stances on issues involving China and U.S.-China relations, concerned about
the impact of the PRC’s strong economic growth and a more assertive PRC
diplomacy in the international arena. Another matter of growing concern is China’s
increasing global “reach” and the consequences that expanding PRC international
influence has for U.S. interests. To feed its appetite for resources, China has been
steadily signing trade agreements, oil and gas contracts, scientific cooperation
agreements, and multilateral security arrangements with countries around the world,
some of which are key U.S. allies.
Taiwan, which China considers a “renegade province,” remains the most
sensitive issue the two countries face and the one many observers fear could lead to
Sino-U.S. conflict. But U.S. relations with Taiwan have also been plagued by what
some U.S. officials see as that government’s minimal military spending, its failure
to enact funding bills that allow it to purchase U.S. weapons offered for sale in 2001,
and the recurrent independence-leaning actions and rhetoric of its President and other
government officials, which U.S. officials have called “unhelpful” to regional
stability.
Much U.S. concern about China appears driven by security calculations in
Congress and at the Pentagon, where officials question the motivations behind
China’s expanding military budget. A congressionally mandated DOD report
concluded Beijing is greatly understating its military expenditures and is developing
anti-satellite (ASAT) systems — a claim that gained more credence when the PRC
used a ballistic missile to destroy one of its own orbiting satellites in January 2007.
Bilateral economic and trade issues also are growing matters of concern. U.S.
officials and lawmakers particularly criticize China’s massive bilateral trade surplus,
its failure to halt piracy of U.S. intellectual property rights (IPR), and its continued
constraints on currency valuation. More recently, allegations about the quality of
Chinese imports have raised growing concerns about the PRC’s poor product safety
enforcement regime.
This report will be updated regularly as events warrant and will track legislative
initiatives involving China. For actions and issues in U.S.-China relations considered
during the 109th Congress, see CRS Report RL32804, China-U.S. Relations in the
109th Congress, by Kerry Dumbaugh.

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Contents
Most Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Background and Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Current Issues and Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Concerns about Product Safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Military and National Security Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
China’s Growing Military Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
PRC Anti-Satellite Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Continuing Espionage Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Weapons Proliferation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Military Contacts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Economic and Trade Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Currency Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Unfair Trade Subsidies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Intellectual Property Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
North Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Six Party Talks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
October 2006 Nuclear Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
U.S.-PRC Official Dialogues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
The Senior Dialogue and Strategic Economic Dialogue . . . . . . . . . . . 12
Taiwan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Referendum on U.N. Membership for Taiwan . . . . . . . . . . . . . . . . . . 14
U.S. Taiwan Policy and U.S. Arms Sales . . . . . . . . . . . . . . . . . . . . . . 15
Corruption Scandals in the Chen Administration . . . . . . . . . . . . . . . . 16
Changing PRC Political Pressure on Taiwan . . . . . . . . . . . . . . . . . . . . 16
Official Taiwan-PRC Contacts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
China’s Growing Global Reach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
European Union . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Middle East and Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Western Hemisphere . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
China and Environmental Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Domestic Political Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Social Stability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Key Party and Government Meetings in 2007 . . . . . . . . . . . . . . . . . . . 26
Tibet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Xinjiang’s Ethnic Muslims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Internet and Media Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Human Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Religious Freedom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Family Planning Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Hong Kong Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
U.S. Policy Implications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Selected Legislation in the 110th Congress . . . . . . . . . . . . . . . . . . . . . . . . . 34

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Chronology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Appendix I: Selected Visits by U.S. and PRC Officials . . . . . . . . . . . . . . . . . . . 43
Appendix II: Selected U.S. Government Reporting Requirements . . . . . . . . . . . 44

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China-U.S. Relations: Current Issues and
Implications for U.S. Policy
Most Recent Developments
September 19, 2007 — For the 15th consecutive year, a U.N. General Assembly
Committee (the General Committee) rejected the recommendation that Taiwan’s
formal U.N. membership be considered at this year’s General Assembly meeting.
September 17, 2007 — China announced it will send a 315-member engineering
unit to Darfur in October 2007 as part of a combined UN-African Union force of
26,000. The same day, the Financial Times reported that China had rejected
shipments of U.S. and Canadian port because they contained the additive
ractopamine, a banned substance in China.
September 16, 2007 — China’s Taiwan Affairs Office said that Beijing was
“preparing for a serious situation” as a result of Taiwan’s UN membership bid.
September 15, 2007 — New York Times researcher Zhao Yan was released from
prison after serving a three-year sentence for accepting money from a source, a
charge he denies. He was arrested originally for “leaking state secrets.”
September 12, 2007 — The Pentagon announced $2.2 billion in possible
military sales to Taiwan, including 12 surplus Orion P3-C maritime patrol craft and
144 SM-2 Block 3A Standard anti-aircraft missiles, built by Raytheon.
September 10, 2007 — Taiwan Defense Minister Ko Cheng-heng said that
Taiwan had an “urgent and legitimate need” to buy F-16s. Minister Ko made the
statement while attending the Sixth U.S.-Taiwan Defense Industry Conference in the
United States.
Background and Overview
Introduction
U.S. relations with the People’s Republic of China (PRC), remarkably smooth
from 2001-2004, have shown signs of becoming somewhat more problematic again
since 2005 as some U.S. policymakers appear to be adopting tougher stances on a
number of issues. 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,

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CRS-2
cooperated on anti-terror initiatives, and worked closely on a multilateral effort 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.
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, various disputes over China’s failure to protect U.S. intellectual
property rights, the economic advantage China gains from pegging its currency to a
basket of international currencies, and growing concerns about the quality and safety
of some exported Chinese products. In addition, China’s accelerating rise in the
world has significant long-term implications for U.S. global power and influence.
In pursuit of its economic development agenda, China’s growing appetite for energy,
raw materials, and other resources has led it to seek an increasing number of
economic and energy-related agreements around the world, some of them with key
U.S. allies. Some U.S. lawmakers have suggested that U.S. policies should be
reassessed in light of the PRC’s continued strong economic growth and more
assertive international posture.
Background
For much of the 1990s, U.S. congressional interest in the PRC increased almost
annually. 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 on 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 challenge (at best) or threat (at worst) to U.S. interests. Members were
particularly concerned about supporting the democratization and growing political
pluralism Taiwan had embraced since abandoning authoritarian rule in the late 1980s.
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) trade 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, 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
1 In the United States only, the term “most-favored-nation” (MFN) status has been replaced
by the term “normal trading relations” (NTR) status.

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resolution of entrenched bilateral policy differences — such as those long held over
human rights or on Taiwan’s status — for these differences still existed and are likely
to plague the relationship for the foreseeable future. Rather, other factors and policy
trends appeared to be at work.
! The George W. Bush Administration’s early willingness to de-
emphasize the importance of Sino-U.S. relations in American
foreign policy, even while being open to substantively and
symbolically meaningful dialogue with China at most senior levels.
! The Bush Administration’s greater initial support for Taiwan
security, which 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.
! The September 11, 2001 terrorist attacks against the United States,
which brought about dramatic changes in global and national
priorities, including new agendas within Congress, that took priority
over other foreign policy issues, including the PRC.
! PRC preoccupations in 2001-2003 with a wholesale transition to a
new generation of leaders who began to put their own stamp on
policy decisions.2
This report addresses relevant policy questions in current U.S.-China relations,
discusses trends and key legislation in the current Congress and provides a
chronology of developments and high-level exchanges. 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 2007, see CRS Report RL32804, China-U.S. Relations During the
109th Congress, by Kerry Dumbaugh. CRS products can be found on the CRS
website at [http://www.crs.gov/].
Current Issues and Developments
Concerns about Product Safety
In spring of 2007, reports of tainted, mislabeled, and outright fraudulent
imported consumer products from China began to raise serious questions about the
safety of U.S. imported products from other countries, the effectiveness of current
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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U.S. product safety inspection regimes, and the vulnerability of the U.S. food supply
to accidental contamination or deliberate tampering. More specifically, the issue has
highlighted growing concerns, born during the SARS crisis of 2002-2003, about
potential threats to the global health system posed by the PRC’s limited food and
pharmaceutical safety standards, poor industry and product quality control, and lack
of transparency.
Initial questions about the safety of imported products from China surfaced in
March and April 2007, when an investigation by the U.S. Food and Drug
Administration (FDA) linked tainted exports of pet food with wheat gluten from
China to reports of pet deaths from kidney failure in the United States. The Canadian
company that had imported the product, Menu Foods, initiated a massive recall of its
products on March 16, 2007, and the recall effort later expanded to more brands of
pet foods and other pet food manufacturers.3 On April 3, 2007, the FDA began
halting imports of wheat gluten from a PRC company, the Xuzhou Anying Biologic
Technology Development Co. Ltd., saying it had tested positive for the tainted wheat
gluten.4 Although the PRC government initially denied its pet food products were
tainted, it later reversed that position, admitting on April 26, 2007, that PRC
companies had exported melamine-laced wheat gluten to the United States.5
The pet food contamination was the beginning of a series of well publicized
recalls of PRC imported products including fish, tires, toothpaste, and toys. Two of
these — Menu Foods pet food recall and Mattel’s voluntary recall of over 18 million
toys, announced on August 14, 2007 — have been reported on most widely.6 But
by August 17, 2007, the U.S. Consumer Product Safety Commission (CPSC) had
issued nearly 150 recall notices in 2007 for Chinese-manufactured products,
including electric throws; ceramic heaters; folding recliner chairs; children’s jewelry;
kayak paddle floats; baby cribs; candles; oil-filled electric heaters; boom boxes;
bicycles; clothing; gas lighters; remote controls; lamps; curling irons; and hair
dryers.7
Bilateral efforts on the quality of Chinese exports to the United States have been
underway for several years.
In 2004, the CPSC and China’s General Administration
of Quality Supervision, Inspection, and Quarantine (AQSIQ) signed a memorandum
of understanding (MOU) to cooperate on increasing the public safety of specific
3 On April 12, 2007, the Director of the FDA Center for Veterinary Medicine, Stephen F.
Sundlof, and other witnesses testified before the Senate Appropriations Committee’s
Subcommittee on Agriculture, Rural Development, and Related Agencies on the scope of
the recall and the path of the FDA’s investigation.
4 Later, Binzhou Futian Biology Technology, another PRC company, was also implicated.
5 See CRS Report RL33536, China-U.S. Trade Issues, by Wayne Morrison.
6 Mattel’s recall involved toys containing lead paint and products containing small, powerful
magnets. For details of Mattel’s recalled products, see [http://www.mattel.com/safety/us/].
7 Based on a review of recalls listed on the USCPSC website from January 1 — August 17,
2007, products manufactured in China were the most frequently subjects of recall notices,
at 147; products manufactured in the United States were the second most frequently cited,
at 41.

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CRS-5
consumer products, including clothing, toys, cigarette and multipurpose lighters,
home appliances, hazardous chemical consumer products, and bicycle helmets. The
two agencies held a Consumer Product Safety Summit (CPSS) in Beijing in 2005,
and a second CPSS meeting in Washington on September 11, 2007.
Leaders in Beijing appear concerned about the implications that recent recalls
may have for international wariness about PRC products. Since late April 2007,
China has announced a ban on melamine in food products, initiated nation-wide
inspections of wheat gluten, and (on May 11, 2007) arrested an official from one of
the companies for falsifying the labeling on exported products to evade inspection.8
On July 10, 2007, Beijing announced it had executed the former official in charge of
the State Food and Drug Administration for accepting bribes to approve tainted or
fraudulent products. On August 15, 2007, officials at the Chinese Embassy in
Washington, DC, held a rare news conference, defending the overall quality of
Chinese products and stating that China would be enhancing significantly its
inspection regime of toys and food being exported to the United States. On August
17, 2007, Beijing took two further actions: the PRC State Council Information Office
released the government’s first report on food quality and safety regimes, “The
Quality and Safety of Food in China”; and Beijing appointed Vice Premier Wu Yi to
head a new Cabinet-level panel charged with ensuring product quality and food
safety.9
Military and National Security Issues
For some years, U.S. officials in the executive branch and in Congress have
continued to voice both private and public concerns about China’s expanding
military budget and issues potentially involving U.S. national security. U.S. security
concerns include the ultimate focus of China’s military build-up; lack of PRC
military transparency; recurring instances of apparent PRC attempts to gain U.S.
military secrets; evidence of improving PRC military and technological prowess; and
PRC military and technological assistance to rogue states and other international bad
actors.
China’s Growing Military Power. In its annual, congressionally mandated
report on China’s Military Power (most recently released in May 2007) the Pentagon
concluded that China is greatly improving its military, including the number and
capabilities of its nuclear forces. U.S. military planners and other American military
specialists maintain that PRC improvements appear largely focused on a Taiwan
contingency and on strategies to “deny access” to the military forces of a third party
— most probably the United States — in the event of a conflict over Taiwan. The
report maintains that this build-up poses a long-term threat to Taiwan and ultimately
to the U.S. military presence in Asia.
8 A report citing China’s General Administration of Quality Supervision, Inspection, and
Quarantine. Lee, Don, and Goldman, Abigail, “Plant linked to pet deaths had history of
polluting,” Los Angeles Times, May 9, 2007, p. C-1.
9 The full text of China’s new white paper on food quality and safety can be found at
[http://news.xinhuanet.com/english/2007-08/17/content_6553424.htm].

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In March 2007, after Beijing announced that its military budget would increase
during the year by nearly 18%, U.S. officials called China’s military build-up a
continuing “source of concern and interest” for the world, and urged PRC leaders to
address these concerns by adopting greater transparency in military matters.10 U.S.
military planners remain concerned that at least some and perhaps much of China’s
military build-up is being driven by Beijing’s preparations to enforce its sovereignty
claims against the island of Taiwan. (Appendix II of this paper contains a list,
legislative authority, and text links for selected mandated U.S. government reports
on China, including the report on China’s Military Power.)
PRC Anti-Satellite Test. On January 11, 2007, the PRC carried out its first
successful anti-satellite (ASAT) test by destroying one of its moribund orbiting
weather satellites with a ballistic missile fired from the ground. Previously, only the
United States and the Soviet Union had conducted successful ASAT tests — tests
both countries reportedly halted more than 20 years ago because of resulting space
debris that could endanger other orbiting satellites. U.S. officials reportedly received
no advance notice from Beijing, nor did Chinese officials publicly confirm the ASAT
test until January 24, 2006, 13 days after the event and almost a week after the U.S.
Government had publicly revealed the PRC test on January 18, 2007.
The January PRC ASAT test and the lack of advance notification to U.S.
officials by Beijing has raised a number of concerns for U.S. policy. Chief among
these are questions about the new potential vulnerability of U.S. satellites — crucial
for both U.S. military operations and a wide range of civilian communications
applications — and the credibility of PRC assertions that it is committed to the
peaceful use of space.
In addition, officials from the United States and other countries have criticized
China for either ignoring or failing to realize the extent of the test’s contributions to
the growing problem of space debris. According to space science experts, the extent
of space debris now orbiting the earth, which is already calculated at about 10,000
detectable items, poses an increasing hazard to hundreds of the world’s operational
satellites, any of which could be destroyed upon collision with a piece of space
“junk.”11 Beijing, which hosted the annual meeting of the Inter-Agency Space Debris
Coordination Committee from April 23-26, 2007, itself became a significant
contributor to the space debris problem with its January 2007 ASAT test. According
to a State Department spokesman, the United States is reevaluating its nascent civil
space cooperation with China (initiated during the meeting of Presidents George
Bush and Hu Jintao in April 2006) in light of the January ASAT test.12
Continuing Espionage Charges. On March 27, 2007, Mr. Chi Mak, a
Chinese-born U.S. engineer arrested in 2005, went on trial in federal court in Los
10 Statement by State Department spokesman Sean McCormack, March 8, 2007.
11 Broad, William J., “Orbiting junk, once a nuisance, is now a threat,” New York Times,
February 6, 2007, p. 1.
12 Author’s conversation with a State Department spokesman on February 6, 2007; see also
“U.S. reviewing space cooperation with China after anti-satellite test,” Agence France
Presse, February 3, 2007.

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Angeles for allegedly providing China with sensitive high-tech Navy weapons
technology that he had helped develop while working for his employer, Power
Paragon. According to the allegations, the technology included sensitive details
about the Navy’s Aegis-class battleship technology; quiet drive technology for new
generations of warships; electro-magnetic artillery; and missile detection and nuclear
defense.13 The defense maintained that the material was not classified but was in the
public domain. On May 11, 2007, Chi Mak was found guilty of conspiracy to violate
export regulations and for failing to register as a Chinese agent. He is scheduled to
be sentenced on September 10, 2007.
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.14 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.15 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 emphasis on controlling the
spread of weapons of mass destruction as well as WMD programs as well as later
disclosures about nuclear weapons programs in Iran and North Korea. The PRC has
had close relationships with both 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.16
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, with U.S. Secretary of Defense
Donald Rumsfeld making his first official visit to China as Secretary of Defense only
13 Flaccus, Gillian, “Chinese-born engineer accused of stealing secrets awaits trial,”
Associated Press Newswires, March 22, 2007.
14 As reasons for such confidence, some point to events since the 1990s, when the PRC has
promised to abide by the Missile Technology Control Regime (MTCR) and acceded to the
Nuclear Non-Proliferation Treaty (NPT), which it did in 1992; signed the Chemical
Weapons Convention (CWC), which it did in 1993; signed the Comprehensive Test Ban
Treaty (1996); and joined the Zangger Committee of NPT exporters (1997).
15 For details, see CRS Report RL31555, China and Proliferation of Weapons of Mass
Destruction and Missiles: Policy Issues, by Shirley Kan.
16 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 nonproliferation Act of 1992 (50 U.S.C. § 1701), which requires
sanctions on countries that sell destabilizing weapons to Iran or Iraq.

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in October 2005.17 Since March 2007, four senior U.S. military officials have visited
China. (See appendix at the end of this report for a list of recent U.S.-China official
visits.)
Economic and Trade Issues18
Economic and trade issues are a growing source of contention in U.S.-China
relations in 2007. The PRC is now the second-largest U.S. trading partner, with total
U.S.-China trade in 2006 at $343 billion. Ongoing issues in U.S.-China economic
relations include the substantial and growing U.S. trade deficit with China (an
estimated $232 billion in 2006), repeated PRC inabilities to protect U.S. intellectual
property rights, and the PRC’s continuing restrictive trade practices, such as its
unwillingness to date to float its currency. (Issues involving allegations about
tainted or faulty PRC exports to the United States are dealt with earlier in this report.)
In addition, some U.S. policymakers have focused attention in recent years on efforts
by PRC companies to buy American assets.
Currency Valuation. On June 13, 2007, the U.S. Treasury Department
released a mandated, semi-annual report to Congress on international exchange rates
in which it concluded that China “did not meet the technical requirements for
designation” [as a currency manipulator] under U.S. law, but declaring that the
United States “forcefully” raises the currency valuation issue with PRC leaders at
every opportunity.19 The report also concluded that China’s economy was “severely”
unbalanced — overly dependent on exports and with weak consumer spending and
at home. The Treasury report prompted renewed calls and legislation in Congress for
firmer U.S. action to mitigate the effects of China’s currency restrictions.
The U.S. concern about the PRC’s decision to keep the value of its currency low
with respect to the dollar, and indirectly with the yen and euro, has been building for
several years. Until 2005, the PRC pegged its currency, the renminbi (RMB), to the
U.S. dollar at a rate of about 8.3 RMB to the dollar — a valuation that many U.S.
policymakers concluded 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 have urged Beijing either to raise the RMB’s value or to make it
freely convertible subject to market forces. On July 1, 2005, the PRC changed this
valuation method, instead announcing it would peg the RMB to a basket of
currencies.
17 See CRS Report RL32496, U.S.-China Military Contacts: Issues for Congress, by Shirley
Kan.
18 See CRS Report RL33536, China-U.S. Trade Issues, by Wayne Morrison, for further
details.
19 For the full text of the Treasury Department report, see [http://www.treasury.gov/
offices/international-affairs/economic-exchange-rates/pdf/2007_FXReport.pdf].

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The resulting small appreciations in the RMB from this action have not been
sufficient to assuage ongoing U.S. congressional concerns.20 Since August 1, 2007,
both the Senate Finance Committee and the Senate Banking, Housing, and Urban
Affairs Committee have reported legislation addressing currency exchange rate
issues.21
Unfair Trade Subsidies. On March 20, 2007, the U.S. Department of
Commerce announced a preliminary decision to apply countervailing duties (an anti-
subsidy remedy) to two PRC companies exporting “coated free sheet” (glossy) paper
to the United States. The announcement broke with a 23-year U.S. policy, adopted
in 1984, of not applying U.S. countervailing duty laws to non-market economies.
Citing a 177% increase in imports of PRC glossy paper products from 2005-2006,
Secretary of Commerce Carlos M. Gutierrez said that the PRC economy had evolved
significantly in the last two decades and that U.S. tools to address unfair competition
needed to evolve in response.
The move signals a new U.S. willingness to be assertive in challenging PRC
trade policies and suggests that other American industries affected by the PRC’s
exports, such as textile, steel, and plastics, may soon be seeking similar remedies.
Beijing’s sharp criticism of the U.S. move hints at potential trade retaliation and has
possible negative implications for the ongoing U.S.-China “Senior Dialogue” being
chaired by Treasury Secretary Henry Paulson.
Intellectual Property Rights. China’s inability to live up to its World Trade
Organization (WTO) commitments to protect 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%.22 U.S. officials routinely have urged Beijing to crack down on IPR piracy, and
a series of U.S. officials visiting China have stressed that China needs to do better at
IPR protection.
North Korea
Progress on dismantling North Korea’s nuclear weapons program continues to
be elusive. After months of apparent forward movement, the Chinese government
on September 16 informed the U.S. Government that a meeting among all parties,
scheduled for mid-September 2007, had been abruptly cancelled. Some have
20 For more information, see CRS Report RS21625, China’s Currency: A Summary of the
Economic Issues, by Wayne M. Morrison and Marc Labonte.
21 The Senate Committee on Banking, Housing, and Urban Affairs reported S. 1677, the
Currency Reform and Financial Markets Access Act of 2007; the Senate Finance Committee
reported S. 1607, the Currency Exchange Rate Oversight Reform Act of 2007.
22 International Intellectual Property Alliance, 2004 Special 301 Report: People’s Republic
of China, February 2005, cited in CRS Report RL33536, China-U.S. Trade Issues, by
Wayne Morrison.

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CRS-10
speculated that the cancellation had to do with reportedly new intelligence, leaked the
previous week, that North Korea may be engaged in nuclear cooperation with Syria.23
Six Party Talks. After months of continuing stalemate in 2006 in the
frequently problematic Six-Party Talks, optimism for a deal warmed after February
13, 2007, when the six parties to the talks signed a document, the “Initial Actions for
the Implementation of the Joint Statement,” designed to begin implementing the joint
statement issued in September 2005. Under that agreement, North Korea is to
dismantle its nuclear weapons program and permit international inspections to
resume in exchange for a package of incentives, including food and energy assistance
and the transfer back of $25 million in North Korean-linked funds that were frozen
by the Banco Delta Asia, located in Macau, in September 2005.24
With the Macau funds having been transferred, the North Korean nuclear reactor
at Yongbyon confirmed as shut down, and International Atomic Energy Agency
(IAEA) inspectors present in North Korea again as of July 14, 2007, the next stage
of the February agreement calls for Pyongyang to declare all its nuclear programs and
disable all its existing nuclear facilities. Six-Party Talks began again on July 19,
2007, ostensibly to discuss permanently disabling the closed Yongbyon reactor and
full disclosure by North Korea of its nuclear research and weapons development
programs. After three days, talks concluded with no agreement on a schedule for
North Korea’s nuclear disarmament, although U.S. chief envoy Christopher Hill
subsequently has appeared cautiously optimistic on further progress.25 The next
round of the Six-Party talks were to take place in September 2007. (As stated above,
it is this round of talks that was abruptly cancelled on September 16, 2007.)
PRC officials repeatedly have 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
for a regional missile defense program, to name only two. But a common U.S. view
has been that Beijing has not exerted enough direct pressure on North Korea, and is
in fact continuing to prop up the North Korean regime with supplies of food and fuel
and to advocate bilateral U.S.-North Korean dialogue. According to other views,
PRC officials primarily exert political pressure on North Korea, preferring to avoid
economic pressure that they judge could lead to instability in North Korea.26
23 Kessler, Glenn, “North Korea, Syria may be at work on nuclear facility,” The Washington
Post, September 13, 2007, p. A12.
24 The funds were frozen after the United States declared the Macau bank a “primary money
laundering concern.”
25 “U.S. envoy sounds cautious on North Korea nuclear talks,” The Wall St. Journal Asia,
August 15, 2007, p. 9.
26 de Nesnera, Andre, “Analysts: alliance between China, North Korea strained over nuclear
issue,” Voice of America, February 7, 2007.

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October 2006 Nuclear Test. Pyongyang’s nuclear weapons test on October
9, 2006, posed new challenges for PRC policy goals in Asia, on the Korean
peninsula, and with the United States. Proponents of the view that China is sincere
in its desire to prevent nuclearization of the Korean peninsula saw Pyongyang’s
October test as a blatant disregard for PRC views and interests, a signal that Beijing
has little leverage with Pyongyang, and a serious challenge to PRC standing as a
credible interlocutor on the North Korean issue. The test was preceded several
months earlier by a series of missile launches that North Korea conducted on July 4,
2006, an event that elevated the North Korean issue to an even more prominent
position in the U.S. political agenda with China.
The evolving PRC reaction after the October 9th test appears to encapsulate the
conflicting political and strategic motivations thought to affect China’s
policymaking on North Korea. Beijing’s initial reaction was unprecedentedly harsh,
and initial speculation in the press and by some American experts was that the PRC
now would be forced to become more coercive in its North Korea policy.27 A
statement released on October 9, 2006 by China’s Ministry of Foreign Affairs
strongly criticized the North Korean action as a “stubbornly defiant” disregard of the
international community’s and China’s “firm, unshakeable, and consistent”
opposition to Pyongyang’s nuclear program.28 The statement went on to say that
China “strongly demands that the DPRK side abide by its commitment to non-
nuclearization.” According to a Foreign Ministry spokesman, the October 9th test had
“a negative impact” on Sino-North Korean relations.29 Some news accounts
maintained that after the nuclear test the PRC began augmenting its military forces
along the Sino-North Korean border and erecting barbed-wire fences along some
stretches of the border.30
But by other measures, Beijing’s resolve has appeared to be fluctuating. Within
days of the North Korean October 9th test, PRC spokesmen were emphasizing that
China was committed to maintaining friendly and cooperative ties with North Korea,
and that Beijing’s goal was not to exact “punishment” on North Korea but to take
“appropriate and moderate” measures to further negotiations.31 On October 14, 2006,
China voted to support a U.N. resolution condemning North Korea’s nuclear test,
including sanctions prohibiting sales of military systems or luxury goods to North
27 Tkacik, John, “A new tack for China after North Korea’s nuclear test?” The Heritage
Foundation, Webmemo #1236, October 11, 2006.
28 PRC Foreign Ministry Issues Statement on DPRK Nuclear Test, Beijing Xinhua Domestic
Service, in Chinese, translated in FBIS, FEA20061009028538, October 9, 2006.
29 OSC Analysis, “China moderating criticism of DPRK in bid to restart talks,”
CPF20061013307001, October 13, 2006.
30 Caryl, Christian and Lee, B.J., “Fed up with Kim? Everybody is exasperated with North
Korea’s capricious leader — including his allies in Beijing.” Newsweek, October 9, 2006.
Fields, Robin and Magnier, Mark, “N. Korea sanctions hand on bridge across the Yalu...”,
Los Angeles Times, October 19, 2006, p. A-1.
31 “Foreign Ministry spokesman Liu Jianchao answers reporters’ questions at regular news
conference on October 12, 2006.” Beijing Ministry of Foreign Affairs, translated in FBIS,
CPP20061012038001, October 12, 2006.

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CRS-12
Korea and an immediate freeze of North Korean financial assets.32 After the U.N.
vote, China said it would not participate in inspections of North Korean cargo
transiting its borders out of fear such inspections would lead to conflict, then reversed
that position within days after heavy pressure from the United States. Subsequent
press reports stated that Chinese banks began blocking financial transactions with
North Korea,33 and that Chinese officials were prepared to reduce oil shipments and
take other actions if North Korea refused to return to the Six Party Talks.34
U.S.-PRC Official Dialogues
The Senior Dialogue and Strategic Economic Dialogue. In recent
years, two new high-level U.S.-China dialogues have been formed: the U.S.-China
Senior Dialogue under the auspices of the State Department, and the U.S.-China
Strategic Economic Dialogue under the auspices of the Treasury Department. Each
of these is intended to meet twice annually so that Cabinet-level officials in both
parties can hold regular talks on key issues. In Beijing in August 2005, Deputy
Secretary of State Robert Zoellick and PRC Vice Foreign Minister Dai Bingguo
presided over the initial round of the Senior Dialogue, which was first suggested by
PRC President Hu Jintao in 2004 during a meeting with President Bush. The third
round of Senior Dialogue talks were held in November in Beijing.
On September 20, 2006, during the first of his three trips (as of March 2007) to
China as Treasury Secretary, Henry Paulson announced that he would chair a new
senior-level mechanism for bilateral dialogue, the U.S.-China Strategic Economic
Dialogue (SED), which like the Senior Dialogue would be held twice annually and
focus on “fundamental, long-term issues” in bilateral relations.35 In the first SED
meeting, held December 14-15, 2006, six U.S. Cabinet officers and other senior U.S.
officials visited Beijing to promote increased access for U.S. exports and better U.S.-
China trade ties.36 The second SED round, held in Washington on May 22-23, 2007,
was attended by 17 U.S. cabinet officials and agency heads and by 15 PRC ministers
and representatives from 21 PRC government ministries and agencies.37 According
to the U.S. Treasury Department, the second meeting resulted in agreements to
provide greater access in China to U.S. goods and services, including in the financial
32 Text of U.N. resolution on N. Korea sanctions, Associated Press, October 14, 2006.
33 Fairclough, Gordon and King, Neil, “Chinese banks begin halting business with North
Korea — Beijing envoy meets Kim in Pyongyang as Rice visits Seoul,” The Wall St.
Journal, Asia, October 20, 2006, p. 1.
34 Kahn, Joseph, “China seems set to harden stance. New measures against North Korea
could include reduced oil shipments.” The New York Times, October 20, 2006, p. 3.
35 Treasury Secretary Henry M. Paulson press briefing in Beijing, September 20, 2006. Joint
statement at [http://www.treas.gov/press/releases/hp105.htm].
36 Participants included U.S. Treasury Secretary Paulson, Secretary of Commerce Carlos
M. Gutierrez, Labor Secretary Elaine Chao, Health and Human Services Secretary Mike
Leavitt, Energy Secretary Sam Bodman, U.S. Trade Representative Susan Schwab, EPA
Administrator Stephen Johnson, and Federal Reserve Chairman Ben S. Bernanke.
37 U.S. Department of the Treasury Fact Sheet, “Second meeting of the U.S.-China Strategic
Dialogue,” May 23, 2007.

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CRS-13
sector; cooperate further in promoting energy security and environmental protection;
and strengthen the PRC’s enforcement of intellectual property rights laws.
The two most recent bilateral dialogue venues join a host of other regularly
occurring official U.S.-China dialogues that hold regular meetings, generally on
either an annual or biannual basis. These include the following:
! The Joint Commission on Commerce and Trade (JCCT), initiated
in 1983 and elevated in 2003 to a senior level. Participating
agencies are the U.S. Department of Commerce, the U.S. Trade
Representative, and the PRC Vice Premier responsible for trade. The
17th session was held in Washington DC in April 2006.
! The U.S.-China Joint Economic Committee (JEC), initiated in
1979. Participating agencies are the U.S. Department of the
Treasury and the PRC Ministry of Finance.
! The U.S.-China Joint Commission on Science and Technology
(JCST), initiated in 1979. Participating agencies are the Office of
Science and Technology Policy (White House), the State
Department’s Office of Science and Technology Cooperation, and
the PRC Ministry of Science and Technology.
! The U.S.-China Economic Development and Reform Dialogue
(EDRD), initiated in 2003. Participating agencies are the U.S.
Department of State and the PRC National Development and
Reform Commission.
! The U.S.-China Energy Policy Dialogue (EPD), negotiated in 2004
and initiated in 2005. Participating agencies are the U.S.
Department of Energy and China’s National Development and
Reform Commission.
! The Global Issues Forum (GIF), negotiated in 2004 and initiated
in 2005. Participating agencies include the U.S. Department of
State’s Bureau for Democracy and Global Affairs and the PRC
Ministry of Foreign Affairs.
! The U.S.-China Healthcare Forum (HCF), initiated in July 2005.
Participating agencies are the U.S. Department of Commerce and the
Department of Health and Human Services; and the PRC Ministry
of Health and Ministry of Commerce.
! The Asia-Pacific Partnership on Clean Development and
Climate (AP6), announced in 2005 and initiated in 2006. The
forum brings together China, the United States, Australia, India,
Japan, and Korea.
Notably absent from the regularized U.S.-China dialogue process is an official
U.S.-China military or defense dialogue at a comparable level of intensity. The
mechanism that does exist, the Defense Consultative Talks (DCT), intermittent and
plagued with recurring setbacks, has been of dubious value for a number of reasons.38
Admiral William Fallon, attempting to revitalize U.S.-China military ties as
38 See CRS Report RL32496, U.S.-China Military Contacts: Issues for Congress, by Shirley
Kan.

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Commander of the U.S. Pacific Command, was quoted in 2006 as saying that there
had been so much decline in U.S.-China military ties in recent years that he was
“starting from virtually zero” in trying to rebuild contacts.39 Admiral Fallon’s
successor, Admiral Timothy Keating, visited China in May 2007 to continue efforts
to build closer military ties.
Taiwan
Taiwan remains the most sensitive and complex issue that U.S. policymakers
face in bilateral Sino-U.S. relations.40 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. Chinese leaders are supporting
these long-standing claims with more than 700 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.” Still, Beijing’s rhetoric and
position on Taiwan are seen to have become somewhat less forceful since China’s
passage of an anti-secession law in March 2005 aimed at Taiwan independence
activists.
China watchers remain especially watchful 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. Since 2004, the DPP has taken a beating in several
electoral contests: the KMT was returned to its slim majority in the legislature in
December 2004 elections, and KMT candidates won 14 of 23 constituencies in local
elections for city mayors and county magistrates, held on December 3, 2005.
Referendum on U.N. Membership for Taiwan. After years of
unsuccessful attempts to win observer status in the United Nations and its affiliate
bodies, particularly the World Health Organization (WHO), Taiwan in 2007 changed
tactics and submitted an application for full membership under its formal name, the
“Republic of China.” This effort in the WHO failed.41 By late May 2007, Taiwan’s
39 Scott Tyson, Ann, “Admiral tries to revive Chinese ties,” Washington Post, September 23,
2006, p. A14.
40 For an analysis of current problems and challenges for U.S. policy toward Taiwan, see
CRS Report RL33684, Underlying Strains in Taiwan-U.S. Political Relations, by Kerry
Dumbaugh.
41 On May 14, 2007, WHO’s annual assembly meeting voted 148-17 not to consider
(continued...)

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President Chen began to argue that Taiwan should apply to these U.N. agencies under
the name “Taiwan,” and on June 18, 2007, Chen announced that he would hold an
island-wide referendum on this subject in conjunction with Taiwan’s presidential
elections in March 2008. Even so, the Taiwan government independently has taken
a number of steps in pursuit of full U.N. membership under the name “Taiwan.”
Taipei has submitted two letters of application to the U.N. (July 19, 2007 and July
31, 2007), both of which were returned on the grounds that such an action would
violate the U.N.’s “one China” policy). And for the 15th consecutive year, on
September 19, 2007, a committee of the General Assembly decided not to include
Taiwan’s application for U.N. membership on the agenda of the (62nd) General
Assembly meeting.
Taiwan’s potential participation in the United Nations is controversial, and
vigorously opposed by China, because it suggests that Taiwan is a sovereign state
separate from the mainland. The U.S. government is on record as supporting
Taiwan’s membership in organizations “where state-hood is not an issue.”42 In one
of many statements over the years on this subject, a State Department spokesman on
June 19, 2007, reacted to President Chen’s U.N. referendum announcement by
saying, “We do not support Taiwan’s membership in international organizations that
require statehood [for membership]....This would include a referendum on whether
or apply to the United Nations under ‘Taiwan’.”43
Beijing argues 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. Always opposed to Taiwan’s U.N. bids, Beijing appears to view the
2007 applications and the referendum being discussed in Taiwan for 2008 as
especially threatening. A spokesman from China’s Taiwan Affairs Office said on
September 16, 2007, that Beijing had “made necessary preparations” to “deal with
serious conditions” as a result of Taiwan’s UN membership bid. No details were
provided on what “necessary preparations” involved.
For its part, Taiwan in the past has maintained that its “observer status” in U.N.
bodies such as WHO would be an apolitical solution since other non-sovereign
entities, like the Holy See and the Palestine Liberation Organization, have been given
such status. In 2004, the 108th Congress enacted legislation (P.L. 108-28) requiring
the Secretary of State to seek Taiwan’s observer status in WHO at every annual
WHA meeting.44
U.S. Taiwan Policy and U.S. Arms Sales. Given Taiwan-PRC tensions
and U.S. defense interests in Taiwan, many U.S. policymakers have grown frustrated
41 (...continued)
Taiwan’s new application.
42 A State Department spokesman, in response to a press question at the State Department
press briefing of March 20, 2002.
43 Department of State spokesman Sean McCormack at the daily press briefing on June 19,
2007.
44 The bill, S. 2092, was enacted as P.L. 108-235.

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with Taiwan’s falling military expenditures and its perceived decline in defense
readiness. Political disagreements in Taiwan also have kept the government from
purchasing much of the weaponry President Bush approved for sale in 2001. Until
2007, these disagreements stalled a special arms acquisition budget that the
government submitted to Taiwan’s legislature, originally for $18 billion, then slashed
to $15 billion and finally to $6.3 billion in an effort to attract legislative support. The
$6.3 billion compromise arms budget package was blocked again by the Taiwan
opposition coalition on October 24, 2006. The Director of the U.S. American
Institute in Taiwan (AIT) Steve Young, held a press conference in Taipei on October
26, 2006, issuing a stern warning to Taiwan legislators about the move, saying “The
United States is watching closely and will judge those who take responsible positions
on this as well as those who play politics.”45 Other U.S. officials also appeared
frustrated with delays over the special arms budget and raised questions about future
U.S. defense commitments to Taiwan if the delays continue.46
On June 15, 2007, Taiwan’s legislature passed a 2007 defense budget which
included funds for portions of the 2001 U.S. weapons package. In addition to funds
($6 million) for a feasibility study for diesel submarines, the budget included funds
for P3-C anti-submarine warfare aircraft: consequently, the Bush Administration
notified Congress on September 12, 2007 of the proposed sale to Taiwan of 12
excess P3-C planes.47
Corruption Scandals in the Chen Administration. Corruption scandals
and controversial political decisions have plagued the Chen Administration since
2006, weakening both his political authority at home and his relationship with U.S.
officials. Allegations that some key presidential advisers and some of the president’s
own family members had profited from insider trading led to a second recall vote in
the Legislative Yuan on October 13, 2006. Both the second recall motion and the
first, held on June 27, 2006, failed to achieve the 2/3 vote majority needed for
passage. Some opinion polls have suggested that a majority of Taiwan citizens feel
the president should step down before his term ends in 2008.48
Changing PRC Political Pressure on Taiwan. In the aftermath of the
March 2005 passage of a heavy-handed anti-secession law aimed at Taiwan, PRC
officials appear to have decided that a Taiwan policy of greater nuance and finesse
45 Press Conference comments of U.S. AIT Director Stephen Young, Taipei, Taiwan,
October 26, 2006. [http://www.ait.org.tw/en/news/speeches/docs/20061026-dir.pdf]
46 Speaking in San Diego on September 20, 2005, Edward Ross, a senior U.S. Pentagon
official with the Defense Security Cooperation Agency, said it is reasonable to question U.S.
defense commitments to Taiwan “if Taiwan is not willing to properly invest in its own self-
defense.” Xinhua Financial Network, September 21, 2005, English. See also CRS Report
RL30957, Taiwan: Major U.S. Arms Sales Since 1990, by Shirley Kan.
47 On the same day, the Administration also notified Congress of the proposed sale to
Taiwan of SM-2 Block IIIA STANDARD missiles.
48 On June 18, 2006, for instance, a poll by The China Times revealed that 53% of
respondents believed Chen should step down. See also CRS Report RL33684, Taiwan-U.S.
Political Relations: New Strains and Changes, by Kerry Dumbaugh.

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may be of more service to mainland policy interests.49 More recently, then, Beijing
officials have taken a series of actions designed to increase pressure on the Chen
government to be more accommodating to mainland concerns. While some China-
watchers describe these measures as positive developments for cross-strait relations,
others see the moves as an effort by Beijing to capitalize on and exploit Taiwan’s
internal political divisions and to further isolate and weaken President Chen and his
pro-independence DPP government.50
Among other measures, Chinese leaders have issued a series of invitations to
key political leaders in the KMT, the People First Party (PFP), and other Taiwan
opposition parties — but not to the elected government — to visit China and hold
talks. U.S. officials are concerned about the motivations of the visits (which one
U.S. Government official termed “not benign on either side”) and have stressed that
PRC officials should be speaking with the democratically elected Taiwan
government.
Official Taiwan-PRC Contacts. Official government-to-government 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.51 But while official talks have flagged,
indirect ties and unofficial contacts have continued and have seen significant recent
breakthroughs. 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 China’s official news
agency, Taiwan’s total bilateral trade with the PRC is likely to be more than
U.S.$110 billion in 2007 — a 13% increase over 2006.52
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 January 16,
2007, Taiwan and China announced that 96 non-stop, round-trip charter flights would
be authorized between the two land masses during the upcoming Lunar New Year
from February 13-26, 2007. In 2007, 48 flights were permitted for each side as
49 The PRC adopted the anti-secession law on March 14, 2005. Article 8 specifically
authorizes the state to employ “non-peaceful means” to reunify Taiwan. See CRS Report
RL32804, China-U.S. Relations in the 109th Congress, by Kerry Dumbaugh.
50 “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.
51 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.
52 According to a Vice Minister of Commerce, cited by AP in “China’s trade with Taiwan
up 13 percent,” September 20, 2007.

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opposed to 36 for each side in 2006. Destinations in 2007 include Beijing, Shanghai,
Guangzhou, and Xiamen in the PRC, and Taoyuan and Kaohsiung in Taiwan. Such
cross-strait accommodations remain 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.53 Thus, each Taiwan government decision to facilitate economic and
transportation links with the PRC represents an uneasy political compromise.
China’s Growing Global Reach
Many observers now focus on the critical implications 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 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 2005, China took part in the first East Asia Summit (EAS),
a fledgling grouping of 16 Asian and Pacific powers including China, the ten
members of the Association of Southeast Asian Nations (ASEAN), Japan, South
Korea, India, Australia, and New Zealand, but excluding the United States.54
Russia’s President Putin attended as an invited observer.55 The second EAS meeting,
hosted by the Philippines, began on January 15, 2007. The 16 nations reached new
agreements to facilitate the eventual formation of a free-trade bloc and in addition
signed the Cebu Declaration on East Asian Energy Security, pledging cooperation
on developing renewable energy supplies and promoting cuts in greenhouse gas
emissions.56
53 For instance, there are reportedly 300,000 Taiwan citizens now residing and working in
Shanghai.
54 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.
55 See CRS Report RL33242, East Asia Summit (EAS): Issues for Congress, by Bruce
Vaughn.
56 BBC News (international version), “East Asia stages inaugural summit,” December 14,
2005.

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For decades prior to the mid-1990s, Sino-ASEAN relations were characterized
by recurring clashes over territorial disputes, diplomatic deadlocks, and ASEAN
concerns about China’s military ambitions and regional economic competitiveness.57
The 2005 EAS meeting is part of a trend in growing Sino-ASEAN regional
cooperation. In addition to being included in 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, the parties started lowering or cancelling
tariffs on 7,000 items, with the goal of reaching full mutual free trade by 2010.
Largely as a result of this, Sino-ASEAN two-way trade increased to more than $160
billion in 2006, up 23% from 2005. On January 14, 2007, China and ASEAN signed
a new trade agreement on services, considered a major step toward eventual
completion of a Sino-ASEAN free trade agreement.58
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 internal Department of Defense
(DOD) document, Beijing is building naval bases in Burma that will give China its
only access to the Indian Ocean.59 These close relations are one explanation the PRC
on January 12, 2007, vetoed a U.S.-sponsored U.N. Security Council resolution
criticizing Burma’s human rights record.60
China has also improved its bilateral 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.61 The two countries have named 2007 as the
“China-India year of friendship through tourism,” and the China National Tourism
Administration (CNTA) opened an office in New Delhi on August 20, 2007. 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 2001.62 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 continuing to
explore a Sino-Australian free trade agreement. China’s growing regional and global
57 For background, see CRS Report RL31183, China’s Maritime Territorial Claims:
Implications for U.S. Interests, coordinated by Kerry Dumbaugh.
58 See CRS Report RL32688, China-Southeast Asian Relations: Trends, Issues, and
Implications for the United States, by Bruce Vaughn and Wayne Morrison.
59 The internal DOD report was cited by a Washington Times reporter. Gertz, Bill, “China
Builds up Strategic Sea Lanes,” Washington Times, January 18, 2005.
60 The veto was only the fifth that Beijing has exercised in the U.N. Security Council.
61 For more, see the “China” section of CRS Report RL33529, India-U.S. Relations, by Alan
Kronstadt.
62 The SCO is a more recent expansion of the “Shanghai Five” formed in 1997. SCO
members include China, Russia, Uzbekistan, Kazakhstan, Kyrgyzstan, and Tajikistan.

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importance to Australia has generated a backlash there against what is perceived as
an increasingly hard-line U.S. policy stance toward China.63
Japan. Japan, considered the most important American ally in Asia, has been
an exception to China’s regional diplomatic achievements. China routinely protested
former Japanese Prime Minister Koizumi’s annual visits to the Yasukuni Shrine,
where war criminals are also enshrined. After Koizumi first visited the shrine in
2001, China used the issue to justify its refusal to engage in bilateral summitry,
except as part of multilateral meetings. The visit to China of Japan’s new Prime
Minister, Shinzo Abe, on October 8, 2006, signaled a thaw in Sino-Japanese
relations, although Abe’s resignation on September 12, 2007 has left the future of
this thaw in some doubt. From April 11-13, 2007, PRC Premier Wen Jiabao made
an official visit to Japan, where the two sides pledged to build “a mutually beneficial
relationship based on common strategic interests” and to enhance cooperation on
environmental issues.64
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,65 but the political relationship remains hampered by
the residual resentments of Japan’s conquest and occupation of China during World
War II. Furthermore, China’s growing economic competitiveness and expanding
regional presence have helped exacerbate its relations with Tokyo. China and Japan
have competed ferociously for access to Siberian oil, with each vying to be the major
winner in a pipeline contract with Russia. 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. Tensions also have escalated over China’s oil explorations in areas of the
South China Sea over which Japan also claims sovereignty. Finally, many Chinese
leaders remain suspicious of Japan’s recent attempts to become a more “normal
nation” by becoming more diplomatically assertive and by expanding its military
capabilities. Some in Beijing have criticized the Bush Administration for supporting
or even encouraging these trends in Japan.66
Russia. Energy resources and security issues also factor heavily into China’s
relations with Russia, where as noted above Beijing and Tokyo are in an ongoing
competition for Siberian oil access. In March 2006, Russian President Vladimir
63 See CRS Report RL33010, Australia: Background and U.S. Relations, by Bruce Vaughn.
64 “Japan-China Joint Press Statement,” from The Ministry of Foreign Affairs of Japan,
April 11, 2007 [http://www.mofa.go.jp/region/asia-paci/china/pv0704/joint.html] See also
CRS Report RL33436, Japan-U.S. Relations: Issues for Congress, coordinated by Emma
Chanlett-Avery.
65 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.
66 See CRS Report RL32466, Rising Energy Competition and Energy Security in Northeast
Asia: Issues for U.S. Policy, by Emma Chanlett-Avery.

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Putin announced plans to open a gas pipeline to China within five years.67 President
Hu made a three-day official visit to Russia on March 26, 2007, where he attended
the opening ceremony of the “Year of China in Russia” and discussed increasing the
two countries’ “pragmatic cooperation” and “strategic coordination” in both
international and regional affairs.68
Russian leaders also meet 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.69 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. The two countries held eight days of joint military exercises
beginning August 18, 2005, involving 7,000 Chinese troops and 1,800 Russian
troops. 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
October 24, 2006, the European Commission released a new paper to the European
Parliament entitled “EU-China: Closer partners, growing responsibilities.” The
document reinforced the trends remarked upon several years ago by European
Commission President Jose Manuel Barroso — that 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.”70 On January 18, 2007, the European
Commissioner for External Relations, Benita Ferrero-Waldner, delivered a speech
in Beijing entitled “The EU and China: Moving Forward.” On May 28, 2007, these
efforts were followed (in Beijing) by the first EU-China Ministerial meeting since the
new framework for partnership was unveiled in October 2006.
By the same token, the EU has taken a firmer action overall on a number of
economic issues involving China that mirror U.S. economic and trade concerns. At
various times in 2007, key EU officials have threatened retaliatory measures against
China if Beijing failed to restrain the low-cost exports that are boosting the
burgeoning EU trade deficit with China;71 suggested that the EU may initiate action
against China at the World Trade Organization (WTO) if Beijing did not tighten and
67 “Russia plans natural gas pipeline to China,” Associated Press, March 21, 2006.
68 “President Hu hails China-Russia relations before Russia visit,” People’s Daily Online,
March 26, 2007.
69 “Russia, China Tighten Security Links,” China Daily, February 3, 2005.
70 [http://europa.eu.int/comm/external_relations/china/summit_1204/ip04_1440.htm]
71 Peter Mandelson, EU trade commissioner, quoted in Bounds, Andrew and McGregor,
Richard, “EU trade chief warns China’s surplus is ‘unsustainable.’” Financial Times
London, June 12, 2007, p. 8.

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CRS-22
improve its dismal record at protecting intellectual property rights (IPR);72 and
intimated that if China failed to improve the safety of its product and food exports,
the EU would block market access.73
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. In addition, China’s
trade with the six Gulf Cooperation Council (GCC) countries has steadily increased
in recent years, reportedly reaching $32 billion in 2005 (although this is still small
by comparison with the United States, whose total trade with Saudi Arabia alone in
2005 was approximately $34 billion).74
The PRC’s growing relations with Iran are particularly troubling to the Bush
Administration, which is seeking to sanction Iran and to use diplomatic pressure to
halt its suspected nuclear weapons program. China has opposed efforts to reinforce
U.N. Security Council sanctions on Iran, saying such a move would have a negative
impact on Chinese economic interests. Chinese negotiators, for instance, were able
to sign significant oil deals with Iran in 2004, including a proposal that allows a PRC
company develop Iran’s Yadavarn oil field in exchange for China’s agreeing to buy
Iranian liquified natural gas.75 According to a statement by Iran’s Interior Minister,
on September 14, 2007, Sino-Iran energy cooperation is on track, and two-way trade
is expected to reach US $20 billion in 2007.
The PRC also has placed a premium on its relations in Africa, with President
Hu Jintao having embarked on his third trip to Africa in three years on January 30,
2007.76 PRC relations with Sudan have been especially problematic for the United
States and other western countries, which have placed increasing pressure on Beijing
to influence the Sudanese government to do more to resolve the humanitarian crisis
in Darfur. Beijing has vowed to use its U.N. Security Council position to block
stronger U.N. sanctions on Sudan, but Chinese leaders say they have raised the issue
of Darfur with the Sudanese government (a statement made by President Hu again
during his January-February 2007 trip). But Beijing also has appointed a special
envoy to Darfur ( Liu Guijin) and has pledged to send a 315-member detachment of
72 “EU’s Mandelson threatens WTO action against China over piracy,” June 20, 2007; for
full text, see [http://www.eubusiness.com/Trade/wto-china-eu.79/]
73 The European consumer protection commission, Meglena Kuneva, on July 25, 2007.
Cited by Barboza, David, “China takes striking steps to alter ‘unsafe’ image,” International
Herald Tribune, July 28, 2007, p. 1.
74 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.
75 Lee, Don, “China Barrels Ahead in Oil Market...,” Los Angeles Times, November 14,
2004, p. C-1.
76 President Hu visited South Africa, Sudan, Cameroon, Liberia, Zambia, Namibia,
Mozambique, and Seychelles.

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CRS-23
engineers to Darfur to assist in peace-keeping operations, suggesting a measure of
concern about western objections to Sino-Sudan relations.
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; the third CACF meeting was in Beijing in early November 2006. China has
also targeted resource-rich African nations such as Sudan and Angola for energy-
related development.77 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.78 China has also
shown an interest in iron ore deposits in Liberia and Gabon. In addition to resource-
related imperatives, some observers have suggested that there is a political dynamic
to China’s push into Africa, as 5 of the 24 countries that still maintain official
diplomatic relations with Taiwan are on the African continent.79
Western Hemisphere.80 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.81
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. On November
18, 2005, Chile, after months of bilateral negotiations, signed the Sino-Chilean Free
Trade Agreement (FTA). Beijing officials have said they hope the Sino-Chile FTA
will become a model for similar agreements with other Latin American countries.82
77 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.
78 Boxell, James, “Circle Oil in Dollars 50m Africa Drilling Deal with Chinese Group,”
Financial Times (London edition), January 28, 2005, p. 25.
79 In January 2007, Taiwan maintained official relations with Burkina Faso, Gambia,
Malawi, Sao Tome and Principe, and Swaziland. Formerly, Senegal and Chad were two of
Taiwan’s official relationships; the former announced on October 25, 2005, that it was
severing official relations with Taiwan; the latter on August 6, 2006.
80 See CRS Report RS22119, China’s Growing Interest in Latin America, by Kerry
Dumbaugh and Mark Sullivan.
81 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.
82 Jiang Wei, “China-Chile FTA Talks Smooth,” China Daily, January 31, 2005, online at
[http://www.bilaterals.org/article.php3?id_article=1237].

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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
2004.83 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
develop Venezuelan oil and gas reserves.84 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.85
China and Environmental Issues
China’s economic development and need for greater energy resources also is
having a rapidly increasing impact on the environment, both within China and for its
regional and global neighbors. Although China alone has been the source of 40% of
the world’s oil demand growth since 2000,86 its continued heavy dependence on soft
coal in recent years has made it second only to the United States as the largest
contributor to global carbon-dioxide (CO2) emissions, with Reuters reporting on
June 20, 2007, that China had surpassed the United States in CO2 emissions.
According to the U.S. Department of Energy, carbon emissions related to
China’s energy use more than doubled between 1980 and 2003, an increase that has
had a corresponding impact on air quality, agriculture, human health, and climate
change. PRC leaders have recognized that this trend is not sustainable and have
83 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.
84 Bajpaee, Chietigi “China’s Quest for Energy Security,” Power and Interest News Report,
February 25, 2005, online at [http://www.pinr.com/].
85 Mortished, Carl, “Chinese Chase Canadian Oil,” The Times (London), March 5, 2005, p.
36.
86 CRS Report RL32466, Rising Energy Competition and Energy Security in Northeast Asia:
Issues for U.S. Policy, by Emma Chanlett-Avery.

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undertaken efforts to address environmental quality, including establishment in 1998
of the State Environmental Protection Administration, adoption of a series of
environmental laws and regulations, and mandatory conversion of many government
vehicles to non-polluting liquified petroleum and natural gas.87 Despite this, PRC
efforts to date have been unable to keep up with the extensive and worsening
pollution from China’s growing economic development.
Beijing’s push to meet more of its development needs through the cleaner
technology of hydro-power has exacerbated other long-term environmental problems
in China. To generate electric power, the government has launched massive dam
construction projects, continuing a phenomenon that occurred throughout centuries
of Chinese history to tame recurring floods.88 Projects such as the Three Gorges
Dam, now being built on the Yangtze River, have been criticized heavily by
environmental scientists who blame these and other such constructions for
significantly contributing to the country’s worsening desertification and flood
damage woes. Moreover, since some of the region’s most significant rivers originate
in the mountains of Tibet, China’s hydro-power development programs are
increasingly affecting its neighbors. China began multiple dam construction on the
upper Mekong River in Yunnan Province with little thought to the resulting impact
on Burma, Thailand, Laos, Cambodia, and Vietnam, the dams’ downstream
neighbors. Other important regional rivers originating in Tibet include the
Brahmaputra (India and Bangladesh); Irrawaddy (Burma); the Indus (Pakistan); and
the Salween (Burma and Thailand).
The United States and China engage in energy and environment-related dialogue
through the recently established U.S.-China Strategic Economic Dialogue. As an
outgrowth of that dialogue, on December 15, 2006, both countries announced that
China would become the third country to join the United States in the FutureGen
International Partnership, a collaborative effort to reduce carbon emissions. The two
countries also signed an Energy Efficiency and Renewable Energy Protocol, an effort
to promote clean, renewable energy technology.
Domestic Political Issues
Despite China’s rapid economic advances and its expanded international
influence, its internal political and institutional development have not kept
comparable pace. Increasing social and economic inequities have hobbled the growth
of civil society and have led to growing strains in China’s political and societal fabric
— between the central government in Beijing and the provincial and municipal
governments in the interior; between the socialist left and the increasingly capitalist
right; between those arguing for economic growth at all costs and those advocating
more sustainable and equitable development; and between the few newly wealthy
87 “China: Environmental Issues,” in Country Analysis Briefs, Energy Information
Administration, U.S. Department of Energy, published in July 2003. [http://www.eia.doe
.gov/emeu/cabs/China/Environment.html]
88 According to Jasper Becker in a series of environmental articles in the Asia Times, China
is home to 22,104 dams, compared to 6,390 in the United States and 4,000 in India. Becker,
Jasper, “Peasants bear the brunt of China’s energy plans,” Asia Times Online, 2003.

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who have thrived under economic liberalism and the many desperately poor who
have not. Leaders in Beijing are thought to be deeply concerned about the political
and social implications of these internal strains and deficiencies, and increasing
debate on and maneuvering around these issues is likely to continue affecting the
political environment leading up to a key five-year Communist Party Congress being
held in Beijing beginning October 15, 2007.
Social Stability. The far-reaching economic changes the PRC continues to
undergo have led to increasing disgruntlement among a number of social groups.89
Peasants and farmers in rapidly developing parts of China have labored under heavy
tax burdens and fallen 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. One widely publicized case occurred on December 6,
2005, in the southern Chinese city of Dongzhou (Shanwei), when paramilitary forces
opened fire on villagers demonstrating against the confiscation of their land for the
construction of a new power plant, killing an unknown number of villagers.
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.90
Key Party and Government Meetings in 2007. American China-
watchers are watching two important policy-related meetings in China in 2007 for
clues as to future PRC policies and actions. The first is the annual meeting of the
National People’s Congress (NPC), the approximately 3,000-member PRC
legislature, which was held in Beijing from March 5-16, 2007. Although the NPC
theoretically is China’s highest authoritative law-making body, in practice it routinely
endorses policy decisions and laws already made by elite leadership groups. Still, for
outside observers, it sheds light on the kinds of political struggles going on in China.
The most controversial item the 2007 NPC meeting considered was a new law
designed to ensure personal property rights — which some in China consider a
betrayal of socialism. Debate on the new law has reflected the ideological struggles
between China’s right and left and between the economy’s winners and losers.
Under discussion for some years (the leadership published a draft for discussion in
2005 — an unusual step for China’s secretive processes), the proposed law was
89 See CRS Report RL33416, Social Unrest in China, by Thomas Lum.
90 The ACFTU is controlled by the Communist Party. For background and further details,
see CRS Report RL31164, China: Labor Conditions and Unrest, by Thomas Lum.

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pulled from consideration at the 2006 NPC meeting because of the controversy it
engendered.91
This and other issues discussed at the NPC meeting will in turn be reflected in
the second and more important of China’s 2007 meetings: the all-important
Communist Party Congress, held every five years. The 17th Party Congress,
scheduled to begin October 15, 2007, will be the first under the new leadership team
of Party Secretary Hu Jintao and Premier Wen Jiabao, both of whom are expected to
keep their posts. Decisions and actions taken at the 17th Congress will set the Party’s
course for the next five years and likely will result in a significant Party leadership
reshuffling.
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.92
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 since 2002 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 several other 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.93 The fifth round of these interactions occurred early in 2006 in Beijing,
where the Dalai Lama’s special envoy and a delegation from the Tibetan community-
in-exile arrived on February 15, 2006. In this negotiation, as in past such
negotiations, the Dalai Lama’s special envoy has acknowledged differences but also
had favorable reactions to the talks, saying “Our Chinese counterparts made clear
91 A full explanation of the law was given by the Vice Chairman of the NPC Standing
Committee on March 8, 2007, and was published by Xinhua, translated in FBIS at
CPP20070308138002, “Full Text of Wang Zhaoguo’s Explanation of PRC draft property
law.”
92 For background and details, see CRS Report RL30983, Tibet, China, and the 107th
Congress: Issues for U.S. Policy, by Kerry Dumbaugh.
93 Lodi Gyari gave a news conference about these talks at the National Press Club in
Washington, D.C. on November 2, 2005.

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their interest in continuing the present process and their firm belief that the obstacles
can be overcome through more discussions and engagements.”94 From June 29-July
5, 2007, Lodi Gyari and another Dalai Lama envoy, Kelsang Gyaltsen, held a sixth
round of talks in Beijing. The two envoys’ description of the discussions — that they
were “candid and frank” and involved the Tibetan side’s “serious concerns
[expressed] in the strongest possible manner” — suggests little progress in the
dialogue process.95 China’s recent statements, and its actions in 2007 to inhibit the
Dalai Lama’s visits overseas in Brussels and Australia, are seen to be more
confrontational than in recent years.
Xinjiang’s Ethnic Muslims. For years, the PRC government also has
maintained a repressive crackdown against Tibetans and Muslims, particularly
against Uighur “separatists” — those in favor of independence from China — in the
Xinjiang-Uighur Autonomous Region in western China. U.S. officials warned after
September 11, 2001 that the global anti-terror campaign should not be used to
persecute Uighurs or other minorities with political grievances against Beijing. But
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 (ETIM), on the U.S. list of terrorist groups. In early
January 2007, PRC officials claimed that the ETIM was the target of a Chinese raid
on a suspected terrorism camp in Xinjiang. No details were given, although PRC
officials reportedly said that 18 were killed and 17 arrested.96
U.S. policies on Uighurs and on terrorism have faced a unique test since 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. Some of the Guantanamo prisoners, including
two Uighurs were determined by the U.S. government in 2005 to not be “military
combatants,” and since then have been pursuing legal action against the United States
in an effort to be released.97 A few of the Uighur prisoners have been released to a
refugee center in Albania, the only country that would accept them.98 According to
press reports, other remaining Uighur prisoners were moved in December 2006 to a
new high-security Guantanamo facility, where they reportedly are being kept in
solitary confinement.99
94 Statement by Special Envoy Lodi Gyari, released on February 25, 2006.
95 Kang Lim, Benjamin, “China, Dalai Lama’s envoy to hold dialogue,” Reuters News, May
16, 2007.
96 “Muslim Terror Raid Finds ‘International’ Ties,” New York Times, January 10, 2007, p.
14.
97 “Two Uighurs held at Guantanamo appeal for high court help,” Agence France Presse,
January 17, 2006.
98 Golden, Tim, “Chinese leave Guantanamo for Albanian limbo,” New York Times, June
10, 2007, p. 1.
99 Smith, Jeffrey and Tate, Julie, “Uighurs’ detention conditions condemned,” The
Washington Post, January 30, 2007, p. A4.

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CRS-29
Internet and Media Restrictions. The explosive growth of the Internet, cell
phones, and text messaging in China has helped make these relatively unregulated
electronic sources the dominant source of information for PRC citizens. Beijing has
increasingly viewed these new information sources as potential threats to the central
government’s ability to control information flows, and for several years PRC leaders
have attempted to restrict and control the scope of Web content and access.
On September 25, 2005, China imposed new regulations designed to further
limit the type of electronic news and opinion pieces available to the Web-savvy in
China.100 Among other things, the regulations prohibits major search engines from
posting their own independent commentary on news stories, stipulating that only
opinion pieces provided by state-controlled media may be posted; requires internet
service providers to record the content, times, and Internet addresses of news
information that is published and to provide this information to authorities upon
inquiry; and in vague terms prohibits certain kinds of content from being posted, such
as content that “undermines state policy” or “disseminates rumors [and] disturbs
social order.”101 The regulations are backed by penalties, including fines, termination
of Internet access, and possible imprisonment.
Human Rights
The Bush Administration generally has favored selective, intense pressure on
individual human rights cases and on rule of law issues rather than the broader
approach adopted by previous American administrations. The PRC government
periodically has acceded to this White House pressure and released early from prison
political dissidents, usually citing health reasons and often immediately preceding
visits to China by senior Bush Administration officials. On March 14, 2005, for
instance, PRC officials released Uighur businesswoman Rebiya Kadeer, arrested in
1999 for “revealing state secrets.” The same day, the U.S. government announced
that it would not introduce a resolution criticizing China’s human rights record at the
61st Session of the U.N. Commission on Human Rights (UNCHR) in Geneva from
March 14 to April 22, 2005.102
There were no such symbolic PRC gestures before President Bush’s November
2005 visit to China. Moreover, during his Asia visit, President Bush publicly
adopted a different human rights approach, making universal freedom, religious
freedom, and democratization appear to be the centerpiece of U.S. policy in Asia.
There has been little sign that the U.S. position on human rights has affected PRC
policies, although there is growing evidence of increasing social demands within
100 “‘Full Text’ of PRC Internet News Information Service Management Rules,” jointly
promulgated by the PRC State Council Information Office and the Ministry of Information
Industry, September 25, 2005, Beijing Xinhuang Wang, in FBIS, CPP2005926038001.
101 Ibid., Article 19.
102 In 2006, the UNCHR was replaced by a new 47-member U.N. body, the U.N. Human
Rights Council (“the Council”). The United States elected not to run for a seat on the
Council on the grounds that the performance of the new body first needed to be evaluated
over time.

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China for greater accountability, transparency, and responsiveness in government,
particularly in cases of official corruption and malfeasance.
Religious Freedom. The PRC continues 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.103 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 16, 2006, the U.S. Department of State judged China’s
record on religious freedom to remain poor and substantially the same as during
previous years. 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 recent years 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.
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.104
103 See CRS Report RL33437, China and Falun Gong, by Thomas Lum.
104 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.

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While the PRC has maintained its restrictive and at times coercive “one-child”
program 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
Family Planning Commission stated that the government intended to modify criminal
law to make it illegal to selectively identify and abort female fetuses.105
There also is growing evidence that citizens of the PRC are becoming more
assertive about their reproductive rights.106 In mid-May 2007, news accounts
reported violent public protests in Guangxi Province (Bobai County) over the
“savage implementation” of family planning policies by local authorities, including
the retroactive imposition of extraordinarily heavy fines and the confiscation or
destruction of household goods and food.107
Hong Kong Governance
China’s Hong Kong Special Administrative Region (HKSAR), a British colony
until being returned to Chinese rule in 1997, remains a political work-in-progress
under several Sino-British agreements reached concerning the territory’s governance.
Promised “a high degree of autonomy” by Beijing — and ultimately universal
suffrage and full democracy — Hong Kong functions as an effectively separate
system with a certain level of democratization and significantly greater individual
and political freedoms than mainland China. But many of Hong Kong’s
approximately 6 million residents fault what they see as Beijing’s covert and at times
direct intervention in setting a glacial pace for Hong Kong’s democratic reforms.
On March 25, 2007, for instance, Hong Kong’s Executive, Donald Tsang, won
a second five-year term to that post in an election in which the only eligible voters
were the 795 members of the Hong Kong Election Committee. Pro-democracy
activists had argued that Hong Kong was politically mature enough to conduct the
election by universal suffrage, but this was refuted by Beijing. Still the 2007 election
was the first in which a challenger, Alan Leong, took on the incumbent who was
universally seen as Beijing’s choice for the post. In addition, Chief Executive Tsang
and Mr. Leong held two public TV debates — again an unprecedented development
for Hong Kong.
105 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.
106 Pan, Philip, “Who controls the family? Blind activist leads peasants in legal challenge
to abuses of China’s population-growth policy,” Washington Post, August 27, 2005, p. A1.
107 Reported in Tung Fang Jih Pao, May 21, 2007, translated in FBIS,
FEA20070522158306.

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Chief Executive Tsang, generally seen as able and well-respected, replaced
Hong Kong’s unpopular former Chief Executive, Tung Chee-hwa, who submitted his
resignation on March 10, 2005, two years before his term was to expire. Controversy
under Mr. Tung’s tenure grew steadily after late summer 2003, when massive
peaceful demonstrations, involving tens of thousands of Hong Kongers began to be
held in opposition to “anti-sedition” laws proposed by Mr. Tung and in favor of more
rapid progress toward democratization. Beijing dealt these democratic aspirations a
stinging setback in April 2004 by ruling that universal suffrage not only was not to
be allowed as early as 2007 (when Hong Kong’s constitution, the Basic Law, implies
it is possible), but that Beijing, and not Hong Kong, would determine the proper pace
for democratic reforms.
While a pragmatist, Chief Executive Tsang also has been criticized by Hong
Kong’s democracy activists. As the territory’s Chief Secretary, Mr. Tsang had
chaired a Tung-appointed task force charged with consulting Beijing to devise a plan
for democratic reforms in Hong Kong in 2007 and 2008. The task force’s final
recommendations, submitted in October 2005, provided for only marginal changes
to electoral procedures in 2007 and 2008, stopping far short of expanding the
franchise in Hong Kong in this decade or for the foreseeable future. The public
response to the recommendations was one of disappointment. On December 4, 2005,
opponents of the recommendations held another large public protest in Hong Kong
in favor of greater political change. Executive Tsang defended the recommendations
as being the most Hong Kong can achieve at the moment given Beijing’s objections
to more rapid democratization. Democracy activists in the Legislative Council
defeated the minimal reform package on December 21, 2005, leaving the status quo
in place and the prescription for future changes uncertain.
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.108
U.S. Policy Implications
Some U.S. observers have become increasingly concerned about China’s
growing economic and political reach in the world, often referred to as “China’s
rise,” and what it means for global U.S. economic and political interests, U.S.-China
108 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, which occurred in 2001.

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relations, and concerns for Taiwan’s security. Some in this debate believe China’s
rise is a malign threat that needs to be thwarted; others believe that it is an inevitable
phenomenon that needs to be managed. As was the 109th Congress before it, the
110th Congress is likely to be faced with recurring issues involving this emerging
debate and whether U.S. interests would best be served by accommodating China’s
rise or containing it.
According to one school of thought, China’s economic and political rise in the
world is inevitable and needs to be accommodated and managed. 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
“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

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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 nonproliferation 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.
Selected Legislation in the 110th Congress109
H.Con.Res. 73 (Tancredo)
Expressing the sense of Congress that the United States should resume
diplomatic relations with Taiwan. Introduced on February 16, 2007. Referred to the
House Foreign Affairs Committee.
H.Con.Res. 136 (Chabot)
Expressing the sense of Congress that the United States lift restrictions on high-
level visits by officials from Taiwan and allow direct high-level dialogue between
officials from both governments. Introduced on May 1, 2007. Referred to the House
Foreign Affairs Committee, which held mark-up on June 26, 2007. The House
passed the measure by voice vote on July 30, 2007, and the measure was referred to
the Senate Foreign Relations Committee on August 3, 2007.
H.Con.Res. 137 (Berkley)
Expressing the sense of Congress that the United States should initiate
immediate negotiations to enter into a free trade agreement with Taiwan. Introduced
on May 1, 2007. Referred to the House Ways and Means Committee.
H.Res. 552 (Marshall)
Calling on the PRC to remove barriers on U.S. financial services firms doing
business in China. Introduced July 17, 2007, and referred to the House Financial
Services Committee. The House passed the measure on the suspension calendar on
September 5, 2007, by a vote of 401-4.
H.Res. 676 (Ros-Lehtinen)
The measure restates and reinforces Section 3(a) of the Taiwan Relations Act
relating to U.S. arms sales to Taiwan, emphasizing that decisions shall be made
“based solely” on Taiwan’s legitimate defense needs. The bill specifically targeted
the Bush Administration’s “non-responsiveness” to Taiwan’s request to buy F-16C/D
fighters. Introduced on September 25, 2007, and referred to the House Foreign
109 For legislative action during the 109th Congress, see CRS Report RL32804, China-U.S.
Relations During the 109th Congress, by Kerry Dumbaugh.

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CRS-35
Affairs Committee. The Committee held mark-up on September 26, 2007, and
agreed to seek the measure’s consideration on the suspension calendar.
H.R. 571 (Tancredo)
A bill to require that additional tariffs be imposed on products of non-market
economies, which the bill specifically defines as including the People’s Republic of
China. Introduced January 18, 2007. Referred to the House Ways and Means
Committee, Subcommittee on Trade.
H.R. 678 (Holt)
The National Security Language Act. The bill seeks to expand and improve
U.S. foreign language study in “less commonly taught” languages, including Chinese.
Introduced January 24, 2007. Referred to House Committees on Education and
Labor; Select Intelligence; Armed Services.
H.R. 782 (Ryan)
The Fair Currency Act of 2007. (Related Senate bill S. 796.) The bill amends
Title VII of the Tariff Act of 1930 to provide that artificial exchange rates by any
country are countervailable export subsidies. The bill requires the U.S. Treasury
Secretary annually to analyze foreign countries’ exchange rate policies and embark
on negotiations with those countries whose currencies are judged to be in
“fundamental misalignment.” Introduced January 31, 2007. Referred to House Ways
and Means Committee and in addition to the House Committees on Financial
Services; Foreign Affairs; and Armed Services.
H.R. 1229 (Davis, A., English)
The Non-Market Economy Trade Remedy Act of 2007. The bill amends long-
standing U.S. law by extending the applicability of countervailing duty measures also
to nonmarket economy countries in addition to market economy countries. The bill
also notes that “special difficulties” may exist in calculating benefit amounts in China
and authorizes U.S. authorities to use “terms and conditions prevailing outside of
China” in such instances. Introduced on February 28, 2007. Referred to the House
Ways and Means Committee (February 28) and to the Trade Subcommittee (March
7), which held hearings on March 15, 2007.
H.R. 1390 (Tancredo, Rohrabacher)
A bill to require Senate confirmation of individuals appointed to serve as the
Director of the American Institute in Taiwan. Introduced March 7, 2007. Referred
to the House Foreign Affairs Committee.
H.R. 1469 (Lantos)
The Senator Paul Simon Study Abroad Foundation Act of 2007. The bill seeks
to enhance the competitiveness and security of the United States by promoting
foreign language skills and opportunities for expanded study abroad among U.S.
students, particularly specifying “non-traditional” destinations such as the People’s
Republic of China. The bill establishes, within the U.S. government, a corporation
and program to provide grants to American students under the Mutual Education and
Cultural Exchange Act of 1961 (22 U.S.C. 2451 et seq). The bill was introduced on
June 12, 2007, and was reported by the House Foreign Affairs Committee on May
9, 2007 (H.Rept. 110-138). The House passed the bill by voice vote on the

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suspension calendar on June 5, 2007. On June 7, the measure was referred to the
Senate Foreign Relations Committee.
H.R. 1585 (Skelton)
Section 1244 of the bill expresses the sense of Congress that U.S. war-fighting
capabilities are potentially under threat by PRC intentions and urges the Secretary of
Defense to expand efforts to develop accurate assessments of PRC military
capabilities and intentions. Introduced March 20, 2007, and reported to the House
Armed Services Committee. Markup on May 9, 2007, and ordered reported by 58-0
(H.Rept. 110-146). Passed by the House May 17, 2007 (397-27), and received in the
Senate on June 4, 2007, which considered the bill for a number of days between June
4 and July 31, 2007, when the bill was returned to the calendar. On September 17,
2007, the bill was put before the Senate by unanimous consent and considered on
September 18, 19, and 20.
H.R. 2942 (Ryan)
The Currency Reform for Fair Trade Act. To provide for the identification and
correction of “fundamentally misaligned” currencies by applying countervailing
duties to nonmarket economy countries with currencies so identified. Introduced
on June 28, 2007, and referred to the Committees on Ways & Means, Financial
Services, and Foreign Affairs.
H.R. 3221 (Pelosi)
Renewable Energy and Energy Conservation Tax Act of 2007. The bill
authorizes the Secretary of Commerce to take efforts to promote U.S. clean energy
technology exports to India, China, and other countries that may benefit. Introduced
July 30, 2007, and referred to multiple committees. On August 3, the Rules
Committee made the bill in order for consideration in the House, where it passed on
August 4, 2007, by a vote of 241-172. The bill was placed on the Senate calendar on
September 5, 2007.
H.R. 3272 (Kirk)
The U.S.-China Diplomatic Expansion Act. The bill provides for increased
funding and support for diplomatic engagement with China. Introduced on August
1, 2007, and referred to the House Committee on Foreign Affairs.
H.R. 3273 (Larsen)
The U.S.-China Market Engagement and Export Promotion Act. The bill
provides for grants to states to operate state offices in China in order to assist U.S.
exporters to promote exports to China. Introduced on August 1, 2007, and referred
to the House Foreign Affairs Committee.
H.R. 3274 (Israel)
The U.S.-China Energy Cooperation Act. The bill provides for grants to
encourage U.S.-China cooperation on joint research, development, or
commercialization of carbon capture and sequestration technology, improved energy
efficiency, or renewable energy sources. Introduced on August 1, 2007, and referred
to the House Science and Technology Committee, Subcommittee on Energy and
Environment.

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CRS-37
H.R. 3275 (Davis)
The U.S.-China Language Engagement Act. The bill supports programs
offering instruction in Chinese language and culture. Introduced on August 1, 2007,
and referred to the House Committee on Education and Labor, Subcommittee on
Early Childhood, Elementary, and Secondary Education.
H.Res. 422 (Lee)/S.Res. 203 (Menendez)
Calling on the PRC to use its leverage with Sudan to stop the violence in Darfur
and to comply with U.N. directives. The measure states that the spirit of the
Olympics is incompatible with acts supporting genocide. The House bill was
introduced on May 21, 2007, and referred to the House Foreign Affairs Committee,
which held markup on May 23, 2007. On June 5, 2007, the House passed the
measure on the suspension calendar by 410-0. The Senate bill was introduced on
May 16 and referred to the Senate Foreign Relations Committee, which ordered the
measure reported with an amendment in the nature of a substitute on June 27, 2007.
The Senate agreed to the measure on July 30, 2007.
S. 796 (Bunning)
The Fair Currency Act of 2007. (Related House bill H.R. 782.) The bill amends
Title VII of the Tariff Act of 1930 to provide that exchange-rate misalignment by any
foreign nation is a countervailable export subsidy and to amend the Exchange Rates
and International Economic Policy Coordination Act of 1988 to clarify the definition
of “manipulation” with respect to currency. Introduced March 7, 2007. Referred to
the Senate Finance Committee.
S. 1607 (Baucus, Schumer, Graham, Grassley)
The Currency Exchange Rate Oversight Reform Act of 2007. The bill provides
for identification and corrective action against “misaligned currencies” that adversely
affect U.S. interests. The bill requires the Secretary of the Treasury to submit a
report to Congress twice annually analyzing economic and monetary policies of
major U.S. trading partners and list currencies judged to be “fundamentally
misaligned” (meaning with a prolonged undervaluation with respect to the U.S.
dollar) and a list of currencies designated for “priority action.” The bill provides for
remedies should a country continue its currency misalignment, including price
adjustments under the anti-dumping law; request for IMF action; suspension of new
OPIC financing; U.S. opposition to multilateral bank financing; and action in the
WTO. The bill permits the President to waive its provisions based on national
security or “vital economic” interests. Introduced on June 13, 2007, by Senators
Charles Schumer, Lindsey Graham, Max Baucus, and Charles Grassley, the bill was
referred to the Senate Finance Committee. The Committee reported the bill on July
31, 2007, with an amendment in the nature of a substitute, and the bill was placed on
the Senate calendar.
S. 1677 (Dodd)
The Currency Reform and Financial Markets Access Act of 2007. Introduced
on June 21, 2007, the bill would require the U.S. Treasury Secretary to analyze
exchange rate policies of foreign countries on an annual basis. On August 1, 2007,
the Committee ordered the measure reported with an amendment in the nature of a
substitute.

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Chronology
09/19/07 —
For the 15th consecutive year, a U.N. General Assembly Committee
(the General Committee) rejected the recommendation that Taiwan’s
formal application for U.N. membership be considered at this year’s
meeting of (the 62nd) General Assembly.
09/17/07 —
DPP Chairman Yu Shyi-kun announced he would offer a motion to
the DPP’s newly drafted “normal country” resolution to change
Taiwan’s official title to “Taiwan to reflect formally that Taiwan is
an independent country.
09/17/07 — China announced it will send a 315-member engineering unit to
Darfur in October 2007 as part of a combined UN-African Union
force of 26,000.
09/17/07 —
The Financial Times reported that China had rejected shipments of
U.S. and Canadian port because they contained the additive
ractopamine, a banned substance in China.
09/17/07 —
Former Senator Bob Dole wrote in the Asian WStJ of his support for
Taiwan’s application for UN membership.
09/16/07 —
China’s Taiwan Affairs Office said that Beijing had “made necessary
preparations” to “deal with serious conditions” as a result of Taiwan’s
UN membership bid.
09/15/07 — Taiwan President Chen Shui-bian reiterated to a Taiwan audience
(and, on September 6, an audience at AEI by video conference) his
“yi bian, yi guo” assertion — not heard publicly from him since
September 2006.
09/15/07 —
New York Times researcher Zhao Yan was released from prison after
serving a three-year sentence for accepting money from a source, a
charge he denies. He was arrested originally for “leaking state
secrets.”
09/12/07 — The Pentagon announced $2.2 billion in possible military sales to
Taiwan, including 12 surplus Orion P3-C maritime patrol craft and
144 SM-2 Block 3A Standard anti-aircraft missiles, built by
Raytheon.
09/10/07 — Taiwan Defense Minister Ko Cheng-heng said that Taiwan had an
“urgent and legitimate need” to buy F-16s. Minister Ko made the
statement while attending the Sixth U.S.-Taiwan Defense Industry
Conference in the United States.
08/17/07 —
The PRC published a white paper entitled “The Quality and Safety of
Food in China.”

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CRS-39
08/15/07 —
PRC Embassy officials in Washington held a rare news conference to
defend the quality of Chinese imports.
08/14/07 — Mattel announced that it was recalling 436,000 Chinese-made toy
cars and 18.2 million other toys because of magnets that could
become dislodged and harm children if swallowed.
08/01/07 — The Senate Committee on Banking, Housing, and Urban Affairs
ordered S. 1677, the Currency Reform and Financial Markets Access
Act of 2007 (Dodd) reported favorably with an amendment in the
nature of a substitute. It passed by a vote of 17-4.
07/25/07 — The IMF released its 2007 projections, concluding that China had
now surpassed the United States as the main engine of the world’s
economic growth.
07/23/07 —
According to the Washington Times, Beijing has warned Pakistan to
improve security for Chinese residents.

07/16/07 —
The Chinese government announced that only six low-level Party and
government figures were being prosecuted for the “brick kilns” slave
labor scandal in Shanxi Province, provoking widespread criticism
that the scandal most certainly was wider and more insidious,
justifying harsher and broader punishments.
07/11/07 —
Beijing shut down the China Development Brief, an online newsletter
tracking environmental and social issues for NGOs that had been
operating for years in China.
07/10/07 —
The PRC’s Customs Bureau released trade figures showing that its
trade surplus with the rest of the world jumped in June to a record
$26.9 billion for the month — almost double that of June 2006.
07/10/07 —
China announced it had executed Zheng Xiaoyu, the former head of
the State Food and Drug Administration, for accepting bribes to
approve tainted or fraudulent drugs.
06/28/07 —
The US FDA issued an import alert requiring 5 types of farm-raised
seafood from China to be tested for banned antibiotics before
allowing entry.
06/20/07 —
Reuters reported that China had overtaken the U.S. as the world’s top
emitter of carbon gases.
06/20/07 —
The U.S.-China Senior Dialogue began, hosted by Deputy Secretary
John Negroponte at the State Department in Washington, with Dai
Bingguo in the PRC interlocutor role.
06/19/07 —
In a State Department press briefing, Sean McCormack reacted to a
question about Taiwan, saying, “We do not support Taiwan’s

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CRS-40
membership in international organizations that require statehood [for
membership].... The United States opposes any initiative that appears
designed to change Taiwan’s status unilaterally. This would include
a referendum on whether or apply to the United Nations under
Taiwan.”
06/13/07 — The U.S. Treasury Department released a mandated, semi-annual
report to Congress on international exchange rates, concluding that
China “did not meet the technical requirements for designation” [as
a currency manipulator] under U.S. law. Legislation was introduced
in the Senate (S. 1607) to pressure the Administration to take stronger
action against PRC currency restrictions.
06/06/07 — Costa Rica announced it was breaking relations with Taiwan and
establishing relations with the PRC.
05/31/07 — In the second such case this year (the first was on March 30), the
Commerce Department announced it was imposing additional
preliminary duties — as much as 99.7% — on imports of glossy
paper made in China.
05/25/07 — The Pentagon released its annual report on PRC military power,
sparking a strong protest from officials in Beijing over the report’s
negative cast.
05/23/07 —
Two days of talks began in Washington in the second meeting of the
U.S.-China Strategic Economic Dialogue (SED) on the U.S.-China
trade imbalance and China’s currency valuation.
05/09/07 —
108 members of the House sent a letter to PRC President Hu Jintao
requesting that China use its influence with Sudan to try to halt the
genocide in Darfur, linking failure to act with a tarnishing of the PRC
image at the 2008 Olympics in Beijing.
05/09/07 —
Senator Richard Durbin and Representative Rosa DeLauro announced
they had secured agreement from PRC Ambassador Zhou Wenzhong
to seek bilateral cooperation on food safety inspections.
05/05/07 —
China announced it was severing diplomatic relations with St. Lucia
after the Caribbean country normalized relations with Taiwan.
04/02/07 —
The U.S. FDA blocked wheat gluten imports from Xuzhou Anying
Biologic Technology Development in Wangdien, China, as a result
of recent pet deaths in the U.S. from tainted pet food.
03/28/07 —
China and Russia signed $4.3 billion in trade deals during President
Hu Jintao’s visit.
03/27/07 —
A Chinese-born U.S. engineer, Chi Mak, went on trial in Los Angeles
for allegedly providing sensitive Navy weapons technology to China.

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CRS-41
03/08/07 —
In his nomination hearing (for top U.S. military commander in the
Pacific) before the Senate Armed Services Committee, Admiral
Timothy Keating said he would seek robust engagement with China’s
navy.
03/07/07 —
U.S. Defense Secretary Robert Gates said “I do not see China, at this
point, as a strategic adversary of the United States. It’s a partner in
some respects, it’s a competitor in other respects...”
02/02/07 —
According to a State Department spokesman, the United States will
need to “evaluate” future civil space cooperation with China in light
of China’s January 11, 2007 ASAT test.
01/30/07 —
President Hu Jintao left for his third trip to Africa in three years: he
visited South Africa, Sudan, Cameroon, Liberia, Zambia, Namibia,
Mozambique, and Seychelles.
01/24/07 — The head of the PRC’s National Population and Family Planning
Commission reported there were 118 boys born for every 100 girls in
China in 2005, which he called “a worsening gender imbalance.”
01/23/07 —
A PRC Foreign Ministry spokesman confirmed that China had fired
a missile to destroy one of its orbiting satellites.
01/18/07 — Bush Administration officials announced that China had tested its
first anti-satellite weapon on January 11, reportedly noting that the
U.S. had expressed concern to Beijing about the test.
01/17/07 — China and Taiwan agreed to allow 96 round-trip charter flights
between the two land masses during the February 13 - 26, 2007 Lunar
New Year.
01/11/07 — Army Lt. General Michael Mapes relayed DOD concerns to the
Senate Intelligence Committee (during its annual threat assessment
hearing) that Russia and China have secret space-based weapons
development programs.
01/10/07 —
China announced that its global trade surplus for 2006 was $177.47
billion — up from $102 billion in 2005.
11/19/06 —
The U.S. and PRC navies conducted joint search and rescue exercises
in the South China Sea. The exercises ostensibly were to increase
transparency and enhance military contacts.
10/14/06 — China voted in favor of a U.N. resolution imposing sanctions on
North Korea for its nuclear weapon test.
10/09/06 —
North Korea conducted a test of a nuclear weapon.

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CRS-42
09/05/06 —
Premier Wen Jiabao announced China needs more time to bring its
anti-piracy standards to international levels.

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CRS-43
Appendix I:
Selected Visits by U.S. and PRC Officials
(For U.S.-PRC visits during the 109th Congress, see CRS Report RL32804.)
August 17, 2007 — U.S. Chairman of the Joint Chiefs Navy Admiral Michael
G. Mullen arrived in Beijing for a visit, including stops in Beijing, naval facilities
along China’s east and northeast coasts, and the naval academy in Dalian.
July 23, 2007 — Air Force General Paul V. Hester, the U.S. Pacific Air Forces
commander, began a five-day visit to China, the first by a senior U.S. military officer
to meet primarily with PLAAF officials. His visit included the first visit by an
American commander to Jining Air Base, as well as to Jianqiao Air Base.
May 10, 2007 — New U.S. Pacific forces commander Admiral Timothy J.
Keating began his first five-day visit to China as Pacific commander. He took
command in his new post on March 26, 2007. He pledged to continue to improve
U.S.-China military contacts and exchanges and to intensify joint exercises.
March 22, 2007 — U.S. Chairman of the Joint Chiefs Marine General Peter
Pace arrived in Beijing for a visit, including a trip to Anshan Air Base in the
Shenyang Military Region. There, Pace examined a PRC-built Su-27 fighter-
bomber.
March 7, 2007 — U.S. Treasury Secretary Henry Paulson arrived in Beijing for
his third official visit in his seven-month tenure as Secretary. His visit purportedly
was to discuss with his counterpart, Wu Yi, the second meeting (upcoming in May)
of the U.S.-China strategic economic dialogue in the United States. The Secretary
reportedly urged China to open its markets more quickly.
March 3, 2007 — On his first official visit to Asia as Deputy Secretary of State,
John Negroponte arrived in Beijing for three days of talks. He met with Foreign
Minister Li Zhaoxing, State Councilor Tang Jiaxuan, and vice foreign ministers Dai
Bingguo and Yang Jiechi. At the end of his trip, he addressed the 17.8% increase in
China’s military budget, saying the United States wanted China to clarify its “plans
and intentions” for its military program.
March 2, 2007 — Alan Holmer, new U.S. Special Envoy for Strategic
Economic Dialogue with China, met in Beijing with Vice Premier Wu Yi.
January 23, 2007 — U.S. Assistant Secretary for Commerce Chris Padilla left
for Beijing to discuss export controls.

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CRS-44
Appendix II:
Selected U.S. Government Reporting Requirements
Report on International Economic and Exchange Rate Policies
(semiannual report)
Most recent date available: June 13, 2007
Agency: U.S. Department of the Treasury
Legislative authority: P.L. 100-418, the Omnibus Trade & Competitive Act of
1988
Full text: [http://www.ustreas.gov/offices/international-affairs/economic-exchange
-rates/pdf/2007_FXReport.pdf]
International Religious Freedom Report, China (annual report)
Most recent date available: September 15, 2006
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/2006/]
U.S. Commission on International Religious Freedom (annual report)
Most recent date available: May 2007
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/
2007annualRpt.pdf#page=1]
Reports on Human Rights Practices, China (annual report)
Most recent date available: March 6, 2007
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/2006/78771.htm]
Military Power of the People’s Republic of China (annual report)
Most recent date available: May 2007
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/pdfs/070523-China-Military-Power-final.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: January 1 through December 31, 2004

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CRS-45
Agency: Director of Central Intelligence
Legislative authority: FY1997 Intelligence Authorization Act, Section 721
Full text:
[http://www.dni.gov/reports/2004_unclass_report_to_NIC_DO_16Nov04.pdf]
International Narcotics Control Strategy Report, 2005 (annual report)
Most recent date available: March 2007
Agency: U.S. Department of State, Bureau for International Narcotics and Law
Enforcement Matters
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 Volume I: [http://www.state.gov/documents/organization/81446.pdf]
Full text Volume II: [http://www.state.gov/documents/organization/81447.pdf]
Report to Congress on China’s WTO Compliance (annual report)
Most recent date available: December 11, 2006
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/
2006/asset_upload_file688_10223.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 2007
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/2007/88157.htm]
Congressional-Executive Commission Report (annual report)
Most recent date available: September 20, 2006
Agency: Congressional-Executive Commission on China
Legislative Authority: P.L. 106-286, Normal Trade Relations with the People’s
Republic of China, 2000

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CRS-46
Full text: [http://www.cecc.gov/pages/annualRpt/annualRpt06/index.php?PHP
SESSID=9377164c288981e42b9a2577054dddf2]

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