The U.S.-China relationship is the most complex bilateral relationship for the United States. Over the last 30 years, Sino-American relations have undergone an impressive transformation from animosity and conflict to candid dialogue and constructive cooperation. These two vast and complicated countries have found common ground on issues of trade, investment and, more recently, security. But key issues remain unresolved, and the potential for troubling divergence is real as China becomes an economic powerhouse, a military force in Asia, and a potential rival to U.S. hegemony.

The future of Sino-American relations is fraught with questions. Will Taiwan declare its independence, or will it be integrated into the People's Republic of China? Will American missile defense trigger a Chinese arms buildup, or will the two militaries strengthen their ties and cooperation? Can China's one-party system sustain itself in a market economy, or will China undergo drastic political change? Will China prove hospitable to human rights, or will it remain a rigid, state-controlled society? Uncertainty about these and other crucial questions is real, and momentous choices remain for Chinese and American leaders. If the last 30 years are taken as a guide, the leaders of tomorrow can best face these challenges by constructively engaging in pursuit of common interests.

The Economic Ties that Bind

Overlapping interests between the United States and China have been predominantly in the economic sphere. China's drive to become an economic power has been simply astonishing. Growth rates have frequently approached 10 percent per year over the past 10 years, and in 2002 China was the recipient of more than $50 billion in foreign investment. There are now 2 million private companies in China, an emerging middle class, and ambitious infrastructure development projects. China is a global center for manufacturing and a regional economic power, particularly since the Japanese economy has stalled. This level of economic openness and growth in China was unthinkable 30 years ago and owes much to the relationship between the United States and China.

On trade and investment, there has been considerable common ground and many areas of mutual interest between the two countries. The United States has pursued commercial opportunities, exports, and profits in China; China has sought U.S. investment, technology, and support for Chinese accession into global trade regimes. U.S. support for trade and investment in China has matured from Most Favored Nation status in the 1980s and 1990s to China's integration into the World Trade Organization (WTO) in 2001. China has in return demonstrated a willingness to open up its state-owned economy, dramatically reducing tariffs, overhauling laws and regulations, and permitting greater private ownership, property rights, and transparency.

China still has a long way to go in reforming its economy, however. China's WTO compliance record so far is mixed, and it must continue to improve protection of intellectual property rights, remove import quotas on agricultural goods, eliminate regulations that discriminate against foreign products, and establish more efficient and vigorous independent regulatory agencies. China is also faced with ongoing problems with inflexible state-owned enterprises, bad loans in state banks, unfunded pension systems, and widespread corruption. But today's vibrant and developing China still bears little resemblance to the economy of the early 1970s. The ties afforded by this development have bolstered Sino-American relations beyond the balance sheet: Americans and Chinese now do business together, travel to each other's countries, indulge in common sports and entertainment, and shop for the same name brands.

Though economic cooperation has been increasingly robust, the lack of political reform in China has proven to be an impediment to strengthening Sino-American ties. The Chinese Communist Party (CCP) has opened the economy while maintaining a one-party state in which power is concentrated in a few dozen individuals, and dissent has been repressed. China is undergoing a stunning modernization, but ordinary Chinese have very little say in the process. This balancing act has raised difficulties as the incompatibility between a free market and one-party rule becomes evident; China could be approaching a crisis in governance, with a decay in the Party's authority, a deteriorating state capacity, and rising tensions between the regime and society. To many observers, it appears that China has to implement some strategy of political reform without delay, including legislative measures, legal system elections, and an empowerment of civil society. But the CCP is both determined and resilient, and the choice between working with a largely repressive entity or encouraging potentially destabilizing dissent has proven difficult for American policymakers.

Political Reform

The United States has struggled to advance the cause of human rights and political reform in China. We have tried private diplomacy, public criticism, and economic sanctions—-none of which have had particularly satisfying results. Human rights of all kinds in China-—civil, political, women's, religious, and ethnic—-remain among the most restricted in the world. The issue is a difficult one because Chinese and Americans approach it from different perspectives. Americans see a stultifying authoritarian government that denies-—sometimes brutally-—universal rights and freedoms; many Chinese counter that economic and social rights are more important than political freedoms, and that the economic progress of the last 25 years therefore represents an impressive advance of human rights. The growth in economic openness presents an opportunity for human rights in China-—as new people and ideas flow across the Chinese border, the potential for accompanying political and social change grows. But until there is real political change in China, human rights will persist as a glaring concern for Americans and American policymakers.

Security

Other areas of concern for Chinese and American policymakers are principally in the security arena. Chief among these is the future of Taiwan, which remains the most volatile point of tension in the U.S.-China relationship. China has been persistent in its claim on Taiwan, simultaneously pursuing military buildups across the Taiwan Strait and closer links in commerce and trade with the island. The United States formally embraces a "one-China" policy, and, despite statements made early in the Bush Administration, we have generally maintained strategic ambiguity with regard to Taiwan-—we have dissuaded Taiwan from declaring independence, while keeping China guessing about a U.S. response to an unprovoked Chinese offensive.

Taiwan arouses passionate and historically rooted sentiment on both sides, and this has periodically led to inflamed rhetoric and escalated tensions. A principal goal on both sides has been—-and should remain-—the avoidance of military conflict over Taiwan. The United States should avoid provoking China over Taiwan, and China should not pursue military coercion in seeking to unify the island with the mainland. The future of Taiwan remains in question, but it is a question that should be worked out quietly—-not through war, but through negotiation, commerce, and the passage of time.

Another area of concern between the United States and China has been in weapons technology and proliferation. China is one of a few nations with the ability to inflict great nuclear harm on the United States, and has pursued a minimum nuclear deterrence capability. The United States has also accused China of exporting dangerous weapons and missile technology to countries like Pakistan and North Korea. Tensions have ebbed somewhat, as the 1990s saw the successful incorporation of China into several nonproliferation regimes, and China has recently announced a plan to limit its exports of missiles and other dual-use technologies. But U.S. plans to build a missile defense system and China's goal of upgrading its nuclear capability ensure difficult times ahead. China will be provoked by any U.S. attempt to eliminate its deterrence capability through a missile shield, while the United States will oppose a nuclear arms buildup in East Asia. Potential flashpoints such as the Korean peninsula and Taiwan could further complicate the situation. Dialogue between the military and civilian leadership of both nations is necessary to ensure that misunderstanding and mistrust do not escalate into something more dangerous.

The potential for a successful and sustained dialogue has been somewhat strengthened since the war on terrorism recast the U.S.-China relationship. The common strategic concern of terrorism has led to tangible cooperation: Chinese support for the U.S.-led campaign in Afghanistan, intelligence-sharing, and U.S. support for the Chinese crackdown on Islamic separatists in China's western territories. There is also a warmer tone between the two nations as of the end of 2002, as the United States has renewed military-to-military ties, and China supported the United Nations resolution on Iraq and has pledged cooperation in defusing the crisis in North Korea.

PRC President Jiang Zemin made it a priority to demonstrate enhanced relations and cooperation between the United States and China in the war on terror as China moved toward a change in leadership. In the coming months and years, incoming President Hu Jintao and the new Chinese leadership must resolve internal differences-—if any-—and formulate their own approach to the United States and foreign policy. It remains to be seen how this approach will differ from Jiang's approach, and to what extent Jiang will remain involved in diplomatic and security matters. For the time being, China seems to have accepted the reality of U.S. preeminence, and the Bush Administration has decided to focus on working with China on areas of common concern.

Building on a Strong, yet Uncertain, Foundation

The war on terror has put the Sino-American relationship on more solid footing, but the potential for a negative turn remains. One event, such as the downed spy plane or a statement by Taiwan's President Chen Shui-bian in favor of independence, could swing relations in the other direction. This instability remains a flaw in the relationship, and in U.S. policy toward China in general.

The United States must have a multifaceted policy toward China because of the diversity of U.S. interests regarding China. Too many Americans tend to think about the U.S.-China relationship in terms of a single issue, such as trade, Taiwan, or human rights. Without diminishing the importance of these specific issues, American policymakers should not allow any one of these issues to dominate, drive, or derail the entire relationship. With so many questions ahead, there will surely be difficult times and differences of opinion. China is a vast and diverse country and economy, with a future that may be marked by both development and upheaval. If we pursue a policy that reflects the breadth of common interests between the two nations, then we can avoid the tumult that has afflicted relations between the two nations over the last 30 years.

The United States should always speak up for its interests and values in dealing with China—-in commerce, international security, and human rights. But we should not fear a strong and prosperous China—-the surest way to make China an enemy is to treat it as one. Despite serious and persistent differences, China and the United States have been able to construct a relationship that has benefited both countries and increased the stability of Asia and the world. Expanded ties and cooperation allow a flow of ideas that can break down mistrust and misunderstanding of China in the United States, while encouraging growth and, potentially, political change within China.

The future of China is the great unknown of the 21st century. The vital task for the United States is to encourage China to move toward greater prosperity, freedom, and international cooperation, while acknowledging China's important and evolving role in the world. The United States and China continue to alternate between connecting and colliding on a great many issues. If both sides commit themselves to engagement, then the United States and China can build on the foundation of the last 30 years to forge a relationship characterized by depth, candor, and common interest.

^{Reprinted with the permission of The China Business Council, Washington, DC, www.uschina.org. The US-China Business Council is the principal organization of US companies engaged in trade and investment with China.}

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