February 4, 2015
U.S.-China Relations
Australia, Japan, the Philippines, South Korea, and
Overview
Thailand, and by expanding military cooperation with
such countries as Singapore and Vietnam;
The U.S.-China relationship is currently one of the world’s
• deepening relationships with emerging powers,
most consequential bilateral relationships. After 35 years of
including China, India, and Indonesia, and pursuing new
fast-paced growth, China’s economy is now the world’s
engagement with others, such as Burma;
second largest in nominal terms, after the United States, and
is estimated to have overtaken the U.S. economy as the
• stepping up engagement with regional multilateral
largest economy in purchasing power parity (PPP) terms.
institutions, such as the Association of Southeast Asian
The two economies are heavily interdependent and the two
Nations (ASEAN) and the East Asia Summit; and
nations are major economic players in almost every region
• expanding trade and investment and helping shape the
of the world. Both nations are also among the five veto-
region’s economic rules and norms, including through a
wielding permanent members of the United Nations
proposed Trans-Pacific Partnership (TPP) trade
Security Council and have militaries that are operating in
agreement with 11 other nations.
increasingly close proximity in Asia and beyond. China and
the United States are, respectively, the world’s first and
Chinese officials have been particularly critical of U.S.
second largest emitters of greenhouse gases.
efforts to strengthen U.S. military relationships in the
region, arguing that such efforts have been destabilizing.
On a trip to Beijing in November 2014, President Obama
stated that, “the United States welcomes the continuing rise
New Model of Major Country Relations
of a China that is peaceful, prosperous, and stable and that
plays a responsible role in the world.” At the same time, the
President Xi’s signature policy toward the United States is
President has acknowledged elements of competition in the
what China calls a “new model of major country relations,”
U.S.-China relationship and accused Chinese leaders of
designed to head off the rivalry and conflict that have often
being “free riders” in the international system. Areas in
bedeviled relations between established and rising powers
which the two countries have presented competing visions
over history. President Obama has agreed to work with Xi
include democracy promotion, Asian security, management
to build a “new model” relationship, but the two presidents
of maritime territorial disputes, trade and investment,
have failed to agree on what it should entail. President
cyberspace, space, and foreign assistance.
Obama’s version is a relationship “defined by increased
Leaders and Envoys
practical cooperation and constructive management of
differences.” President Xi has emphasized “respecting each
other’s sovereignty and territorial integrity, as well as
The Communist Party of China founded the People’s
choice of development path,” references to China’s claim to
Republic of China (PRC) in 1949 and has led the country
sovereignty over Taiwan, its rule in Hong Kong, Tibet, and
since. China’s top leader, Xi Jinping (his family name, Xi,
the northwestern region of Xinjiang, and its insistence on
is pronounced “Shee”), has been Communist Party General
continued Communist Party rule.
Secretary and Central Military Commission Chairman since
2012, and State President since 2013. The Chinese
Taiwan in the U.S.-China Relationship
Ambassador to the United States is Cui Tiankai (his family
name, Cui, is pronounced “Tsway”). The U.S. Ambassador
Agreements on Taiwan laid the foundation for the
to China is former U.S. Senator Max Baucus.
normalization of relations between the United States and
The Rebalance to the Asia-Pacific Region China in 1979. In the 1972 Shanghai Communiqué, the
United States declared that it “acknowledges that all
Chinese on either side of the Taiwan Strait maintain there is
The Obama Administration’s overall approach to the Asia-
but one China and that Taiwan is a part of China.” In a
Pacific region involves a strategic rebalancing or “pivot” of
1979 communiqué on the establishment of U.S.-China
U.S. priorities to the region. Chinese commentators have
diplomatic relations, the United States agreed that it would
characterized the rebalance as intended to “contain” China.
henceforth have only “unofficial” relations with Taiwan. In
U.S. officials have denied that intention. After leaving
a subsequent 1982 communiqué, the United States said it
office, an architect of the policy wrote that it was intended
intended “gradually to reduce its sale of arms to Taiwan.”
to “give comfort to countries uncertain about the impact of
China’s rise and provide important balance and leadership.”
Concerned that the first two communiqués did not do
The strategy, formally announced in 2011, includes:
enough to protect Taiwan’s interests, the U.S. Congress in
• “forging a broad-based military presence” in the region,
March 1979 passed the Taiwan Relations Act or TRA (P.L.
including by strengthening bilateral alliances with
96-8). The TRA declared that it is U.S. policy that the
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U.S.-China Relations
decision to establish diplomatic relations with the PRC
the U.S. perspective, many trade tensions stem from
“rests upon the expectation that the future of Taiwan will be
China’s incomplete transition to a free market economy.
determined by peaceful means.” The TRA also mandated
While China has significantly liberalized its economic and
that the United States would sell Taiwan defense items “in
trade regimes since 1978, it continues to impose a number
such quantity as may be necessary to enable Taiwan to
of state-directed policies that appear to distort trade and
maintain a sufficient self-defense capability.” Beijing
investment flows. Major areas of U.S. concern include
continues to vow to unify the PRC and Taiwan, by force if
China’s relatively poor record of intellectual property rights
necessary. Washington continues to sell arms to Taiwan,
(IPR) enforcement and its alleged cyber theft of U.S. trade
over strenuous PRC objections. Both Washington and
secrets; its mixed record on implementing its World Trade
Beijing continue to plan for the possibility that they could
Organization (WTO) obligations; its extensive use of
one day find themselves involved in a military
industrial policies, such as subsidies, to promote state-
confrontation over Taiwan’s fate. In China’s case, such
owned firms; trade and investment barriers; pressure put on
planning includes investment in what the U.S. Department
foreign-invested firms in China to transfer technology in
of Defense (DOD) calls “anti-access/area-denial” (A2/AD)
exchange for market access; and China’s efforts to hold
military capabilities designed to deter U.S. and other forces
down the value of the Chinese currency against the dollar.
from intervening in a conflict in the Western Pacific.
Many U.S. policy makers argue that such policies harm
U.S. economic interests and have contributed to U.S. job
The Political/Security Relationship
losses. The United States and China are negotiating a “high
standard” bilateral investment treaty (BIT) with the goal of
The United States and China have sought to expand
expanding bilateral investment and trade opportunities.
cooperation in addressing global and regional challenges,
such as the weak global economy, the Iranian and North
Dialogues
Korean nuclear programs, climate change, Afghan
reconstruction, and the Ebola epidemic. At the same time,
The United States and China are engaged in more than 100
the United States has raised concerns about China’s use of
bilateral dialogues, although dialogue on strategic issues,
coercive tactics in its maritime territorial disputes with
such as nuclear weapons policy, remains limited. High-
neighbors in the East China Sea and South China Sea; the
profile annual dialogues include:
alleged involvement of Chinese state actors in cyber
• The Strategic and Economic Dialogue (S&ED), co-
espionage and cyber-theft against U.S. targets; China’s
human rights record, including in the ethnic minority areas
chaired on the U.S. side by the Secretary of State and
the Secretary of the Treasury. Since 2011, the S&ED
of Tibet and Xinjiang; and China’s resistance to calls for
framework has included a Strategic Security Dialogue
more democratic electoral reforms in Hong Kong.
(SSD) that includes representatives of the two militaries.
The military-to-military relationship has long lagged behind
• The Joint Commission on Commerce and Trade
the broader relationship; both presidents have committed to
(JCCT), co-chaired on the U.S. side by the Secretary of
work to change that. The two militaries have stepped up the
Commerce and the U.S. Trade Representative.
pace of high-level exchanges. In November 2014, they
agreed to a memorandum of understanding (MOU) on rules
Issues for the 114th Congress
of behavior for safe military encounters at sea and in the air.
In 2015, the United States hopes to complete an annex to
The 114th Congress is expected to monitor and address the
the MOU on rules for air encounters. A longstanding source
security situation in the Asia-Pacific region, including
of friction is the issue of U.S. military ships and aircraft
China’s continuing military modernization, implementation
operating in international waters and airspace near China’s
of the U.S. strategic rebalance, and maritime disputes
coast. China says it has a right to regulate such activities,
between China and its neighbors. In the 113th Congress,
and it has engaged in sometimes risky interceptions of U.S.
P.L. 113-291 required DOD to prepare a report, due in
vessels and aircraft to prove the point. The United States
December 2015, on its strategy to prioritize U.S. defense
argues that international law gives China no such right.
interests in the region. The 114th Congress is also expected
to consider the legislative framework for cybersecurity and
The Economic Relationship
bills to facilitate the approval of exports of liquid natural
gas (LNG) to non-free trade agreement countries,
U.S.-China commercial ties have expanded rapidly over the
potentially including China. Other issues the 114th Congress
past three decades. In nominal terms, total bilateral trade
may consider include the U.S.-China BIT and regional TPP
(imports and exports) rose from $2 billion in 1979 to $593
trade negotiations; China’s human rights record; China’s
billion in 2014. In 2014, China was the United States’
efforts to tighten control of the Internet; PRC-Taiwan
second-largest trading partner, its third-largest export
tensions ahead of Taiwan’s 2016 presidential election; and
market, its biggest source of imports, and one of the two
developments in Hong Kong.
largest foreign holders of U.S. debt in the form of U.S.
treasury securities. China is estimated to be a $350 billion
Susan V. Lawrence, slawrence@crs.loc.gov, 7-2577
market for U.S. firms, based on U.S. direct and indirect
Wayne M. Morrison, wmorrison@crs.loc.gov, 7-7767
exports to China and sales by U.S.-invested firms in China.

However, the bilateral economic relationship has become
increasingly complex and often fraught with tension. From
IF10119
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