China-U.S. Relations: in the 109th Congress

China-U.S. Relations in the 109 Congress

Updated December 31, 2006
Kerry Dumbaugh
Specialist in Asian Affairs
Foreign Affairs, Defense, and Trade Division

China-U.S. Relations in the 109 Congress
U.S.-China relations, remarkably smooth from 2001-2004, became moreth
problematic again in the 109 Congress. U.S. policy toward China appeared to be
subject to competing reassessments. State Department officials in 2005 unveiled
what they said was a new policy framework for the relationship — one in which the
United States was willing to work cooperatively with a non-democratic China while
encouraging Beijing to become a “responsible stakeholder” in the global system.
Other U.S. policymakers appear to adopt tougher stances on issues involving China
and U.S.-China relations, concerned about strong PRC economic growth and a more
assertive and influential PRC diplomacy in the international arena.
Taiwan, which China considers a “renegade province,” remained the most
sensitive issue the two countries face and the one many observers fear could lead to
Sino-U.S. conflict. Late in 2004 PRC officials created more tension over Taiwan by
passing an “anti-secession” law (adopted in March 2005) aimed at curbing Taiwan
independence. U.S. officials regarded the action as provocative and unconstructive.
In February 2006, Taiwan President Chen Shui-bian suspended the activities of the
National Unification Council, a symbol of Taiwan’s commitment to unification with
China, citing in part the 2005 anti-secession law as a reason for his action. Both the
PRC and Taiwan moves raised U.S. concerns about cross-strait stability.
Another matter of growing U.S. concern was China’s increasing global “reach”
and the consequences that the PRC’s expanding its international influence have for
U.S. interests. To feed its appetite for resources, China during 2005-2006 steadily
signed 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. Some U.S. observers viewed these activities as a threat to the
United States. Even if simply the natural outcome of China’s economic
development, these and other PRC activities appeared to pose critical future
challenges for U.S. economic and political interests.
Much U.S. concern about China appeared driven by security calculations at the
Pentagon and in Congress. In remarks in June 2005, Secretary of Defense Donald
Rumsfeld questioned the motivations behind China’s expanding military budget and
stated that a congressionally mandated DOD report concluded Beijing is greatly
understating its military expenditures. Bilateral economic and trade issues alsoth
remained matters of concern, with U.S. officials and some Members of the 109
Congress particularly criticizing China’s failure to halt piracy of U.S. intellectual
property rights (IPR) and China’s continued constraints on its currency valuation.
In the February 2005 State Department Country Reports on Human Rights Practices,
U.S. officials again classified China’s record as poor. Beijing continued its
crackdown on independent religious organizations and political activists.
The 109th Congress considered these and other issues in a number of legislative
vehicles, including The John Warner National Defense Authorization Act for
FY2007 (P.L. 109-364), and S. 295, a bill to authorize punitive action if China’s
currency is not reevaluated.

Background and Overview...........................................1
Introduction ..................................................1
Key Issues.......................................................2
North Korea..................................................2
October 2006 Nuclear Test..................................2
Six Party Talks............................................3
Unocal: PRC Bids to Purchase U.S. Companies .....................4
U.S.-PRC “Senior Dialogue”.....................................5
Taiwan ......................................................6
Corruption Scandals in the Chen Administration.................7
“Abolishing” Taiwan’s Unification Council and Guidelines........7
PRC Anti-Secession Law....................................8
Changing PRC Political Pressure on Taiwan.....................8
U.S. Taiwan Policy and U.S. Arms Sales.......................9
Taiwan and the World Health Organization (WHO)..............10
Official Taiwan-PRC Contacts..............................11
Avian Flu...................................................11
China’s Growing Global Reach .................................14
Asia ...................................................14
European Union..........................................16
Middle East and Africa....................................16
Western Hemisphere......................................17
Economic Issues .............................................18
Intellectual Property Rights.................................19
Currency Valuation.......................................19
National Security Issues .......................................19
Annual Report on China’s Military Power.....................19
Weapons Proliferation.....................................20
Military Contacts.........................................20
PRC Submarine and the U.S.S. Kitty Hawk....................21
Human Rights...............................................21
New Internet and Media Restrictions..........................22
Religious Freedom........................................22
Tibet ...................................................22
Xinjiang’s Ethnic Muslims.................................23
Family Planning Policies...................................24
Social Stability...........................................25
Hong Kong Governance .......................................25
Major Legislation ............................................26
Appendix I: Selected Visits by U.S. and PRC Officials...................32
Appendix II: Chronology of Developments, 2005-2006...................35
Developments in 2006.........................................35
Developments in 2005.........................................41

China-U.S. Relations in the 109 Congress
Background and Overview
U.S.-China relations, remarkably smooth from 2001-2004, became more
problematic again in the 109th Congress as some U.S. policymakers appeared to begin
adopting tougher stances on issues involving China and U.S.-China relations.
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, 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 continued 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, and the economic advantage China gains from pegging its currency
to a basket of international currencies. In addition, China’s accelerating rise in the
world has significant implications for U.S. global power and influence. In pursuit of
its economic development agenda, China’s enormous and 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, many of them with key
U.S. allies. A number of new developments and statements since late 2004 suggest
that U.S. policymakers are reassessing U.S. policies in light of strong PRC economic
growth and a more assertive PRC international posture.
This report addresses relevant policy questions, trends, and key legislation in
U.S.-China relations during the 109th Congress, and provides a chronology of
developments and high-level exchanges from January 2005 onward. Additional
details on the issues discussed here are available in other CRS products, noted
throughout this report. For background information and legislative action preceding

2005, see CRS Report RL31815, China-U.S. Relations During the 108th Congress,

by Kerry Dumbaugh. CRS products can be found on the CRS website at
[] .

Key Issues
North Korea
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 which elevated the North Korean issue to an even more prominent
position in the U.S. political agenda with China.
The evolving PRC reaction in the weeks following the October 9th test appeared
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 speculation in the press and by some American experts
at the time was that the PRC now would be forced to become more coercive in its1
North Korea policy. 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.2 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 9th3
test had “a negative impact” on Sino-North Korean relations. Some news accounts
maintained that the PRC in subsequent weeks began augmenting its military forces
along the Sino-North Korean border and started erecting barbed-wire fences along
some stretches of the border.4
But in other instances, Beijing’s resolve appeared to be fluctuating. Within daysth
of the North Korean October 9 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

1 Tkacik, John, “A new tack for China after North Korea’s nuclear test?” The Heritage
Foundation, Webmemo #1236, October 11, 2006.
2 PRC Foreign Ministry Issues Statement on DPRK Nuclear Test, Beijing Xinhua Domestic
Service, in Chinese, translated in FBIS, FEA20061009028538, October 9, 2006.
3 OSC Analysis, “China moderating criticism of DPRK in bid to restart talks,”
CPF20061013307001, October 13, 2006.
4 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.

“appropriate and moderate” measures designed to further negotiations.5 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 Korea and an immediate freeze of North Korean financial assets.6 After the
U.N. vote, however, 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 had begun blocking
financial transactions with North Korea,7 and that Chinese officials were preparing
to reduce oil shipments and take other actions if North Korea refused to return to the
Six Party Talks.8
Six Party Talks.After over a year of stalemate and months of intensive
diplomacy behind the scenes, Six-Party Talks on North Korea’s nuclear program
began again in Beijing with two meetings held in July-August 2005 and September
2005. With both the North Korean and U.S. sides appearing to have moderated their
agendas, the talks resulted in the adoption of the first written agreement arising from
the talks — a joint statement of principles drafted with heavy Chinese involvement.
In the joint statement, the North Koreans agreed to dismantle their nuclear program,
and the United States and the four other participants agreed to discuss providing
North Korea with a light water reactor “at an appropriate time.” But in the days
following the release of the joint statement, it became evident that the United States
and the North Koreans had different views about the proper sequencing and timing
of these two events. The fifth round of Six-Party Talks was held in Beijing in9
November 2005.
The road to the North Korean nuclear crisis began in October 2002, when
Pyongyang told visiting U.S. officials that it was conducting a uranium enrichment
program in violation of its pledges under the 1994 U.S.-North Korean Agreed
Framework. The crisis continued to escalate as the United States, Japan, South
Korea, and other countries suspended energy assistance to North Korea and the latter
withdrew from the Nuclear Non-Proliferation Treaty and restarted its nuclear reactor
at Yongbyon. The Bush Administration rejected North Korean demands for bilateral
talks to resolve the crisis, and instead consented only to six-party talks involving
North and South Korea, the United States, the PRC, Japan, and Russia — still the
venue for nuclear discussions with North Korea.

5 “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.
6 Text of U.N. resolution on N. Korea sanctions, Associated Press, October 14, 2006.
7 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.
8 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.
9 See CRS Report RL33567, Korea-U.S. Relations: Issues for Congress, by Larry Niksch.

PRC officials have repeatedly 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 in 2005-2006, Beijing
still stopped short of promising to put further pressure on North Korea, and continued
to prop up the North Korean regime with supplies of food and fuel and to advocate
bilateral U.S.-North Korean dialogue.10
Unocal: PRC Bids to Purchase U.S. Companies
Although PRC investment in the United States long has been minimal, in 2004
PRC companies began to make several high-profile purchases and bids for American
companies. In December 2004, the PRC’s Lenovo Group Ltd. purchased IBM’s
personal computer division for $1.25 billion. On June 21, 2005, the Haier Group, the
PRC’s preeminent refrigerator manufacturer, teamed with a consortium of investors
in a $1.28 billion offer for the Maytag Corporation, owner of the Amana, Jenn-Air,
and Hoover brands. In the most sensitive case, China National Offshore Oil
Corporation (CNOOC), one of the PRC’s largest state-controlled companies, on June
21, 2005, made an unsolicited cash bid of $18.5 billion for the U.S. oil company
Unocal, topping the winning bid of $16.4 billion made two months earlier by
California-based Chevron. The CNOOC bid set off a spirited debate about the
national security risks of selling American energy assets to the PRC.11
Energy economists and business representatives who saw the CNOOC offer as
no economic or security threat to U.S. interests stressed that Unocal’s U.S.
production is small — 57,000 barrels a day in a total U.S. output of 7.3 million
barrels a day; pointed out that most of Unocal’s production assets are in Asia and
committed in long-term supply contracts to the Asian market; and said that Unocal
has no technology that needs to be protected for security reasons.12 Opponents of the
deal raised concerns about U.S. security. They asserted that U.S. oil reserves and
energy companies are vital strategic assets, and that the United States would be
economically vulnerable if they were owned by a Communist country; that Unocal
platforms in Alaska’s Cook Islands Inlet and deep-sea exploration platforms in the
Gulf of Mexico would provide ideal vantage points for PRC observation of U.S.

10 “U.S. Rebuffs Direct Talks with North Korea,” Korea Times, March 9, 2005; “China
Envoy Heads to U.S. for North Korea Nuclear Talks,” Reuters, March 8, 2005.
11 In a June 17, 2005 letter to President Bush, California Congressmen Richard Pombo and
Duncan Hunter urged the President to begin a review of the U.S. security implications of
such a sale. The letter was made available to Reuters.
12 These views are espoused, for instance, by Robert J. Samuelson, economic columnist for
Newsweek (“Let’s Stay Out of This Fight...”, Newsweek, July 11, 2005); Philip Verleger,
a specialist in the economics of international energy at the Institute for International
Economics in Washington DC (“Many Oil Experts Unconcerned Over China Unocal Bid,”
Washington Post, July 1, 2005, p. D01); and Paul Magnusson, international trade economist
for BusinessWeek (“Play Fair, and Insist That China Do the Same...” BusinessWeek, July 11,

2005, p. 31.)

military activities; and that sale of Unocal holdings throughout Asia would push the
region further into China’s economic orbit.13 Chevron executives argued further that
CNOOC lacked the deep-water exploration skills that Chevron brought to the table
and would thus be unable to increase Unocal domestic production as much as
Chevron would.
Some state governments pressed for assurances that the proposed CNOOC
purchase would not adversely affect Unocal obligations, such as environmental
clean-up and pension and health care benefits.14 Some Members of Congress
appeared most concerned about the potential security risks in the CNOOC deal. On
June 30, 2005, the House approved an amendment (333-92) by Representative
Kilpatrick to H.R. 3058 that prohibited the Treasury Department from using federal
monies to approve the CNOOC bid for Unocal. The same day, the House adopted
H.Res. 344 (398-15), urging President Bush to immediately review any CNOOC final
agreement to buy Unocal. Faced with this stiff American opposition, which CNOOC
executives termed as presenting an “unacceptable risk” to the takeover effort,
CNOOC dropped its Unocal bid on August 2, 2005.
U.S.-PRC “Senior Dialogue”
U.S. Treasury Secretary Henry Paulson continued the U.S. efforts initiated in
2005 by U.S. Deputy Secretary of State Robert Zoellick to maintain strategic
dialogues with the PRC. On September 20, 2006, during his first trip to China as
Treasury Secretary, Paulson announced that he would chair a new mechanism for
bilateral dialogue — the U.S.-China Strategic Economic Dialogue. According to the
Secretary, the goal of the Dialogue is “to take a long-term, a strategic view to
managing this relationship where we focus on fundamental, long-term issues.”15 The
Senior Dialogue will not supplant current ongoing Sino-U.S. dialogues, such as the
Joint Commission on Commerce and Trade, the Joint Economic Committee, and the
Joint Commission on Science and Technology.
The idea for an ongoing high-level dialogue was suggested by PRC President
Hu Jintao during a meeting with President Bush at the November 2004 Asia Pacific
Economic Cooperation (APEC) meeting in Chile. Preparations were finalized during
Secretary of State Condoleezza Rice’s subsequent visit to China. On August 1,
2005, U.S. Deputy Secretary of State Robert Zoellick initiated the Senior Dialogue
process in Beijing, meeting with his counterpart, Vice Foreign Minister Dai Bingguo.

13 Similar views, for instance, are held by John Tkacik, senior research expert on China at
the Heritage Foundation (“Say No to CNOOC’s bid for Unocal,” Asian Wall St. Journal,
June 29, 2005, p. A5); and Larry Wortzel, member of the congressionally established U.S.
China Security Review Commission (“The Big Tug of War Over Unocal,” The New York
Times, July 6, 2005, p. 1.
14 California, New Mexico, Pennsylvania, Montana, and Texas attorneys general are said to
be seeking Unocal assurances that CNOOC ownership would not undermine Unocal’s
obligations. “States to Weigh In on Unocal Offer...” Los Angeles Times, July 6, 2005, p. C-


15 Treasury Secretary Henry M. Paulson press briefing in Beijing, September 20, 2006. Joint
statement at [].

On December 7, 2005, Minister Dai and Secretary Zoellick held the second Senior
Dialogue meeting in Washington, DC, discussing “the strategic and conceptual
framework” of U.S.-China relations and other issues.16 The talks, planned for twice
annually, are the first time in the U.S.-PRC relationship that dialogue at this level of
seniority has been held on a regular basis. The talks suggest, in the words of a U.S.
official spokesman, an American recognition of “the role that China is playing in
Asia, in global affairs, [and] as a member of the U.N. Security Council.”17
Along with the establishment of regular U.S.-China talks, a speech given by
Deputy Secretary of State Zoellick on September 21, 2005, suggested an effort
underway within the Administration to explore a new framework for U.S. diplomacy
with China. Zoellick’s speech appeared designed to strike a balance somewhere
between the “open door/engagement” school of thought and the more dire security
threat concerns regularly raised by Pentagon planners (as expressed in the latest
Pentagon report, Military Power of the People’s Republic of China, released on May
24, 2006). Zoellick’s September 2005 speech emphasized the benefits of U.S.-China
cooperation but focused on urging the PRC to become a “responsible stakeholder”
— to not only reap the economic benefits of the global system but also to assume
greater responsibilities in its global economic and political diplomacy. According
to Zoellick, the United States was prepared to work cooperatively with a non-
democratic China even as U.S. officials sought to improve China’s democratic
Taiwan remained the most sensitive and complex issue that U.S. policymakers
face in bilateral Sino-U.S. relations.18 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. On December 27, 2004, the PRC
emphasized this point again in its fifth white paper on national security, entitled

16 Deputy Secretary Zoellick used the phrase to describe the first senior dialogue meeting
in Beijing in August 2005, at which the two sides discussed energy security, terrorism,
economic development and trade, and issues of democracy, freedom, and human rights.
According to the State Department, participants in the second Senior Dialogue and the
Economic Development and Reform Dialogue, which met simultaneously in December

2005, included Deputy Secretary Robert Zoellick and Under Secretary for Economic,

Business and Agricultural Affairs Josette Shiner, Director of Policy Planning Stephen
Krasner, Acting EB Assistant Secretary Larry Greenwood, EAP Senior Adviser James
Keith, APEC Senior Official Michael Michalak, National Security Council Senior Director
for Asia Michael Green, Council of Economic Advisers Member Dr. Matthew Slaughter,
Deputy Assistant Secretary of the Treasury David Loevinger, and Deputy Assistant
Secretary of Energy David Pumphrey.
17 State Department spokesman Richard Boucher in the daily press briefing of April 8, 2005.
18 For an analysis of current problems and challenges for U.S. policy toward Taiwan, see
CRS Report RL33684, Taiwan-U.S. Political Relations: New Strains and Changes, by Kerry

“China’s National Defense in 2004.”19 The paper called the Taiwan independence
movement the single biggest threat to China’s sovereignty and to regional peace, and
it vowed to prevent Taiwan independence at all costs. 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.”
Concerns intensified in the 109th Congress 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.
Corruption Scandals in the Chen Administration. Corruption scandals
and controversial political decisions plagued the Chen Administration in recent
months, 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. According to some opinion polls at the time, a majority of Taiwan citizens
felt the president should step down before his term ends in 2008.20
“Abolishing” Taiwan’s Unification Council and Guidelines. New
political controversy also arose when President Chen announced on February 27,
2006, that Taiwan’s National Unification Council (NUC) will “cease operations” and
the Guidelines on National Reunification (GNR) will “cease to apply.” The NUC
and GNR, two initiatives strongly identified with the former KMT government, had
importance chiefly for their symbolic embrace of that government’s commitment to
eventual unification with China.
President Chen first mentioned he was considering scrapping the NUC/GNR on
January 29, 2006. That statement appeared to surprise U.S. officials, who responded
by publicly reiterating the U.S. “one-China” policy, secretly sending a special envoy
delegation to Taiwan to express concerns, and reportedly privately criticizing the

19 The paper was released by the Information Office of the State Council of the PRC. Full
text is at [].
20 On June 18, 2006, for instance, a poll by The China Times revealed that 53% of
respondents believed Chen should step down.

decision to Taiwan officials.21 The softer formulation of the language in Chen’s
February 27, 2006 decision was regarded as a compromise to strong U.S. concern
over the cross-strait implications of “abolishing” both entities — a decision that at
least one PRC scholar opined could result in a “non-peaceful” response by Beijing.22
President Chen’s NUC decision sparked controversy and policy conflicts in
Taiwan. Critics maintained that the decision was a dangerous and unnecessary
provocation to Beijing, that it violated President Chen’s 2000 inaugural pledge of
not seeking to abolish the NUC, and that it unilaterally changed the “status quo” in
the Taiwan Strait. Supporters of the President’s statement asserted that Beijing’s
increasing missile deployments opposite Taiwan and its adoption of an “Anti-
Secession Law” (see below) violated the “no use of force” condition under which
Chen’s original pledge was made. These PRC moves, Chen’s supporters said, had
already changed the status quo in the Strait.
PRC Anti-Secession Law. On March 14, 2005, the PRC’s National
People’s Congress (NPC) officially adopted an “anti-secession law,” aimed at reining
in Taiwan independence advocates and creating a legal basis for possible PRC
military intervention in Taiwan. American observers and U.S. officials termed the
initiative counterproductive, particularly given improvements in a range of Taiwan-
China contacts since December 2004. Critics feared that the anti-secession law
increased the possibility of conflict with Taiwan and that the provision could be used
to harass independence advocates in Taiwan by, for example, labeling them
“criminals” and demanding their extradition from third countries. While many of the
new law’s 10 articles appeared relatively conciliatory, Article 8 was of special
concern because of its specific authorization of force. Article 8 states:
Article 8. In the event that the ‘Taiwan independence’ secessionist forces should
act under any name or by any means to cause the fact of Taiwan’s secession from
China, or that major incidents entailing Taiwan’s secession from China should
occur, or that possibilities for a peaceful reunification should be completely
exhausted, the state shall employ non-peaceful means and other necessary
measures to protect China’s sovereignty and territorial integrity. The State
Council and the Central Military Commission shall decide on and execute the23
non-peaceful means and other necessary measures...
Changing PRC Political Pressure on Taiwan. In the aftermath of the
heavy-handed anti-secession law, PRC officials appeared to decide that a Taiwan

21 In a January 20, 2006 press briefing, Deputy State Department spokesman Adam Ereli
responded to a question on the statement with “we certainly weren’t expecting it, we weren’t
consulted about it, so I’d say it was a surprise.” On February 14, 2006, a White House
National Security Council official, Dennis Wilder, reportedly with State Department Taiwan
official Clifford Hart, secretly visited Taiwan to express U.S. concern and was reportedly
told that the decision could not be changed. Reuters, “Taiwan’s pro-independence Chen
Snubs U.S.: Paper,” February 22, 2006.
22 Chang, S.C., “PRC scholar warns of ‘non-peaceful response’ to Chen’s NUC game,”
Central News Agency, February 23, 2006.
23 Full text of the law can be found in the Chinese newspaper China Daily at the following
website [].

policy of greater nuance and finesse may be of more service to mainland policy
interests. In subsequent months, then, Beijing officials took a series of actions
designed to increase pressure on the Chen government to be more accommodating
to mainland concerns. While some China-watchers described these measures as
positive developments for cross-strait relations, others saw 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.24 Among other measures, Chinese leaders issued a series of invitations
to key political leaders in the KMT, PFP, and other Taiwan opposition parties — but
not to the elected government — to visit China and hold talks. U.S. officials
expressed concern about the motivations of the visits (which one U.S. government
official termed “not benign on either side”) and stressed that PRC officials should be
speaking with the democratically elected Taiwan government.
U.S. Taiwan Policy and U.S. Arms Sales. U.S. policymakers generally
continued to try to maintain a delicate balancing act between Taiwan and the PRC,
periodically admonishing each side not to take provocative action that could
destabilize the status quo.25 The George W. Bush Administration, regarded as having
been more solicitous and supportive of Taiwan than any previous U.S.
Administration since 1979, 26 took a number of steps in its first term:
!Approved a robust arms sales package to Taiwan, including Kidd-27
class destroyers, diesel submarines, and P-3C Orion aircraft.
!Enhanced military-to-military contacts, including meetings between
higher-level officers; cooperation on command, control, and
communications; and training assistance.28
!Approved transit visas for top Taiwan officials to come to the United
States, including Taiwan’s President and Vice-President.

24 “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.
25 Since the 1970s, when the United States broke relations with Taiwan in order to normalize
relations with Beijing, U.S. policy toward Taiwan has been shaped by the three U.S.-China
communiqués, the Taiwan Relations Act (P.L. 96-8), and the so-called Six Assurances. See
CRS Report 96-246, Taiwan: Texts of the Taiwan Relations Act, the U.S.-China
Communiques, and the “Six Assurances," by Kerry Dumbaugh.
26 As an example, in an ABC television interview on April 25, 2001, President Bush
responded to a question about what his Administration would do if Taiwan were attacked
by saying that the United States would do “whatever it took” to help Taiwan defend itself.
Critics of the statement said that the United States had no defense alliance with Taiwan and
had remained deliberately ambiguous about its reaction if Taiwan were attacked.
27 See CRS Report RL30957, Taiwan: Major U.S. Arms Sales Since 1990, by Shirley Kan.
28 According to an online journal from Pacific Forum CSIS, at a March 2002 meeting of the
U.S.-Taiwan Business Council in Florida, Deputy Defense Secretary Paul Wolfowitz
emphasized that along with arms sales, helping Taiwan more successfully integrate its
military forces was an important U.S. priority.

But faced with increasingly heated political battles between the pro-
independence DPP and the status-quo KMT, Bush Administration officials by the
109th Congress had dialed back their earlier favorable rhetoric of the Taiwan
government. The apparent reassessment was emphasized on December 9, 2003,
when President Bush, while standing next to visiting PRC Premier Wen Jiabao,
issued a blunt warning to Taiwan, saying “The comments and actions made by the
leader of Taiwan indicate he may be willing to make decisions unilaterally that
change the status quo, which we oppose.”29 In addition to criticizing President Chen
Shui-bian’s February 27, 2006 National Unification Council decision, U.S. officials
during the 109th Congress expressed increasing frustration over Taiwan’s lagging
arms purchases from the United States. Political disagreements in Taiwan continued
to keep the government from purchasing much of the weapons President Bush
approved for sale in 2001. Held hostage to the disagreements was a special arms
acquisition budget that the DPP 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.
U.S. AIT Director 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.”30 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 continued.31
Taiwan and the World Health Organization (WHO). For years, Taiwan’s
application for observer status in the WHO has been defeated — as it was again on
May 16, 2005, and May 22, 2006, at the annual meetings of WHO’s administrative
arm, the World Health Assembly (WHA). Opposition from the PRC routinely has
blocked Taiwan’s bids on political grounds. PRC officials argue 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. Taiwan authorities
maintain that “observer status” in WHO would be an apolitical solution in Taiwan’s
case, since other non-sovereign entities, like the Holy See and the Palestine
Liberation Organization, have been given such status. The U.S. government is on
record as supporting Taiwan’s membership in organizations “where state-hood is not

29 For more background information on Taiwan and its history with the PRC, see CRS
Report RL33510, Taiwan: Recent Developments and U.S. Policy Choices; and forth
background on developments in U.S.-China relations during the 108 Congress, see CRSth
Report RL31815, China-U.S. Relations During the 108 Congress, both by Kerry
30 Press Conference comments of U.S. AIT Director Stephen Young, Taipei, Taiwan,
October 26, 2006. []
31 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.

an issue.”32 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.33
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 Straits34
(ARATS), held meetings in Shanghai. But while official talks have flagged,
indirect ties and unofficial contacts have continued and saw significant breakthroughsth
during the 109 Congress. Taiwan businesses were increasingly invested across the
strait, although the exact figures remained unclear. Taiwan-China trade also has
increased dramatically over the past decade, so that China by 2006 had surpassed the
United States as Taiwan’s most important trading partner.
This increasing economic interconnectedness with the PRC put pressure on
Taiwan’s DPP government in 2005-2006 to further accommodate the Taiwan
business community by easing restrictions on direct travel and investment to the
PRC. On November 18, 2005, Taiwan and China announced that for only the second
time (the first being January 2005), direct cross-strait charter flights would be
allowed for the duration of the Lunar New Year from January 20 - February 13, 2006.
The arrangements for 2006 were less restrictive than those for 2005. In addition to
expanding eligibility for the flights to all Taiwan residents, the number of flights was
expanded (to 36 from each side) as well as the number of destinations (adding
Xiamen in 2006 to the previous year’s approved destinations of Beijing, Shanghai,
and Guangzhou). But such cross-strait accommodations remained 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” of35
Taiwan’s industrial base. Thus, each Taiwan government decision to facilitate
economic links with the PRC represented an uneasy political compromise.
Avian Flu
The close proximity of millions of people, birds, and animals in southern China
made it a common breeding ground for deadly types of influenza viruses, including
the new H5N1 virus now thought to be endemic in poultry throughout Asia. Added
to this, the PRC’s poor public health infrastructure and the traditionally secretive,
non-transparent policy approach of its communist government made international

32 A State Department spokesman, in response to a press question at the State Department
press briefing of March 20, 2002.
33 The bill, S. 2092, was enacted as P.L. 108-235.
34 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.
35 For instance, there are reportedly 300,000 Taiwan citizens now residing and working in

health specialists particularly concerned about the PRC as a potential contributor to
a global flu pandemic. According to the World Health Organization (WHO), H5N1
is now considered to afflict not only domestic poultry and migratory birds in China,
but also parts of China’s pig population.36 During a U.N. summit on September 13,
2005, President George Bush and PRC President Hu Jintao reportedly discussed
greater avian flu coordination, including an aggressive containment approach and
establishment of an early-warning system.37 Two months later, on November 16,
2005, Chinese officials reported the country’s first human cases of avian flu.38 As
of the end of the 2005-2006 flu season in August 14, 2006, the number of human
avian flu cases in the PRC had grown to twenty-one, with fourteen fatalities.39
As a result of the 2003 global crisis with SARS, a new virus which originated
in China in 2003-2004, PRC leaders appeared to grow more sensitive to the potential
catastrophic effects of an avian flu pandemic during the 109th Congress. The PRC
Ministry of Health reported it had established 63 influenza monitoring labs
throughout China40 and had crafted and published an emergency plan for an influenza
pandemic, including a four-color-coded notification system.41 On November 2, 2005,
the government announced further aggressive anti-flu measures. These included an
earmark of 2 billion yuan ($420 million) from China’s budget to fight avian flu, as
well as the banning of poultry imports from 14 countries affected by the virus. On
January 17-18, 2006, the PRC co-hosted in Beijing an international conference on
avian and human influenza at which participating countries pledged $1.9 billion to
fight the disease.42
Despite these preparations, some international health experts remained
concerned about the PRC’s transparency on avian flu issues. In late April and June
2005, for instance, PRC officials reported an unknown cause for the suspicious
sudden deaths of thousands of migratory birds in western China’s Qinghai Lake. In
July 2005, a virology team from Hong Kong reported in a scientific journal that their
research showed the Qinghai bird deaths were from an H5N1 strain genetically
similar to that originating in south China. The Hong Kong report was vigorously

36 According to the U.S. Centers for Disease Control and Prevention. See website at
[ h t t p : / / www.c d c . go v/ f l u/ a vi a n/ out br e a ks / a s i a .ht m] .
37 King Jr., Neil, “Hu pledges efforts to ease U.S. strains — ,” Asian Wall St. Journal,
September 15, 2005, p. A1.
38 On December 15, 2005, PRC officials announced the sixth human case of avian flu.
39 This number for the 2005-2006 flu year was on the World Health Organization website
as of December 4, 2006: []
40 Beijing Liaowang in Chinese. Translated on September 26, 2005, in FBIS,
41 PRC Ministry of Health, “Preparations and Plan for an Influenza Pandemic Emergency,”
September 28, 2005, translated in FBIS, CPP20051012335002 (October 12, 2005).
42 In addition to the PRC, the conference was co-hosted by the World Bank and the
European Commission.

criticized as inaccurate by Jia Youling, an official with the PRC Ministry of
Agriculture charged with coordinating avian-flu eradication.43
President George Bush and PRC President Hu Jintao discussed greater avian flu
coordination on several occasions during the 109th — during a meeting at the U.N.
summit in September 2005 and during Bush’s visit to Beijing in November 2005.44
During the latter visit, the two sides initialed a joint initiative on avian flu, promising
to participate in joint research on human and animal virus samples, establish a
mechanism to share influenza strains for research purposes, and cooperate actively
on a number of regional and international levels, including the WHO, the U.N. Food
and Agriculture Organization, and the World Organization of Animal Health.45 The
agreement marked an important step, since world health officials consider sharing flu
virus samples a key step in tracking the virus’ mutation and devising an effective
vaccine. In 2005, the PRC did not provide WHO with any samples of avian flu cases
in poultry.46 On March 22, 2006, press accounts reported an announcement by WHO
officials that China had agreed to provide up to 20 virus samples from infected
poultry for study in WHO reference labs.47 But this cooperation still appeared
problematic as the 109th Congress drew to a close. On November 1, 2006, for
instance, WHO accused PRC officials of continuing to keep virus samples secret and
of failing to report on the emergence of a new H5N1 variant.48 A WHO official on
November 10, 2006, said that the PRC Ministry of Agriculture would finally be
providing samples of avian flu virus, collected during 2004-2005, that WHO had
been requesting since 2005.49

43 The independent virology team was from the University of Hong Kong and included Dr.
Guan Yi, a co-author of the scientific report published in Nature magazine on July 7, 2005.
For reference to PRC official Jia Youling’s comments, see Sipress, Alan, “China has not
shared crucial data on bird flu outbreaks, officials say,” in the Washington Post, July 19,

2005, p. A15.

44 King Jr., Neil, “Hu pledges efforts to ease U.S. strains — ,” Asian Wall St. Journal,
September 15, 2005, p. A1.
45 [
46 This appears still to be the case as of January 23, 2006; Ramirez, Luis, “WHO negotiates
with China for handover of bird flu samples,” Voice of America, January 24, 2006.
47 According to Beijing WHO official Julie Hall, the breakthrough came after WHO
negotiated an agreement with China’s Agriculture Ministry that will assure PRC scientists
they will receive “intellectual property rights and ... commercial rights” for their avian flu
work on poultry. According to health experts, China’s Health Ministry has regularly been
providing WHO with samples of human avian flu cases. Oleson, Alexa, China turns over
bird flu samples to WHO,” Associated Press, March 22, 2006.
48 “WHO criticizes China for not releasing bird flu data,” Avian Influenza News &
Information, November 1, 2006.
49 Ramirez, Luis, “China disputes claims of new bird flu strain,”

China’s Growing Global Reach
Many observers during the 109th Congress began to focus on the critical
implications China’s economic growth and increasing international engagement have
for U.S. economic and strategic interests. To feed its voracious appetite for
resources, capital, and technology, China in 2005 and 2006 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 went hand-in-hand with
expanding political influence. Although some believe that PRC officials appeared
more comfortable working with undemocratic or authoritarian governments, PRC
outreach also extended to key U.S. allies or to regions where U.S. dominance
previously was unparalleled and unquestioned. A brief survey of China’s
international engagement during the 109th Congress hints at the potential for
increasing Sino-U.S. competition for resources, power, and influence around the
Asia. China’s improved relationships with its regional neighbors were
particularly visible. On December 14, 2005, China took part in the first East Asia
Summit (EAS) — a fledgling grouping of 16 Asian countries, including the ten
members of the Association of Southeast Asian Nations (ASEAN), Japan, South
Korea, India, Australia, and New Zealand, but excluding the United States.50
Russia’s President Putin attended as an invited observer. According to a statement
issued after the summit, the purpose of the new grouping is to permit “dialogue on51
broad strategic, political, and economic issues.”
The 2005 EAS meeting represented another step in a trend of growing Sino-
ASEAN regional cooperation. In addition to being part of 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, all parties began to
lower or cancel tariffs on 7,000 kinds of items, with the goal of reaching full mutual
free trade by 2010.
Outside the EAS framework, China also improved its bilateral relationship with
India in 2005-2006, 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. During a visit
to South Asia in early April 2005, PRC Premier Wen Jiabao alluded to his stop in

50 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.
51 BBC News (international version), “East Asia stages inaugural summit,” December 14,


India (on April 9) as his “most important agenda item” in 2005.52 With the Central
Asian countries of the former Soviet Union, China pursued both economic and
security arrangements through the Shanghai Cooperation Organization (SCO),
founded in 2001.53 Within the SCO context, China cooperated on border
enforcement, signed pipeline and rail link agreements, and conducted joint military
maneuvers. China also negotiated energy deals with Australia, another U.S. regional
ally, to supply liquid natural gas to southern China, and continued to explore a Sino-
Australian free trade agreement.
Japan. Japan, considered the most important American ally in Asia, remained
a notable exception to China’s recent regional diplomatic achievements throughout
most of the 109th Congress. China routinely protested former Japanese Prime
Minister Koizumi’s annual visits to the Yasukuni Shrine, where war criminals are
also enshrined. Since 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. But the visit to China of Japan’s new Prime Minister, Shinzo Abe, on
October 8, 2006, may signal the beginning of a thaw in Sino-Japanese relations. The
trip to the PRC was Prime Minister Abe’s first foreign visit as Prime Minister.
By 2004, China (including Hong Kong) surpassed the United States as Japan’s54
largest trading partner, but the political relationship remained hampered by the
residual resentments of Japan’s conquest and occupation of China during World War
II. Furthermore, since 2004 China’s growing economic competitiveness and
expanding regional presence helped exacerbate its relations with Tokyo. China and
Japan competed ferociously for access to Siberian oil, with Japan emerging the major
winner in a contract to have a main pipeline built to Japan with a smaller branch
running to China. As a result of China’s exploration activities in the Chunxiao Gas
Field, in waters where Japan and Taiwan also have territorial claims, Tokyo began
its own exploration activities in and around the Senkakus. Tensions also escalated
over China’s oil explorations in areas of the South China Sea over which Japan also
claims sovereignty.
Russia. Energy resources and security issues also factored heavily into
China’s relations with Russia, where as noted above Beijing lost out to Japan in
securing a monopoly pipeline supply from Siberian oil fields. In March 2006,
Russian President Vladimir Putin and PRC President Hu Jintao held their fifth
meeting in less than a year, with President Putin announcing plans to open a gas
pipeline to China within five years.55 Russian leaders also met 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

52 U.S. relations with India also have been improving in recent years.
53 The SCO is a more recent expansion of the “Shanghai Five” formed in 1997. SCO
members include China, Russia, Uzbekistan, Kazakhstan, Kyrgyzstan, and Tajikistan.
54 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.
55 “Russia plans natural gas pipeline to China,” Associated Press, March 21, 2006.

would begin holding regular security consultations.56 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. China also 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 previously 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 years57
to come.”
Perhaps nothing illustrated China’s growing importance in Europe as much as
the EU campaign in 2005 to lift the arms embargo that it (along with the United
States) has maintained against China since the Tiananmen Square crackdown in
1989. Momentum to lift the embargo appeared to accelerate early in 2005 despite a
number of American efforts to derail it on the grounds that China had not made
sufficient improvements in its human rights record. On February 2, 2005, the U.S.
House of Representatives acted on a measure urging the EU to maintain the embargo,
passing H.Res. 57 by a vote of 411-3. Senator Lugar, Chairman of the Senate
Foreign Relations Committee, was quoted as saying he would support curbs on sales
of advanced military technology to EU countries unless the EU could give strong
assurances that advanced technologies would not be diverted to China should the
embargo be lifted.58
Until China’s passage of the anti-secession law on March 14, 2005, EU
governments tended to dismiss American arguments that the PRC military, equipped
with improved EU-provided defense technologies, could use those technologies to
threaten Taiwan and U.S. forces in Asia. But these American arguments appeared
strengthened by the PRC’s anti-secession law, and the EU’s campaign to lift the
China arms embargo eventually abated.
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. During the 109th Congress, China also poised itself
to become a major energy player in the Middle East with some of these same
countries. PRC negotiators, for instance, were able to sign significant oil deals with
Iran in 2004, including a proposal that allows a Chinese company develop Iran’s

56 “Russia, China Tighten Security Links,” China Daily, February 3, 2005.
57 []
58 In an interview with the Financial Times, February 21, 2005, p. 8.

Yadavarn oil field in exchange for China’s agreeing to buy Iranian liquified natural
gas.59 In addition, China’s trade with the six Gulf Cooperation Council (GCC)
countries has steadily increased in the last few years, reaching $20 billion in 2004
(although this is still small by comparison with the United States, whose trade with
Saudi Arabia alone in 2004 was $26 billion).60
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 48 of Africa’s 55
countries attended the CACF’s third Ministerial Conference in November 2006.
China also targeted resource-rich African nations such as Sudan and Angola for
energy-related development.61 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.62 China also evidenced 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 6 of the 24 countries that still maintain official
diplomatic relations with Taiwan are on the African continent.63
Western Hemisphere.64 There also appeared to be 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 relations65th
with Taiwan. In addition, China’s growing presence in the region during the 109
Congress has political and economic consequences for the United States. On January
25, 2005, Chile became the first Latin American county to hold bilateral negotiations
with China to craft a Sino-Chilean Free Trade Agreement (FTA). The two

59 Lee, Don, “China Barrels Ahead in Oil Market...,” Los Angeles Times, November 14,

2004, p. C-1.

60 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.
61 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.
62 Boxell, James, “Circle Oil in Dollars 50m Africa Drilling Deal with Chinese Group,”
Financial Times (London edition), January 28, 2005, p. 25.
63 In November 2005, Taiwan maintains official relations with Burkina Faso, Chad, the
Gambia, Malawi, Sao Tome and Principe, and Swaziland. Formerly, Senegal was one of
Taiwan’s official relationships; it announced on October 25, 2005, that it was severing
official relations with Taiwan.
64 See CRS Report RS22119, China’s Growing Interest in Latin America, by Kerry
Dumbaugh and Mark Sullivan.
65 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

governments signed a final FTA agreement on November 18, 2005. Beijing officials
have said they hope the Sino-Chile FTA will become a model for similar agreements
with other Latin American countries.66
Energy concerns also played a role in China’s Latin-American diplomacy,
particularly in Venezuela, which accounts for almost 15% of U.S. oil imports, and
in Brazil, with which China announced a $10 billion energy deal in November
2004.67 As a consequence of visits between Venezuelan President Hugo Chavez and
PRC Vice-President Zeng Qinghong in 2004 and 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.68
Given the 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 also extended 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, was 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.69
Economic Issues
The PRC was the third-largest U.S. trading partner during the 109th Congress,
with total U.S.-China trade in 2005 estimated at $285 billion. In addition to the
efforts of PRC companies to buy American assets, mentioned earlier in this report,
other issues in U.S.-China economic relations included the substantial and growing
U.S. trade deficit with China ($202 billion in 2005), repeated PRC failures to protect
U.S. intellectual property rights, and the PRC’s ongoing restrictive trade practices,

66 Jiang Wei, “China-Chile FTA Talks Smooth,” China Daily, January 31, 2005, online at
[ article.php3?id_article=1237].
67 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.
68 Bajpaee, Chietigi “China’s Quest for Energy Security,” Power and Interest News Report,
February 25, 2005, online at [].
69 Mortished, Carl, “Chinese Chase Canadian Oil,” The Times (London), March 5, 2005, p.

such as its refusal to float its currency.70 (For further information, see CRS Report
RL33536, China-U.S. Trade Issues, by Wayne Morrison.)
Intellectual Property Rights. China’s lack of protection for intellectual
property rights (IPR) became another important issue in U.S.-China bilateral trade
during the 109th Congress. 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 remained at an estimated 90%.71 U.S. officials routinely urged
Beijing to crack down on IPR piracy, and Secretary of Commerce Don Evans and his
successor, Secretary Carlos M. Gutierrez, as well as Treasury Secretary Henry
Paulson, all stressed that China needed to do better at IPR protection.
Currency Valuation. Another U.S. concern during 2005-2006 was the PRC’s
decision to keep the value of its currency low with respect to the dollar, and indirectly
with the yen and euro. 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 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. The resulting small appreciation in the RMB from this action was not
sufficient to assuage U.S. congressional concerns, and Senators Charles Schumer and
Lindsay Graham introduced legislation (S. 295) that would have raised U.S. tariffs
on PRC goods by 27.5% unless PRC currency levels appreciate. (For more
information, see CRS Report RS21625, China’s Currency: A Summary of the
Economic Issues, by Wayne M. Morrison and Marc Labonte.)
National Security Issues
Annual Report on China’s Military Power. In May 2006, the Pentagon
released its annual, congressionally-mandated report on China’s Military Power,
which concluded that China is greatly improving its military, including the number
and capabilities of its nuclear forces, and that PRC improvements appear largely
focused on a Taiwan contingency. The report maintained that this build-up posed a
long-term threat to Taiwan and ultimately to the U.S. military presence in Asia.
The 2006 report continued a theme set forward in the 2005 Pentagon annual
report, released on July 19, 2005. That particular report, normally submitted late,
had been expected for weeks (its due date is March 1 annually), and it reportedly was
delayed further in 2005 because of bureaucratic disagreement about its conclusions.
The 2005 report appeared to reflect a more alarmist view about military trends in

70 See CRS Report RL33536, China-U.S. Trade Issues, by Wayne Morrison, for further
71 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.

China than did earlier reports. It concluded that China is greatly improving its
military, including the number and capabilities of its nuclear forces, and that this
build-up poses a long-term threat to Taiwan and ultimately to the U.S. military
presence in Asia. The tone of the two Pentagon reports prompted renewed
congressional debate over what China’s military expansion means for U.S. interests
and what should be the proper U.S. response.
Weapons Proliferation. For many years, U.S. officials and some 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,72
congressional and other critics charge that such confidence is misplaced. 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.73 Although these allegations have always
created problems in Sino-U.S. relations, they took on new and potentially significant
implications given the Bush Administration’s emphasis on controlling the spread of
weapons of mass destruction as well as disclosures about nuclear weapons programs
in Iran and North Korea. The PRC maintained close relationships with all three
countries, including selling military equipment that could threaten U.S. forces in the
region and missiles that could enhance a nuclear weapons capability.74
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 explored continuing military contacts during the 109th Congress, although
efforts to reenergize military ties met with repeated setbacks. In October 2005, U.S.
Secretary of Defense Donald Rumsfeld made his first official visit to China as
Secretary of Defense.75 Commander of U.S. Forces in the Pacific Admiral William
J. Fallon also spent a week visiting the 28th Air Division in the PRC, including
inspection of a new twin-engine FB7 fighter. As a consequence of an invitation
issued then by Admiral Fallon, a 10-member, high-level Chinese military delegation
in June 2006 became the first PRC officers to observe a “solely-organized,” large-

72 As reasons for such confidence, some point to the past decade, when the PRC has: 1992
— promised to abide by the Missile Technology Control Regime (MTCR) and acceded to
the Nuclear Non-Proliferation Treaty (NPT); 1993 — signed the Chemical Weapons
Convention (CWC); 1996 — signed the Comprehensive Test Ban Treaty; and 1997 —
joined the Zangger Committee of NPT exporters.
73 For details, see CRS Report RL31555, China and Proliferation of Weapons of Mass
Destruction and Missiles: Policy Issues, by Shirley Kan.
74 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 Non-Proliferation Act of 1992 (50 U.S.C. § 1701), which requires
sanctions on countries that sell destabilizing weapons to Iran or Iraq.
75 See CRS Report RL32496, U.S.-China Military Contacts: Issues for Congress, by Shirley

scale U.S. naval exercise in the Pacific Ocean off Guam. In addition, on November
19, 2006, 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 further
enhance military contacts.
PRC Submarine and the U.S.S. Kitty Hawk. On November 14, 2006,
Admiral Fallon confirmed that the previous month, reportedly on October 26, 2006,
a PRC Song-class diesel submarine had surfaced undetected 5 miles from the U.S.S.76
Kitty Hawk carrier battle group (CVB) that was operating in waters off Okinawa.
U.S. Navy officials reportedly said that as a result of the incident, U.S. submarine
defenses for the Kitty Hawk CVB would be reviewed. Admiral Fallon used the
incident to call for more U.S. military cooperation with China to enhance bilateral
understandings and avoid misunderstandings. A PRC Foreign Ministry spokesperson,
Ms. Jiang Yu, denied reports that the sub had “stalked” and deliberately surfaced near
the group of U.S. warships.
Human Rights
The Bush Administration generally has favored selective, intense pressure on
individual human rights cases and on rule of law 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, the PRC
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 in Geneva from March 14 to April 22, 2005.
There were no such symbolic gestures before President Bush’s November 2005
visit to China. Moreover, President Bush, during his Asia visit, 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 was little
sign that the President’s November remarks about the U.S. position on human rights
affected subsequent PRC policies, although there was growing evidence of increasing
social demands within China for greater accountability, transparency, and
responsiveness in government.
On December 2, 2005, the first U.N. torture investigator allowed to visit China,
Manfred Nowak, stated his conclusion that while torture was on the decline (China
outlawed it in 1996), it was still a widespread problem in Chinese prisons.
Beginning November 21, 2005, Nowak spent two weeks visiting Chinese prisons and
speaking to detainees. Nowak submitted his report to the United Nations on March

10, 2006.

76 Gertz, Bill, “China sub secretly stalked U.S. fleet; surfaced within torpedo range of carrier
battle group,” The Washington Times, November 13, 2006, p. A01.

New 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 Chinese
citizens. During the 109th Congress, Beijing increasingly viewed these new
information sources as potential threats to the central government’s ability to control
and shape information flows and 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 to77
the Web-savvy in China. Among other things, the regulations prohibited 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; required 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 prohibited certain kinds of content from
being posted — such as content that “undermines state policy” or “disseminates
rumors [and] disturbs social order.”78 The new regulations were backed by penalties,
including fines, termination of Internet access, and possible imprisonment.
Religious Freedom. The PRC continued to crack down on unauthorized
religious groups and to restrict the freedoms of ethnic communities that seek greater
religious autonomy. Much of this repression focused on what PRC officials have
classified as illegal religious “cults” such as the Falun Gong and the Three Grades
of Servants Church. Reports about religious freedom in China suggested that state
persecution of some religious and spiritual groups will continue as long as the
Chinese Communist Party (CCP) perceived these groups to be threatening to its
political control. However, religions in the PRC during 2005-2006 also attracted
increasing numbers of adherents as well.
In the China section of its annual International Religious Freedom Report,
released November 8, 2005, and 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) continued to
require churches to register with the government. Churches that were unregistered
— so-called “house churches” — continued to be technically illegal and often
repressed by the government. As in the past, however, treatment of unregistered
churches varied widely from locality to locality, with some local officials highly
repressive and others surprisingly tolerant. As they have in the past, Communist
Party officials continue now to stress that religious belief is incompatible with Party
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. The U.S.
government continued to recognize Tibet as part of China and has always done so,

77 “‘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.
78 Ibid., Article 19.

although some dispute the historical consistency of this U.S. position. Controversy
continued during the 109th Congress over Tibet’s 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. Special Coordinator for Tibetan issues — Paula Dobriansky, Under
Secretary of State for Global Affairs — is charged with seeking to foster dialogue
between the Beijing government and the government-in-exile of the Dalai Lama,
Tibetan Buddhism’s highest spiritual leader.79 Although this dialogue 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
The fifth and latest round of these interactions occurred in early 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 the latter negotiation, as in past such
negotiations, the Dalai Lama’s special envoy acknowledged differences but also had
favorable reactions to the talks, saying “Our Chinese counterparts made clear their
interest in continuing the present process and their firm belief that the obstacles can
be overcome through more discussions and engagements.”81
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. Although 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, 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, on the U.S. list of terrorist groups.
U.S. policies on Uighurs and on terrorism continued to face criticism in 2005-
2006 over the cases of approximately 22 Uighur Muslims being held by U.S. forces
at Guantanamo Bay after having been apprehended during the U.S. strikes against the
Taliban in Afghanistan. By May of 2004, international human rights groups were
reporting concerns about the planned release of Uighur prisoners that U.S. forces had
decided were of “no intelligence value.” These prisoners, they feared, would be

79 For background and details, see CRS Report RL30983, Tibet, China, and the 107th
Congress: Issues for U.S. Policy, by Kerry Dumbaugh.
80 Lodi Gyari gave a news conference about these talks at the National Press Club in
Washington, DC, on November 2, 2005.
81 Statement by Special Envoy Lodi Gyari, released on February 25, 2006.

executed or imprisoned as terrorists if sent back to China.82 In October 2004,
Secretary of State Colin Powell said that U.S. officials were still reviewing the status
of the Uighur prisoners because of U.S. fears that returning them to possible
persecution in China would “be inconsistent ... with our obligations to comply with
international law and consistent with [the] Geneva Convention...”83 Later press
reports said that a number of U.S. allies had refused requests to accept the prisoners.84
Some of the Guantanamo prisoners, including two Uighurs (Chinese Muslims)
determined by the U.S. government in 2005 to not be “military combatants,” began
pursuing legal action against the United States in an effort to be released.85 On May
5, 2006, the U.S. State Department issued a statement saying that five of the Uighur
men had been released for resettlement in Albania.86 On December 4, 2006, seven
other Uighur prisoners filed suit in U.S. federal court challenging their status as
“enemy combatants” and arguing that they also should be released.87
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 has long been prohibited in provisions of several
U.S. laws. In addition, subsequent legislation has expanded these restrictions to
include U.S. funding for international and multilateral family planning programs,88
such as the U.N. Population Fund (UNFPA), that have programs in China.
While the PRC maintained its restrictive and at times coercive “one-child”
program for several decades, there were growing indications during the 109th
Congress 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

82 James, Ian, “Guantanamo Prisoners from China’s Muslim Northwest Face Danger If
Returned Home, Human Rights Groups Warn,” Associated Press Newswires, May 28, 2004.
83 Heibert, Murray, and Susan Lawrence, in an interview with Colin Powell, Far Eastern
Economic Review, cited in Political Transcripts by Federal Document Clearing House,
October 19, 2004.
84 Sevastopulo, Demetri, “U.S. Fails to Find Countries to Take Uighurs,” Financial Times,
October 28, 2004, p. 5.
85 “Two Uighurs held at Guantanamo appeal for high court help,” Agence France Presse,
January 17, 2006.
86 McCormack, Sean, “Release of Five Ethnic Uighurs from Guantanamo,” May 5, 2006
press statement, [].
87 “Holding Uighur Muslims at Guantanamo just a bow to China: defence lawyers,” The
Canadian Press, December 6, 2006.
88 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.

government intended to modify criminal law to make it illegal to selectively identify
and abort female fetuses.89 There also is evidence that some citizens of the PRC are
becoming more assertive about their reproductive rights.90 Still, on December 1,
2006, a PRC court upheld the sentence of Chen Guangcheng, a blind PRC activist
arrested four years earlier for having exposed abuses in local officials’ enforcement
of the PRC’s “one child” policy.91
Social Stability. The far-reaching economic changes the PRC continued to
undergo led to increasing disgruntlement among a number of social groups in 2005-
2006. Peasants and farmers in rapidly developing parts of China were under heavy
tax burdens and falling farther behind their urban contemporaries in income. Some
had their farmland confiscated by local government and Party officials, who then sold
the confiscated land for development, often reportedly offering little or no
compensation to the peasants from whom the land was seized. 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. An unknown number of villagers were killed.
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, remained another particularly troubling issue for Beijing, a regime
founded on communist-inspired notions of a workers’ paradise. Increasing labor
unrest has placed greater pressure on the authority and credibility of the All-China92
Federation of Trade Unions (ACFTU), China’s only legal labor organization.
Hong Kong Governance
On June 21, 2005, following his selection to the post by the 800-member Hong
Kong Election Committee, Donald Tsang was formally appointed Chief Executive
of Hong Kong by the PRC State Council. He 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

89 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 at birth, according to a United Nations estimate. “Analysts View Problems
with Huge PRC Gender Gap,” South China Morning Post, January 7, 2005.
90 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.
91 Fan, Maureen, “Chinese activist’s sentence is reaffirmed,” The Washington Post,
December 1, 2006, p. A20.
92 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.

“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. Critics maintained that the Beijing decisions contravened provisions in the
Basic Law leaving decisions on democratic development up to the Hong Kong
While a pragmatist who is far more popular than his predecessor, Chief
Executive Tsang also has been criticized by democracy activists. As Hong Kong’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.93
Major Legislation94
P.L. 109-102 (H.R. 3057 — Kolbe)
Appropriations for Foreign Operations, Export Financing, and related programs
for FY2006. Section 560(c) prohibited funds from being made available to the U.N.
Population Fund (UNFPA) for a country program in China; Section 575(b) provided
$4 million in ESF funds to NGOs to promote cultural traditions, sustainable

93 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.
94 For legislative action during the 108th Congress, see CRS Report RL31815, China-U.S.
Relations During the 108th Congress, by Kerry Dumbaugh.

development, and environmental conservation in Tibet; Section 589 prohibited the
Export-Import Bank from using federal funds to approve an application for a nuclear
project in China. Introduced in House June 24, 2005 (H.Rept. 109-152). House
passed the bill, amended, by a vote of 393-32 on June 28, 2005. Referred to the
Senate Committee on Appropriations on June 29, 2005 and ordered reported,
amended, on June 30, 2005 (S.Rept. 109-96). Passed the Senate with an amendment
on July 20, 2005 (98-1). The Senate named conferees on July 20, 2005; the House
on October 27, 2005. Conference Report, H.Rept. 109-265, was filed on November
2, 2005. The conference report included the UNFPA funding prohibition, $4 million
in ESF funding to NGOs for Tibet programs (along with $250,000 to the National
Endowment for Democracy for democracy programs relating to Tibet); and a Senate
provision to provide $5 million in Development Assistance to American educational
institutions for activities and programs in the PRC relating to rule of law, the
environment, and democracy. The House agreed to the Conference Report on
November 4, 2005 (358-39); the Senate on November 10, 2005 (91-0). The bill was
signed by the President on November 14, 2005.
P.L. 109-115 (H.R. 3058 — Knollenberg)
Transportation, Treasury, Housing and Urban Development, the Judiciary, the
District of Columbia, and Independent Agencies Appropriations Act, FY2006.
Section 951 of the bill (the Kilpatrick amendment) prohibited the Department of the
Treasury from using funds to recommend approval of the sale of Unocal to the
PRC’s CNOOC Ltd. This language later was deleted by the Senate and was not
included in the final Conference Report language (H.Rept. 109-307) — which passed
the House on November 18, 2005 (392-31) and the Senate on November 21, 2005
(unanimous consent). The President signed the bill into law on November 30, 2005.
P.L. 109-163 (H.R. 1815 — Hunter)
Authorizing appropriations for the Department of Defense for FY2006.
Introduced April 26, 2005. H.Rept. 109-89. The final Act was the result of a
conference. Sec. 535 provides incentives to cadets and midshipmen to study key
languages, including Chinese; Sec. 1211 prohibits the Secretary of Defense from
procuring any goods or services from a “Communist Chinese military company,”
except on a waiver for national security reasons; Sec.1234 states the sense of
Congress that the White House should “quickly” present to Congress a
comprehensive strategy to deal with China’s economic, diplomatic, and military rise,
including specific mention of what areas such a strategy should address. In
conference, the House receded on several key measures in its bill: on a measure to
mandate “at least” one class field study trip annually to both Taiwan and the People’s
Republic of China (PRC) by military education classes of the National Defense
University; on a measure to require regular senior U.S. military exchanges with
Taiwan military officials; and on a measure to prohibit the Secretary of Defense from
procuring goods or services from any foreign person who knowingly sells to the PRC
items on the U.S. munitions list. House action: After Committee and Subcommittee
mark-ups, reported (amended) by the House Armed Services Committee on May 20,

2005. Referred to the House on May 25, 2005, and passed by a vote of 390-39.

Referred to the Senate Armed Services Committee on June 6, 2005. Senate action:
On November 15, 2005, the Committee was discharged, the Senate considered the
bill under unanimous consent, and the Senate passed the bill after incorporating the
language of S. 1042. Conference action: Conferees filed a conference report on

December 12, 2005 (H.Rept. 109-360), and the House passed it on December 19,

2005 (374-41). The Senate agreed to the Report by voice vote on December 21,

2005, and the President signed the bill into law on January 1, 2006, with a clarifying
statement ([]).
P.L. 109-364 (H.R. 5122 — Hunter)
The John Warner National Defense Authorization Act for FY2007. Several
provisions of the House-passed bill (introduced on April 6, 2006) replicated the
provisions of H.R. 1815 (P.L. 109-163) that the House later receded from in
conference. These were: requirements that the National Defense University (NDU)
include visits to both the PRC and Taiwan as part of the course of military study; that
senior military officer and official exchanges be held with Taiwan, and that the
United States not procure goods or services from any foreign entity who knowingly
sells to the PRC items on the U.S. munitions list. Section 1221 of the House bill
requires the United States to submit to Taiwan plans for design and construction for
diesel electric submarines, subject to the provisions of the Arms Export Control Act
(22 U.S.C. 2751 et seq.) and any other export control law of the United States. The
Senate bill (S. 2766) contained no such provisions. The House Armed Services
Committee reported its version (60-1) on May 5, 2006 (H.Rept. 109-452), and the
House passed the bill, amended on May 11, 2006 (396-31). On June 22, 2006, the
Senate struck all after the enacting clause and substituted S. 2766, passing that
measure by unanimous consent. A conference was held on September 12, 2006, and
a conference report (H.Rept. 109-702) filed on September 29, 2006. The House
receded from its China-related provisions in the bill in favor of the Senate version,
agreeing to the Conference Report the same day by a vote of 398-23. The Senate
agreed to the Conference Report by unanimous consent on September 30, 2006. The
President signed the bill into law on October 17, 2006, as P.L. 109-364.
H.R. 728 (Sanders)
To withdraw normal trade relations (NTR — formerly known as most-favored-
nation status, or MFN) from the PRC. Introduced February 9, 2005, referred to
House Ways and Means Committee, to the Subcommittee on Trade (February 25,


H.R. 1498 (Ryan)
Chinese Currency Act of 2005. To clarify that PRC currency manipulation is
actionable under U.S. countervailing duty laws and product-specific safeguards.
Introduced on April 21, 2005, and referred to House Ways and Means Committee
and House Armed Services Committee. Executive comment was requested from
DOD on April 21, 2005.
H.R. 2601 (C. Smith)
The State Department Authorization bill. Title IX consists of the East Asia
Security Act of 2005, a bill to impose trade sanctions on persons, companies, and
governments (specifically the European Union, but also Israel and Russia) that sell
weapons to China in violation of agreed-upon export restrictions. The bill also
contains annual reporting requirements on EU weapons sales to China and on foreign
governments participating in cooperative defense projects with the United States.
The East Asian Security Act originally was H.R. 3100, introduced by Representatives
Hyde and Lantos on June 29, 2005 (H.Rept. 109-165). After mark-up by the House

International Relations Committee on June 30, 2005, H.R. 3100 was considered by
the House on July 14, 2005, on the suspension calendar. It failed to achieve the
necessary 2/3 vote by a vote of 215-203, reportedly because of some Member’s
concerns that it would be unfairly punitive on U.S. defense contractors. Responding
to these objections, the bill’s sponsors amended the bill to apply sanctions on U.S.
companies only if they knowingly sold items to China for military use. The amended
version was then made in order as an amendment to H.R. 2601, which the House then
passed on July 20, 2005, by a vote of 351-78. The bill was referred to the Senate on
July 22, 2005.
H.R. 3100 (Hyde)
East Asia Security Act of 2005. See H.R. 2601.
H.R. 3283 (English)
Introduced on July 14, 2005, and referred to the House Ways and Means
Committee. The bill seeks to place further trade restrictions on non-market
economies and particularly to further restrict and more heavily monitor various
aspects of China’s trade with the United States. The House passed H.R. 3283 on July
27, 2005 (255-168), including a countervailing duties provision (in Section 3) with
respect to China. The bill was referred to the Senate on July 28, 2005, to the
Committee on Finance.
H.R. 5522 (Kolbe)
Foreign Operations, Export Financing, and Related Appropriations Act, 2007.
Introduced on June 5, 2006, and referred to the House and Senate Appropriations
Committees. The House reported an original measure the same day (H.Rept. 109-
486), and the House debated the measure on June 8 and 9, 2006, passing the measure
on June 9 (373-34). The Senate reported the measure with an amendment in the
nature of a substitute on July 10, 2006 (S.Rept. 109-277). As reported in the House,
Section 559 of the bill prohibits funds from being made available to UNFPA for
family planning programs in China. (This provision was struck from the Senate-
reported version.) Section 573 (b) of the bill makes $4 million in Economic Support
Funds available to support activities preserving cultural traditions and promoting
sustainable development and environmental conservation in Tibet, and provides not
less than $250,000 for the National Endowment for Democracy for human rights and
democracy programs in Tibet. (A similar provision was provided in section 553 (b)
in the Senate-reported version.)
The Senate bill contains language providing that assistance should be made
available to Taiwan for furthering political and democracy reforms. Section 534 (h)
of the Senate-reported version provides $10 million in development assistance to
American educational institutions and NGOs for programs in China relating to
democracy, the environment, and rule of law.
H.R. 5672 (Wolf)
State, Justice, Commerce, and Related Agencies Appropriations bill, 2007.
Introduced June 22, 2006, and referred to the House and Senate Appropriations
Committees. As passed by the House, the bill provides $3 million for the Office of
China Compliance in the Import Administration of the Commerce Department; and
restricts the State Department from licensing the export of U.S. satellites and satellite

components to China without congressional notification 15 days prior. The House
also passed an amendment by Representative Tancredo that prohibited funds from
being used to enforce the “Guidelines on Relations With Taiwan” — a set of general
restrictions on official U.S. contacts with Taiwan officials. The House
Appropriations Committee reported an original measure on June 22, 2006 (H.Rept.

109-520); the House passed the final measure, amended, on June 29, 2006 (393-23),

and the bill was referred to the Senate. The Senate Appropriations Committee
marked up the measure on July 13, 2006 (S.Rept. 109-280).
H.Con.Res. 83 (Smith)st
Urging the United States to introduce a measure at the 61 U.N. Conference on
Human Rights calling on China to end its human rights abuses. Introduced March
3, 2005, and referred to the House Committee on International Relations. Mark-up
held on March 9, 2005.
H.Con.Res. 98 (Hyde)
Expressing the “grave concern” of Congress about China’s passage of an anti-
secession law aimed at Taiwan. Introduced March 15, 2005. The measure passed
on March 16, 2005, by a vote of 424-4. It was referred to the Senate Foreign
Relations Committee on March 17, 2005.
H.Con.Res. 381 (Chabot)
Expressing the sense of Congress that all restrictions on high-level visits to the
United States by Taiwan officials should be lifted; that direct U.S.-Taiwan exchanges
should take place at the Cabinet level; and that U.S. links with Taiwan should be
H.Res. 57 (Hyde)
Urging the European Union to maintain its arms embargo on the People’s
Republic of China. Introduced on February 1, 2005; passed House on February 2,

2005, by a vote of 411-3.

H.Res. 344 (Pombo)
A resolution urging the President to immediately review any CNOOC agreement
to buy the American energy company Unocal. Introduced June 29, 2005, referred to
House International Relations and Financial Services Committees. Considered under
suspension on June 30, 2005, passed by a vote of 398-15.
S. 295 (Schumer)
Authorization of a 27.5% import duty on imports of PRC-made goods or
agricultural products unless the President certifies to Congress that China is not
indulging in unfair trade practices. Introduced on February 3, 2005, referred to
Senate Committee on Finance.
S. 1042 (Warner) (see H.R. 1815, above)
National Defense Authorization Act for FY2006.
Section 2539C of the Senate bill requires the Secretary of Defense to annually
report (by September 30) whether a foreign country with a reciprocal defense
procurement agreement with the United States has “qualitatively or quantitatively”
increased exports of defense items to the People’s Republic of China. The Senate

bill was introduced on May 17, 2005. On May 12, 2005, the Senate Armed Services
Committee ordered reported an original measure (S.Rept. 109-69), which was
considered by the Senate on July 20, 21, 22, 25, and 26, 2005. (The House-passed
bill, H.R. 1815, was referred to the Senate on June 6, 2005.) On July 26, 2005,
cloture was not invoked on the Senate measure, (50-48), and the bill was returned to
the calendar. The Senate considered the bill for seven days beginning November 4,
2005. It passed the measure (amended) on November 15, 2005 (98-0) and
incorporated it into H.R. 1815 as an amendment. H.R. 1815 as amended ultimately
was enacted as P.L. 109-115.
S. 1117 (Lieberman)
U.S.-PRC Cultural Engagement Act. To expand U.S. academic, cultural, and
business activities and increase American expertise in Chinese language and culture.
Provides funds to establish Chinese language centers to assist elementary and
secondary schools and institutes of higher learning in offering Chinese language
instruction; and funds to establish exchange programs between U.S. and PRC post-
secondary educational institutions. Introduced May 25, 2005, and referred to the
Committee on Foreign Relations.

Appendix I:
Selected Visits by U.S. and PRC Officials
December 14-15, 2006 — In the first meeting of the U.S.-China Strategic
Economic Dialogue (initiated by U.S. Treasury Secretary Henry Paulson on
September 20, 2006), six US. Cabinet officers and other senior U.S. officials visited
China to participate in bilateral discussions to promote increased access for U.S.
exports and better U.S.-China trade ties. 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.
November 13, 2006 — U.S. Secretary of Commerce Carlos Gutierrez began
a visit to Beijing — his fourth as Secretary — to discuss trade issues. During histh
visit, he pressed PRC officials to do more to combat IPR piracy (at the 5 IPR
roundtable beginning on 11/14).
October 17-22, 2006 — Secretary of State Condoleezza Rice visited Beijing,
China as part of a trip to Asia that included Tokyo, Japan; Seoul, South Korea; and
Moscow, Russia.
September 19, 2006 — U.S. Treasury Secretary Henry Paulson Jr. arrived in
China after the IMF meeting in Singapore. Paulson is also President Bush’s special
representative in the economic section of the strategic dialogue between the U.S. and
September 5, 2006 — U.S. Assistant Secretary of State Chris Hill arrived in
Beijing for a five-day visit to revive the Six Party Talks. Hill’s trip included visits
to Beijing and to U.S. diplomatic missions in Chengdu, Guangzhou, and Shanghai,
and to Seoul, S. Korea
July 7 and July 11, 2006 — U.S. negotiator Chris Hill made trips to Beijingth
to discuss North Korea’s July 4 missile firings.
May 16, 2006 — The Wall St. Journal, Asia, reported that America’s top
commander in the Pacific, Admiral William Fallon spent a week visiting the 28th Air
Division in the PRC, including a new twin-engine FB7 fighter.
April 20, 2006 — PRC President Hu Jintao arrived in Washington for meetings
with President Bush and other U.S. government officials. Hu began his U.S. trip by
visiting the state of Washington, touring the Boeing and Microsoft plants and having
dinner at Bill Gates’ house. While speaking on the White House lawn, Hu was
heckled by a Falun Gong supporter who had been admitted as a credentialed
journalist. A spokesman also referred incorrectly to the PRC as “The Republic of
China” (Taiwan).
April 7, 2006 — EPA Administrator Stephen Johnson left for China, the first
Environmental Protection Agency administrator to visit China in seven years.

March 26, 2006 — U.S. Secretary of Commerce Carlos Gutierrez arrived in
China for a five-day visit to discuss trade issues.
December 7, 2005 — U.S. Deputy Secretary of State Bob Zoellick met in
Washington D.C. with PRC Executive Vice Foreign Minister Dai Bingguo in the
second session of the U.S.-China Senior Dialogue. At the same time, U.S. Under
Secretary of State for Economic, Business, and Agricultural Affairs Josette Shiner
also hosted a dialogue with Mr. Zhu Zhixin, Vice Chairman of China’s National
Development and Reform Commission (NDRC). (See August 1, 2005.)
November 20, 2005 — President Bush met with President Hu Jintao and
Premier Wen Jiabao in Beijing. His visit to China was part of an overall Asia trip
that began in Japan and included South Korea and Mongolia. His remarks in China
emphasized a U.S. commitment to the spread of democracy and to universal human
rights and freedoms.
October 18, 2005 — Secretary of Defense Donald Rumsfeld made his first
official trip to China as Secretary, meeting with President Hu Jintao and PRC
Defense Minister Cao Gangchuan. During his two-day trip, Secretary Rumsfeld
visited the Second Artillery and addressed rising Communist Party cadres at the
Central Party School, urging China to expand political freedoms and be more
transparent about China’s military.
October 11, 2005 — Secretary of the Treasury John W. Snow and Chairman
of the Federal Reserve Alan Greenspan began a week-long visit to China, among
other things discussing China’s currency valuation and trade surplus.
September 13, 2005 — President Bush and President Hu Jintao met in New
York while attending a U.N. meeting. The Bush-Hu New York meeting substituted
for a Hu visit to Washington that was postponed at the last minute because of U.S.
preoccupation with Hurricane Katrina.
August 1, 2005 — U.S. Deputy Secretary of State Robert Zoellick arrived in
Beijing to initiate “a new senior dialogue on global issues” in which Beijing and
Washington will take turns as hosts. The session was the first of what is expected
to be a regular U.S.-China Senior Dialogue.
July 8, 2005 — Secretary of State Condoleezza Rice, Secretary of Commerce
Carlos Gutierrez, Secretary of Agriculture Mike Johanns, and U.S. Trade
Representative Rob Portman left for a visit to the PRC for discussions about North
Korea’s nuclear program, tougher enforcement of anti-piracy laws for intellectual
property, and other issues. The visit includes a meeting of the U.S.-China Joint
Commission on Commerce and Trade (JCCT).
June 6, 2005 — Secretary of Commerce Carlos Gutierrez arrived in Beijing for
meetings with his counterpart, Chinese Commerce Minister Bo Xilai. Gutierrez
urged the PRC to crack down on IPR piracy, calling IPR violations “a crime.”
March 20- 21, 2005 — Secretary of State Condoleezza Rice held talks in
Beijing with PRC officials as part of her first visit to Asia as Secretary of State. Her

stops included India, Pakistan, Afghanistan, Japan, and South Korea. Her
discussions included North Korea and the Six-Party talks, Taiwan, human rights, and
plans to hold a regular U.S.-China senior dialogue.
February 2, 2005 — U.S. officials from the National Security Council, Michael
J. Green and William Tobey, presented evidence to officials in Japan, South Korea,
and China that North Korea may have exported uranium to Libya. Mr. Green also
delivered a letter from President Bush to President Hu Jintao underscoring the
urgency of North Korea’s possible sale of nuclear materials.
January 31, 2005 — U.S. Deputy Assistant Secretary for Defense Richard
Lawless held talks in Beijing to discuss U.S.-China security cooperation.

Appendix II: Chronology of Developments, 2005-2006
Developments in 2006

12/07/06 — Sino-U.S. defense-policy coordination talks began in Washington.

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.
11/16/06 — The U.S. China Economic and Security Review Commission released its 2006
annual report, including 44 recommendations for U.S. policymakers. Among
the top ten: enhance China’s compliance with WTO obligations, greater
dialogue and congressional scrutiny on security issues, and greater U.S.
pressure for PRC help on North Korea.
11/16/06 — The PRC said it would consider setting up a business association at the
national level for Taiwan businessmen operating in the mainland.
11/16/06 — A PRC Foreign Ministry spokesperson, Ms. Jiang Yu, denied reports that a
Chinese sub had followed and surfaced near a group of U.S. warships.
11/14/06 — Admiral Fallon, Commander of U.S. forces in the Pacific, confirmed a Chinese
sub had surfaced undetected 5 miles from the U.S. S. Kitty Hawk CVB. He
also called for more U.S. military cooperation with China to enhance bilateral
understandings and avoid misunderstandings.

11/03/06 — Prosecutors in Taiwan indicted Wu Shu-jen, wife of President Chen Shui-bian,

and 3 close aides on charges of embezzlement, forgery, and perjury. The
President himself was described as a “perpetrator,” with the implication that
he would be indicted when he left office.

10/26/06 — A PRC Foreign Ministry spokesman, Liu Jianchao, responded on October 26,

2006 to Secretary Rice’s previous day’s remarks by calling on the United
States to work with the PRC to oppose Taiwan independence. On October 25,
Secretary Rice said that U.S. policy on Taiwan is an inseparable “package” that
includes the “one-China policy” and a U.S. commitment to help Taiwan
defense itself.
10/24/06 — According to the WStJ Asia, Exxon Mobil Corp. reached a preliminary
agreement to sell China natural gas from a project on Russia’s Sakhalin Island.
10/24/06 — Taiwan’s opposition-controlled legislature again blocked a military weapons
procurement budget.

10/09/06 — The PRC Foreign Ministry issued a statement on North Korea’s nuclear test,

saying Pyongyang “disregarded the international community’s universal

opposition and flagrantly conducted a nuclear test,” and expressing the PRC’s
“resolute opposition” to the test.
10/08/06 — Japanese Prime Minister Shinzo Abe made his first official visit as Prime
Minister to China instead of to the United States. It was the first visit of a
Japanese PM to China in five years.
10/03/06 — A Taiwan defense official said that the United States had temporarily blocked
the sale of 66 F-16C/D fighters pending resolution of the defense budget
impasse in Taiwan’s legislature.
09/11/06 — According to the WStJ Asia, China appointed a new ambassador to North
Korea — Liu Xiaoming, a career diplomat with extensive knowledge of the
09/11/06 — The IMF warned that China needed to tighten monetary policy to prevent the
economy from over-heating or going into a boom-bust cycle.
09/10/06 — Xinhua issued regulations prohibiting foreign financial news media from
soliciting subscribers in China and requiring them to channel their business
through Xinhua agents. Western commentators speculated that the move was
an effort to siphon off profits from Reuters and other providers of financial
09/07/06 — The WStJ (Asia) reported that the Chinese government announced it plans a
nationwide audit of locally managed pension funds, after an ongoing
corruption probe in Shanghai.
09/05/06 — Premier Wen Jiabao announced China needs more time to bring its anti-piracy
standards to international levels.
09/05/06 — U.S. Assistant Secretary of State Chris Hill arrived in Beijing for a five-day
visit to revive the Six Party Talks. Hill’s trip included visits to Beijing and to
U.S. diplomatic missions in Chengdu, Guangzhou, and Shanghai, and to Seoul,
S. Korea.
09/05/06 — In an undated essay by PRC Vice President Zeng Qinghong, Zeng disclosed
that China’s forex reserves totaled $954.5 billion at the end of July 2006.
09/04/06 — Egypt’s Minister of Trade and Industry, Rachid Mohamed Rachid, began a
week-long visit to China to increase bilateral trade and encourage Chinese
investment in Egypt.

09/03/06 — NYT researcher Zhao Yan decided to appeal his three-year conviction for fraud.

07/12/06 — China replaced two top officials in the National Development and Reform
Commission, the country’s top energy policy body. Beijing reportedly is
considering a World Bank recommendation that it reconstitute the Ministry of
Energy, dissolved in 1993, to better coordinate its energy policy.

07/11/06 — Chinese officials criticized as an “overreaction” a tough U.S.-backed U.N.

resolution on North Korea’s missile tests. President Hu Jintao also criticized
North Korea, telling the visiting North Korean vice-president of the parliament,
“we are against any actions that will aggravate the situation.”

06/21/06 — News accounts said China and South Africa would sign an agreement to co-

operate on peaceful nuclear energy technology during Premier Wen Jiabao’s
06/19/06 — Bob Zoellick, Deputy Secretary of State, announced he would be leaving
government to work for Goldman Sachs as managing director and vice-
chairman, international.

06/17/06 — Premier Wen Jiabao left for a 7-nation tour of Africa, including Egypt, Ghana,

Congo Republic, Angola, South Africa, Tanzania, and Uganda. Wen’s is the
third Africa trip this year by senior Chinese officials.

06/16/06 — China Great Wall Industry Corp. announced it strongly opposed the U.S.

decision to freeze its U.S. assets on the allegation it had aided Iran’s missile
06/16/06 — A 10-member high-level Chinese military delegation left to observe large-scale
U.S. naval exercises in the Pacific Ocean off Guam.

06/16/06 — Taiwan and Nicaragua signed a Free Trade Agreement in Taipei.

06/15/06 — The director of China’s Animal Husbandry and Veterinary Bureau (Ministry
of Agriculture), Jia Youling, warned that avian flu was on the rise among
migratory birds in China.
06/15/06 — According to the London Financial Times, state-run Chinese media challenged
PRC officials to be more forthcoming in explaining the firing (for corruption)
of the official responsible for Olympics construction in Beijing. Greater
transparency is needed, the media said, to retain public confidence in the
06/14/06 — China signed an agreement with Brazil to offer $1.1 billion in energy-related
investment in Brazil.
06/14/06 — China’s Ministry of Agriculture announced that China’s National Avian
Influenza Reference Lab had developed 3 new avian flu vaccines.”
06/14/06 — Taiwan and China announced simultaneously that they had reached agreement
to allow direct round-trip charter passenger flights between China and Taiwan,
shared evenly between mainland and Taiwan airlines, during 4 major public
06/13/06 — The U.S. Treasury Department announced it was placing sanctions on and
freezing the U.S. assets of 4 Chinese state-owned companies for aiding Iran’s
ballistic missile program. The four are: Beijing Alite Technologies Co.,

LIMMT Economic & Trade Co., China National Precision Machinery
Import/Export Corp., and China Great Wall Industry Corp. The agency also
said it was blacklisting the California-based U.S. subsidiary of the latter
company, G.W. Aerospace.
06/12/06 — Pakistani President Pervez Musharraf arrived in Beijing to attend as an
observer the SCO summit meeting scheduled for June 15 in Shanghai. The
Presidents of Mongolia and Iran and the petroleum and gas minister from India
also observed the summit.
06/12/06 — The head of the Beijing commission (Liu Zhihua) responsible for construction
projects for the 2008 Olympics was charged with corruption and fired.
06/11/06 — Amnesty International issued a report calling China one of the world’s most
irresponsible arms exporters.
06/09/06 — The United States announced it would revise U.S. “China Export Control
Policy” to facilitate export of high-tech equipment to China.
06/09/06 — The U.S. and Chinese Olympics Committees signed an agreement of
cooperation to share information about training, research, and anti-doping
06/08/06 — It was announced that the PLA would send observers later in June to the
“Valiant Shield 2006,” U.S.-led military exercises near Guam.
06/06/06 — Japanese Chief Cabinet Secretary Shinzo Abe said that Japan would soon be
lifting a freeze on a 74 billion yen ($550 million) yen loan to China focusing
on environmental issues.
06/06/06 — North Korea’s Foreign Minister, Paek Nam Sun, left after an eight-day visit to
China, at the conclusion of which it was announced that both countries had
agreed to jointly explore for oil in the Yellow Sea.
06/03/06 — In remarks he made at an annual meeting of senior Asia-Pacific defense
officials in Singapore, Secretary of Defense Donald Rumsfeld called for
Beijing to be more transparent about its military.
05/19/06 — Reuters reported that senator Richard Lugar, SFRC Chairman, was drafting
legislation to animate the Six-Party Talks by specifying a time line and series
of mutual concessions, including what the U.S. would offer North Korea.
05/19/06 — 19 U.S. army generals ended a two-day visit to Tibet and left for Beijing. The
group was headed by retired Gen. Morgan Thomas, senior advisor to U.S.
National Defense University.
05/16/06 — The Wall St. Journal, Asia, reported that CinCPac Admiral William Fallon
spent a week visiting the 28th Air Division in the PRC, including a new twin-
engine FB7 fighter. During the visit, Adm. Fallon invited senior Chinese
officers to observe the U.S.-led military exercises near Guam in June 2006.

05/10/06 — In its semiannual report on International Economic and Exchange Rate
Policies, the U.S. did not designate China as a “currency manipulator.”
04/20/06 — PRC President Hu Jintao arrived in Washington D.C. for meetings with
President Bush and other U.S. government officials. Hu began his U.S. trip by
visiting the state of Washington, touring the Boeing and Microsoft plants.
While speaking on the White House lawn, Hu was heckled by a Falun Gong
supporter who had been admitted as a credentialed journalist. A U.S.
spokesman also referred incorrectly to the PRC as “The Republic of China.”
04/10/06 — A chemical spill from two paper mills engulfed and destroyed the tiny village
of Sugai.
04/07/06 — EPA Administrator Stephen Johnson left for China, the first EPA official to
visit China in seven years.
03/24/06 — The Wall St. Journal, Asia, reported that Julie Hall, WHO’s top expert in
Beijing, criticized China’s transparency in only reporting to WHO confirmed
cases of avian flu in humans.
03/23/06 — Senator Schumer, in China with Senator Graham to discuss trade issues and
their 27.5% tariff bill, said he was “more optimistic than we were when we
came here” about the PRC’s currency policy.
03/22/06 — The Associated Press reported that WHO official Julie Hall announced that
China had agreed to share 20 avian flu samples with WHO offices in the next
few weeks, after WHO had negotiated an agreement working out “intellectual
property rights and such issues as commercial rights.” China shared no flu
samples in 2005.
03/22/06 — Taipei Mayor Ma Ying-jeou arrived in DC for a series of meetings, unveiling
his “five ‘do’s’” (or “five yeses”) proposal. During his trip, Ma reportedly also
met with Dep. Sec. State Bob Zoellick; Asst. Sec. East Asia Chris Hill; deputy
national security advisor Jack Crouch; and NSC China specialist Dennis

03/22/06 — The Taiwan government announced a new regulatory framework of approval,

on a case-by-case basis, for large investments involving “sensitive technology”
in China.
03/17/06 — Ma Ying-jeou said the KMT had reached consensus on a “reasonable
purchase” of U.S. arms, but did not pass the package in the wake of Chen’s
NUC decision because it did not want to appear to endorse the decision.
03/02/06 — State Department spokesman Adam Ereli issued a written statement saying that
the United States expected the Taiwan authorities to unambiguously and
publicly clarify that the NUC had been abolished, the status quo maintained,
and that the Chen Shui-bian assurances were still in force.

02/27/06 — President Chen Shui-bian announced officially that the NUC and GNR had
“ceased to function.”

02/07/06 — The Department of Energy (DOE) issued a report (requested by Congress)

concluding that China’s search for oil resources did not damage U.S. security.
02/03/06 — The Pentagon’s 2006 Quadrennial Defense Review (QDR) dubbed China as
the country with “the greatest potential to compete militarily” with the United
States. China issued a formal protest.
01/31/06 — In a New Year’s Day speech, Taiwan president Chen Shui-bian proposed
scrapping the National Unification Council and unification guidelines and seek
U.N. membership under the name “Taiwan.”

01/25/06 — The Financial Times (USA) reported that Google had agreed to launch a China-

based version of its Internet search service and to have portions censored by
Chinese authorities. The same day, Representative Chris Smith announced his
subcommittee on Human Rights would hold hearings on February 16, 2006,
to examine U.S. internet companies’ operating procedures.
01/25/06 — Deputy USTR Karan Bhatia warned China it had to start operating as a “fully
accountable” member of the global trading system to protect U.S.-China trade
01/22/06 — Saudi Arabia King Abdullah began a three-day visit to China, his first overseas
visit since becoming king and the first by a Saudi king to China since 1990.
On 1/23/06, both sides signed five agreements, including one on future energy
01/18/06 — North Korean leader Kim Jong-Il reportedly headed back to North Korea after
an eight-day trip to China.

01/17/06 — A two-day international avian flu funding conference began in Beijing, co-

hosted by China, the World Bank, and the European Commission. A total of
$1.9 billion was pledged by international participants, with the money to go
toward developing countries’ fights against avian flu.
01/17/06 — Lawyers for Uighur detainees in Guantanamo Bay announced they were taking
the case to the U.S. Supreme Court, saying the prisoners are being illegally
01/14/06 — According to the New York Times, villagers in Panlong village in Guangdong
Province were attacked by police officers on their sixth day of protests against
government land seizures.
01/12/06 — China and India signed an agreement to cooperate on securing oil resources

01/08/06 — China’s State Council issued a national emergency response plan, dividing
emergencies into four categories: natural disasters; accidents; public health
incidents; and social safety incidents.

01/08/06 — Bolivia’s president-elect Evo Morales arrived in Beijing for a two-day visit.

During his visit, he invited China to develop Bolivia’s huge natural gas
01/04/06 — Yang Bin, Chief Editor of the popular and aggressively news-oriented tabloid
Beijing News, was removed from his job by the Communist Party’s
propaganda department. The paper had broken the news about the Dongzhou
crackdown in which police forces fired on and killed protesting farmers.
Developments in 2005
12/30/05 — WHO officials announced that China still had not shared with international
health officials virus samples for testing from avian flu outbreaks in bird
12/27/05 — Xinhua reported that Chinese scientists claim to have “completed clinical
experiments” on a new anti-viral drug more effective and cheaper than
12/22/06 — General Zhu Chenghu, a dean of China’s NDU, reportedly received an
“administrative demerit” for comments in July 2005 that China would have to
use nuclear weapons against the United States if Washington intervened on
Taiwan’s behalf in a conflict.
12/14/05 — The day of the first East Asia Summit (EAS) of 16 Asian countries, including
the ten ASEAN countries, China, Japan, South Korea, India, Australia, and
New Zealand — but not the United States. Russia, in the form of President
Putin, attended as an invited observer.

12/13/05 — The WTO Ministerial in Hong Kong began.

12/11/05 — Australia signed the Treaty of Amity and Cooperation in Southeast Asia — a
prerequisite for attending the new East Asian Summit. The Treaty stipulates
signatories will not interfere in each others’ internal affairs.
12/06/05 — Security officials opened fire on protesters in the town of Dongzhou, in
Guangdong Province. According to reports, as many as 20 were killed; the
protesters were objecting to plans to build a new power plant on confiscated
12/02/05 — The State Council adopted a “Decision on Perfecting the Basic Old-Age
Insurance System for Enterprise Employees,” — the first decision since a 1997
State Council decision on pension reform.

11/27/05 — An explosion occurred at the Dongfeng coal mine in Heilongjiang Province,

killing at least 68. Water was also restored to residents of Harbin after the
Songhua spill.
11/25/05 — The PRC announced that six mainland airlines would run special Lunar New
Year cross-strait charter flights: Air China, China East Airlines, China
Southern Airlines, Shanghai Airlines, Hainan Airlines, and Xiamen Airlines.
11/23/05 — Beijing admitted that a “major water pollution incident” had occurred in
Heilongjiang Province on the Songhua River. The government promised to
investigate the spill and punish responsible officials.
11/18/05 — Taiwan and the PRC reached agreement to offer cross-strait flights for the
Lunar New Year from January 20 — February 13, 2006.
11/13/05 — An explosion at a Jilin chemical plant owned by PetroChina, China’s largest
oil company, sent a 50-mile slick of benzene and other toxic chemicals down
the Songhua River, the main source of water for Harbin and other cities
downstream, including in Russia.
10/27/05 — On behalf of China, a small surveillance satellite, the Beijing-1, was launched
on a Russian rocket from Plesetsk Cosmodrome. The satellite was developed
with the help of Surray Satellite Technology Limited, a British company.
10/26/05 — The United States notified Congress that it had approved for sale to Taiwan 10
AIM-9M Sidewinder missiles and 5 AIM-7M Sparrow missiles, worth as much
as $280 million, both systems manufactured by Raytheon.
10/26/05 — Hong Kong Chief Executive Donald Tsang arrived for a three-day visit in the
United States.
10/26/05 — A court in Canada approved China National Petroleum Corporation’s $4.2
billion offer to buy Canadian company PetroKazakhstan.
10/26/05 — The United States (backed by Japan and Switzerland) asked the WTO to force
China to reveal details about how it is using legal and regulatory procedures
to crack down on piracy of intellectual property, including case-by-case
remedies and penalties, responsible authorities, and other data.
09/27/05 — The NPC Standing Committee held its first-ever public hearing — on the
subject of the starting point for taxable income.
09/25/05 — Thousands of Taiwan citizens marched through Taipei in protest to the
legislature’s delay in passing the “special arms budget” to purchase American
09/20/05 — Edward Ross, a senior Pentagon official, said it was reasonable to question
whether the United States should continue to provide for Taiwan’s self-defense
“if Taiwan is not willing to properly invest in its own self-defense.”

09/12/05 — The PRC’s National Administration of State Secrets announced it would no
longer consider death tolls from natural disasters to be state secrets, and it
would begin to declassify past such statistics.
09/08/05 — According to a report in Bloomberg cited by TSR, the PRC’s China
Development Bank agreed to offer 30 billion yuan ($3.7 billion) in loans to
Taiwan companies wanting to invest in China.
09/07/05 — Ma Ying-jeou (KMT) and James Soong (PFP), Taiwan’s two main opposition
party leaders, announced they would jointly oppose the $NT340 special
defense budget to buy U.S. weapons.
09/03/05 — President George Bush and President Hu Jintao agreed in a phone conversation
to postpone the Chinese leader’s U.S. visit, ostensibly because of the Hurricane
Katrina emergency.

09/01/05 — The U.S. re-imposed limits on imports of Chinese-made synthetic fabrics, bras,

and other undergarments.
08/29/05 — China and the United States met in Beijing for a second round of talks over
Chinese textile exports.
08/28/05 — The Taipei Times reported that regular high-level U.S.-Taiwan military talks
— called the “Monterey Talks” for their California location — would be
postponed this year from their scheduled dates of September 13 & 14 until
later in September.
08/24/05 — Taiwan withdrew from legislative consideration a special budget for
purchasing U.S. weapons. Reportedly, the special budget is being slashed from
$480 NT to around $370 million in order to garner more support from
opposition lawmakers.
08/24/05 — China announced that tuition for Taiwan students at PRC universities will be
slashed by more than half, to the same rates as mainland students pay.
08/22/05 — In an interview with The New York Times, Secretary of State Rice said, “We
want a strong and confident China. I actually think a weak China is potentially
much more dangerous.”
08/18/05 — China and Russia began an eight-day joint military exercise in Vladivostok and
off the Shandong Peninsula — their largest joint military exercise in modern
08/16/05 — KMT Chairman Lien Chan announced the formal start of grass-roots
exchanges between the KMT and the CCP.
08/15/05 — The inaugural ceremony in Taiwan for the “Democratic Pacific Union,” a
quasi-governmental body comprised of political and civil leaders from 26
countries, including: the United States including , Canada, Australia, New
Zealand, Mexico, Honduras, Guatemala, El Salvador, Costa Rica, Nicaragua,

Panama, Peru, Chile, Russia, Japan, South Korea, the Philippines, Malaysia,
Indonesia, East Timor, Marshall Islands, Solomon Islands, Tuvalu, Kiribati,
Palau, and Taiwan. Taiwan was the prime mover behind the group’s
formation, and Taiwan Vice President Annette Lu was elected as the body’s
first chairman.
08/12/06 — An Agence France Presse report said Taiwan has begun deploying indigenous
cruise missiles around the island on mobile launchers. The report was
denounced by the Ministry of National Defense.
08/10/05 — The Asian Wall St. Journal reported that the FBI and the Justice Department
since 911 have established a broad new program of counterintelligence against
possible PRC economic and industrial espionage in the United States.
08/10/05 — The Bank of China revealed that China’s new “managed float” of its currency
is tied to a basket of currencies consisting of: the U.S. dollar, Euro, yen, won
(with the biggest weights), and the currencies of Singapore, Britain, Malaysia,
Russia, Australia, Thailand, and Canada.
08/10/05 — 72% of UNOCAL’s shareholders voted to accept Chevron’s $17.06 billion bid
for the company.
08/09/05 — The New York Times reported that four Chinese airlines had signed contracts
with Chicago-based Boeing to purchase 42 Boeing 787 jets, at a cost of
approximately $5.4 billion.

08/05/05 — China formally leveled espionage charges against Ching Cheong, the well-

known, Hong Kong-based chief China correspondent of Singapore’s Straits
Times newspaper. Ching, charged with spying for Taiwan, is the first Hong
Kong journalist to be so accused by China.
08/02/05 — CNOOC dropped its $18 billion bid for Unocal, expressing frustration with
what it called U.S. political interference with the business deal.
08/02/05 — Japan released its annual defense white paper, part of which urged China to opt
for greater transparency in its defense build-up.
08/01/05 — USTR Robert Zoellick arrived in Beijing to initiate “a new senior dialogue on
global issues” in which Beijing and Washington will take turns as hosts.

07/26/05 — The fourth round of Six Party Talks started in Beijing.

07/11/05 — China’s Securities Regulatory Commission published guidelines (in the China
Securities Journal on July 13) requiring listed Chinese companies to increase
transparency by informing investors of their growth strategies, business plans,
and major events in the company.
07/04/05 — Responding to congressional action on the Unocal bid, the PRC Foreign
Ministry issued a strongly worded statement saying “We demand that the U.S.
Congress correct its mistaken ways of politicizing economic and trade issues

and stop interfering in the normal commercial exchanges between enterprises
of the two countries.”

07/01/05 — The Chinese National Offshore Oil Company (CNOOC) asked the U.S.

Committee on Foreign Investment in the United States (CFIUS) to begin a
national security review of its $18.5 bid for UNOCAL. CFIUS is composed
of the Secretaries of the Treasury, Defense, State, Homeland Security, and
Commerce, plus the Attorney General and the Director of OMB.
06/20/05 — After a three-week delay, international health officials received PRC
permission to visit the site of a bird-flu outbreak in Qinghai Province.
06/19/05 — Israel formally apologized to the United States for its sale of Harpy attack
drones and other advanced technology to China. Reports indicate that Israel
is negotiating an agreement to allow U.S. supervision of future Israeli arms
sales to problematic countries.
06/18/05 — The Washington Post reported that Chinese farmers had been using one of two
existing anti-influenza drugs (amantadine, meant for humans) to innoculate
poultry against the H5N1 bird flu virus, rendering the drug ineffective against
the virus strain in humans.
06/16/05 — U.S. and PRC trade officials negotiated via video link to reach a compromise
on Chinese textile imports. Also, according to Yomiuri Shimbun, China test-
fired a new long-range SLBM, believed to be the Ju Lang-2, a modified
version of the Dong Feng-31.

06/14/05 — The Congressional China Caucus was formally launched at a news conference.

06/13/05 — The Washington Post reported that a peasant revolt had occurred in Huawi
township on April 10, 2005, near Hangzhou. Farmers and peasants who were
protesting the building of an industrial park on their land beat back a police
effort to halt their efforts.
06/11/05 — In China, a group of farmers who had been resisting surrendering their land to
officials for a power plant project were attached by armed men. Six were
killed and as many as 100 injured.
06/05/05 — AFP reported that in recent months (perhaps March), Taiwan had successfully
test-fired its first “Hsiung-Feng” cruise missile, with a range of 1,000 miles.
06/04/05 — Thousands of Hong Kong citizens gathered at Victoria Park to commemorate
the Tiananmen Square crackdown killings of June 4, 1989.
06/01/05 — The Asian Development Bank released a study, “Coping with Global
Imbalances and Asian Currencies,” which discusses the implications of
reevaluating the PRC yuan.
05/07/05 — During an Asia-Europe meeting in Kyoto, PRC Foreign Minister Li Zhaoxing
and Japanese Foreign Minister Nobutaka Machimura met to discuss ways of

easing Sino-Japanese tensions, including compensating Japan for damage
cause by riots in China.
04/26/05 — U.S. Assistant Secretary of State Christopher Hill arrived in China to discuss
ways to re-start the Six Party Talks involving North Korea’s nuclear program.
He reportedly asked Beijing to cut off oil shipments to North Korea, which the
Chinese declined.
04/26/05 — KMT Chairman Lien Chan departed for an eight-day visit to China and a
meeting with CCP Chairman Hu Jintao. It is the first time the leaders of the
CCP and KMT will have met since World War II.
04/22/05 — Hong Kong journalist Ching Cheong, chief China correspondent for the Straits
Times, was arrested in China after he went to collect a manuscript of interviews
with Zhao Ziyang.
04/19/05 — The PRC convicted two U.S. citizens living in China on charges of intellectual
property piracy, including selling fake DVD movies. Their arrests in July 2002
were coordinated between the U.S. Immigration Service and the Shanghai
police, described as “the first joint counterfeiting investigation by ICE and
Chinese authorities” by a U.S. Department of Homeland Security spokesman.

04/10/05 — Japan demanded a formal apology and compensation from Beijing over anti-

Japanese protests in China during the weekend where an estimated 10,000
protestors marched against the Japanese Embassy and Japanese businesses in
Beijing, throwing rocks and inflicting damage.
04/10/05 — Pakistani officials announced that China and Pakistan had agreed that Beijing
would supply two more nuclear reactors to Pakistan in addition to the two
reactors already promised.
04/09/05 — PRC Premier Wen Jiabao held talks in India with Prime Minister Manmohan
Singh. The talks were reported to focus on energy projects.
04/08/05 — Peter Mandelson, the EU trade commission, asked his PRC counterpart for
“proof” that China was adequately restraining its textile exports.
04/04/05 — The U.S. Commerce Department announced it was beginning an investigation
into whether textile safeguard quotas should be imposed on imports of Chinese
03/30/05 — President Hu Jintao confirmed the appointment of Vice Foreign Minister Zhou
Wenzhong as the new PRC Ambassador to the United States. Zhou arrived in
Washington in early April 2005.
03/29/05 — Zhou Xiaochuan, governor of the People’s Bank of China (the country’s
central bank), said that China would move to a flexible current exchange rate
on its own timetable and after assessing the international balance of payments,
not simply to rectify a trade imbalance with any individual country.

03/28/05 — In a ground-breaking visit, a Hong Kong delegation of Christian, Buddhist,

Taoist, Confucian, and Islamic religious leaders, including Bishop Zen Ze-
kiun, head of the Catholic Church in Hong Kong, traveled to Guangzhou for
discussions on religious matters.
03/28/05 — Australia released an opinion poll that revealed a majority of Australians
believe U.S. foreign policy to pose as big a threat to world peace as Islamic
fundamentalism. 84% of those polled expressed positive views of Japan; 69%
expressed positive views of China; and 58% expressed positive views of the
United States.
03/14/05 — China’s NPC enacted an anti-secession law aimed at Taiwan independence
03/04/05 — In a panel discussion with CPPCC members representing Taiwan, Hu Jintao
proposed a four-point guideline for China in pursuing cross-strait relations.
03/01/05 — Emerging from a meeting with President Bush, Senator Joe Biden called the
EU intent to lift its arms embargo against China “a nonstarter with Congress.”
Senator Lugar said that Congress could react by placing “a prohibition on a
great number of technical skills and materials, or products, being available to
Europeans.” Also, China’s new law “ Provisions on Religious Affairs” took
effect. Text of the new law can be found at [http://www.amitynewsservice.
org/ page.php? page=1289] .
02/23/05 — A senior WHO official, Dr. Shigeru Omi, warned that “the world is now in the
gravest possible danger of a pandemic” from the avian flu ravaging Asia.
02/21/05 — In an interview published by the Financial Times, Senator Richard Lugar said
he would support curbs on sales of advanced military technology to EU
countries if the EU lifted its arms embargo against China, unless the EU could
assure that advanced technologies would not be diverted to China.
02/21/05 — According to The Asian Wall St. Journal, the U.S. Export-Import Bank
(EXIM) has made a preliminary commitment to provide Westinghouse Electric
with a $5 billion package enabling it to build 4 nuclear plants in China.
02/19/05 — The United States and Japan issued a joint statement describing mutual
security concerns and announcing a new joint security agreement. Among
other issues, the statement listed a peaceful resolution of Taiwan’s situation as
a mutual security concern — the first time Japan had placed itself on record in
this way on the Taiwan issue. China denounced the joint statement the
following day.
02/16/05 — Appearing before the Senate Select Committee on Intelligence, CIA Director
Porter Goss and DIA Director Vice Adm. Lowell Jacoby testified that China’s
build-up of its military capabilities threatens U.S. forces in Asia.
02/11/05 — In Canberra, Australian Trade Minister Mark Vaile expressed confidence that
Australia could sign a free trade agreement with China by the end of 2007, and

that the government hoped to jumpstart formal negotiations during Prime
Minister John Howard’s April visit to Beijing for the Bo-ao Forum.
02/11/05 — The Asia Times reported that China had become India’s second-largest trading
partner in 2004, surpassed only by the United States. The same report stated
that in 2004, “the European Union breezed past Japan and the U.S. to become
[China’s] biggest trading partner,” with bilateral trade pegged at $177.28
billion (a 33.6% increase over 2003.)
02/09/05 — The U.S. Chamber of Commerce announced it was asking the administration
to initiate legal proceedings against China in the WTO for failing to do more
to protect intellectual property rights.
02/02/05 — The PRC and Russia announced they would begin regular security
consultations to enhance their military cooperation. PRC State Councillor
Tang Jiaxun called Russia “China’s main partner for strategic cooperation.”
02/02/05 — Members of the House signed a bipartisan letter to Secretary of State
Condoleezza Rice asking her to help with State’s foot-dragging over
transmitting congressional notifications for an $28.2 billion arms sales to
Taiwan. The letter was drafted by Representative Rob Simmons and signed
by Representatives Roscoe G. Bartlett, Madeleine Z. Bordallo, Jeb Bradley,
Lane Evans, Trent Franks, John N. Hostettler, and Christopher H. Smith.
02/02/05 — According to The Washington Post, U.S. officials from the National Security
Council (Michael J. Green and William Tobey) presented evidence to officials
in Japan, South Korea, and China that North Korea may have exported
uranium hexafluoride to Libya.

01/31/05 — The People’s Daily published the full text of the “2005 Number 1 Document,”

a new PRC measure to reduce taxes on rural peasants and increase farm
subsidies. The measure is intended to address the widening income gap
between urban and rural residents — the source of increasing discontent and

01/29/05 — Venezuelan President Hugo Chavez signed 19 agreements with PRC vice-

president Zeng Qinghong, including agreements allowing China to develop oil
and gas reserves in Venezuela.
01/29/05 — For the first time since 1949, Taiwan and China launched direct cross-strait
charter flights for the Chinese New Year holiday. The United States issued a
statement welcoming the flights.
01/28/05 — As China signed an agreement to purchase 60 new Boeing aircraft from the
United States, Boeing officials announced they were renaming the new aircraft,
the 7E7 Dreamliner, the 787 Dreamliner in recognition of the significance of
the number 8 in China.

01/27/05 — Taiwan formally ended diplomatic ties with Grenada after the Caribbean island
established formal ties with the PRC on January 20, 2005. The move reduces
to 25 those countries with formal relations with Taiwan.
01/27/05 — Japan’s Ministry of Finance released figures illustrating that in 2004, China for
the first time surpassed the United States as Japan’s largest trading partner.
China in 2004 accounted for 20.1% of total Japanese trade, while the United
States accounted for 18.6 %.

01/24/05 — China and India began a “strategic dialogue” on mutual security concerns.

According to a news account in The Straits Times, the talks will pave the way
for PRC Premier Wen Jiabao’s spring 2005 visit to New Delhi.
01/12/05 — The British government announced that the European Union likely would lift
its arms embargo against the PRC some time in the next few months.
01/08/05 — According to the Los Angeles Times (p. C-3), the United States and China
agreed to a new, multi-entry visa policy to facilitate business and tourist visits.
The policy is to take effect on January 15, 2005.
01/05/05 — Chen Yunlin, the PRC’s senior cross-strait official as head of the official
Taiwan Affairs Office, met in Washington with U.S. Deputy Secretary of State
Richard Armitage. The purpose of the meeting reportedly was to portray the
PRC’s proposed anti-secession law as beneficial, rather than destabilizing, to
the status quo.