Fact Sheet released by the Bureau of East Asian and Pacific Affairs, US Department of State, June 20, 1997.

The United States seeks constructive relations with a strong, stable, open, and prosperous China that is integrated into the international community and acts as responsible member of that community.

The US needs a constructive working relationship with China because:

In the 1972 Shanghai Communiqué signed during President Nixon's historic trip to China, the United States adopted a "one China policy." This policy acknowledges that Chinese on both sides of the Taiwan Strait maintain that there is only one China and that Taiwan is part of China. In 1979, the United States established relations with the P.R.C. and transferred diplomatic recognition from Taipei to Beijing. A 1979 Joint Communiqué reflected this change, and Beijing agreed that the American people would continue to carry on commercial, cultural, and other unofficial contacts with the people of Taiwan. The 1979 Taiwan Relations Act, and a third Joint Communiqué signed in 1982, further defined the US-China relationship as well as unofficial US relations with the people of Taiwan.

In September 1993, President Clinton launched a policy of comprehensive engagement with China to pursue US interests through intensive, high-level dialogue with the Chinese.

This policy seeks:

Regional security remains a key issue in the US-China relations. The United States has a long-term interest in peace and stability in Asia; there are approximately 100,000 American soldiers stationed in the Asia-Pacific region. China plays a key role in regional security issues, including resolving the North Korean nuclear issue, reaching a peaceful settlement of the territorial dispute over the South China Sea and Spratly Islands, and building democracy and peace in Cambodia. The United States supports China's active participation in evolving regional security institutions, most prominently the ASEAN (Association of Southeast Asian Nations) Regional Forum and the Northeast Asia Security Dialogue.

With regard to other nuclear and security issues, the United States and China have agreed to work together to try to achieve an international convention banning the production of fissile materials for nuclear weapons or other nuclear explosive devices. China is a signatory to the Nuclear Non-Proliferation Treaty (NPT), signed the Comprehensive Test Ban Treaty in 1996, ratified the Chemical Weapons Convention in April 1997, and has banned the exports of MTCR-class intermediate and long-range missiles. In May 1995, China voted in favor of indefinite extension of the NPT, a top priority in US foreign policy. The United States continues to urge China to stop all nuclear cooperation with Iran's nuclear power generation program; to join the Zangger Nuclear Suppliers Group; further restrict transfers of missile components and technology; and control strictly exports of chemical and biological weapon precursors.

Trade and Investment

China has a quarter of the world's population- a vast pool of potential consumers for US products and services- and market-oriented reforms have recently helped generate very rapid economic growth. The World Bank has predicted that China's economy will grow 8%-10% per year until the year 2000 and has estimated that China's economic output will reach $10 trillion by the middle of the next century.

With this rapid economic expansion, China's market will be increasingly important for United States commercial interests. The US currently grants China most-favored-nation trading status. In some sectors, access to the Chinese market has become a critical element of US producers' growth strategies. US-China trade has continued to climb, reaching $57.3 billion in 1995- up from $48.1 billion the previous year. Recently, however, China's exports to the US have accounted for most of the growth in bilateral trade. The US merchandise trade deficit with China was about $39.5 billion in 1996, exceeded only by the US bilateral trade deficit with Japan. In order to build a balanced and sustainable bilateral trading relationship, it will be essential to obtain greater market access for US products and services in China.

Seeking to participate in China's rapid economic growth, major multinational corporations from around the world have shown great interest in investing in China. The United States is the third-largest source of such investment, after Hong Kong and Taiwan. Globally, China is second only to the United States as recipient of foreign direct investment.

The increasingly important US economic and trade relations with China are an important element of the Administration's "comprehensive engagement" strategy. In economics and trade, there are two main elements to the US approach.

First, the United States seeks to fully integrate China into the global, market-based economic and trading system. China's participation in the global economy will nurture the process of economic reform and increase China's stake in the stability and prosperity of East Asia.

Second, the United States seeks to expand US exporters' and investors' access to the Chinese market. As China grows and develops, its needs for imported goods and services will grow even more rapidly.

China is now in its 10th year of negotiations for accession to the WTO (World Trade Organization; formerly the General Agreement on Tariffs and Trade (GATT)). To gain WTO entry, all prospective WTO members are required to comply with certain fundamental trading disciplines and offer substantially expanded market access to other members of the organization.

Securing China's accession to the WTO on these terms will contribute to China's economic transformation, spur economic growth in the US and other WTO-member economies, and support the integrity of the international trading system. The United States continues to work with China and other WTO members toward a commercially viable accession protocol.

Many major trading entities- among them the United States, the European Union, and Japan- have shared concerns with respect to China's accession. These concerns include efforts to obtain satisfactory market access offers for both goods and services, full trading rights for all potential Chinese consumers and end-users, nondiscrimination between foreign and local commercial operations in China, the reduction of monopolistic state trading practices, and the elimination of arbitrary or non-scientific technical standards.

The United States and China also maintain a very active dialogue on bilateral trade issues. In the past two years , the two sides have concluded agreements on the protection of intellectual property rights (IPR), textiles, and satellite launches.

US and Chinese negotiators meet regularly to review progress in implementing our commercial agreements. In areas where China has failed to comply with its international commitments, the Administration has exercised its legislative authority to conduct investigations and, when necessary, propose appropriate trade sanctions. These efforts will not only expand the commercial opportunities open to US exporters in China but also contribute to China's efforts to bring its trade regime into compliance with the WTO and with other international commercial standards.

The United States continues to expand its export promotion efforts and its scientific and technical exchange programs in China. The US and China last year renewed their Bilateral Science and Technology Agreement for another five years. In March 1997, the two countries held their first Sustainable Development Forum which is intended to expand cooperation in the environmental field. The Joint Commission on Commerce and Trade, hosted by the Commerce Department in September, discussed expansion of long-term economic and business ties between China and the United States.

The US economic relationship with Hong Kong is closely tied to US- China relations. Under the 1984 Sino-British Joint Declaration, Hong Kong will become a Special Administrative Region (SAR) of the P.R.C. on July 1, 1997. US concerns over this transition include economic and investment issues. The United States has substantial economic and social ties with Hong Kong, with an estimated $8 billion to $10 billion invested there. There are 900,000 US firms and 30,000 Americans resident in Hong Kong. The United States is Hong Kong's second largest market- importing $10.2 billion in 1995- and Hong Kong is America's 14th-largest trading partner- $14.2 billion in US exports in 1995.

The United States and China both are members of the Asia-Pacific Economic Cooperation forum (APEC). At the November 1994 APEC summit in Bogor, Indonesia, President Clinton, Chinese President Jiang Zemin, and the other APEC leaders pledged to meet the goal of free and open trade and investment in the Asia-Pacific region by the year 2020.