China and the U.S.: present and future

US Department of State Bulletin, August, 1988

Address before the National Council for United States-China Trade on June 1, 1988. Ambassador Armacost is Under Secretary for Political Affairs.

Nearly a decade ago, the United States and China completed the process of normalization-initiated by President Nixon in 1969--by establishing full diplomatic relations between our countries.

Today the U.S.-China relationship has been normalized in every sense of the word. We have substantial cultural, economic, and trade contacts, and these are growing rapidly. Our political dialogue has been broadened and deepened. We have the normal day-to-day problems and differences that mark any vibrant relationship. Perhaps most notably, this important relationship-once the subject of such domestic controversy-is no longer a matter of partisan debate as we head into a presidential election.

I would like to take a few minutes this evening to look at the relationship: where we are; where we are going; what we have learned.

The Development of Relations

First, a brief historical note. Strategic concerns, rather than sentiment, prompted the United States and China to make the initial moves toward rapprochement in the late 1960s. The friendlier relations that emerged in the early 1970s eased U.S. security concerns both in Asia and on the wider global geopolitical playing field.

In the late 1970s, full normalization of relations was facilitated not only by a shared opposition to Soviet expansionism but by China's decision to accelerate its modernization drive. The new relationship got off to a fast start, especially in the areas of educational and scientific exchange, people-to-people contacts, and an upsurge in commercial transactions. These and other important substantive ties developed in a honeymoon atmosphere in which expectations on both sides were high. Inevitably, there were disappointments. But there was also rapid learning and real progress on many fronts.

The Achievements of the Relationship Throughout the Reagan Administration, the United States and China have worked to diversify and to expand this relationship. In so doing, we have reinforced its original foundations. A quick look at the record reveals the progress achieved.

* In diplomacy, regular high-level consultations on key regional and international issues have been institutionalized;

* In commerce, bilateral trade with China has grown from $1.1 billion in 1978 to $10.5 billion in 1987.

* Investment flows, nonexistent in 1978, have grown to $3.1 billion in committed funds and $1.7 in paid-in funds; there are now approximately 350 joint ventures, many of them undoubtedly represented in this room;

* In science and technology, we have signed over 30 protocols, more than either the United States or China has with any other country. Today we cooperate across a broad spectrum of scientific and technological researchfrom agriculture to superconductivity;

* In defense, ship and aircraft visits, personnel exchanges, and transfers of technology have flourished, and we now have a cash FMS [Foreign Military Sales] program with China;

* In education, we have moved from a closed to an open door policy. Almost 30,000 Chinese students are in the United States, while Americans in increasing numbers are studying and conducting research in China. In April China agreed in principle to accept a Peace Corps contingent.

This is a record in which both our peoples and governments can take pride.

Changes in China

This audience is well aware of the striking economic transformation now taking place in China today. Yet, as businessmen, diplomats, and observers of China, we may share a certain skepticism about developments that appear, at first glance, to be almost too good to be true. Will the reforms continue? Will they provoke a backlash? Will they be reversed? These are questions that are frequently asked. Let me give you my own views on the subject.

Recent developments encourage optimism. Over the past 6 months, both the 13th National Party Congress and the 7th National People's Congress have affirmed China's commitment to a broad program of economic reform. The internal debates are no longer focused on the question of whether reform should take place-as was the case in the late 1970s--but on the scope and pace of reform. The issue is not whether but how far and how fast to effect fundamental changes in the economy and political system. Leaders of all stripes, including many who were formerly considered "economic conservatives," appear to accept the necessity for more reform. The principal problems now facing the leadership are those of managing a complex process of directed and derivative change-how best to introduce market mechanisms without fueling inflation; how to improve enterprise efficiency without causing massive unemployment; how to introduce greater freedom without spawning unacceptably high levels of social conflict and political demands.

There is now a heightened political will to tackle key reforms, as underscored by policy initiatives in the areas of price reform, foreign trade, constitutional sanction of private property, and the further curtailment of central control over the daily economic life of China. Movement toward a marketoriented economy is an unabashed goal as Chinese leaders seek to invigorate the economy by replacing the heavy hand of bureaucracy with the vitality of the marketplace.