[Senate Hearing 108-265]
[From the U.S. Government Publishing Office]
S. Hrg. 108-265
U.S.-CHINA RELATIONS
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON FOREIGN RELATIONS
UNITED STATES SENATE
ONE HUNDRED EIGHTH CONGRESS
FIRST SESSION
__________
SEPTEMBER 11, 2003
__________
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COMMITTEE ON FOREIGN RELATIONS
RICHARD G. LUGAR, Indiana, Chairman
CHUCK HAGEL, Nebraska JOSEPH R. BIDEN, Jr., Delaware
LINCOLN CHAFEE, Rhode Island PAUL S. SARBANES, Maryland
GEORGE ALLEN, Virginia CHRISTOPHER J. DODD, Connecticut
SAM BROWNBACK, Kansas JOHN F. KERRY, Massachusetts
MICHAEL B. ENZI, Wyoming RUSSELL D. FEINGOLD, Wisconsin
GEORGE V. VOINOVICH, Ohio BARBARA BOXER, California
LAMAR ALEXANDER, Tennessee BILL NELSON, Florida
NORM COLEMAN, Minnesota JOHN D. ROCKEFELLER IV, West
JOHN E. SUNUNU, New Hampshire Virginia
JON S. CORZINE, New Jersey
Kenneth A. Myers, Jr., Staff Director
Antony J. Blinken, Democratic Staff Director
(ii)
C O N T E N T S
----------
Page
Brown, Hon. Harold, counselor and member, Board of Trustees,
Center for Strategic and International Studies [CSIS],
Washington, DC................................................. 61
Prepared statement........................................... 63
Campbell, Dr. Kurt M., senior vice president, Henry A. Kissinger
Chair for National Security, and director, International
Security Program, Center for Strategic and International
Studies [CSIS], Washington, DC................................. 40
Prepared statement........................................... 42
Feingold, Hon. Russell D., U.S. Senator from Wisconsin, prepared
statement...................................................... 13
Kelly, Hon. James A., Assistant Secretary of State, Bureau of
East Asian and Pacific Affairs, Department of State,
Washington, DC................................................. 4
Prepared statement........................................... 6
Responses to additional questions for the record from Senator
Brownback.................................................. 69
Responses to additional questions for the record from Senator
Allen...................................................... 70
Kumar, Mr. T., advocacy director for Asia and Pacific, Amnesty
International USA, Washington, DC.............................. 45
Prepared statement........................................... 48
Lardy, Dr. Nicholas R., senior fellow, Institute for
International Economics, Washington, DC........................ 28
Prepared statement........................................... 33
Lugar, Hon. Richard G., U.S. Senator from Indiana, opening
statement...................................................... 3
(iii)
U.S.-CHINA RELATIONS
----------
THURSDAY, SEPTEMBER 11, 2003
U.S. Senate,
Committee on Foreign Relations,
Washington, DC.
The committee met, pursuant to notice, at 9:32 a.m. in room
SD-419, Dirksen Senate Office Building, Hon. Richard G. Lugar
(chairman of the committee), presiding.
Present: Senators Lugar, Hagel, Allen, Alexander, Coleman,
Sarbanes, Feingold, and Bill Nelson.
The Chairman. This hearing of the Senate Foreign Relations
Committee is called to order.
It's a pleasure to note, in our audience today, four
Members of the Parliament of Great Britain. And I note that Mr.
Blizzard, Mr. Holmes, Mr. Russell, and Mr. Weir are here, and
also Mr. Paul Riderman, who's Advisor to Secretary General
Solana. Will you rise so we will know that you are here? We
thank you so much for coming. It's an honor to have you here
this morning.
The Committee on Foreign Relations today welcomes James A.
Kelly, an old friend of the committee, and Assistant Secretary
of State for East Asian and Pacific Affairs.
On our second panel, we will have four distinguished
outside experts, Nicholas Lardy, a senior fellow at the
Institute for International Economics, Harold Brown, former
Secretary of Defense and counselor and trustee of the Center
for Strategic and International Studies [CSIS], Kurt Campbell,
former Assistant Deputy Secretary of Defense for Asia and the
Pacific, and now senior vice president and director of the
International Security Program at CSIS, and T. Kumar, Amnesty
International USA advocacy director for Asia and the Pacific.
The purpose of this hearing is to review the relationship
between the United States and the People's Republic of China.
This relationship is one of the most complex foreign policy
issues that we must manage today. China's economic and
political influence is growing, and few Asian problems can be
solved without its cooperation. In recent months, China has
taken some helpful steps in the global war on terrorism, and
performed an active role in seeking a diplomatic solution to
North Korea's dangerous nuclear weapons program. Although these
steps have led to improved political cooperation with China, we
continue to have serious issues of concern, and sometimes sharp
disagreements with the Beijing Government.
The driving force in China's evolving relationship with the
United States and the rest of the world is its record of
economic growth. Since 1979, China has maintained an average
annual growth rate of nearly 10 percent, lifting 200 million
people out of extreme poverty and creating a new middle class.
For Americans, however, the most visible aspect of this
transformation is the large and growing trade deficit with
China, which reached $103 billion last year. This is more than
twice the size of our deficit with China from 1997, for
comparison.
China is now the third-largest supplier of imports to the
United States, and an increasing proportion of the products
being imported are relatively sophisticated items, such as
computers and microwave ovens. China is now the world's largest
recipient of foreign direct investment. A good share of this
investment has come from American firms.
China's economic policies require close scrutiny because of
their implications for both U.S. national security policy and
United States jobs. Many American workers in the manufacturing
sector perceive their livelihoods to be threatened by China's
ability to attract investment, its low wages, and its trade
practices. These workers want to know that everything is being
done to ensure that China plays fair in the international
marketplace. In particular, there is great concern about the
under-valued Chinese currency, about China's resistance to
complying with WTO obligations to reduce trade barriers, about
its failure to adequately protect copyrights on software and
other intellectual property. Our trade representatives and
diplomats must tirelessly pursue these issues with the Chinese,
both in specific talks and in the context of our broader
relationship.
We must also pay attention to the impact of China's growth
on economic stability in Asia. Prosperous countries, such as
Japan, Korea, and Taiwan, are worried that their own
manufacturing industries are being hollowed out, while many
developing countries in Asia are complaining that China is
absorbing much of the foreign investment that would have gone
their way. China's smaller neighbors worry about Chinese
influence in regional affairs, including the recurrent disputes
over the South China Sea.
With China's new wealth has come a major program to
modernize its military, the world's largest. According to a
recent Council on Foreign Relations report, the focal point of
this military modernization is influencing Taiwan's political
choices about reunification.
In early 2001, after President Bush's statement that the
United States would not remain aloof if China attacked Taiwan,
I wrote, ``I will be one of many Americans assisting the
President in his assertion that a forceful military unification
of Taiwan and China will not be tolerated.'' Today, we should
consider what China's military program means for the United
States, its neighbors, and especially Taiwan. Given China's
past history as a proliferator of weapons technology, does this
modernization pose new proliferation risks?
Finally, China's development has given millions of Chinese
citizens new personal space to choose their jobs, start
businesses, make money, travel, and communicate with one
another and the outside world. These developments have produced
more questions about democracy in China, transparency in
government, and observance of human rights. According to
Amnesty International's latest report, the human-rights
situation in China has worsened. The Strike Hard Campaign, the
handling of the SARS epidemic, actions against Falun Going,
moves against ethnic minorities in the name of counter-
terrorism, and continuing repression in Tibet all raise
important questions.
We look forward to discussing these issues with our
witnesses. We thank each of them for agreeing to appear before
us today.
[The opening statement of Senator Lugar follows:]
Opening Statement of Senator Richard G. Lugar
The Committee on Foreign Relations welcomes today James A. Kelly,
Assistant Secretary of State for East Asian and Pacific Affairs. On our
second panel we will have four distinguished outside experts: Nicholas
Lardy, a senior fellow at the Institute for International Economics;
Harold Brown, former Secretary of Defense and counselor and trustee of
the Center for Strategic and International Studies; Kurt Campbell,
former Assistant Deputy Secretary of Defense for Asia and the Pacific
and now senior vice president and director of the International
Security Program at CSIS; and T. Kumar, Amnesty International USA's
Advocacy Director for Asia and the Pacific.
The purpose of this hearing is to review the relationship between
the United States and the People's Republic of China. This relationship
is one of the more complex foreign policy issues that we must manage
today. China's economic and political influence is growing, and few
Asian problems can be solved without its cooperation. In recent months
China has taken some helpful steps in the global war on terrorism and
performed an active role in seeking a diplomatic solution to North
Korea's dangerous nuclear weapons program. Although these steps have
led to improved political cooperation with China, we continue to have
serious issues of concern and sometimes very sharp disagreements with
the Beijing government.
The driving force in China's evolving relationship with the United
States and the rest of the world is its record of economic growth.
Since 1979, China has maintained an average annual growth rate of
nearly 10 percent, lifting 200 million people out of extreme poverty
and creating a new middle class. For Americans, however, the most
visible aspect of this transformation is the large and growing trade
deficit with China, which reached $103 billion last year. This is more
than twice the size of our deficit with China from 1997. China is now
the third largest supplier of imports to the United States, and an
increasing proportion of the products being imported are relatively
sophisticated items such as computers and microwave ovens. China is now
the world's largest recipient of foreign direct investment. A good
share of this investment has come from American firms.
China's economic policies require close scrutiny because of their
implications for both U.S. national security policy and U.S. jobs. Many
American workers in the manufacturing sector perceive their livelihoods
to be threatened by China's ability to attract investment, its low
wages, and its trade practices. These workers want to know that
everything is being done to ensure that China plays fair in the
international marketplace. In particular, there is great concern about
the undervalued Chinese currency, about China's resistance to complying
with WTO obligations to reduce trade barriers, and about its failure to
adequately protect copyrights on software and other intellectual
property. Our trade representatives and diplomats must tirelessly
pursue these issues with the Chinese, both in specific talks and in the
context of our broader relationship.
We also must pay attention to the impact of China's growth on
economic stability in Asia. Prosperous countries such as Japan, Korea,
and Taiwan are worried that their own manufacturing industries are
being ``hollowed out,'' while many developing countries in Asia are
complaining that China is absorbing much of the foreign investment that
would have gone their way. China's smaller neighbors worry about
Chinese influence in regional affairs, including the recurrent disputes
over the South China Sea.
With China's new wealth has come a major program to modernize its
military, the world's largest. According to a recent Council on Foreign
Relations report, the focal point of its military modernization is
influencing Taiwan's political choices about reunification. In early
2001, after President Bush's statement that the United States would not
remain aloof if China attacked Taiwan, I wrote: ``I will be one of many
Americans assisting the president in his assertion that a forceful
military unification of Taiwan and China will not be tolerated.'' Today
we should consider what China's military program means for the U.S.,
its neighbors, and especially Taiwan. Given China's past history as a
proliferator of weapons technology, does this modernization pose new
proliferation risks?
Finally, China's development has given millions of Chinese citizens
new personal space to choose their jobs, start businesses, make money,
travel, and communicate with one another and the outside world. These
developments have produced more questions about democracy in China,
transparency in government, and observance of human rights. According
to Amnesty International's latest report, the human rights situation in
China has worsened. The ``strike hard'' campaign, the handling of the
SARS epidemic, actions against Falun Gong, moves against ethnic
minorities in the name of counter-terrorism, and continuing repression
in Tibet, all raise important questions.
We look forward to discussing these issues with our witnesses, and
we thank each of them for agreeing to appear before us today.
The Chairman. It's a special pleasure to have you,
Secretary Kelly. Would you please proceed with your testimony?
STATEMENT OF HON. JAMES A. KELLY, ASSISTANT SECRETARY OF STATE,
BUREAU OF EAST ASIAN AND PACIFIC AFFAIRS, DEPARTMENT OF STATE,
WASHINGTON, DC
Mr. Kelly. Thank you very much, Mr. Chairman. And thank
you, sir, for that statement, which I think summarizes
exceptionally well many of the factors that I will try to touch
on in this testimony.
With your permission, sir, I would like to just have an
abbreviated version of my statement, and submit the entire
statement for the record.
The Chairman. It will be published in full in the record.
Mr. Kelly. Thank you, sir.
It's a pleasure and an honor to address the Senate Foreign
Relations Committee on one of the most important bilateral
relationships of the 21st century, the U.S.-China relationship.
As the world's most populous country, with a huge and rapidly
growing economy and a permanent seat on the United Nations
Security Council, China is well on its way to becoming a major
force in global affairs. In some respects, it is already there.
In others, it has aspirations to leadership that could
complement or potentially conflict with our Nation's
objectives. Managing our relationship with this dynamic and
evolving country and ensuring that the U.S.-China relationship
is a force for peace, security, and prosperity, is a task as
critical as it is complicated.
President Bush, Secretary Powell, and all of us in the
administration have worked very hard over the last 2\1/2\ years
to forge a candid, constructive, and cooperative relationship
with China. In the spirit of dealing straightforwardly with our
differences, and building on common interests, the President
has met with China's leader an unprecedented four times since
taking office. He visited China twice in his first 13 months in
office, hosted President Jiang Zemin in Crawford last October,
and met the new Chinese President Hu Jintao in France this
June. I expect additional senior meetings even before the end
of this year.
While not minimizing the differences that remain over human
rights, nonproliferation, and Taiwan, I can report to you, sir,
that the administration's approach to China has resulted in a
U.S.-China relationship that is, on some fronts, the best it
has been in years. It is marked by complementary and sometimes
common policies on a broad range of issues that are critical to
U.S. national interests. The war on terrorism, and critical
regional security issues are two examples.
Both China and America understand that what we need, what
is in both of our interests, is a relationship that is
pragmatic, based on mutual respect, and focused on furthering
peace and stability in the world. By ``pragmatic,'' I mean that
we maintain and strengthen our core interests or values. Yes,
we have real and important differences with China, and we must
continue to encourage China's evolution as a responsible global
power that contributes to the solution of global problems and
respects its international obligations in areas such as
nonproliferation, trade, and human rights. Our goal is to
develop a relationship with the PRC that furthers bilateral
cooperation on a range of critical issues while staying true to
U.S. ideals and principles.
I was recently in Beijing for six-party talks aimed at the
complete, verifiable, and irreversible termination of North
Korea's nuclear programs. China played a critical role in
getting the DPRK to the table and arranging the talks and in
letting Pyongyang know that North Korea's pursuit of nuclear
weapons is not simply a bilateral issue between the U.S. and
North Korea, but is a matter of great concern to its neighbors
in the region.
It bears remembering that 50 years ago the U.S. and the PRC
were fighting on opposite sides of a war on the Korean
Peninsula. Clearly, China and the United States do not have
identical perspectives on world affairs. Taiwan is one example.
Our abiding interest is in a peaceful resolution of cross-
strait differences. We continue to tell China clearly that its
missile deployments across the strait from Taiwan and refusal
to renounce the use of force are fundamentally incompatible
with a peaceful approach.
I want to highlight today the profound importance of
China's extraordinary and ongoing economic transformation. In a
clear move away from a moribund Communist economic system,
China has implemented market-oriented reforms over the past two
decades, and unleashed individual initiative and
entrepreneurship. While substantial development challenges
remain, the result has been the largest reduction of poverty
and one of the fastest increases in income levels ever seen.
China's economic relations with the United States and the
world have also been transformed. In general, trade relations
in East Asia are undergoing significant restructuring. For
example, South Korean exports to China in July exceeded their
exports to the United States for the first time. These trends
are likely to accelerate as intra-regional trade in East Asia
continues to expand. And I would interject that some 10 years
ago, China was perhaps a 1-percent factor in intra-Asian trade
throughout East Asia. It's now approaching 20 percent. This is
incredible growth in a short period of time.
Largely closed to foreign firms until 1980, China is now
the world's fourth-largest trading nation, with total trade of
over $600 billion. Trade between the U.S. and China has led the
way, reaching more than $148 billion in 2002.
But some of our most serious disagreements with China today
relate to the nature of China's political system and its
internal policies. Despite reform, China's legal system remains
seriously flawed and often provides little or no due process to
those accused of crimes, particularly political crimes. There
is simply no other way to put it. Ongoing gross violations of
human rights are a serious impediment to better relations, and
undermine the goodwill generated by individual releases or by
other steps.
We have been particularly disappointed by backsliding on
human rights this year, after a year of incremental but still
unprecedented progress in 2002. It is important that China take
steps to modernize its criminal and civil jurisprudence system,
and we intend to press these issues in our bilateral meetings
with China.
There are also steps that need to be taken with regard to
nonproliferation. The Chinese have expressed their desire to
stem the proliferation of missiles and WMD, and we are
heartened by recent steps taken in the right direction, but
there's a long way to go.
Perhaps, sir, I'd conclude by returning to where I started.
The U.S.-China relationship has come a long way since just a
few years ago, and has moved beyond some rocky moments, notably
the accidental bombing of China's Embassy in Belgrade and the
EP-3 crisis of April of 2 years ago, to begin to build a more
mature relationship, one defined as much by our common efforts
in support of shared interests as by our differences. I do not
underestimate the challenges of our relations with China, and
we must continue to speak frankly and forcefully on issues that
concern us.
A U.S.-China relationship that is candid, cooperative, and
constructive is both necessary and possible today. It is also
in the interest of our mutual prosperity and peace and that of
the Asian Pacific region and the world.
Thank you, Mr. Chairman. Sir, I'd be happy to take
questions from the committee.
[The prepared statement of Mr. Kelly follows:]
Prepared Statement of Hon. James A. Kelly, Assistant Secretary of
State, Bureau of East Asian and Pacific Affairs, Department of State
Good Morning. Thank you Mr. Chairman for the opportunity to address
the Senate Foreign Relations Committee on one of the most important
bilateral relationships of the 21st century--The US-China relationship.
As the world's most populous country, with a huge and rapidly
growing economy, and a permanent seat in the UNSC, China is well on its
way to becoming a major force in global affairs. In some respects, it
is already there; in others, it has aspirations to leadership that can
complement--or potentially conflict with--our nation's objectives.
Managing our relationship with this dynamic and evolving country and
ensuring that the US-China relationship is a force for peace, security,
and prosperity is a task as critical as it is complicated.
Many have tried to sum up the United States' relationship with
China in a catch phrase--friend or enemy, good or bad, strategic
competitor or strategic partner. Such characterizations are neither
useful nor accurate. Our relationship with the PRC and its 1.3 billion
citizens is too complex, varied, and fast changing to be reduced to
sound bites. And so today, avoiding broad generalizations and overly
simplistic judgments, I want to give you specifics on where we stand on
a whole range of issues with the PRC after the first two years of this
Administration.
President Bush, Secretary Powell, and all of us in the
administration have worked hard over the last two and a half years to
forge a candid, constructive and cooperative relationship with China.
In the spirit of dealing straightforwardly with our differences and
building on common interests, the President has met with China's leader
an unprecedented four times since taking office. He visited China twice
in his first 13 months in office, hosted President Jiang Zemin in
Crawford last October, and met the new Chinese President Hu Jintao in
Evian, France this June.
While not minimizing the differences that remain over human rights,
nonproliferation, and Taiwan, I can report to you that the
administration's approach to China has resulted in a US-China
relationship that is, on some fronts, the best it has been in years. It
is marked by complementary--and sometimes common--policies on a broad
range of issues that are critical to US national interests: the war on
terrorism and critical regional security issues are just two examples.
Both China and America understand that what we need--what is in
both of our interests--is a relationship that is pragmatic, based on
mutual respect, and focused on furthering peace and stability in the
world.
By pragmatic, I mean that we maintain and strengthen our core
interests or values. Yes, we have real and important differences with
China and we must continue to encourage China's evolution as a
responsible global power that contributes to the solution of global
problems and respects its international obligations in areas such as
nonproliferation, trade, and human rights. Our goal is to develop a
relationship with the PRC that furthers bilateral cooperation on a
range of critical issues while staying true to US ideals and
principles.
I was recently in Beijing for 6-party talks aimed at the complete,
verifiable, and irreversible termination of North Korea's nuclear
programs. China played a critical role in getting the DPRK to the table
and arranging the talks, and in letting Pyongyang know that North
Korea's pursuit of nuclear weapons is not simply a bilateral issue
between the US and the DPRK, but is a matter of great concern to its
neighbors in the region.
It bears remembering that 50 years ago the U.S. and the PRC were
fighting on opposite sides of a conflict on the Korean peninsula.
Today, by contrast, we share a common goal in preventing North Korea's
further development of weapons of mass destruction. China's
appreciation of the need to bring North Korea back into compliance with
its international commitments is significant indeed. As PRC chair of
the talks, Vice Foreign Minister Wang Yi, said at the conclusion of the
talks, China would continue to do its part to seek a peaceful
settlement of the nuclear issue and a lasting peace in the Korean
peninsula. We will continue working with the Chinese and our other
partners to find a peaceful, diplomatic solution to this complicated
and difficult issue.
Today marks the two year anniversary of the tragic attacks of
September 11th. The swift Chinese condemnation of those attacks and the
subsequent enhancing of our bilateral counter-terrorism cooperation
have shown that we stand united in our fight against those who wish ill
to the United States, and the security and stability of the world. The
PRC voted in support of both UN Security Council resolutions after the
September 11th attacks. Within two weeks of 9-11, we initiated a U.S.-
China counterterrorism dialogue to improve practical cooperation, and
have subsequently held two rounds of those talks and are looking
towards a third round. China supported the coalition campaign in
Afghanistan and pledged $150 million--a significant amount measured
against China's historical foreign aid commitments--to Afghan
reconstruction following the defeat of the Taliban and our successes in
disrupting and setting back al Qaeda. This July, China joined the
Container Security Initiative, enabling joint efforts to target and
pre-screen cargo being shipped to the U.S. from Chinese ports. This
means that Chinese and American customs officials will be working
together on the ground in China to keep Americans safe at home.
We have also had a useful dialogue on Iraq. China voted for UN
Resolution 1441 authorizing renewed weapons inspections in Iraq, and
publicly decried Baghdad's attempts to play games with the UN Security
Council. We are looking for ways to engage China further in
reconstruction and stabilization efforts in Iraq.
Clearly, China and the U.S. do not have identical perspectives on
world affairs. Taiwan is one example. Our abiding interest is in a
peaceful resolution of cross-Strait differences; we continue to tell
China clearly that its missile deployments across the Strait from
Taiwan and refusal to renounce the use of force are fundamentally
incompatible with a peaceful approach.
Let me assure you that this Administration takes seriously its
obligations under the three U.S.-China communiques and the Taiwan
Relations Act. We will continue to adhere to our ``one China'' policy.
We will also consider the sale of defense articles and services at an
appropriate level to allow Taiwan to maintain its ability to defend
itself.
However, we can say that on some of the most important
international issues of the day, China and the United States have
overlapping, if not identical, interests, and that the areas of shared
interest and cooperation are growing in both scope and intensity.
I want to highlight today the profound importance of China's
extraordinary, ongoing economic transformation. In a clear move away
from a moribund communist economic system, China has implemented
market-oriented reforms over the past two decades and unleashed
individual initiative and entrepreneurship. While substantial
development challenges remain, the result has been the largest
reduction of poverty and one of the fastest increases in income levels
ever seen. China's economic growth has reportedly averaged 9% since
1979, and is expected to remain strong in 2003 despite the setbacks of
the SARS outbreak and a sluggish global economy.
China's economic relations with the United States and the world
have also been transformed. In general, trade relations in East Asia
are undergoing significant restructuring; for example, South Korean
exports to China in July exceeded their exports to the U.S. These
trends are likely to accelerate as intra-regional trade in East Asia
continues to expand.
Largely closed to foreign firms until 1980, China is now the
world's fourth-largest trading nation, with total trade over $600
billion. Trade between the U.S. and China has led the way, reaching
more than $148 billion in 2002. China is America's fourth largest
trading partner, sixth largest export market and fourth largest source
of imports. If current trends continue, China may pass Japan as our
third-largest trading partner by the end of 2003. In the process, China
has also become the world's largest recipient of FDI. U.S. firms have
invested over $25 billion in China, in key areas ranging from energy
development to automotive and telecommunications technology. U.S.
economic engagement with China can--and should--promote prosperity in
both countries and throughout the world.
The United States is currently running a large bilateral trade
deficit with China. We want to eliminate any and all unfair trade
practices that contribute to this deficit and are working with China to
open its markets further, insisting that our trade relationship be
based on a shared commitment to open markets and to playing by the
rules. Maintaining domestic support for open markets to China will
become increasingly difficult without demonstrated support in China for
open markets to U.S. goods and services. I should note some encouraging
signs on that score: our exports to China are growing at a nearly 25%
pace this year. Nevertheless, there is still room for improvement.
China's full and timely implementation of its WTO commitments is
key to expanding market opportunities for U.S. firms in China and
ultimately creating more jobs for American workers and farmers. We are
working with our Chinese counterparts to hasten that process, and
believe China's WTO implementation will accelerate China's economic
reform through the creation of a more rules-based and market-driven
economy. While China has made great strides in reforming its economy
and moving toward a market-based economy, lowering tariffs in the
process, we still believe more needs to be done.
We have serious concerns with China's WTO compliance in certain
areas--particularly in agriculture, intellectual property rights, the
services sector, and the cross-cutting issue of transparency--and are
insisting that the Chinese address these concerns. I want to emphasize
that monitoring and enforcing China's implementation of its WTO
commitments are top priorities for the U.S. government. We also look
forward to working with the PRC on key economic issues in the current
Doha Round, including a move to reduce agricultural subsidies, which
inhibit the trade of goods in which the United States and China are
both competitive.
I should also note that with the end of the textile quota system in
2004 the explosive growth of China's textile industry will pose
increasing challenges, not simply to our domestic producers, but to the
legion of developing economies that rely on textile exports. Navigating
this process will require some sensitivity by China as others adjust.
I know that many members of Congress are concerned that China is
deliberately maintaining an undervalued currency to gain an unfair
advantage in trade. Treasury Secretary Snow, in his recent visit to
Beijing, reiterated to Chinese officials our belief that the best
international economic system is one based on free trade, free capital
flows, and market-determined exchange rates. We are encouraging China
to accelerate trade liberalization, permit the free flow of capital,
and take steps to establish a floating exchange rate. I understand that
you will have many questions about the currency issue and I defer to my
colleagues at the Treasury to address this issue in more detail.
Some of our most serious disagreements with China today relate to
the nature of China's political system and its internal policies.
Although access to information from outside China and the imperatives
of economic reform have made it increasingly difficult for the
Communist Party to control social and political thought or activities,
China remains a one-party system where the people who rule and who make
the rules are by and large not accountable to the general population.
The abuses that such a system invites are manifest in China's lack of
respect for the rights of its citizens. Any individual or group the
regime sees as threatening--whether they be democracy activists, Falun
Gong practitioners, Christians worshiping in home or unregistered
churches, Tibetans, Muslim Uighurs, journalists investigating
corruption, laid-off workers protesting, or even university students
venting on the Internet--any of these people run the risk of detention
or worse if they cross an ill-defined line.
Despite reform, China's legal system remains seriously flawed, and
often provides little or no due process to those accused of crimes,
particularly political crimes. There is simply no other way to put it--
ongoing gross violations of human rights are a serious impediment to
better relations and undermine the goodwill generated by individual
releases or other steps.
We have been particularly disappointed by backsliding on human
rights this year, after a year of incremental, but still unprecedented,
progress in 2002. It is important that China take steps to modernize
its criminal and civil jurisprudence system and we intend to press
these issues in our bilateral meetings with China.
There are also steps that need to be taken with regard to
nonproliferation. The Chinese have expressed their desire to stem the
proliferation of missiles and WMD, and we are heartened by recent steps
taken in the right direction. Under Secretary for Arms Control and
International Security John Bolton was recently in Beijing for the
second round of a semi-annual security dialogue aimed at--among other
key issues--halting the spread of these deadly weapons and
technologies. Although China recently issued updated regulations on the
export of chemical and biological agents, as well as missile-related
export controls, full implementation and effective enforcement are
still lacking. We continue to see disturbing cases of proliferation
activities by certain Chinese firms. As you know, the Administration
has not shied from sanctioning such activities, as required by U.S.
law. China must realize that this kind of proliferation not only
damages its relationship with the U.S., but also ultimately hurts its
own interests and security.
Let me return to where I started. The U.S.-China relationship has
come a long way since just a few years ago, and has moved beyond some
rocky moments--notably the accidental bombing of China's embassy in
Belgrade, and the EP-3 crisis--to begin to build a more mature
relationship: one defined as much by our common efforts in support of
shared interests as by our differences.
Contrast those difficult moments with where we are today--four
presidential meetings in two years, a common stand on some of the most
pressing matters of the day, and a relationship that across a number of
different dimensions is enormously robust.
I do not underestimate the challenges of our relations with China,
and we must continue to speak frankly and forcefully on issues that
concern us. A U.S.-China relationship that is candid, cooperative, and
constructive, is both necessary and possible today. It is also in the
interests of our mutual prosperity and peace and that of Asia-Pacific
region and the world.
Thank you. I look forward to taking your questions.
The Chairman. Thank you very much, Secretary Kelly. We'll
have a round of questioning, and the Chair will suggest 8-
minute limits, at least for the first round. If there are
additional questions for the Secretary, why, we'll have another
round, and then we will have another panel.
I'll begin the questioning. You mentioned the relations
improving. I know, from previous testimony, you have pointed
out the work you have been doing, personally, as well as
through others, with the Chinese with reference to North Korea.
Can you describe the role the Chinese are playing, how helpful
they have been? Or has this, in fact, been a place in which the
relationships have come together much faster?
Mr. Kelly. Yes, Mr. Chairman. The work with North Korea
that brought us to the multilateral talks of 2 weeks ago has
had a significant contribution by China. Two very senior
leaders and delegations have been sent to North Korea by China
within the last year to urge North Korea's movement in the
direction that we saw 2 weeks ago with the multilateral talks.
The Chinese are, of course, always following their own
interests, but they have made absolutely clear that the end of
nuclear weapons on the Korean Peninsula is a very strong
objective of China, as well, and they have made that clear,
both verbally and I think in their actions.
They have also, by setting up the six-party talks, made
clear that the North Korean nuclear issue is not just something
between the DPRK and the United States, but something that very
much involves, of course, China, but also the other significant
players in the region, in particular, the Republic of Korea,
Japan, and the Russian Federation.
The Chairman. In some newspaper articles about these
negotiations and the ways in which they have influenced our
domestic situation, it has been alleged that the United States
did not press China particularly hard, during the Secretary of
the Treasury's visit, on the currency evaluation issue, because
we had other objectives, namely the North Korean problem. Would
you comment on that and what we might anticipate with regard to
currency revaluation in China in the near future?
Mr. Kelly. As I tried to make clear in the statement, it's
necessary for us to pursue all kinds of messages with China at
all times. And even as we cooperate, to the extent we can, on
North Korea, even as we cooperate in the global war on
terrorism, there is no room for ignoring the significant trade
and economic and human rights issues that are there, as well.
In fact the very week we had the multilateral talks in China, I
had a separate meeting with senior Chinese officials to go
through a large range of difficult bilateral problems.
Secretary Snow, in that same vein, went there, and I think that
there is no question that he made points that are very
significant.
During this testimony, I'm going to play it safe. It's not
the role of Assistant Secretaries of State to comment on
currency valuations, but I'd be delighted, Mr. Chairman, to
quote from, I think, the very eloquent positions that Secretary
Snow took while he was there. And if you'd like, I would be
happy to do that.
But the fact is, we have a very difficult trade and
economic situation. It is true that over the last 4 years, our
exports to China have doubled from about $13 billion to about
$26 billion. But the imports from China have--starting from a
much higher base 4 years ago, about $85 billion, now we're
looking at about $125 billion. So there is a vast and very
difficult trade imbalance in our relations with China. It's
very complex in its nature, and I think other members of the
panel, later on, are going to be able to comment more
intelligently, perhaps, than I could on that. But this was very
much in Secretary Snow's mind when he went to China, and I do
not believe that he was impeded in the slightest by the other
interests we have. The President is determined that ``candid,
cooperative, and constructive'' means that we pursue all of our
interests with China.
The Chairman. Frequently, Russians complain that relatively
small American investment is occurring, private investment, in
Russia. At the same time, they point out huge investments by
American firms are occurring in China. And we may make
comparisons of trade laws, of particular rights, of due process
commercially in this situation. But at least some are surprised
that there is such an abnormal amount of American private
investment in China. Why is that so? And is it likely to
continue? We may not be able to get into all the domestic
politics of China today, but the fact is that, at the
grassroots, a number of our constituents are calling for
revaluation of currency. They do so perhaps in the hope that
something can occur that would stem the tide of jobs going to
China, sometimes jobs brought about by American investment, an
expansion of plants there, and an imbalance of trade that they
feel ultimately will be to our detriment because it is so
large.
Why the investment in China and the huge outpouring of
American capital into that country?
Mr. Kelly. Well, there are many reasons, obviously, Mr.
Chairman. There are also some obvious imbalances--India, I
think, frequently notes to us that American investment is
considerably less in India than in China, and the same with
Russian Federation. I think as these countries develop and
their economies become more attuned internationally, this is
likely to switch. Additionally, whether China can continue its
unbroken significant growth is also a valid question to be
asked. But obviously these are choices of businesses and
investors that are made on an economic basis, and they have
been made.
One factor that I think is significant is that the largest
amount of foreign direct investment in China has been invested
from Hong Kong and from Taiwan. In particular, in Hong Kong I
believe a lot of that money is what I call ``round-trip
money.'' It's Chinese investing in their own economy. And that
kind of confidence of the people of China in their own future,
I think, underpins business confidence, as well. Currency
valuation, I'm sure, is a part of the equation, as well.
The Chairman. Thank you very much.
Senator Feingold.
Senator Feingold. Thank you, Mr. Chairman. As usual, you
are holding hearings on very important issues in a very timely
way, and I thank you for it.
Welcome, Secretary Kelly. Let me just ask you a few
questions.
First, I can tell you, and I'm sure you know, that the loss
of manufacturing jobs to China has not only been very much in
the news, but something that is inescapable for anyone who
would travel, at least my part of the country--in particular,
in Wisconsin. And in the midst of this, we hear the accusations
that Chinese workers receive extremely low wages and often work
in abysmal conditions.
China took an exception to article 8a, which guarantees the
right of everyone to form and join trade unions of their
choice, when it ratified the International Covenant on
Economic, Social, and Cultural Rights. And the State
Department's own human rights report catalogs the dismal state
of workers' rights in China. Does the administration expect to
engage China on the twin issues of collective bargaining and
freedom of association? And what specifically is the
administration doing to support labor rights in China? What
consequence does the administration support in the absence of
progress on labor rights issues?
Mr. Kelly. Senator Feingold, that is a very serious
question, and it's a big part of the ``candid'' part of our
relationship with China. The inability of workers to organize
is a serious impediment. It has restricted, for example, our
ability to provide support to financing from the Overseas
Private Investment Corporation [OPIC]. It is an ongoing issue
that is raised with China, but the nature of the adversity to
trade unions in the Chinese system is deeply ingrained, and
it's going to be a slow slog to change this attitude. This is
part and parcel of our work in building democratic
institutions, building a greater commitment to a rule of law
rather than the rule of the party. It's an ongoing issue that
is taken up at a variety of levels by the administration with
the Chinese.
Senator Feingold. Can you give me a sense of what the
administration supports if there isn't progress on this?
Mr. Kelly. The overall relationship with China, as has been
noted, has many, many components. There are many things in
China that are not to our liking and that, in fact, need to be
changed. Rather than identifying negative actions or sanctions
that would be taken if some specific goal is not obtained, a
bluff on which our country has been called before, we are
preferring to emphasize the positive. We have supported, for
example, some substantial amounts of money for programming with
NGOs and other institutions that are aimed at strengthening
labor rights and the ability of workers to organize in China.
Much of the effort on rule of law is involved in strengthening
the rights of workers.
China, itself, recognizes the lack of a social safety net
of any kind, as they deal with one of their greatest problems,
the huge state-owned enterprises filled with nonproductive
workers, and the problem of unemployment, as well.
So we're much more focused on trying to work to improve the
situation rather than to make threats that might be
counterproductive if we had to carry them out.
Senator Feingold. Well, let me urge the administration as
strongly as I can to obviously continue the positive, but also
to communicate to the Chinese that--in my State, there is a
growing consensus that the problems with competition with China
are, in many ways, destroying our manufacturing base that has
been so important to our State, and it is repeated every day to
me and is of great importance to the people of my State.
Let me switch to something that the Chairman brought up,
which is the relationship between China and North Korea. And I
certainly acknowledge the Chinese role in the recent six-party
talks. Let me follow on another aspect of it.
In the past, evidence has suggested that China has
transferred sensitive technology to North Korea, which has its
own very problematic history of proliferation. Can we be
assured, at this sensitive time, that China has ceased all such
proliferation collaboration with North Korea? And what steps
can the United States expect China will be willing to take to
combat further proliferation attempts by North Korea? Without
concerted Chinese cooperation, I'm wondering if we can expect
any regime, aimed at containing North Korea's proliferation, to
succeed.
Mr. Kelly. I think, Senator Feingold, that you have put
your finger on the critical component of restricting North
Korea's ability to bring in, from outside, the technologies and
items that are needed for not only nuclear weapons and
ballistic missiles, but also for other weapons of mass
destruction. We have had, and continue to have, ongoing
discussions with China on this issue, and China has, I think,
made a credible case that, on major end-items and on the most,
at least, obvious forms of military technologies, that it has
been quite restrictive. And I know that there have been
examples in which China blocked shipments.
But the fact is, sir, there are many North Korean companies
and front companies operating around in China. Within the last
2 weeks, I've had discussions with Chinese colleagues about
this topic. China is new to export control laws, and its ways
of enforcing them and the bureaucracy to make that meaningful
is still in the incubator stage. So they have a long way to go.
But I am convinced that they are making an effort. They mean it
when they say that they do not want North Korea to be either an
unstable military threat or to have nuclear weapons, and are
backing that up. But I wouldn't deny that there is some leakage
around the edges, and money does talk, unfortunately, sir.
Senator Feingold. What about North Korean planes flying
through Chinese airspace or even making refueling stops in
China when these planes may well be involved in proliferation
activities? As far as you know, does that continue? And have we
raised this issue with the Chinese?
Mr. Kelly. Yes, sir, we have raised that issue with the
Chinese. It would probably be best to brief you more completely
on that particular topic in a closed hearing, sir.
Senator Feingold. I'll look forward to that.
Thank you, Mr. Chairman.
[The prepared statement of Senator Feingold follows:]
Prepared Statement of Senator Russell D. Feingold
I thank Chairman Lugar and Senator Biden for holding this important
hearing, and I thank all of the witnesses for being here today.
This hearing is an opportunity to review the totality of the U.S.-
China relationship, and there is no question that our bilateral
relationship is extraordinarily complex and important. I certainly look
forward to reviewing a number of issues, from cooperation on the North
Korean crisis to progress, or the lack thereof, on critical human
rights issues.
But I also want to take this opportunity to pass along the concerns
of many of my constituents. As I travel throughout Wisconsin, I see
community after community ravaged by the loss of manufacturing jobs--
jobs that have been lost to other countries in large part because of
the flawed trade policies of the past several years. When I opposed
Permanent Normal Trade Relations with China, and other flawed trade
measures, I did so in great part because I believed they would lead to
a significant loss of jobs. But even as an opponent of those
agreements, I don't think I could have imagined just how bad things
would get in so short a time. This is especially true with respect to
our current trade relationship with China, which is increasingly the
single biggest reason our manufacturing base is eroding. Until and
unless the fundamental inequities in that trade relationship are
rectified we will continue to see significant hemorrhaging of
manufacturing jobs, devastating more and more communities in Wisconsin
and across the country.
The Chairman. Thank you very much, Senator Feingold.
Senator Hagel.
Senator Hagel. Mr. Chairman, thank you.
Secretary Kelly, thank you for appearing this morning and
for your good work.
Your statement covered many general areas regarding U.S.-
Chinese relations. And I'd like to delve a little deeper into
your thoughts regarding this new fourth generation of
leadership, your sense. For example, is it more committed to
internal reforms, more focused on human rights than, for
example, the Jiang administration? What do you think we will
look forward to in regard to--if that is the case a more
complete and universal attitude toward some of these big issues
that have been points of contention between the United States
and China? And I suppose I would start with this question. Is
it, in fact, true that President Hu and his new administration,
as it's developing, is, in fact, focused on more internal
reform?
Mr. Kelly. I couldn't go that far, Senator Hagel. This is a
transition that is still going on, and I don't think we're
going to have a full appreciation of what President Hu and
Premier Wen Jiabao and the four new Vice Premiers and the newly
installed party leadership do for quite awhile. It is, for
example, sir, far from clear to me that the new leadership has
broken any new ground on human rights. I noted some
backsliding, in fact. Now, maybe that's just new people getting
their brief. I think it's an open question about the commitment
to reform.
Above all, sir, I see caution and a ongoing desire not to
take any false moves, that are going to shatter the kind of
confidence that underpins the economic growth, which I believe
is a significant part of the legitimacy that the Chinese
leadership clings to.
Senator Hagel. Would you say, from what you know, that the
Jiang era of leadership has ended?
Mr. Kelly. No, sir, I would not. Former President Jiang
remains Chairman of the Military Commission. Individual
leaders, associated most of their lives with former President
Jiang, remain in perhaps even a predominant number of
significant positions in China. There is no question that
President Hu is establishing some patterns for himself that are
different from his predecessor, but these differences are
fuzzy, rather than sharp.
Senator Hagel. As you may know, Mr. Secretary, this
committee had an opportunity to spend some time with the Dalai
Lama yesterday. Give me your assessment of what we need to do
more of, less of, what are our most effective means of working
with the Chinese regarding human rights?
Mr. Kelly. The human rights question has many different
facets. And, of course, His Holiness, the Dalai Lama,
represents one of those facets. And the rights and the
preservation of the culture of Tibetan people is very much on
our minds. And certainly, of course, it's a central concern of
His Holiness that he's expressed to many people here in town.
We, of course, actively work by sending officials to Tibet
as often as we can to see what the situation is on the ground.
Overall, in human rights, our effort has got to be less on
announcing--and I know this is Assistant Secretary Craner's
view--that we're going to have some talks in a few months, but
seeing some progress, on some individuals cases. I would note
Fong Fu Ming, Yang Jion Li, Rebiya Kadeer, just three very
different situations, right off the top of my head, and there
are many others, including American citizens, such as Dr. Chuck
Li, who are maintained as, in effect, political prisoners.
We want to emphasize some of these individual cases, but we
want to also emphasize the rule of law and the larger
situation, as well, including things that have been committed
to, such as visits of international rapporteurs on torture, for
example, that--a part of the International Human Rights
Committee that China had indicated very strongly to us that
they would accept, and they have not done so. And it's very
important, we believe, that these commitments be honored.
Senator Hagel. What's your assessment of the current
Chinese military modernization efforts?
Mr. Kelly. It's certainly ongoing and troubling, as it
seems to be particularly focused, in terms of ballistic
missiles and some of the tactical capabilities, on Taiwan. And
that, in turn, is something that we have to take note of, and
should and do take note of, under our responsibilities of the
Taiwan Relations Act, as well.
The PLA has had to go a long way to be modernized, but
their growth in resources is a significant one, and the
capabilities are obviously being upgraded in many different
areas, whether it be submarines or missiles or naval forces or
tactical air.
Senator Hagel. I know the chairman's covered this, as well
as Senator Feingold, but let me come at this from a little
different perspective, and that is our economic relationship,
trade imbalance, with China. I know that's not in your
portfolio, as you have suggested in answering a question
regarding the currency issue. But in your discussions that you
have regularly with the Chinese, do you bring up--do you often
have opportunities to talk about the more global dynamic of
trade, of economics, of how that impacts our relationship? I
mean, you know what kind of pressure we are getting up here
from our constituents, the President's getting, this trade
imbalance issue, the job issue. How much does that play into
your discussions with the Chinese, if any?
Mr. Kelly. It's a big part of my discussions with the
Chinese. I regularly see the Chinese Ambassador here. I don't
think we ever have a conversation that these issues don't come
up. I don't know how many times I've discussed the topic of
soybeans with the Chinese. And the same would go up the line
with Secretary Powell, and President Bush has raised this on a
number of occasions. And we're hopeful on that area. There are
also a number of individual other trade issues, including
intellectual property rights, a number of specific
manufacturing and financial access concerns, that we definitely
raise.
The relationship is a whole one, and it wouldn't do, in my
view, for us to have anyone that would only touch on some
items. And so we definitely, at the State Department, are much
involved in these economic issues. I was simply referring to
the practice that the President and the Secretary of the
Treasury are those who comment on exchange-rate issues. But,
beyond that issue, we're all at work very closely together. I
met with Secretary Snow before he went to China. Secretary
Powell and the President had discussions with him. This is very
much a coordinated policy led by the President.
Senator Hagel. We particularly appreciate your good work on
behalf of soybeans.
Thank you, Mr. Chairman.
The Chairman. Thank you very much, Senator Hagel. I commend
you on that comment.
Senator Sarbanes.
Senator Sarbanes. Thank you very much, Mr. Chairman. Mr.
Secretary, we're pleased to have you here.
I want to continue on the trade issue. How are we going to
work out of this situation? I mean, we're running our largest
trade deficit with China. Some experts in this country estimate
that--through the way they address the currency question, they
gain a 30 to 40 percent advantage in trade terms. In fact, we
have the most lopsided trading arrangement with China that we
have with any major trading partner. The deficit now is well
over $100 billion, and climbing. And that's on a very small
amount of total trade. The figures I have indicate that 85
percent of the trade relationship, U.S.-China, are imports from
China. Only 15 percent are exports from the U.S. to China. So
we have a relatively small total trading arrangement. In 2002,
just under $150 billion. And yet we run deficits well over $100
billion. So there's a tremendous imbalance in this trading
relationship.
Now, we have a significant trade deficit with Japan, and
that's another question. That's not the subject of today's
hearings. And the Japanese, of course, have been intervening us
very substantially to maintain the currency advantage. But at
least there the amount of trade is much larger and the amount
of imbalance is smaller, although it still sticks out. Then
when you look around the rest of the world, the relationships
are much closer, in terms of the ebb and flow of trade imports/
exports.
But it seems to me we have a chronic problem here. What are
we going to do about it?
Mr. Kelly. Well, sir, the first thing we needed to do was
to get China, as a part of the international trading regime,
into the World Trade Organization [WTO], where it has now been
a member for two or three years. Our next steps in the process
are holding to China's development under a rule-based trading
system. But the fact is, the numbers you point out are, indeed,
sobering. This is a huge imbalance. It brings some benefits,
too. It brings lower prices to Americans on a wide variety of
items that China exports to us. These are obviously very
popular. It is also a displacement of items that were sold into
the U.S. from other smaller countries and buried in other
figures, and there's now a consolidation into China's trade
figures.
Senator Sarbanes. What do you think about that? What are
the foreign-policy implications of that?
Mr. Kelly. They're potentially very serious. The slowness
of Southeast Asia's emerging from its 1997 economic crisis is
very much a part of this consolidation, and yet there is an
overall growth in trade and a growth in those economies that is
also a significant part of this, as well.
But the fact is, Senator Sarbanes, we have a structural
problem, and it's going to be very slow to resolve itself with
China, as far as the trade imbalance is concerned.
Senator Sarbanes. Well, how will it ever resolve itself if
they continue to deal with the currency in such a way as to
gain a 30 to 40 percent advantage in the terms of trade?
Mr. Kelly. The fact is, sir, that China is going to have to
address that very issue, and that's why Secretary Snow went to
China last week to intensify the dialog with Chinese leaders. I
believe Secretary Snow called for flexible exchange rates. This
is something that China is going to have to address, whether it
be revaluation or exchange-rate flexibility.
Senator Sarbanes. Well, which is it we're seeking of those
two?
Mr. Kelly. I'll quote, sir, from Secretary Snow. He said,
``Let me turn to the subject of exchange rates, because the
subject of exchange rates has been so much in discussion among
us.'' This was his press conference at the Departure. ``The
establishment of flexible exchange rates, of a flexible
exchange rate regime, would benefit both our nations, as well
as our regional and global trading partners. Market denominated
floating currencies are really the key to a well-functioning
financial system.''
And that's the way Secretary Snow put it, and this was a
major focus of his discussions with all of the economic and
political leaders of China.
Senator Sarbanes. I'm going to quote Fred Bergsten's column
here in the Post, which I gather has been referred to earlier
in the hearing. ``The growing storm over China is the latest
example. Congressional leaders from both sides of the aisle,
the business community, and labor agree that the administration
must take forceful action to bring that country into the center
of the international adjustment process. Remarkably, there is a
strong consensus that this should happen by a revaluation of
China's exchange rate, rather than new trade barriers. But Snow
was precluded from pursuing the issue forcefully, and was even
instructed to ask the Chinese to float their currency,'' which
is what you quoted there, ``when everyone knew they would
rightly reject such an approach because it requires that they
open themselves up to the vagaries of the global capital
markets. The inevitable result of this impasse will be new
assaults on China's exports to the United States, badly
undermining a Chinese leadership that overcame enormous
domestic resistance to join the World Trade Organization. The
President and his foreign-policy officials should recall that
huge economic imbalances can be as destructive of relations
among nations as traditional security disputes. Ignoring such
problems until they reach crisis proportions will, in fact,
inflame our domestic politics.'' And he goes on from there.
What do you say to that comment?
Mr. Kelly. I think Professor Bergsten's views speak for
themselves, and the emphasis that you, Senator Sarbanes, have
put on them also speaks for itself. There have been many
conversations to which I've either been in the lead or a party
to that have made that exact point to China, that it is
possible to have a crisis in trade relations, and that is
certainly not in China's or America's interest, and that we
have to move along the process, as well.
With respect to whether revaluation or flexible exchange
rates are the solution, I'll just plead inadequate technical
background and the desire to leave that question to the
Treasury to speak to, sir.
Senator Sarbanes. Well, this article suggests that the
Treasury is being circumscribed in what it can push for by
foreign-policy considerations.
Mr. Kelly. Well, sir, the President's policy is that we
have to be able to work on all of the issues with China. I do
not believe that Secretary Snow was in any way restricted. But
obviously he'd have to speak for himself on that.
Senator Sarbanes. All right.
Mr. Chairman, I know my time's up. Could I make just one
final comment?
In 1993, the U.S. trade imbalance with China was $23
billion. That's 10 years ago. In 2002, it was $103 billion. And
I understand that the estimates now are projecting that it will
be about $120 billion, I think, for 2003. That's an incredible
runup in this trade imbalance over a very short period of time,
and it's obviously having a major impact here. And I think
Bergsten's right. If it's not addressed, you're going to get
pressure for other more direct measures to try to correct this
situation.
The Chairman. Thank you very much, Senator Sarbanes.
Senator Allen.
Senator Allen. Thank you, Mr. Chairman.
Thank you, Assistant Secretary Kelly and other witnesses,
for taking time today to come before this committee.
I'm sorry I was late. This was the second anniversary in
Virginia of the Pentagon being hit, and that's why I was late.
And I think we all--you probably have already said it, Mr.
Chairman, but we all very much appreciate those firefighters
and folks here at home, as well as those in our armed services
protecting our freedoms.
Now, let us turn to China, a very important issue. I think
the most challenging of all portfolios for our country, is
dealing with China on multiple levels. We want to have positive
statements along political lines encouraging cooperation on
issues such as North Korea, but they have to be tempered with
our concerns for human rights violations in China.
On the economic side, I'd incorporate, by reference, the
comments of Senator Sarbanes and Senator Hagel on the economic
side. We do desire to have a productive and positive
relationship in trade with China because of the access to their
market provided to U.S. businesses. However, there are so many
troubling issues with our present-day trade relationship that
unfairly disadvantage United States workers and businesses and
exporters. And you may not have it all in your portfolio, but
this is an opportunity to bring this up.
I'm very pleased, Mr. Chairman, that we're examining this
issue of U.S.-China trade and relations. In Virginia, this
country has lost thousands and thousands of jobs--
manufacturing-sector jobs--due, in part to the artificially
low-priced Chinese imports. And we need to make sure that China
complies with the WTO rules it agreed to when it joined that
organization just a few years ago.
Now, let's face the reality of what China is doing. They're
cheating. They're violating these rules. In some cases, what
they're doing may be a condonation or negligence; in other
cases, it's willful violations of these rules.
You take, No. 1, the intellectual property, piracy matters,
the piracy of everything from recordings to software. And that
may be, at best, a situation of negligence, condoning and not
doing anything to enforce intellectual property rights.
Several have already mentioned, and I support, Secretary
Snow's efforts to make sure that their currency is set at
market forces, as far as the value is concerned. In fact, I
think that that would go a long way to correcting the imbalance
in our trading relationship, and help save and create jobs here
in this country.
Third point, in regard to the dumping of below-market-price
textiles, actions there need to be taken, as well. There are
safeguards that we can apply, special textile safeguards, to
stem this surge of Chinese textiles into our market, and I hope
that the administration will do so, so that we can get markets
to return to some reasonable balance. I have written President
Bush urging him to take action and am hopeful that he'll
carefully examine the situation and enact the available
safeguards that have been agreed to by both nations.
Fourth area of concern, domestic furniture industry. We're
facing a similar un-level playing field with China. The U.S.
Furniture Coalition has petitioned the International Trade
Commission to investigate the possibility of illegal dumping of
wood bedroom furniture by Chinese manufacturers. I, again, hope
the ITC will look into that. It seems to me a very credible
case of illegal dumping is not only crippling our domestic
furniture industry, but losing, again, thousands of jobs in our
country, and that erosion should not continue. I hope the ITC
and the administration will be involved in it.
Fifth, and finally, we need to hold China accountable for
its practice of applying a discriminatory value-added tax. It's
not just furniture, shirts, and textiles, and piracy; it's also
semiconductor chips. China imposes a 17 percent value-added tax
on semiconductor chips. In the event, though, that the chips
are fabricated in China, they give them an 11 percent rebate.
If they are designed and fabricated in China, it is a 14
percent rebate. So, in other words, if we're trying to import--
or anyone else is trying to import--semiconductor chips into
China, you get hit with a 17 percent tax. But if they are
fabricated there, it's a 6 percent tax. If designed and
fabricated or manufactured there, 3 percent tax. This is
obviously a distinct disadvantage that limits access to the
Chinese market. It also adversely impacts the worldwide
semiconductor market, and this is clearly in violation. This is
a willful and deliberate violate of China's WTO obligations.
I'd urge the administration to seek, as quickly as possible, a
resolution to rectify this inequity.
So trade is good. Fair trade's something that we would
like. But when a country cheats, when it violates the rules,
violates the laws, violates the contracts and agreements, I
think it's absolutely essential that our government make sure
they comply with those laws. There are some times you have to
put in countervailing duties. It's a last resort, but it is a
resort and a remedy that, in some cases, are absolutely
necessary for adherence to these contracts, to these
agreements, and also for the saving of good-paying jobs here in
this country.
And so would you share with us any actions--we've already
covered Secretary Snow and the currency matters, but on
semiconductors, on semiconductor chips, furniture, or textiles,
could you be so kind as to share with us the actions and
positions of the administration in these particular areas?
Mr. Kelly. You raise a large series of entirely valid and
very serious problems in our trade and economic relationship
with China, Senator Allen, and I have, in a cursory manner,
recently discussed some of the semiconductor problems.
Furniture, textile problems, I'm well aware that they are
there. I think I would serve the committee best if I gave a
more detailed response for the record of the specific actions
that are being taken by State Department, Department of
Commerce, U.S. Trade Representative's Office in holding China
to its WTO commitments in those and other areas, sir.
[The following response was subsequently received.]
The Administration is dedicated to ensuring that the U.S.-China
economic relationship is beneficial to both parties and especially to
U.S. workers, farmers, small and medium-size business, and consumers.
We believe and have stressed to China that the best international
economic system--for China and the world--is based on free trade, free
capital flows, and market-determined exchange rates. President Bush
emphasized these points during his meeting with Chinese Premier Wen
Jiabao in December 2003. In addition, Treasury Secretary Snow, Commerce
Secretary Evans, Ambassador Zoellick and other senior officials have
visited Beijing in recent months and pressed China to move toward
market-based exchange rates, improve market access for U.S. exports and
accelerate domestic economic reform. Although China has made some
progress in these areas, much more needs to be done.
Intellectual Property Rights: China's overall protection of
intellectual property rights (IPR) is inadequate and of serious concern
to the United States. Administration officials have consistently
pressed the Chinese to strengthen IPR protection and enforcement, but
results have so far been unsatisfactory.
China's statutory system for the protection of intellectual
property has improved as a result of its WTO accession. In accordance
with the WTO Trade-Related Aspects of Intellectual Property Rights
(TRIPS) Agreement, China has revised all of its principal intellectual
property laws and implementing regulations to strengthen administrative
enforcement, civil remedies, and criminal penalties. However, IPR
violations remain rampant. Bilaterally and in multilateral fora, we
have pushed China to pursue a sustained, transparent effort to punish
and deter IPR violations, especially by dedicating more resources to
enforcement, setting and enforcing deterrent levels of fines and
criminal penalties, and reducing the high thresholds for criminal
prosecutions.
The Administration has made numerous efforts to enhance
coordination with U.S. IPR-related groups and to press China to improve
IPR protection. U.S. Ambassador to China Clark Randt has held two IPR
roundtables in Beijing with more than 100 representatives from American
copyright industries and their trade associations as well as U.S.
Government and Chinese officials. Subsequently, the U.S. Embassy in
China followed up on the November 2003 roundtable by compiling an IPR
White Paper highlighting key industry concerns and recommendations for
presentation to Chinese Vice Premier Wu Yi, who now heads China's
effort to strengthen IPR protection. The Embassy and our constituent
posts in China also developed an action plan to pursue specific
objectives ranging from the criminalization of IPR-infringing exports
to improving market access for American films, music and books. U.S.
Embassy efforts involve broad interagency cooperation, active
government-to-government advocacy, outreach and capacity building,
assistance to U.S. businesses, and diplomatic reporting on IPR
developments.
The United States has also cooperated with Japan and other WTO
members to seek improvement in China's IPR enforcement. Together with
the European Union, the U.S. has made IPR a key feature of ``Rule of
Law'' discussions with Chinese authorities. The United States
Government also co-sponsored with Chinese officials a successful
training seminar on IPR Criminal Enforcement in October 2003.
Currency Valuation: The Treasury Department has been working
actively to encourage China to move toward a flexible exchange rate.
China has now taken a number of steps to restructure its banking sector
and liberalize its capital market--steps that the Chinese have said are
necessary preconditions to adopting flexible exchange rates.
Last October, the Treasury Department and the People's Bank of
China signed an agreement for a technical cooperation program on
financial sector issues. Treasury will conduct its first substantive
meeting in Beijing later this month, and more will follow. In addition,
Chinese Vice Premier Huang Ju has accepted Treasury Secretary Snow's
invitation to come to Washington for a high-level discussion of these
issues. Finally, the Treasury Department will shortly announce the
appointment of a senior Treasury attache in Beijing to act as the U.S.
Government's special envoy on these issues.
Despite this progress, the Administration recognizes that more
remains to be done. We are working closely with our Chinese
counterparts to encourage them to implement key reforms and to move as
quickly as possible to a flexible exchange rate.
Textiles: In its WTO accession agreement, China agreed to a special
textile safeguard provision that allows WTO members to address surges
in imports of textile and apparel products from China. This provision
applies to textile products that have been ``integrated'' (i.e., no
longer subject to quotas) into the WTO trade regime and that are
causing market disruption. U.S. workers and companies will have access
to the special safeguard on textiles through 2008.
In May 2003, the interagency Committee for the Implementation of
Textile Agreements (CITA) published guidelines for how American
companies and associations can file requests for consideration of
special safeguard action. In July 2003, four textile associations filed
petitions for safeguard relief for four product categories: knit
fabric, gloves, dressing gowns, and brassieres. The petition regarding
gloves was not accepted because certain gloves remain subject to
quotas. After a period of investigation, CITA determined that imports
of the three other products from China are causing or threatening to
cause market disruption. In December, safeguard measures were imposed
on these products and consultations requested with the Chinese. The
first round of consultations were held in January.
Furniture Imports from China: On October 31, 2004, petitions were
filed on behalf of the U.S. industry with the International Trade
Commission and the Department of Commerce regarding imports of wooden
bedroom furniture from the People's Republic of China. On December 10,
2003, the Commerce Department initiated an antidumping duty (AD)
investigation on these products. On January 9, 2004, the International
Trade Commission (ITC) made a preliminary affirmative determination
that there is a reasonable indication that the U.S. industry is
materially injured or threatened with material injury by reason of
imports of wooden bedroom furniture from China. The Commerce Department
is currently scheduledto issue its preliminary determination on April
28, 2004. The Commerce Department and U.S. International Trade
Commission will investigate this case in full accordance with U.S. law
and regulations.
Semiconductor VAT Rebate Policy: The Administration has repeatedly
raised with Chinese officials our serious concerns about the
discriminatory nature of China's application of value-added taxes (VAT)
to imported semiconductors. Specifically, China provides VAT rebates
for certain semiconductors produced and/or designed in China but not
for imported semiconductors. We do not believe this practice is
consistent with WTO rules requiring ``national treatment'' for imported
goods. Although we have so far used bilateral channels to press China
on this issue, we are prepared to seek WTO dispute resolution to
address our concerns if necessary.
Senator Allen. I'll look forward to receiving that. And you
can imagine that you and the administration will be receiving
further proddings and encouragement and support for efforts to
stop them from cheating and living up to their commitments.
Mr. Kelly. Well, we should, sir, because the fact is these
are problems with this incredible economic growth that China
has experienced. Bringing this huge new player into the
international trading system in a legitimate and law-abiding
way is a major American foreign-policy objective, and we're
going to work on it. And this is something in which the
spurring of the administration by the Congress is obviously a
reality and appropriate.
Senator Allen. Thank you, Mr. Secretary.
The Chairman. Thank you, Senator Allen.
Senator Nelson.
Senator Nelson. Thank you, Mr. Chairman.
Give us, Mr. Secretary, your analysis of the fact of
China's influence over North Korea. For example, the
circumstance, 6 monthsor so, I can't remember exactly when, in
which North Korea had been particularly outspoken and
boisterous, and suddenly the fuel was cutoff for about 3 days,
and they seemed to change--they, the North Koreans, seemed to
change their tune, at least publicly. Would you recount for us
that particular incident?
Mr. Kelly. Well, to the extent that we know about it, it
was last February or March, and it was around the time that the
then-Vice Premier Qian Qichen, former Foreign Minister, a very
senior Chinese official, traveled to Pyongyang and prompted the
first occasion of North Korea coming to the table. There was,
we know, a shutoff of oil for some 3 days. I am skeptical, I
think, of the official explanation of some technical failure.
But the fact is, China is the supplier of last resort to North
Korea of fuel, and I would say food, as well. Numbers of
perhaps some $500 million a year turn up with some regularity.
It's not clear how much of that is paid for by the North
Koreans.
That said, there is this longstanding alliance
relationship. There is this powerful desire for China to have a
stable relationship, a powerful desire for them not to have
thousands, even millions of new refugees from North Korea
crossing their border and adding to their already huge
population. So China obviously uses that influence with a great
deal of caution. Whether, if we were in their position, which
we certainly aren't, we would do it in that way is very
doubtful. But the fact is, there is a steady influence that has
at least brought North Korea to the table, and I think, in
general, been positive on this. But it certainly hasn't been
decisive.
Senator Nelson. But for the future, they clearly--it would
be the policy approach of the U.S. Government that China is
clearly a key, key player here, because their interest happened
to coincide with our interest with respect to nuclearized North
Korea.
Mr. Kelly. I would say, Senator Nelson, that their
interests mostly coincide with our interests, and we want to
emphasize that. But I'm not certain that, in every instance,
that they do. And China is always pursuing its interests as it
defines them. We do have a big overlap, and it's very much a
part of obtaining a regional solution and is something that is
very much supported by our allies, Japan and the Republic of
Korea, as a useful process of engaging North Korea and
fulfilling the President's goal of a peaceful resolution of
their nuclear issue. But we haven't got there yet, sir.
Senator Nelson. You briefed the majority leader's
delegation prior to us visiting China, as we were there on the
eve of your arrival, and on the eve of discussions with the
Chinese about North Korea--with North Korea present, by the
way--in early April. It's interesting, as we would bring up
these issues with the various leaders that we met with in
Beijing, they all had a coordinated--it was almost like a rote
kind of discussion--what you would think was at the top of
their agenda was Taiwan. And they would always go through this
litany of everything having to do with Taiwan. You would think
that that was the more important thing to them than what we
were there to talk about, which was primarily North Korea and,
secondarily, owning up to stopping all of the fake information
about the SARS epidemic, which was going on right at the time.
Your comments about the Chinese huffing and puffing about
Taiwan to our delegation?
Mr. Kelly. The Taiwan issue is never far from any dialog
that the PRC has with us, and our riposte is invariably the
same. We cite our dedication to our unofficial relationship,
that Taiwan must not be coerced, that our relationship with
China is based on the three communiques and the commitment to
peaceful resolution of that issue, in light of the difficulties
inherent in China's military development.
It comes up time and again. Sometimes it's given more
prominence in Chinese interactions with visiting delegations at
one time or another. Your visit was just after the party
congress, and I think there must have been some judgment that
their domestic interests were best served by giving prominence
to that.
There's been an increase in the tension that Chinese
dialogs have had with North Korea since that time, but Taiwan
is never far from hand in any of these discussions.
Senator Nelson. In our discussions, we always brought up
the question of human rights. Is it the government's position,
as well as our congressional delegation's position, that we are
as committed to discussing, with the Chinese, human rights as
it seems to be that the Chinese are committed to discussing
relations with Taiwan?
Mr. Kelly. Absolutely, Senator Nelson. It invariably comes
up in all senior and intermediate dialogs with China. As I've
pointed out in answer to some other questions, we have a
variety of serious issues, and we sense some deterioration in
what we see as China's commitments and performances here, and
this is very disturbing.
Senator Nelson. Mr. Secretary--I'll close with this--this
morning's Los Angeles Times--has this been brought up at the
hearing? The Los Angeles Times, this morning, is saying that
North Korea has halted activity at its Yongbyon nuclear
complex, where it's been holding thousands of nuclear fuel rods
that can be reprocessed. What can you tell us about this, Mr.
Secretary?
Mr. Kelly. Very little, Senator Nelson, in an open hearing.
I think that is more appropriate to a briefing by intelligence
or other officials, and we'd be happy to provide that to you,
sir.
Senator Nelson. Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Nelson.
Senator Alexander.
Senator Alexander. Thank you, Mr. Chairman.
Mr. Secretary, I'd like to go back to the issues that
Senator Sarbanes and Senator Allen talked about, particularly
the question Senator Sarbanes asked, how are we going to work
this out? And I think it falls in your portfolio or a broad
portfolio, because, as I see it, as we look over the next dozen
years in this country, our biggest economic challenge, our most
difficult one, will be how do we keep too many of our jobs from
moving to China, or appearing to move to China. And I would
expect China to be the symbol for job losses, which may occur
for a variety of reasons and which may go to many countries.
And I'm wondering, particularly given your background in
foreign affairs, if we could look back a quarter of a century
and learn some lessons from how we navigated this with Japan. I
mean, we had almost the same thing. We had a richer country,
but a smaller country. And 20 years ago, we could substitute
China for Japan on almost all the issues that have been raised
this morning. All the books were about how Japan was going to
eat us alive, and there were regular unpleasant visits between
United States representatives and Japanese representatives,
and--almost impolite. But the lesson may be that we did some
unusual things to make sure that, as Japan grew and fit into
the world marketplace with us, that we could tolerate it, that
we could tolerate the job loss that came with it.
For example, I remember going to my first meeting of
Governors with the President in 1979, and President Carter said
to the Governors of American, ``Governors, go to Japan and
persuade them to make here what they sell here.'' And, as a
result, the biggest Japanese import to the United States became
something produced here, and that is cars and trucks. I mean,
that was, by far, the largest dollar figure, and it made a
massive difference. I mean, in our State, a third of the
manufacturing jobs 25 years ago were textiles. Today they're
automotive. And many of those are because of Japanese auto
parts.
So we didn't just sit back. I mean, we insisted they follow
the rules. We talked to the Japanese about their yen, their
currency, all the time, it seemed like. We took actions
involving with that. We took the extraordinary step of placing
domestic content requirements on some of the things they sold
here. We did--as I mentioned President Carter said, ``Japan,
make here what you sell here.'' And in addition to that, the
successful--what I would call the successful resolution of all
that came partly because Japan then went into a funk, into a
big recession and weren't able to compete as well with us. But
eventually their wage rates got up to a level that we didn't
worry so much about that competition.
Now, how do we develop a broad policy, taking into account
a variety of strategies, that looks over the next 10 or 15
years and keeps this jobs issue from poisoning the Taiwan
issue, the human rights issue, the North Korean issue, the
weapons-of-mass-destruction issue? I mean, that requires a big
strategy, it seems to me.
Mr. Kelly. You raise a very important issue, Senator
Alexander. But, first of all, we still have some problems with
Japan and a big trade imbalance with Japan, despite its slow
growth. The auto part of the trade deficit has changed in many
respects. There are a lot of excellent Japanese cars that I'm
sure, as you know, are made in Tennessee and sold around the
U.S.
The good news, I suppose, is that China is not, at the
moment, a major factor in automobile trade. And as it tries to
grow, it needs higher-value components that are experiencing
some growth in sales from the U.S.
The bad news, of course, is that China is very much
determined to be a player, and it's going to be interesting to
see how that goes.
Korea has gone through a similar pattern with Korean
vehicles establishing a presence strictly as exports from Korea
to the United States, and now they're looking and finding plant
destinations here, as well.
Of course, Japan started from a much higher economic base
of wealth of individual people than China does. And, in my
view, that makes the China problem, not to mention the huge
mass of the place, more troublesome. It also, of course, puts a
burden on China, as well, because it has got to bring along
that whole 1.3 billion population, and Japan had a much more
streamlined problem for them to deal with.
So I think there are lessons, but I'm not sure all of them
are going to fit in similar ways. But obviously we need to look
very carefully at those things.
Senator Alexander. I would suggest, Mr. Secretary, that--in
my experience, that maybe the most important lesson is to
insist that the Chinese follow the rules. I would try to
explain that to my Japanese friends during the 1980s, when I
would try to get them to do what I thought was fair, in terms
of buying baseballs and bats manufactured in America. We
thought they were keeping those out. And they would say to me,
``Well, that's such a small item. Why are you making such a
fuss about that?'' And my answer to them was that there's
always going to be a big trade imbalance between Japan and the
United States, just as I suspect there will always be a big one
between China and the United States, but it's much easier for
us to accept if you follow the rules. And I think that's an
important part of our administration's position that will help.
Mr. Kelly. It is an important part of it, sir, and thank
you for that impetus. Following the rules, bringing China fully
under the WTO aegis, in fact as well as in aspiration, has got
to be a part of the solution.
Senator Alexander. Thank you.
The Chairman. Thank you very much, Senator Alexander.
Senator Coleman.
Senator Coleman. Thank you, Mr. Chairman.
I would first note, I do associate myself with the comments
of Senator Hagel and the chairman when it comes to soybeans.
Very, very important. I'm glad you bring that up.
I'm not going to talk about the trade deficit issue. It's
on all our minds. We're frustrated. Every one of us goes back
home and talks to folks about losing manufacturing jobs, and
they talk to China.
I found it interesting, not too long ago--your comment
about Mexicans concerned about the low cost of labor in China.
And I'm wondering, one, clearly following the rules is
absolutely essential. That's a given. But, you know, one of
the, kind of, obvious realities we face is--and I'm not sure I
have the numbers correct, but perhaps you can correct me--that
the salary-per-year, wage-per-year, of the Chinese worker,
about $1,200, versus an American worker, maybe $26,000. Is
there any way to--how do you deal with that imbalance? How do
you all overcome that gap?
Mr. Kelly. At that level, it's going to be a very long
time. Now, obviously, some more skilled parts of Chinese labor
are starting to inch up into the $5,000 and $6,000 range. These
salaries would be for very skilled people. So there is a huge
structural imbalance, and I think the solution of it has to do
with the overall structure of our economies, as manufacturing
will always be important in America, but services have also
become important, as well.
But there's no way around that huge difference, and the
solution, of course, is the power of compounding of China's
aspiration of 8 and 9 percent economic growth. But, even so,
under the best of conditions, it's going to take a long, long
time to build any kind of equivalence.
The other end of the story is, of course, of our
productivity of our workers, which unquestionably is far ahead
of that of Chinese, but the fact is they're making progress
there, too.
Senator Coleman. But I just think we have to--and I concur,
we've got to recognize that. I mean, we've got to recognize
that productivity and ingenuity and all those things that we
can bring to the table are important because of that reality of
that huge, huge gap.
Let me, if I can, switch to one other issue. We just got
back from a trip to sub-Saharan Africa with the majority leader
and five of my other colleagues, looking at AIDS. A terrible
pandemic, 40 million people in Africa are HIV positive. In
South Africa, 5 million HIV positive, and 20,000 receiving
anti-retroviral treatment.
China, looking at the public-health issue--I want to touch
on that--did a rotten job with SARS. And throughout the world,
folks are dealing with the consequences of that--didn't deal
with it in an honest and aggressive way. The AIDS pandemic has
not hit China to the degree it has hit Africa, but it's coming.
And I'm wondering if you can give me any assessment of what's
going on in China, in terms of dealing with AIDS, recognizing
the serious concern, and whether there is the honest and
aggressive approach that's going to be needed to stem the tide
of AIDS in China?
Mr. Kelly. The AIDS story in China is a pretty sad one,
because much of it, of course, has been spread by reuse of
needles, and whole villages were selling blood, and almost
everybody came down with HIV infections. And these tend to be
very poor villages, and the actions that have been taken are
not very good. China is slowly waking to the dangers of AIDS.
Whether in a public sense, as has been, for example, the case
in Thailand, the response will be adequate is in considerable
question.
This is a major item of dialog and interaction between
parts of our government--particularly Health and Human Services
Secretary Thompson has certainly made this a major issue--and
our overall HIV/AIDS work, as well, has a considerable focus on
China. But there's no way to minimize the threat; it is a very
serious problem.
The one item of hope is the Chinese started out with a
terrible record, as you pointed out, on SARS. They got a lot
better quickly. We hope they can get a lot better quickly on
AIDS, as well. Though whether they're going to be able to treat
adequately the people who are HIV infected in China is an open
question. And to the extent these people are untreated, this
can very much perpetuate the problem. And the spreading of HIV
among truck drivers, and sources of that nature, can occur
rapidly through the poorer parts of a poor and very large
country.
Senator Coleman. It's my understanding that the commitment
the President's made for $15 billion is focused on 14
countries--12 African, I believe, two in this hemisphere. Part
of that discussion there is to look at what's happening there
as a model so that we can then look to China and look to India
and look to Russia to say, ``Here's what working. Here's what's
not working.'' There are good things going on in Botswana, in
terms of voluntary tests and confidential testing and then use
of anti-retrovirals.
Is there a sense that the Chinese would be open to, kind
of, gathering--taking advantage of the knowledge of the
experience that others--that we might have gathered from our
experiences in Africa or in this hemisphere regarding AIDS?
Mr. Kelly. I think clearly the cleaned-out health
bureaucracy after the SARS event is receptive to that
information. But whether they're going to have the kind of
political support in local areas in China to pursue the
solutions that are needed, I think, is an open question. I
think this is very much a work in progress, and maybe the
progress is pretty short now.
Senator Coleman. You mentioned Secretary Thompson's
efforts. What else can we do? What can this government do to
work with China? And do you see this as an avenue of
strengthening relations--whether it be the governmental action,
whether it be working with the drug companies, U.S.-based drug
companies that are developing the ARVs, do you see this as any
avenue of opportunity for strengthening ties?
Mr. Kelly. Yes, sir, I do. We don't, of course, have an aid
program with China, but this is an area where funding for non-
governmental organizations, and particularly in the area of
HIV, could be particularly fruitful. And we have had a number
of instances and several programs for working within China on
this problem.
Senator Coleman. Thank you, Mr. Secretary.
Thank you, Mr. Chairman.
The Chairman. Thank you very much, Senator Coleman.
At this juncture, I suspect that it would be best to
relieve Secretary Kelly of his role, because we have an
excellent panel, and Senators have obligations with regard to
memorial services. If there are impelling questions, I'll
recognize them, but----
Yes, Senator Sarbanes.
Senator Sarbanes. Mr. Chairman, I just want to make one
parting comment to the Secretary.
I was struck by your responses to the questions,
particularly by Senator Alexander, where he mentioned the
China-Japan issue, and how we work it out. There was no
reference on your part to the relevance of democratic values
and human rights concerns with respect to the economic
questions.
Clearly, one of the reasons that wage rates rose in Japan
to eliminate some of that enormous gap that existed was the
fact that they had free political institutions and free trade
unions. And, therefore, the society was in a position, on the
part of ordinary working people, for pressure to be brought to
bear, that they should have a greater share in the economic
returns, so that the ordinary person would benefit from that.
And that served to, in effect, to narrow that gap.
Also, when you have dissidents and people expressing
dissenting opinions, you have an opportunity to question public
policy and to have it adjusted to better serve ordinary people.
And I think that took place in Japan. I have serious questions
whether that's happening in China, which I think is another
explanation for the continuation of this very substantial gap.
There's a growing body of development economists who have
established the link between governance structures, political
freedoms, human rights, and economic development, and have
countered the view that existed quite some time ago that they
were just entirely two separate categories without an
interrelationship, one with the other.
And I was struck by the fact that you made no reference to
that in those responses, and I just wanted to leave that
comment with you as you prepare to depart.
Thank you, Mr. Chairman.
Mr. Kelly. Senator Sarbanes, thank you. Your criticism is
very well aimed. That's a crucial difference, and I should have
made that point.
Thank you, sir.
The Chairman. Thank you very much, Secretary Kelly. We
appreciate, as always, your testimony and look forward to
seeing you again soon.
The Chair would like to announce now a panel composed of
Dr. Nicholas R. Lardy, senior fellow, Institute for
International Economics, Washington, DC, Dr. Kurt Campbell,
senior vice president and director, International Security
Program, CSIS, in Washington, DC, Mr. T. Kumar, advocacy
director for Asia and Pacific of Amnesty International USA, in
Washington, DC, and the Honorable Harold Brown, counselor and
member, Board of Trustees, CSIS, of Washington, DC.
Gentlemen, we are pleased to welcome you to the hearing
this morning. I'll ask that you testify in the order that I
introduced you, which will be, first of all, Dr. Lardy, then
Dr. Campbell, Mr. Kumar, and then Secretary Brown.
If you wish to summarize your remarks, that would probably
be helpful. And let me just say at the outset that your full
text will be made a part of the record, so that you need not
ask for permission that that occur.
Let me call now upon Dr. Lardy for his testimony.
STATEMENT OF DR. NICHOLAS R. LARDY, SENIOR FELLOW, INSTITUTE
FOR INTERNATIONAL ECONOMICS, WASHINGTON, DC
Dr. Lardy. Thank you very much, Senator Lugar. I very much
appreciate the opportunity to appear before you. Of course, I
have admired your work on this committee for many years, so
it's a special privilege to be here.
Your staff suggested that you'd like to hear something
about the currency issue. That's already been raised several
times this morning, so I will address that. I will also try to
address a little bit the internal domestic economy, if time
allows.
I have prepared a number of diagrams \1\ that I think will
be helpful in elucidating some of these complex issues as we go
forward, and I will begin with the currency issue and just
simply review briefly where China is in terms of its overall
economic interactions with the rest of the world, and then
focus particularly on the United States.
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\1\ The diagrams referred to appear beginning on page 34.
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In the first diagram, I'm simply looking at China's current
account. As you can see, China has had a fairly sustained
current account since it pegged its currency to the dollar at
the beginning of 1994. It has averaged about 2 percent of GDP
over this time period, a little under $20 billion, and it was
about $35 billion last year. So they are running a surplus on
their trade and related current account transactions.
The second diagram also shows that China has run, in most
years, a capital account surplus since it pegged its currency.
This has averaged about 1\1/2\ percent of GDP since the Asian
financial crisis in 1997/98.
The third diagram takes you to the buildup of foreign
exchange reserves. What we see is that these current and
capital account surpluses and, more recently, substantial hot
money inflows have added substantially to China's foreign
exchange reserves. They have been intervening in the market to
prevent the rate from appreciating above 8.3 to the dollar.
Reserves went up by about $120 billion, cumulatively, in 2001
and 2002, and they have been going up steadily by about $10
billion a month in this year.
Now, the purchases of dollars, which are accomplished
through the sales of domestic currency, have added about one
trillion RMB to China's money supply over the last 18 months.
Although China has sterilized a substantial portion of this
increase and almost all the increases that has occurred since
late April, the continued buildup of foreign exchange reserves
is beginning to pose significant problems for monetary policy.
I will come back to that at the end, if time allows.
I think the evidence supports the view not that China
should float its currency, as Secretary Snow has proposed or
has been mentioned, I think, by some members of the committee.
We have to recognize that China's banking system is extremely
weak, that households have the equivalent of more than one
trillion U.S. dollars in savings accounts, and if they were
given the opportunity to convert these into U.S. dollars or
other foreign assets, they would certainly take advantage of
this, and perhaps to a considerable extent. I think it is quite
likely that if China floated its currency, that the value of
the RMB would depreciation, not appreciate. So I think we
should be very cautious when we recommend to the Chinese that
they float their currency. I think it has the potential to
cause many problems in its domestic economy, with significant
implications throughout Asia, and that it would move the
currency in a direction that would be contrary to our
interests.
I have argued that they should, instead, revalue their
currency. And if you take a look at their overall position in
the trade and capital flows, I think the underlying
fundamentals suggest that they should revalue their currency
approximately 20 percent. You could argue maybe it should be 15
percent, maybe it should be 25 percent, but it's somewhere in
that range. And I say that because what they really need to do
is get their current account down to be slightly negative,
which would be offset by their capital inflows, which have been
about 1\1/2\ percent of GDP.
I want to turn to diagram 5 and explain what the
implications of this would be for the United States. This is a
diagram that I originally prepared for Secretary Snow. It
simply breaks China's trade balance down into what their global
balance is, what their balance is with the United States, and
what their balance is with the rest of the world. And, as you
can see, the red line is their surplus with the United States,
standing at about $104 billion last year. The bottom negative
line, the yellow line, shows that they have a growing deficit
in their trade with the rest of the world. And then the blue
line shows their overall trade balance. Their overall trade
balance is positive, but the number is not as large as some
people imagine. Last year, it was only about 30 billion U.S.
dollars.
So you take into account the relative size of China's trade
with the United States, if they were to revalue their currency
by about 20 percent, I estimate that the effect on the
bilateral trade with the United States would be to reduce their
surplus by about $10 billion. This, of course, would occur over
a period of time as the effects of the exchange-rate change
would work their way through the system. So the likelihood is
that a 20 percent revaluation would not lead to a shrinkage in
our deficit with China. It might cause a slowdown in the rate
of growth of that deficit for a period of time as the
adjustment process worked through, but I don't think a
revaluation, which is justified on the fundamentals, would lead
to a shrinkage in our bilateral deficit with the United States.
I think there's a great deal of misunderstanding about this.
China cannot set its currency to reduce its trade surplus with
the United States to zero, because at that point it would have
a gigantic overall deficit.
So we really have a very difficult problem. I think it is a
structural problem, and not one that is going to be resolved
through exchange-rate policy changes on the Chinese side. And
it really stems from the fact that was alluded to by Secretary
Kelly, that China has opened itself up for so much foreign
direct investment and that it has become a major manufacturer
of goods that used to be produced elsewhere in Asia.
As a consequence, because most of this activity is assembly
operation, China is buying huge quantities of parts and
components, but largely from other Asian countries. China runs
its biggest trade deficit, for example, with Taiwan. Last year,
they had a $25 billion deficit in their trade with Taiwan,
because all the Taiwan companies that have moved to the
mainland are buying high-value-added parts and components from
their traditional suppliers, bringing them into China,
assembling them, and then selling them to the United States,
Europe, and other high-income countries.
The changes in the exchange rate that would be reasonable
for China to adopt, given its surplus on both the capital
account and the current account, would not likely have a big
impact on the bilateral deficit that we are suffering with
China. In effect, it stems largely from the openness that China
has to foreign direct investment and the fact that a great deal
of labor-intensive manufacturing has moved to China.
Now, I want to say something next about how open the
Chinese economy is. I think several questions today pointed out
quite clearly, and I think for the most part, quite accurately,
that China is not in full compliance with all of the
commitments that it made when it joined the WTO. Nonetheless, I
would argue that it is a remarkably open economy. And the
diagram on page 6 simply shows, over the last 10 years or so,
that imports as a share of GDP have increased from a little
under 15 percent to a little under 25 percent. They have
increased by two-thirds over this period. Their imports have
grown from $53 billion in 1990 to about $300 billion last year.
China is roughly three times more open than Japan. This
year, for the very first time, China is going to import more
than Japan does. Japan's economy is roughly 3.2 times the size
of China's. So here is an economy that is much, much smaller
than Japan's, but importing, actually, more as a result. In
Japan, imports are about 8 percent of GDP. As you can see from
the diagram, China's imports are almost 25 percent. They're
also well ahead of the United States, for example, on this
measure.
In addition, I think it's useful to note that foreign
companies in China are playing a very big role in making the
place more open, as well. They now produce about a fourth of
all manufactured goods, and a little over half of those goods
are sold on the domestic market. So if you take the combination
of what's imported into China and what's produced by foreign
firms operating in China, by last year this was more than 40
percent of GDP. This is an extraordinarily open economy, by
these measures.
Yes, they are certainly not in full compliance with several
of their obligations, but they actually have, in comparative
terms, a relatively open economy.
I would say that one of the best pieces of recent evidence
of how open the economy has become is the extremely rapid
growth of imports this year. As China's growth has accelerated,
particularly in the first half, their imports in the first 8
months of this year exceeded 250 billion U.S. dollars. That's
an increase of more than 40 percent over the import levels of
the prior year. And if you go back and think of the first
diagram, on the current account, the current account is falling
very dramatically this year, because imports are growing much,
much more rapidly than their exports.
So, yes, they're out of compliance on some things, but I
think they have become substantially more open and are quite
open compared to many other economies.
I did say, at the outset, I would try to say something
about the domestic economy. The most important thing to
understand now is that China is currently in a phase of
accelerating growth based largely on an unsustainable expansion
of domestic credit. In the first half of this year, for
example, loans outstanding increased by 1.9 trillion RMB. Last
year in the same period, they increased by about 900 billion.
So there has been an absolute explosion of credit. Relative to
gross domestic product, the increase in credit is at all-time
high.
So I think we are now approaching or are perhaps at a peak
of the macroeconomic cycle. Inflation is accelerating and
imports are growing extraordinarily rapidly relative to
exports. The challenge China now faces is the need to rein in
credit growth before inflation accelerates further, but without
stepping on the brakes so hard that the economy falters, in
terms of its underlying economic growth.
And I would go back and argue that I think one of the most
compelling arguments for China to revalue is that the buildup
of foreign exchange reserves has contributed significantly to
the excessive growth of credit over the last two to three
quarters, and that it is in their own self-interest to revalue.
If they don't, increasingly there will be more problems on the
monetary policy side.
In effect, their exchange-rate policy and their domestic
macro policy are currently working at cross-purposes, and a
revaluation would bring them into congruence and would help
them with their domestic macroeconomic management.
Thank you very much.
[The prepared statement of Dr. Lardy follows:]
The Chairman. Well, thank you very much, Dr. Lardy.
Dr. Campbell.
STATEMENT OF DR. KURT M. CAMPBELL, SENIOR VICE PRESIDENT, HENRY
A. KISSINGER CHAIR FOR NATIONAL SECURITY, AND DIRECTOR,
INTERNATIONAL SECURITY PROGRAM, CENTER FOR STRATEGIC AND
INTERNATIONAL STUDIES, WASHINGTON, DC
Dr. Campbell. Thank you very much, Mr. Chairman. It's an
honor to appear before the committee, and I thank you and your
colleagues for your service and leadership on these and other
issues.
I've been asked to talk today about China's rise influence
in the region, I think following on what we've heard earlier
from Assistant Secretary Kelly today. And I think it's probably
appropriate to begin 2 years ago today, on this tragic day,
September 11, and think a little bit about how September 11,
2001, has influenced the U.S. role in Asia and, by association,
China.
But before we look at that, let's look just quickly at the
conventional wisdom about the United States on September 10,
2001, what we expected in terms of American focus and strategic
priorities.
I think the belief was then that every major challenge to
peace and stability was found, for the first time in our
history, in Asia rather than Europe. Dangerous situations still
exist today on the Korean Peninsula, increasing militarization
across strait between China/Taiwan, and, of course, the very
provocative nuclear rivalry between India and Pakistan. I think
there was an expectation that--sort of like, Bonnie and Clyde,
you know, this is where the bang starts, so that's where we'd
be focused--that we would be focused like a laser on Asia.
During the campaign, there was a lot of discussion about
how China would be a strategic competitor of the United States,
and we were heading toward a circumstance where you could
really easily see long-term structural competition on a
strategic level between the United States and China.
September 11 changed all that, for very dramatic reasons,
and I just want to run through a few, Mr. Chairman, that I
think would be of interest to the committee today.
The first and most important development since September 11
is the United States has been preoccupied in a way somewhat
from Asia, focused on other issues and not focused as much on
Asia as we had anticipated--much more focused on the Middle
East, on South Asia, on the rise of Islamic fundamentalism
elsewhere, and I think only periodic attention to these and
other issues in Asia.
Second, because of changing conditions associated with the
rise of terrorism, U.S.-China relations are the best they have
ever been. And one of the interesting things, there was a lot
of discussion and critique about this concept of a constructive
strategic partnership between the United States and China with
really tough attacks during the campaign. But the irony is,
having come to power, the Bush administration has actually
built a constructive strategic partnership with China. U.S.-
China relations are probably stronger today than they ever have
been. This is probably the first administration in history, if
anything, that under-exaggerates how strong U.S.-China
relations, where every other administration in the past, if
anything, has exaggerated it.
The third reason that we've seen big development, and as a
consequence of these first two, is the rise of substantial
prominence of China in Asia, and you see that everywhere. It's
felt in Japan. It's felt in Korea. And it's particularly felt
in Southeast Asia. Even though, by every measure, the United
States is the greatest power on the globe today, if you walk
the hallways and the business corridors of Asia, the dominant
power in the region is China--in many respects, stronger in
certain circumstances, than even the United States.
There are many reasons for China's gain in prominence, and
I'm just going to review three of them for you quickly, Mr.
Chairman, today. First, although many of the goals of China and
its leadership have not changed in Asia--I think we still have
some concerns about Taiwan--we've discussed this--we have
concerns about the Spratlys in the South China Sea--their style
has changed notably. I used to remember when I was in
government, a few years ago, you could always count on the
Chinese diplomat or military representative either to sit in
stony silence or to make a scene--you know, sometimes, you
know, throwing up arms, knocking over things. That's changed
dramatically. China is much smoother, much more careful, much
more sophisticated. They've come up substantially on the
learning curve, in terms of how to deal in international
circumstances. And nowhere is that more clear than in complex
situations in Asia, as a whole.
On disputatious issues, like China, like Taiwan, and the
South China Sea, they're taking the longer view. And I think
what you hear more and more is that time is on our side. You
hear that reflecting throughout discussions in Asia, as a
whole.
Second, as a result of some of the things that Nick has
talked about, there is almost a China fever, in terms of
investment and interest. If you talk to most European
companies, American companies, and, indeed, most Asian
companies, there is a rush to get into the China market, both
in terms of investments and manufacturing. And many countries
in Southeast Asia look at the geography and think, ``China's
going to be our neighbor for a thousand years. I'd better cut
my best deal now.'' And so the smart countries in Southeast
Asia who see China moving rapidly up the ladder, in terms of
the sophistication of their manufacturing, have decided to try
to cut their deal as quickly as possible.
The third reason--and this is interesting--is I think the
United States, in many respects, has facilitated China's rise
in a way that perhaps is occasionally unintentional. Just a few
years ago, I think we had some misgivings about ceding to China
a really dramatic and important role in certain Asian affairs.
But, for instance, on the Korean Peninsula, we have welcomed
it, we've encouraged it, and we've actually opened the door.
They key player in the six-party talks, in many respects, is
not the United States; it's China. China is the convener, the
cajoler. They are playing the role as the major diplomatic
power in Asia on the Korean Peninsula, not the United States.
And we have asked for that.
Now, let's just look quickly into the future. What are the
challenges that China will face in the region as we go forward?
I think the first and most important challenge that they're
going to face is on the Korean Peninsula, itself. I think
they're coming to the realization that, over the long term, the
current leadership and the structure of the situation on the
peninsula is unsustainable. In the short term, they're trying
to both sustain the North Korean leadership and try to prevent
North Korea from acquiring a substantial nuclear capacity. I
think North Korea's becoming so inconvenient that they're
starting to think about developments on the Korean Peninsula
that will take us beyond the current leadership. And they are
building relations, very close relations, with our allies in
South Korea at a time that our relationship with Seoul is
particularly strained.
Second, Japan. Japan is simultaneously a partner of China
in many areas, a big investor in China, and it's also a
historical nemesis. It's probably the most complex relationship
in Asia. If the rise of China is challenging for the United
States, double that and that's what you've got in Japan. Japan
feels that China's rise, in many respects, comes at its
expense, and the notion of Japan passing is now part and parcel
of the Japanese psyche when it thinks about developments in the
region, as a whole.
Third, the rise of Muslim/Islamic movements in Southeast
Asia. When we talk about the challenge of Islamic terrorism, we
often think elsewhere. We think about Iraq now, Iran, the
Middle East. But the reality is that the largest population,
sort of, the hearts-and-minds problems that we'll face, will be
in Southeast Asia. Indonesia, in particular. If you made a list
of those countries that were important to the United States
that the United States didn't realize were important to it,
Indonesia would be No. 1. China also feels threatened by
Islamic fundamentalism, both at home, in terms of their groups
in the West, which they have ruthlessly suppressed, but also in
the region, as well, and they want to work with the United
States and also reach out to moderate countries in the region
as they go forward.
Last, the situation in Taiwan. This situation, in terms of
the increasing militarization does not serve China's long-term
interests. And with their gathering power and influence, the
hopes are that they will find a better and different way to
deal with this democratic island in the Pacific.
Thank you, Mr. Chairman.
[The prepared statement of Dr. Campbell follows:]
Prepared Statement of Dr. Kurt M. Campbell, Senior Vice President,
Henry A. Kissinger Chair for National Security, and Director,
International Security Program, Center for Strategic and International
Studies
china's new prominence in asia
China's rise in regional prominence in geostrategic, political,
commercial, and indeed, cultural terms has been felt throughout Asia
and has been one of the most significant developments of the early 21th
century, rivaling in many respects the change of international
circumstances associated with the new realities brought about by the
global war on terrorism. China has always been a latent or prospective
power player in Asia but recently its influence has been felt across a
broad front. Signs of China's new found influence are evident in the
delicate diplomacy on the Korean peninsula, in China's high stakes
currency valuation deliberations with key western monetary officials,
and on crucial transnational issues such as global environmental
concerns and health matters. It was only a few years ago that many in
the United States openly worried about the prospect of China playing a
larger regional and military role in Asia. Indeed, the Bush campaign
was critical of the very notion of a ``constructive strategic
partnership'' between Washington and Beijing and was wary of the rise
of Chinese power in the East. Strategic competition was to be the
watchword for coming U.S.-China interactions. However, having come to
power, the Bush administration has actually built a constructive
strategic partnership with China, a relationship the likes of which has
never existed between our two countries. While there continues to be
considerable uncertainty and suspicion among conservative elements in
both societies, the United States and China are cooperating more
closely than ever before--in the intelligence arena, diplomatically,
and in larger global political pursuits--and the U.S. has even helped
provide the context and conditions for China's recent ascent.
Since September 11th, 2001, American foreign policy has been
understandably preoccupied with immediate challenges posed by
fundamentalist Islam and the security problems in the Middle East.
While there was an expectation in the waning years of the 1990's that
Asia would be the next major focal point of strategic preoccupation for
the United States--with a still divided and militarized Korean
peninsula, tense cross Strait dynamics, and dangerous nuclear rivalry
between India and Pakistan--9/11 changed all that. Instead, U.S. focus
and resources are increasingly directed towards the Middle East and
South Asia, and Asia has received only periodic high-level attention,
most recently during the increasingly tense diplomacy over North
Korea's nuclear status and ambitions. But while 9/11 diverted American
attention away from Asia in some respects, it has also created the
context for China's new profile as well as for greater cooperation
between the two powerful states of the Pacific. China has provided
consequential assistance in the intelligence and diplomatic arenas in
the ongoing war on terrorism and the very tenor of the relationship as
a consequence has changed markedly and for the better. The period when
a U.S. military plane crew was held against its will on a Chinese
island amid escalating tensions between Washington and Beijing seems a
distant memory. Conservative commentators who were very publicly
concerned over China's military buildup across the Taiwan Strait, and
of Beijing's larger ambitions in the region, are now curiously silent
(even though worrisome military trends continue) and as Secretary of
State Colin Powell said the other day, U.S.-China relations are ``the
best they have been since Nixon''. Indeed, it has been a shared
bipartisan tendency to exaggerate the health of U.S.-China relations
once at the helm of the diplomacy, but if anything, the Bush
administration has downplayed the significance and depth of the recent
closeness between Beijing and Washington.
China's rise to prominence has other important dimensions as well.
Partly because of domestic preoccupations associated with the
leadership transfer and partially because of an undeniable learning
curve in the handling of delicate international matters, China's manner
of diplomacy has evolved considerably in recent years. While in the
past, China's diplomats and military representatives were noted both
for their lack of candor and publicly staged tantrums, current
representatives of the People's Republic are handling a host of
challenging problems with a surer touch and a much more effective
approach. China's has been far more subtle in its recent international
interactions and much more adept in multilateral dialogues, taking
pains to seem in tune with regional interests and sensibilities. For
instance in the past, it was often China that resisted multilateral
efforts at cooperation and institutionalization in regional dialogues
such as the ASEAN forum, the cornerstone clustering of the Southeast
Asian community. Now, however, it is not uncommon to find China taking
a leading role in such gatherings, sometimes offering up ambitious and
creative initiatives, to promote regional dialogue and discourse. China
appears to recognize the political value of working through regional
forums as a confidence-building measure and as part of its ``charm
offensive'' strategy, particularly in Southeast Asia, to help allay
concerns about its rising power and influence, even while it is
profoundly changing the dynamics of regional economies and politics.
Ironically, in many circumstances it is now the United States that
is resisting or demurring from active participation in these
multilateral venues, preferring instead to deal with many complex
matters through traditional bilateral avenues (except of course on
North Korea). Indeed, when it comes to multilateral
institutionalization and cooperation in Asia, it is as if the United
States and China have changed places. China now appears much more
comfortable in many multilateral forums, while the United States
sometimes appears to be a powerful, but solitary actor, hesitant to
engage in deeper institutional discussions.
While there are complex reasons for this change in course in both
the United States and China, China's new found enthusiasm for closer
dialogue and ties--with Southeast Asia in particular--have won it
substantial kudos and more benign regional assessments. In the past,
most of Southeast Asia was deeply ambivalent about China's rise,
fearing that an increase in Beijing's power would invariably lead to
greater belligerence and bullying. However, at least the early
experience of China's recent ascension suggests a greater degree of
comfort among most of the key Southeast Asian players, particularly at
the level of strategic interaction. China's military representatives
and diplomats are much more aggressive in their regional politicking
than ever before, and this sustained regional engagement reveals a much
more sophisticated approach from Beijing than we have seen in the past.
However, it is on the issue of North Korea that China's newly
acquired significance is clearly revealed. The Bush administration has
made very clear both publicly and privately that the key to the
resolution of the North Korean matter lies in China playing a much more
robust and public role in the multilateral diplomacy with Pyongyang.
The recent Chinese hosting of the six party dialogues in Beijing, while
unsuccessful at least initially in eliciting North Korean concessions,
was a manifest demonstration of China's new role as power broker. The
United States in the past has been either deeply ambivalent or opposed
to China playing such a prominent role, potentially at America's
expense, but this time the United States helped engineer and encourage
the session to take place. This undoubtedly reflects the
Administration's confidence in American power and reach in Asia and
while this is undoubtedly true, many nations believe that they are
witnessing the arrival of the next great power in Asia before their
eyes.
The commercial dimension of China's rise poses more complex trade
offs for all of Asia and indeed for the entire industrialized as well
as developing world. Its rapidly expanding manufacturing base provides
enormous temptations for industries both high tech and low to relocate
and there are associated investment opportunities that are virtually
unparalleled in the world. There has been a massive increase in foreign
direct investment in China and increasingly, global business
enterprises based in Europe or the Untied States will look at China as
an Asian outpost before they will consider hubs in either Southeast
Asia or Japan and Korea. These trends are reshaping the commercial,
manufacturing and investment maps of Asia and with it, the very nature
of economic interaction within and across the Pacific. In the last few
years, inter-Asian trade and investment--largely spurred by the growing
opportunities in China--has surpassed commercial interaction across the
Pacific with the United States.
While currently the United States is the only true engine of growth
in the global economy, there are signs that China has the potential to
play a similar pivotal role, at least in Asia. Most commercial groups
and governments in Southeast Asia have a deep and profound sense of
these trends and regard them with some foreboding. Many key Southeast
Asian business groups in the midst of a complex process of striking
long-term bargains with Beijing that will have long lasting political
and commercial significance. China's economy is a potential Colossus
and smart south Asian countries like Singapore, are thinking creatively
about the best ways to strike enduring partnerships that are
sustainable even with mounting Chinese gains in productivity and
wealth.
This is not to say that there are not real worries about China's
ambitions and intentions in the region. Although China has handled many
recent diplomatic issues, such as the increased Japanese security role
in world affairs, with greater grace than in the past, there are still
clear examples of the traditional clumsy approach to crises that we
associate with a harder line, communist China. For instance, the cover-
up of the spread of the SARS epidemic cost thousands of lives and
billions of dollars for China and Asia as a whole, and could have been
dealt with much more effectively with greater and earlier Chinese
transparency and diplomatic engagement. So to, the continuing military
buildup across the Taiwan Strait is an ominous forewarning of trouble
ahead unless Cross Strait issues can be dealt with through more
peaceful and diplomatic means. While China has largely suspended its
very public threats and condemnations of Taiwan, there can be no doubt
that Taiwan occupies a unique place of import among China's policy-
making elite. There are clear anxieties throughout Asia that either
through miscalculation or provocation, the Cross Strait situation could
spin out of control, and while most are reluctant to openly criticize
China's continuing military buildup here, it is a source of anxiety
throughout the region.
China has also been seemingly more patient recently when it comes
to the handling of the periodically tense issues surrounding the legal
and territorial status surrounding the South China Sea and Spratlys,
favoring a kind of code of conduct to facilitate joint use and to
prevent military clashes. China has not changed its essential position
on sovereignty, but on this matter, as on other issues, Beijing--with a
full appreciation of its accumulating power and influence throughout
the region--is taking a longer view with a sense that time is on
China's side.
China faces three enormous regional challenges in the years ahead
in East Asia alone. One is dealing with the clearly untenable situation
on the Korean peninsula. Its erstwhile ally in North Korea is
continuing to act in ways that undermine China's own long term
interests and Beijing must begin to think hard about political outcomes
on the peninsula that involve regime change in North Korea, as
difficult and unpalatable as that prospect is. China has taken pains to
cultivate a closer relationship with South Korea, to a great effect,
and is well positioned to have a prosperous and stable relationship
with a successor political arrangement on the Korean peninsula. Yet,
North Korea shows no sign of political collapse nor real internal
reform and China must now consider more intrusive options to help
determine the fate of Pyongyang's current rulers.
China's second greatest challenge is in developing a better
relationship with Japan, simultaneously a regional rival, commercial
partner, and historical nemesis. While China's rise provides very
obvious challenges for the United States, there are probably more
urgent anxieties in Japan associated with Beijing's greater regional
prominence. Many in Japan fear that China's rise has come at Japan's
expense, and there is a real sensitivity to a growing and pervasive
regional pervasive regional mindset that is best captured with the term
``Japan passing''. While Japan and China have recently taken pains to
portray their relationship as on the upswing, there are clear and
undeniable tensions just beneath the surface.
The third challenge is in relation to the rise of Islamic
fundamentalism, both inside China's borders in the western hinterland
and in the surrounding region, particularly in Indonesia. China fully
appreciates that it too is a target of militant Islam and that regional
stability in Southeast Asia in many senses hinges on how this most
delicate issue is handled both by the region's ruling elite and outside
actors. China's main strategy at home has been to practice brutal
repression against Muslim minorities but there are recent signs of
closer Chinese ties with a range of states in Southeast Asia with
substantial Muslim populations, including Malaysia and Indonesia.
There is a tendency in Asia to make bad judgments when it comes to
power predictions and hegemonic transitions. For instance, it was in
1986 that Soviet Premier Mikhail Gorbachev traveled to Vladivostok to
give a speech about a new Soviet strategy for Asia. Many commentators
in Asia subsequently surmised that we were heading into a new era of
Russian dominance in the Pacific. Laughable as that seems in
retrospect, the notion of more dominant soviet position in the Pacific
dominated discourse for several years following. Further, in the late
1980's and early 1990's, it was a common refrain to hear that the Cold
War was over and Japan had won. It was commonly expected that Japan's
remarkable economic rise would continue unabated and the country would
acquire greater political and military power, potentially rivaling the
United States. There was also the profound belief in the very idea of
an American decline and anxiety throughout Asia that the United States
was a spent force, humiliated in Vietnam and exhausted by the Cold War.
Obviously the United States is back with enormous influence springing
from our continuing commercial prosperity, our unparalleled military
power, and our ability to harness the forces of globalization.
The same kind of gold rush mentality also influences our
calculations on the course of China's rise. It has become the common
conventional wisdom that China's rise is inevitable and that 8\1/4\ a
year growth figures will continue into the future as far as the eye can
see. The reality, of course, is China faces enormous domestic pressures
and problems, and there are daunting challenges ahead that could well
stymie China's modernization and rise to regional prominence. Although
it is wise to plan and prepare for China's rise, it is also prudent to
consider its potential failings, either politically or economically.
Either way, the course of and prospects for China in the world will be
one of the most important and multifaceted challenges facing the United
States in the 21st century, with enormous stakes for both success and
failure. The United States has a deep interest in China's success, but
our overriding objective must be to see that China's ascent does not
come at our expense, or at the expense of our regional friends and
allies.
The Chairman. Well, thank you very much, Dr. Campbell.
Mr. Kumar.
STATEMENT OF MR. T. KUMAR, ADVOCACY DIRECTOR FOR ASIA AND
PACIFIC, AMNESTY INTERNATIONAL USA, WASHINGTON, DC
Mr. Kumar. Thank you very much, Mr. Chairman.
Amnesty International is extremely pleased to be here to
testify on this important topic and also on an important
country.
As far as Amnesty International is concerned, the human
rights situation in China has gone from bad to worse. Our
opinion is not only shared by other human rights organizations,
it's also shared by the administration, itself. Even today, we
heard Secretary Kelly give testimony to that effect.
Before I go into details, I just want to give you a list of
human rights abuses that are taking place in China. The list is
pretty long, so I will summarize the important ones. And the
list is growing by the day there.
First, the Chinese are holding tens of thousands of
political prisoners. Tens of thousands. They have been
imprisoned without charge or trial. If there are any trials at
all, they are unfair, and sometimes they are closed-door
trials. Most of the time, the admission of evidence is obtained
through torture.
As for the human rights perspective on religion, every
religious group that operates in China which doesn't have the
government's authority or permission gets persecuted.
Christians are number-one on the list, Tibetan Buddhists,
second, then Muslims in the West.
The death penalty is practiced on a routine basis. China
executes more people than all other countries combined. And we
also have reports that China is harvesting organs from executed
prisoners for transplant purposes. This has become a trade in
China.
Forced abortion and sterilization is another issue of
concern to us. As you are aware, Mr. Chairman, China has a one-
child policy. The Chinese Government allows forced abortion and
sterilization to take place as one of the methods of
controlling the population growth in China.
Last, but not least, is the North Korean situation. There
were a lot of questions that were asked of Secretary Kelly
about North Korea. We are concerned about the refugees from
North Korea residing in China. There are at least 100,000 to
150,000 such refugees in China at this moment, and the Chinese
are not treating them well, and they are forcing them back,
against their wishes. And, above all, the Chinese are not
allowing the United Nations High Commission authorities to have
access to these North Korean refugees in China.
Coming back to the main issue of political prisoners, there
is one political prisoner I would like to single out. Her name
is Rebiya Kadeer. She was arrested for meeting with--trying to
meet with--congressional staffers. She was sentenced to 8 years
in prison for providing secret information to foreigners. And
when Human Rights Secretary Craner visited Xinjiang, the Muslim
province of China, everyone expected that Rebiya Kadeer would
be released at that time. But, to our dismay, not only was she
not released, they arrested three of her children the day
before Secretary Craner arrived, and detained them for a couple
of hours and warned them not to talk to anyone about their
mother's case.
The other case is Tibet. There is a case of a 6-year-old
child who was selected by the Dalai Lama as the Panchen Lama,
the second hierarchy in Tibetan Buddhism. This happened about 8
years ago. The Chinese immediately detained the 6-year-old
child and his parents, and, for the last 8 years, we don't know
what has happened to that child and/or the parents.
These are two glaring examples of the contempt the Chinese
have for human rights and also religious persecution and the
denial of rights to minorities in China.
I will quickly move on to the U.S. policy aspect of the
human rights situation in China. As Secretary Kelly mentioned,
China is backsliding in terms of human rights. We also see that
the United States is backsliding in terms of dealing with the
human rights abuses in China. The United States failed to
sponsor a resolution at the last United Nations Human Rights
Convention. Whatever excuses the administration may give, they
have given the green light to the Chinese to believe that they
can get away with by abusing the rights of their civilians, and
no one in the world, including the most powerful country in the
world, the United States, is going to stand up to them. That's
why we are urging the administration to sponsor a resolution at
the upcoming 2004 Human Rights Convention.
Today is the second anniversary of the 9/11 tradegy. The
Chinese have turned the tragedy into a weapon of human rights
abuse. Since 9/11, they have created numerous anti-terrorism
laws. And they are not only cracking down on the Muslim
province of Xinjiang. They are now also expanding it to
Tibetans and to others. For the first time ever, a Tibetan
political prisoner was executed under those laws a couple of
months ago. So what we see is the tragedy of 9/11 being used as
a weapon of terror by the Chinese against their own citizens.
We also want the administration, especially President Bush,
to take human rights to his heart when he meets with Chinese
leaders this October, when he is going to have a meeting with
the President of China at the APEC conference. We would urge
him to specifically request that Rebiya Kadeer be released
before that meeting or immediately after the meeting.
As a final note, Mr. Chairman, I would like to highlight
the importance of congressional leadership on this issue. Given
China's contempt for human rights, and given the Bush
administration's unwillingness to deal with human rights in a
meaningful way, the burden comes to you, as the main committee
that deals with foreign policy. It's your responsibility to
ensure that the administration does not undermine the need to
secure human rights for Chinese civilians--I mean, to make sure
that human rights is raised in a meaningful way with the
Chinese. And also as a committee you can deal with Chinese
directly and ensure that there is some progress made regarding
human rights before any other developments take place, in terms
of trade or anything else.
One of the downsides of what has happened to U.S.-China
relations during the last couple of years was the granting to
China of PNTR, of permanent normal trade relations. We, as an
organization, did not take a position on that, but we are
concerned that the annual debate surrounding human rights in
China that took place during that time is not there anymore. So
the Chinese know that there is no spotlight on their human
rights abuses. That is also giving them an added incentive to
abuse the rights of their own civilians.
So, in closing, Mr. Chairman, as a human rights
organization, we are extremely pleased that you are holding
this hearing today and keeping human rights as part of the
discussion. And we expect that you will keep this human rights
agenda as part of your deliberations with the administration
and the Chinese.
Thank you very much.
[The prepared statement of Mr. Kumar follows:]
Prepared Statement of T. Kumar, Advocacy Director for Asia and Pacific,
Amnesty International USA
Thank you Mr. Chairman, and distinguished members of this
committee. Amnesty International is pleased to testify at this hearing.
The human rights situation in China has been of consistent and grave
concern to Amnesty International and, indeed, to Members of this
Senate, for years. In 1996, Amnesty International launched an
international campaign to increase awareness of China's horrible human
rights record. Over the years we have released numerous reports to
highlight the deteriorating conditions.
It would be impossible to cover the vast scope of human rights
violations in China in my testimony, so I will summarize some of our
major concerns. The scale of China's human rights violations is
staggering. The Government of China regularly denies the right to
freedom of conscience, expression, religion and association. China
holds thousands of political prisoners, executes more people than the
rest of the world combined, regularly practices torture resulting in
numerous deaths, persecutes religious groups of all persuasions, has
forced mothers to endure forced abortions and sterilizations, and
perpetrates countless other human rights violations. Tibetans, Uighers,
``unofficial'' church members, Falun Gong practitioners, democracy
activists, and political dissidents bear the brunt of abuses. Other
groups targeted for repression include trade union organizers,
advocates of reform, and people using the Internet to disseminate
information deemed to be ``politically sensitive.'' North Korean asylum
seekers also have faced an intense crackdown in China leading to large-
scale forcible repatriation to North Korea.
bush administration's human rights policy on china
The Administration's policy of over the last three years of
appeasing China and compromising on fundamental human rights issues
have emboldened Chinese authorities to continue committing human rights
abuses. Secretary Powell recently stated that ``U.S. relations with
China are the best they have been since President Nixon's first visit
in 1972.'' Given Secretary Powell's statement, one wonders whether the
positive relationship with China comes at the expense of human rights.
If the relationship is so positive, why has the Administration failed
to secure the release of Rebiya Kadeer, who is imprisoned for
attempting to meet U.S. Congressional staff? And why do so many
continue to languish in prison for exercising their right to freedom of
conscience, expression, religion and association?
The Administration's failure to sponsor a resolution at last year's
United Nations annual Human Rights Commission meeting in Geneva and the
Administration's failure to comprehensively integrate human rights in
its dealing with the Chinese authorities are reprehensible and are
marks of short-sighted policy. Amnesty International urges the
Administration to declare its intention to sponsor a resolution at next
year's UN Human Rights Commission meeting and to put real diplomatic
muscle behind this effort. We also urge the Administration to
incorporate meaningfully human rights requirements in all its dealing
with the Chinese authorities.
Secretary Powell's up-beat assessment is in sham contrast with the
Department of State's own admission of a failed U.S. human rights
policy towards China. The failure of the Administration's human rights
policy was displayed in public at the State Department's press briefing
on July 2, 2003. Following is the statement:
Taken Questions
Office of the Spokesman
Washington, DC
July 2, 2003
Question Taken at July 2, 2003 Press Briefing
China: Human Rights Deterioration (Question Taken)
Question. Can you elaborate on your comment that there has been a
``deterioration in human rights'' in China recently?
Answer. During much of 2002, we saw incremental, but unprecedented
steps in the right direction on human rights, including the release of
a number of prominent prisoners of conscience, the visit of
representatives of the Dalai Lama to China for the first time in two
decades, and numerous commitments undertaken by the Chinese government
at the U.S.-China human rights dialogue last December aimed at systemic
human rights reform. We were hopeful that these were signals of a new
commitment by the Chinese government to cooperate with the United
States on human rights issues.
We have been disappointed, therefore, to see negative developments
in 2003. The commitments to make progress on human rights concerns made
by China at the conclusion of the December human rights dialogue have
not been met, and there have been a number of troubling incidents since
the beginning of the year. For example:
The execution of a Tibetan without due process and despite
assurances that his case would receive a review by the Supreme
People's Court;
The arrests of a number of democracy activists;
Harsh sentences handed down to Internet essayists and labor
protesters;
The forced repatriation of 18 Tibetans from Nepal in
contravention of UN practices;
The failure of PRC authorities to respect due process rights
of those accused of political crimes; and
Lack of access for us diplomats and family members to trials
of those detained for political activities.
This backsliding on human rights is of great concern to the United
States and the international community.
Our decision not to raise a China resolution at the Geneva Human
Rights Commission this year was based on assurances by the Chinese
government that human rights cooperation would get back on track. This
was a good faith effort to try to find a new way forward on improving
human rights in China.
We urge the Chinese government to take steps to ensure that its
citizens are not persecuted for the peaceful expression of their views,
and to release all prisoners of conscience.
[End]
Mr. Chairman, Amnesty International is keenly watching the
Administration's steps with regard to China policy. And we sincerely
hope for a China policy that will depart from the policy of the last
three years, and one that will begin to secure real human rights gains
in China.
I would now like to bring your attention to a number of cases that
exemplify the vast array of human rights violations occurring in China
today that need immediate attention.
the imprisonment of rebiya kadeer
Mr. Chairman, Amnesty International would like to bring to your
attention the case of Rebiya Kadeer. Ms. Kadeer, a successful
businesswoman from the Xinjiang Uighur Autonomous Region (XAUR) in
China, was arrested while trying to meet with members of the United
States Congressional Research Service and Congressional staff.
Following a trial held in secret, a Chinese court sentenced her to
eight years' imprisonment for ``providing secret information to
foreigners''. Her continued imprisonment is a slap in the face to those
in the United States who would investigate human rights conditions in
China.
Ms. Kadeer was widely expected to be released when Assistant
Secretary of State for Human Rights Lorne Craner was given permission
to visit the XUAR in December 2002. Not only was Ms. Kadeer not
released, but her three children were taken into custody on the day
before Secretary Craner's arrival. The children were released the
following day with strict instructions not to meet with anyone about
their mother's case. Ms. Kadeer's health is reportedly deteriorating,
resulting in her inability to perform prison labour.
Amnesty International would urge you to take appropriate steps to
secure her immediate release. Mr. Chairman, President Bush is planning
to meet Chinese President Hu Jintao at the APEC Conference in Thailand
in October. We urge you to contact President Bush to ask that he
raiseRebiya Kadeer's case with the Chinese President during this
conference.
where is the child?
Gendun Choekyi Nyima was only six years old when he was selected as
the 11th Panchen Lama by the Dalai Lama. He has not been seen for eight
years. It is believed that the Chinese authorities are holding him in a
secret location. Amnesty International considers this child as a
political prisoner.
On May 14, 1995 the Dalai Lama, Tibet's exiled leader, announced
that Gendun Choekyi Nyima was the reincarnation of the 10th Panchen
Lama. The Chinese authorities have disputed the Dalai Lama's authority
to announce the discovery of the reincarnated Panchen Lama and rejected
the Dalai Lama's choice and choose another six-year-old boy to be the
reincarnate.
It is reported that the Chinese authorities took the Panchen Lama
selected by the Dalai Lama to Beijing along with his parents. Eight
years have passed and there is no information on this missing child.
The Chinese authorities have refused to allow any independent observers
to meet the boy or his parents. They also refused to share any
information about his whereabouts.
A number of Buddhist monks who assisted the Dalai Lama in the
search for the 11th Panchen Lama were also arrested and imprisoned. For
example, Chadrel Rinpoche, the imprisoned abbot of Tashi Lhunpo
Monastery, who is believed to have been released in January 2002
following the completion of his sentence, is now reported to be under
house arrest.
There is no independent information on the status of Gendun Choekyi
Nyima's health or living conditions. Chinese authorities assured a
delegation of European Union Ambassadors visiting Tibet in 1998 that
the ``boy was in good health and living a normal life''. The
Ambassadors' request to visit the boy was refused on the grounds that
the boy and his parents wished to lead a normal life, which was not
compatible with receiving visits from foreigners.
Amnesty International is seriously concerned about the welfare of
the child and that of his parents and urges the Chinese authorities to
lift the restrictions and allow the boy and his parents to return to
their village and live without restriction or harassment.
crackdown on internet users
In China, individuals can be sentenced to death for publishing
information on the Internet that the government considers a ``state
secret''. Scores of people have been imprisoned in China for using the
Internet; of those arrested at least three have died as a result of
torture by police. Those detained to date range from political
activists and writers to Falun Gong practitioners and members of other
religious groups banned by the authorities.
With the introduction of the Internet, news reaches China from a
multiplicity of sources enabling people to form opinions, analyze and
share information and to communicate in ways previously unknown in
China. Lively on-line debate flourished in China. However, the
potential of the Internet to spread new ideas has led the authorities
to take measures to control its use.
The Chinese government has introduced numerous regulations, closed
Internet cafes, and blocked e-mails, search engines, foreign news and
politically sensitive websites. Recently, it has introduced filtering
systems for web searches and has even created a special ``Internet
police'' to enforce these restrictions. The Ministry of State Security
has reportedly installed tracking devises on Internet service providers
to monitor individual e-mail accounts and all Internet cafes are
required to register and inform the police about their customers.
The Chinese government has also forced Internet companies to take
on the responsibility of policing the web. A ``Public Pledge on Self-
Discipline'' was introduced in August 2002 requiring Internet companies
to agree not to allow the posting of ``pernicious'' information that
may ``jeopardize state security, disrupt social stability, contravene
laws and spread superstition and obscenity''. Yahoo also signed to this
pledge to police Internet users. After a fire in an Internet cafe in
Beijing last year, authorities closed thousands of Intemet cafes and
demanded that those allowed to re-open do so only after installing
filtering software to block web sites considered ``politically
sensitive'' or ``reactionary''. The software prevents access to 500,000
various websites.
1989 tiananmen square prisoners
Fourteen years after the 1989 pro-democracy demonstrations in
Tiananmen Square, we again call upon the Chinese authorities to account
for all those killed and injured in the crackdown and to offer
compensation to the families.
Those who lost their lives or were imprisoned in 1989 were calling
for transparent and accountable government and an end to corruption--
core building blocks for genuine stability and development. The new
Chinese leadership has recently given prominence to these watchwords
with its efforts to combat the spread of SARS.
Amnesty International reiterates its appeal to the Chinese
authorities to release all prisoners still held in connection with the
1989 pro-democracy protests. AI has records of 82 people that it
believes are still imprisoned following swift and unfair trials. Cases
continue to come to light, indicating that the true figure is likely
much higher.
forced abortion and sterilization
Birth control has been compulsory in China since 1979 and the
official government line that ``coercion'' is not permitted is flatly
contradicted by the facts. Birth control is enforced through quotas
allocated to each work or social unit (such as schools factories or
villages) with local officials directly responsible for monitoring and
enforcement. At a minimum, couples who have ``above quota'' face
punitive action, including heavy fines and loss of employment. ln
reality, many local authorities resort to much more severe action,
including forced abortions and forced sterilizations. Relatives of
those accused of having too many children have been held as hostages
until fines are paid or the pregnant woman agrees to have an abortion.
``Above quota'' newborn babies have reportedly been killed by doctors
under pressure from officials and at least one doctor who issued false
sterilization certificates was given the death penalty.
rape and other sexual torture
There have been many reports of the use of electric batons and
sticks to rape or sexually violate and torture women in custody. One
Tibetan nun described how on arrest in mid-1988, she and 11 other nuns
were forced to stand in line as one by one they were stripped naked.
Two policewomen with sticks then beat the naked women as male prisoners
looked on. One of the nuns later reported: ``I felt humiliated in the
beginning, but later I forgot everything but the terrible pain.'' The
policewomen then twice poked them with an electric baton and pushed it
into their vaginas. By the time the nuns returned to their cells, they
were ``not aware of what was happening'' around them.
torture and deaths in custody
Zhou Jianxiong, a 30 year-old agricultural worker from Chunhua
Township in Hunan province, died under torture on May 15, 1998.
Detained on May 13, he was tortured by officials from the township
birth control office to make him reveal the whereabouts of his wife,
suspected of being pregnant without permission. Zhou was hung upside
down, repeatedly whipped and beaten with wooden clubs, burned with
cigarette butts, branded with soldering irons, and had his genitals
ripped off.
This horrific case of abuse is not an isolated case. Every year
many people die due to torture in China. Others survive the torture but
continue to suffer the long-term effects of the physical and mental
traumas they have endured.
Torture and ill treatment of detainees and prisoners is widespread
and systemic in China. Such abuses have been reported in the full range
of state institutions, from police stations, detention centers,
prisons, to administrative ``re-education through labor'' camps,
internal migrant ``custody and repatriation centers'', and enforced
drug rehabilitation centers. Torture is also frequently reported as an
integral part of the abuse of ``non-custodial'' control measures such
as ``residential supervision'' and during ``special isolation'' of
officials during investigations into allegations of corruption.
The common forms of torture reported by prisoners are the use of
electric shock batons, particularly on sensitive areas such as mouth
and genitals; being forced to stand in awkward positions for long
periods and being suspended from the ceiling by their arms. Prisoners
reported being tied in agonizing positions with ropes and also being
forced into awkward positions with the use of ankle cuffs, handcuffs
and thumb cuffs.
Kidney and liver ailments are common among prisoners as a result of
kicking and beatings by prison guards aimed specifically at these
sensitive organs. Many report being beaten with whatever implement a
guard or interrogator can find at hand, such as a log, a gun butt or
even in one case, a tire pump.
prison conditions
Prison conditions remain harsh and many prisoners are forced to
work for long hours in unacceptable conditions. Prisoners receive
inadequate food of a very poor standard. Prisons have poor sanitation
and many prisoners suffer health problems as a result, particularly
diarrhea and digestive problems.
Medical care for prisoners is reported to be insufficient and to be
administered only at a late stage. One former prisoner's account
indicates that there is a small clinic at Drapchi prison in Tibet with
a resident nurse but no doctor. These facilities are not well equipped.
Serious illness, such as tuberculosis, liver disease, and kidney
problems, are dealt with in hospitals outside the prison, but many
prisoners distrust the medical system. There is no preventive health
care for prisoners. Some prisoners report that there are instances of
tuberculosis in prison and that this particularly affects elderly or
physically weak prisoners. It reportedly spreads easily as several
prisoners are kept in one cell.
psychiatric hospitals
Many prisoners in China are confined to state run psychiatric
hospitals for simple acts of expressing their thoughts on political
issues. Take the example of veteran human rights activist and prisoner
of conscience Wang Wanxing. He was forcibly removed from his home by
eight public security officers and returned to Ankang psychiatric
hospital in Beijing on November 23, 1999. There has been no further
news of him.
Wang Wanxing was first detained in the hospital in June 1992 for
unfurling a banner in Tiananmen Square to commemorate the anniversary
of the pro-democracy protests of June 1989. On that occasion his wife
was informed that he was suffering from ``political monomania'', which
is not an internationally recognized medical term and would appear to
imply political obsessiveness.
In August 1999, Wang Wanxing was released for a three-month trial
period during which he was prohibited from contacting the media or pro-
democracy activists. At the end of this trial period, on November 18,
1999, Wang Wanxing asked the authorities if he could hold a press
conference to discuss his confinement. A week later, he was forcibly
returned to Ankang psychiatric hospital, which is managed by the
Beijing National Security Bureau. There is no evidence that Wang
Wanxing has any form of mental illness and AI believes that he is being
confined to a psychiatric institution in order to suppress his right to
freedom of expression and belief.
the death penalty
The death penalty continues to be used extensively, arbitrarily,
and frequently as a result of political interference. Its use increased
dramatically after the launch of the ``strike hard'' campaign against
crime in April 2001. Following the start of the campaign, a record
number of people were sentenced to death and executed, reportedly 1,921
death sentences and 1,060 executions, many after apparently summary
trials for crimes ranging from tax fraud and drug trafficking to
pimping. Official reports on the campaign reveal a total absence of
concern for international norms, which require that the most careful
judicial procedures be followed in death penalty cases.
While the campaign was initially targeted at organized violent
crime, national and provincial authorities have greatly expanded its
scope, including the expansion of the campaign in the Xinjiang Uighur
Autonomous Region (XUAR) to ``deal a decisive blow to separatist
forces, eliminating separatism and illegal religious activities''.
Until early 2003, the XUAR has been the only place in China where
Amnesty International has monitored reports of public executions and
the executions of political prisoners. In January 2003, Tibetan Lobsang
Dhondup was executed following his conviction in a secret trial for
involvement in a series of bombings in Sichuan province. There are
serious concerns that Lobsang Dhondup's trial was unfair. He was held
for several months incommunicado, he was not given full and adequate
legal representation and his trial was held in secret. According to
official sources, this was because the case involved ``state secrets'',
but the authorities never explained how this related to charges against
the defendant. This case could signal a move by the Chinese authorities
to extend the use of the death penalty to those branded as political
opponents, ``separatists'' or ``terrorists'' beyond the XUAR.
Despite official reports suggesting that the national ``strike
hard'' campaign has been of limited success, its extension for a
further year was announced on March 26, 2002. On August 30, 2002 it was
reported that the ``strike hard'' campaign would be intensified to
eliminate crime and ``deepen and consolidate the results of the `strike
hard' campaign'' in the run up to the 16th Chinese Communist Party
Congress to be held in November 2002 in Beijing. It was further
reported that the Beijing authorities' have initiated a move towards
holding local administrative organs responsible for the crime rate in
their jurisdictions. Amnesty International is concerned that this could
signal an increase in the number of cases of torture, unfair trials or
summary trials as police and other authorities struggle to show
results.
In 2002, as in previous years several reports have come to light of
miscarriages of justice based on confessions extracted by torture. The
use of torture to extract confessions from suspects is common and such
incidences escalate during a ``strike hard'' campaign. In the majority
of cases, the miscarriage of justice has only come to light after the
real culprit was found.
mobile execution vans
In an effort to improve cost-efficiency, Chinese provincial
authorities are beginning to introduce so-called mobile execution vans.
These are intended to replace the method of execution by firing squad
in which prisoners are taken to an execution ground and made to kneel
with hands cuffed before being shot in the head. Officials in Yunnan
province explained that only four people are required to carry out the
execution in the mobile vans; the executioner, one member of the court,
one official from the procuratorate and one forensic doctor.
Eighteen mobile execution vans, converted 24-seater buses, are
being distributed to all intermediate courts and one high court in
Yunnan province. The windowless execution chamber at the back contains
a metal bed on which the prisoner is strapped down. Once the doctor
attaches the needle, a police officer presses a button and an automatic
syringe inserts the lethal drug into the prisoner's vein. The execution
can be watched on a video monitor next to the driver's seat and can be
recorded if required.
The newspaper Beijing Today reported that use of the vans was
approved by the legal authorities in Yunnan province on March 6th,
2003. Later that same day, two farmers, Liu Huafu and Zhou Chaojie, who
had been convicted of drug trafficking, were executed by lethal
injection in a mobile execution van. Zhao Shijie, president of the
Yunnan Provincial High Court, was quoted as praising the new system:
``The use of lethal injection shows that China's death penalty system
is becoming more civilized and humane.'' However, members of China's
legal community have voiced their concerns that it will only lead to an
increase in the use of the death penalty.
harvesting organs from executed prisoners
It has been known for some time that organs taken from executed
prisoners are used for transplants in China. Amnesty International
reported this practice in 1993 and called at that time for the Chinese
government to ban the use of organs from executed prisoners without
their free and informed consent. However, the use of organs from this
source continues in China, reportedly on a widespread scale. In the
absence of a system of voluntary death-related organ donation, the main
source of organs in China is reported to be executed prisoners. The
percentage of transplant kidneys estimated to be derived from executed
prisoners has been put as high as 90%. Organs reported to be harvested
from this source include corneas, kidneys and hearts. A number of
reports indicate that it is also possible for foreigners to travel to
China and buy transplants using organs of executed prisoners.
``rule by law'' versus rule of law and human rights
In addition to human rights violations resulting from political
repression, lack of respect for the law and arbitrariness in its
enforcement are at the basis of gross human rights violations in China.
Every year, countless numbers of people are detained without charge or
trial. For those who are charged, sentences are frequently imposed
after unfair trials. In many cases the verdicts passed at such trials
include the death penalty.
Rule of law is still understood in China to mean ``rule by law'',
reflecting a system in which the law is subordinate to political goals,
including the defeat of perceived political threats. The judiciary
lacks independence and the judicial process is subject to interference
by political authorities. The vague and contradictory provisions of the
law lead consistently to its arbitrary use and provide wide scope for
abuse of power. The combined effects of repressive and vaguely worded
criminal legislation, impunity for officials who abuse their power, and
the use of a system of administrative detention mean that anyone can be
detained at the whim of individuals in a position of power.
During the 1990s, the Chinese government took steps to address some
of these issues, including, for example, its amending of the Criminal
Procedure Law (CPL). However, the measures taken were far too limited
to significantly change the law enforcement and justice system. In
practice, they have failed to protect individuals in China against
arbitrary detention, unfair trials, torture and other human rights
violations. Widespread illegal practices by law enforcers, such as the
use of ``torture to extract confessions'', which has been explicitly
prohibited by law since 1980, continue unabated, and in many cases
remain unpunished.
administrative detention--re-education through labour
The system of ``re-education through labour''--a form of
administrative detention imposed as a punishment--is based on a
Decision passed by the National People's Congress in 1957, which was
later updated with new regulations. This legislation remains in force.
According to a definition given by an official legal newspaper, ``re-
education through labour'' is a punishment for actions, which fall
``somewhere between crime and error''.
``Re-education through labour'' involves detention without charge
or trial for up to three years, renewable by one year, in a forced
labour camp. It is imposed by local government committees usually
presided over by police officials. It applies to people who are
regarded as troublemakers or those accused of committing minor offences
which are not regarded as mounting to ``crime'' and which therefore are
not prosecuted under the criminal justice system. Detainees liable to
receive terms of ``re-education through labour'' have no right of
access to a lawyer. Under the regulations on ``re-education through
labour'', people who can be subjected to this punishment include those
who are classified as being ``counter-revolutionary'', ``anti-Party''
or ``anti-socialist'', as well as people who ``behave like hooligans'',
such as by engaging in fights, smuggling or prostitution, or by
disturbing public order or ``the order of production'' in other ways.
According to official statistics, in 1996 there were 200,000 people
in ``re-education through labour'' camps in China. By early 2001, the
number had increased to 310,000, the latest official figure. The figure
was thought to be substantially higher in 2002 as a result of the
government's crackdown on the Falun Gong and the ``strike hard''
campaign against crime. Over the past two years, the use of this form
of detention has increased particularly against Falun Gong
practitioners and during the ``strike hard'' campaign against crime
launched by the Chinese authorities in April 2001. Other victims
include political dissidents, members of religious groups and a wide
range of people accused of ``disturbing public order'', including
prostitutes.
brutal suppression of religious freedom
Freedom of religion and belief is not tolerated by the Government
of China and has led to an increase in crackdowns against those who
choose to practice their religion freely. Ill-treatment and torture is
used against Tibetan Buddhists, Uighur Muslims, Christians, Falun Gong
practitioners and Catholics. Tens of thousands are detained for their
religious activities and are languishing in prisons for an indefinite
period of time without any charge or trial. Some are sentenced to death
after unfair trials, where confessions were extracted under torture.
Religious persecution is widespread in Tibet and the XUAR. Unauthorized
religious groups of all persuasions can face heavy fines, harassment,
and imprisonment. Many peaceful but unregistered religious gatherings
have been raided by police and those attending have been beaten,
threatened and detained.
christians
Members of evangelical Protestant groups and Roman Catholics who
worship outside the official ``patriotic'' church are victims of the
intense Chinese crackdown and are subjected to imprisonment, torture,
harassment and fines. Five Chinese Protestants are currently undergoing
a retrial on charges that carry the death penalty; in their original
trial, the defendants appear to have been convicted based on evidence
obtained through torture.
Gong Shengliang and four others were sentenced to death in December
2001 in connection with their membership of an unofficial Christian
organization, reportedly after witnesses were tortured. Three women
said they were tortured by police to make them confess to having had
sexual relations with Gong Shengliang, whose convictions included rape.
The allegations of torture included being shackled, whipped and kicked,
and being beaten on the bare chest with electroshock batons. In October
2002 the sentences were commuted to long prison terms after a retrial
was ordered because of ``insufficient evidence and unclear facts''.
However, the verdicts still appeared to be partly based on confessions
obtained through torture.
tibet autonomous region (tar)
Despite the recent meetings between representatives of the Tibetan
Government In Exile and Chinese officials in China and the release of
seven Tibetan prisoners of conscience over the last two years, freedom
of expression, religion, and association is still severely curtained by
the Chinese government. The Chinese government continues to use the
``Patriotic Re-Education Campaign'' to target Tibetan Buddhist
followers of the exiled Dalai Lama. Tibetans have been detained for
having a picture of the Dalai Lama. The whereabouts of the Dalai Lama's
choice of the 11th Panchen Lama, the second-ranking Tibetan religious
leader, has remained unknown for the last eight years. The third-
ranking Tibetan religious leader, the Karmapa Lama, fled to India
citing lack of religious freedom in Tibet. Thousands of Tibetans flee
to India every year to practice their religion freely. The activities
of religious institutions continue to be severely restricted, many
Buddhist monasteries and nunneries have been destroyed, and hundreds of
monks and nuns have been expelled.
Many former Tibetan prisoners find life after prison too difficult
and, rather than suffer harassment and potential retribution, they,
along with lay people, leave Tibet for a life in exile in India. It is
dangerous and difficult to leave Tibet; the majority of exiles walk
across the Himalayas to Nepal--a journey that can take up to 30 days.
Children often make the trip unaccompanied. In recent months, the
Nepalese government has stopped Tibetans escaping to India and returned
them to the Chinese government. The latest operations appears to
confirm widely held suspicions that China has increased its pressure on
other countries to return its nationals over recent months. Last year,
three ethnic Uighur asylum seekers from China's Xinjiang Uighur
Autonomous Region are believed to have been forcibly returned to China
from Nepal even after they had been granted refugee status by the
United Nations High Commissioner for Refugees (UNHCR).
In a recent incident, a group of 18 Tibetans were sent back to
China at around 6 a.m. in a joint operation carried out by officials
from Nepal and China. Eyewitnesses described them as being carried
crying and screaming into vehicles before being dnven in the direction
of the border. The operation was carried out in the face of widespread
international concern expressed by the UNHCR, governments, and NGOs.
Until now, the Nepali authorities have allowed UNHCR to assess the
claims of Tibetan asylum seekers and facilitate their resettlement or
transit to third countries, usually India. UNHCR described the
deportations as an ``alarming departure'' from that practice.
While it is not a party to the UN Convention relating to the Status
of Refugees, Nepal is party to the Convention against Torture and Other
Cruel, Inhuman or Degrading Treatment or Punishment which prohibits the
return of anyone to a country where they are at risk of torture, and
the Convention on the Rights of the Child which obliges States to
ensure that a child who is seeking refugee status receives appropriate
protection.
In August 2003, Nepal officially adopted a new policy of protection
for Tibetan refugees. Full implementation of this policy by the
Nepalese government will ensure that Tibetans can safely enter Nepal en
route to India.
It is extremely difficult to discover the fate of those returned to
Tibet due to the tight controls on information imposed by the Chinese
authorities. However, at the very least, Tibetan asylum seekers and
refugees who are returned to China face detention for interrogation,
where they are at serious risk of torture and ill-treatment.
xinjiang uighur autonomous region (xuar)
In the Xinjiang Uighur Autonomous region, the crackdown on ethnic
Uighur Muslims has intensified.
Thousands of Uighurs have been detained under the new ``Anti-
Terrorism'' law and political prisoners have been executed after unfair
trials. Chinese authorities have arrested numerous Muslim preachers and
religious leaders, destroyed several Mosques, and closed down many
Muslim religious schools. Muslims working in government offices and
other official institutions are prohibited from practicing their
religion, or risk loosing their jobs. Chinese authorities in the XUAR
practice various forms of torture, including the use of an unidentified
injection which causes the victim to become mentally unbalanced and,
for mate prisoners, the insertion of horse hair or wires into the
penis.
Amnesty International remains concerned at China's apparent use of
the attacks in the USA on September 11, 2001 to justify its ongoing
repression of Uighur culture and religion and the curtailment of other
fundamental freedoms in the XUAR. The authorities have imposed new
restrictions on freedom of religion, closed down mosques that were
deemed to have a ``bad influence'' on young people, and subjected the
Islamic clergy to intensive scrutiny and ``political education''.
Official sources have made clear that the ``struggle against
separatism'' is wide-ranging and encompasses repressing all potential
dissent and opposition activities, including the peaceful expression of
views via poems, songs, books, pamphlets, letters, or the Internet.
Such policies have resulted in serious human rights violations,
including the arrest and detention of thousands of Uighurs. Those
detained for political offences in the XUAR are at serious risk of
torture or ill treatment.
In December 2001, the Criminal Law was amended to strengthen
provisions relating to ``terrorism''. Amnesty International is
concerned that the amendments enlarge the scope of the application of
the death penalty and may criminalize peaceful activities, freedom of
expression and association. For example, the law makes it a criminal
offence to be a member of a ``terrorist organization'' but as there is
no definition for such an organization. The law could be interpreted as
referring to political opposition or religious groups.
Amnesty International's concerns have been heightened following the
announcement by the USA that it has placed the East Turkestan Islamic
Movement (ETIM) on its list of so-called ``terrorist'' organizations.
This listing, which was confirmed by the United Nations Security
Council on September 11, 2002, appears to corroborate China's previous
condemnation of the group. While Amnesty International is unable to
confirm or deny reports that ETIM has been responsible for acts of
violence, it is clear that the group is relatively small, little known
and unrepresentative of many within China's Uighur community who have
advocated respect for fundamental rights and freedoms or tried to
exercise these rights peacefully. It is feared that China will
interpret this move by the USA and the UN as an endorsement of its
crackdown on all forms of dissent in the XUAR, resulting in further
human rights violations against the mainly Muslim Uighur community.
Thousands of people remain imprisoned in the region in violation of
their fundamental human rights. Amnesty International continues to call
for the immediate and unconditional release of all prisoners of
conscience in the XUAR, including Uighur businesswoman, Rebiya Kadeer,
and the academic, Tohti Tunyaz (who writes under the pen-name Tohti
Muzart). Rebiya Kadeer continues to serve an eight-year prison sentence
after being found guilty in March 2000 of ``providing secret
information to foreigners''. The information in question was nothing
more than freely available public newspapers which she sent to her
husband in the USA. She is being held in Baijiahu Prison in the
regional capital, Urumqi, where her health has reportedly deteriorated
over recent months.
Tohti Tunyaz was also detained on ``state secrets'' charges after
being arrested while conducting academic research into Uighur history
in the XUAR in February 1998. He was sentenced to 11 years in prison
for ``inciting separatism'' and ``illegally acquiring state secrets''
in March 1999 and continues to serve his sentence in XUAR No.3 Prison
in Urumqi. In May 2001, the UN Working Group on Arbitrary Detention
concluded that his imprisonment was arbitrary and in violation of his
right to freedom of thought, expression and opinion.
1997 crackdown in gulia (yining)
Dozens of people were killed or injured when the Chinese security
forces reportedly opened fire on ethnic Uighur demonstrators in Gulja
(Yining) City, on February 5 and 6, 1997. The initially peaceful
demonstration on February 5, was followed by several days of sporadic
rioting in which both civilians and members of the security forces were
killed or injured. Thousands of people were detained as the security
forces went systematically through the streets, arresting suspected
protestors and supporters, including their relatives. Many of those
detained were reportedly tortured. Amnesty International calls for an
independent inquiry into allegations of serious human rights violations
that took place during and after the demonstration and requests further
information about those who remain in prison.
inner mongolia
The situation in Inner Mongolia is quite similar to that of the
XUAR and Tibet. A large influx of Han Chinese immigrants has made the
Mongolian people a minority in their own territory. Their rights to the
use of their own language and to the practice of their own religion--
most are Buddhists who look to the leadership of the Dalai Lama, as
well as to their own ``living Buddhas''--have been seriously abridged.
Since 1995-96, the Beijing government has taken severe repressive
measures against any manifestations of Mongolian nationalism, including
the selling and distribution of books in the Mongolian language and
script. For example, the Mongolian bookstore operated by Hada and
Xinna, his wife, has been closed; Hada is still in prison and Xinna has
been subjected to intrusive questioning and police harassment. Although
Tegexi, another prominent Inner Mongolian prisoner, has been released,
he remains under restriction and his status is unclear.
Despite the new leadership in Beijing, so far there has been no
sign that these policies will change. Amnesty International calls for
the immediate and unconditional release of Tegexi and Hada, and also
calls on the Chinese government to accord the ethnic Mongols in the
Inner Mongolian region their full rights to social, cultural, and
linguistic development.
In addition to these instances, the treatment of North Korean
refugees in this region has become increasingly harsh, with detentions
and long-term imprisonment more common in the past two years.
the crackdown on the falun gong spiritual movement
The Chinese authorities have made it clear that one of the main
targets of the ``strike hard'' campaign is the Falun Gong spiritual
movement which has been banned in China since July 1999 along with
other so-called ``heretical organizations''. There are serious concerns
that the Chinese authorities have sanctioned the use of violence as one
of the means to eradicate the group.
Falun Gong practitioners have suffered severe repression, with tens
of thousands of practitioners arbitrarily detained since Chinese
authorities banned this group in July 1999 and sent the vast majority
of them to labor through re-education camps. Alleged Falun Gong leaders
and organizers have been sentenced to lengthy prison terms or sent to
psychiatric hospitals. Over 500 Falun Gong practitioners have
reportedly died in custody.
Tens of thousands of Falun Gong practitioners continue to be
detained in China where they are at serious risk of torture or ill-
treatment, particularly if they refuse to renounce their spiritual
beliefs. The vast majority of them are believed to be held in labor
through re-education centers, a form of administrative detention
imposed without charge or trial. Amnesty International considers all
those detained in violation of their rights to freedom of belief,
expression and association, and who have not used or advocated
violence, to be prisoners of conscience.
One example is Yoko Kaneko (also known as Luo Rong), a Chinese
citizen with permanent residency in Japan, who was detained while
handing out Falun Gong leaflets to passersby in Beijing on May 24,
2002. One month later, on June 24, 2002, the Beijing People's
Government Committee for the Administration of Re-education through
Labor concluded that Luo Rong (Yoko Kaneko) had ``resisted the
enforcement of national laws'' and ``disrupted the order of social
administration'' by distributing Falun Gong ``propaganda material''.
She was assigned to one-and-a-half years' re-education through labor.
Amnesty International considers her to be a prisoner of conscience and
is calling for her immediate and unconditional release.
Amnesty International continues to receive regular reports of Falun
Gong members being tortured or ill-treated in custody. They include
Zhao Ming, a Falun Gong practitioner from Changchun City, Jilin
Province, who stated after his release that he had been subjected to
beatings with fists and electric shock batons, sleep deprivation,
force-feeding and other forms of torture during his detention in Tuanhe
Re-education through Labor Camp in Beijing between June 2000 and March
2002. According to Falun Gong sources, over 500 Falun Gong
practitioners have died in custody (or shortly after their release),
most as a result of torture.
workers and labor rights activists
Over the last year, the number of labor disputes and protests
involving large numbers of workers has risen dramatically in China.
Workers have been protesting about conditions of employment, low or
missing wages, corrupt management, illegal working conditions, mass
lay-offs, industrial accidents and deaths, poor safety, restrictive
working practices, and physical ill-treatment from factory bosses. Such
protests are generally deemed illegal, as are independent trade unions.
Many protests have been met with excessive use of force by the
police and participants have been detained, harassed or imprisoned for
taking part in such protests or publicizing them. Journalists and
lawyers have also been targeted by the authorities and have faced
intimidation or arrest for speaking out in defense of protesters.
Yao Fuxin, Xiao Yunliang, Pang Qingxiang and Wang Zhaoming were
detained after taking part in massive demonstrations by laid off
workers in Liaoning City, Liaoning Province in spring 2002. The
protests were against corruption, insufficient severance pay and
unemployment. The four remain in detention and are reported to have
been charged with organizing ``illegal demonstrations''. Yao Fuxin is
believed to be seriously ill, possibly due to ill treatment. Several
other demonstrators were reportedly detained and beaten. Gu Baoshu, who
was detained and released after several hours of interrogation, was
reportedly covered in bruises and suffering from severe chest pain and
blood clots in his eyes when he was released. He has subsequently been
threatened and harassed by the police, following his demands for those
responsible for his beatings to be investigated.
Many labor activists are also imprisoned on charges of
``subversion'', for revealing ``state secrets'' (which may simply refer
to reporting labor unrest), or for organizing an ``illegal
demonstration''. They include Zhang Shanguang who is currently serving
a ten year sentence for ``illegally supplying intelligence to hostile
organizations and people abroad''. One of the charges against him was
based on an interview he gave to a foreign radio station during which
he spoke, among other things, about peasant demonstrations in Hunan
Province. He has reportedly been tortured in prison and is believed to
be seriously ill.
In October 2001, extensive amendments to the Trade Union law of the
People's Republic of China were ratified by the National People's
Congress. While the amendments brought some improvements, the revised
law still severely restricts workers' rights to freedom of association
and expression. Some revisions also represent a step backwards in the
promotion of workers rights. For instance, the revisions reinforce the
existing monopoly of the ACFTU and affirm the subordination of Chinese
Trade Unions to the Chinese Communist Party (CCP). There continues to
be no explicit reference to the right of workers to ``strike'' (ba
gong) and independent trade unions are still not permitted.
abuses against hiv/aids patients
In June 2003, around 600 police and other unidentified men carried
out a violent raid of Xiongqiao village in Shangcai County, Henan
Province. The raid is believed to have been provoked by an earlier
incident in which up to 100 HIV-positive villagers visited the
provincial capital Zhengzhou to protest the lack of adequate health
care in Xiongqiao. Sixteen unarmed people thought to be HIV-positive
and possibly suffering from AIDS were detained. There are unconfirmed
reports that at least some of them were beaten in police custody. One
of those released has claimed that the detainees were beaten to force
them to confess to crimes of ``robbery'' and ``attacking government
offices.''
An estimated one third to one half of the 500-600 residents of
Xiongqiao are reported to be HIV positive after becoming infected
through the sale of their blood to government-sanctioned blood-
collecting stations in the 1990s. The blood-collection schemes became a
useful source of income for villagers, but were often poorly managed
and unsafe. It is estimated that up to one million people may have been
infected with the HIV virus in this way in Henan and other provinces.
The cost of medical treatment in China has increased sharply over
recent years due to economic restructuring. Few villagers in Henan and
other infected provinces have been given antiretroviral drugs or other
specialist care.
The extent of the spread of HIV/AIDS in Henan became better known
last year after the most prominent HIV/AIDS activist in China, Dr Wan
Yanhai, head of the Beijing-based Aizhi Institute, published on his
website lists of people who died in Henan province of HIV/AIDS related
illnesses. He was arrested in August 2002 on suspicion of ``leaking
state secrets,'' but released around one month later after widespread
international protests at his detention.
In July, the Aizhi Institute reportedly wrote to the Health
Minister of the Chinese government, calling for greater transparency
and urging the government to release statistics detailing the number of
people infected with the HIV virus through use of government-sanctioned
blood collection centers and the provinces in which they were infected.
According to Dr Wan Yanhai, the deputy director of the Henan Center
for Disease Control, Ma Shiwen, was arrested in August for allegedly
leaking documents on the Henan epidemic to the Aizhi Institute. Amnesty
International is particularly concerned that Ma Shiwen appears to have
been detained under vaguely-worded state secrets legislation, which
continues to be used widely in China to detain individuals in violation
of their fundamental human right to freedom of expression.
hong kong special administrative region
Amnesty International welcomes the withdrawal of Article 23
legislation proposed by the HK SAR. This legislation would have allowed
Hong Kong to enact its own laws to prohibit acts of treason, secession,
sedition and subversion. It was feared that the proposals could be used
to suppress the rights to freedom of expression and association as well
as the legitimate activities of nongovernmental organizations and the
media.
Police reportedly used excessive force in response to protests on
economic issues and the right of abode. Three prominent activists were
arrested and charged with organizing an unlawful assembly under a
revised Public Order Ordinance that had never before been invoked. In
November, two other well-known activists were arrested and charged with
the same offence after holding a demonstration in May in protest
against the arrests of the three activists.
Members of the Falun Gong, a registered society in Hong Kong, were
arrested at peaceful demonstrations and alleged that they were victims
of police violence. On August, 16, 2002 Falun Gong members were
convicted of obstruction during a demonstration in March. There were
claims that the trial was politically motivated.
macao special administrative region
There were continuing reports of beatings and torture in police
custody at least one detainee died in suspicious circumstances. Police
reportedly used excessive force during labor protests. Investigations
into complaints about police violence continued to be slow and
unsatisfactory. Members of the Falun Gong, which was neither registered
nor banned in Macao, were reportedly ``harassed by police and foreign
practitioners were denied access to Macao.''
north korean asylum seekers in china
In the face of serious food shortages and political repression,
thousands of North Koreans have fled across the border to China where
many live in fear of arrest and possible repatriation. The Chinese
authorities claim that all North Koreans who illegally come to China
are economic migrants, and have consistently denied them access to any
refugee determination procedure, in violation of China's obligations
under the 1951 Refugee Convention and despite evidence that many among
them have genuine claims to asylum.
Their desperate plight has been brought into sharp focus over
recent months by a series of diplomatic incidents in which over 100
North Koreans have entered foreign diplomatic facilities in several
Chinese cities in an attempt to claim asylum. China has responded to
these incidents by stepping up its crackdown on North Koreans,
particularly in the provinces of Liaoning and Jilin which border North
Korea. Hundreds, possibly thousands, of North Koreans have been
detained and forcibly returned across the border where they meet an
uncertain fate. Amnesty International fears that they could be
subjected to serious human rights violations, including arbitrary
detention, torture or even summary execution.
The renewed crackdown in northeast China has also extended to
people suspected of helping North Koreans, including members of foreign
aid and religious organizations and ethnic Korean Chinese nationals
living in the border area, many of whom have been detained for
interrogation. In December 2001, a South Korean pastor, Chun Ki-won and
his assistant, Jin Qilong, an ethnic Korean Chinese national, were
arrested in Hulunbeier City in China's Inner Mongolia Autonomous Region
while leading a group of 13 North Koreans through northeast China
towards the neighbouring state of Mongolia. On March 3, 2002, Chun Ki-
won and Jin Qilong were charged with ``organizing other people to
illegally cross the national border''. They were tried by the
Hulunbeier Municipal People's Court in Inner Mongolia in July, found
guilty and sentenced to pay fines of 50,000 and 20,000 Yuan
respectively (US$6,000/US$2,400). They were subsequently released, and
Chun Ki-won was deported to South Korea on August 22, 2002.
The 13 North Koreans were detained in Manzhouli Prison in Inner
Mongolia. Three of them, including a newly-born baby, were reportedly
returned to North Korea in late January or early February 2002, but
there were no further details about their status or whereabouts. The
others, including four children, were reported to have been moved from
Manzhouli Prison in July 2002, but their current whereabouts remains
unknown.
The Chinese authorities' have often failed to distinguish between
peaceful acts of protest and ``terrorism''. For example, in its report
of January 21, 2002 (mentioned above), the Chinese authorities accused
ETIM (otherwise known as the ``East Turkestan Islamic Party of Allah'')
of being behind the ``Yining Incident'' of February 5-8, 1997, which
was described as a ``serious riot during which the terrorists shouted
slogans calling for the establishment of an Islamic Kingdom.'' However,
eyewitness accounts indicated that this unrest started with a peaceful
demonstration by Uighurs which was brutally suppressed by the security
forces, leading to sporadic rioting and violence over two days.
u.s. government response
Mr. Chairman, as my testimony has demonstrated, Amnesty
International sees no signs of improvement with regards to human rights
in China. Chinese authorities continue to detain political prisoners
without charge, and to torture and ill-treat prisoners in custody,
often resulting in the prisoners' deaths. Thousands remain incarcerated
simply for exercising their right to freedom of conscience, expression,
religion and association.
It is crucial that the United States continue to play a leadership
role in demanding fundamental improvements in the Chinese government's
respect for human rights. We should not allow the Chinese government to
take advantage of our wish that they cooperate in the war on terrorism.
Such requests must not result in giving Beijing a blank check to
crackdown on human rights at home. Peaceful political dissent is not
terrorism.
We appreciate the steps taken by the Assistant Secretary of State
for Human Rights Lorne Craner to secure fundamental human rights to
Chinese civilians. His efforts have to be backed up by President Bush.
The President and other senior Administration officials must
articulate a strong, clear, and consistent human rights policy on
China. The international community is unlikely to take firm action when
the world's leader is engaged in a policy of appeasement which gives
priority to trade over human rights. The Chinese Government's policy of
dealing with dissent has not changed over the years. It is the U.S. and
international community's response that has changed.
u.s. congress
Mr. Chairman, historically the United States Congress has played a
crucial role in shaping U.S. human rights policy towards China. Through
persuasion and legislation, Congress members fought to keep respect for
human rights at the forefront of U.S.-China policy. Congressional
oversight countered Administration tendencies to overlook abuses and
tendencies by the Administration to buy into trade at any cost.
The spotlight that Congress provided helped lessen the abuses from
China's repressive regime, and led to countless releases of prisoners
of conscience. Until recently, Congress debated the human rights
situation in China on an annual basis during the debates about the re-
granting of Most Favored Nation (MFN) status. Such debates helped keep
the excesses of abuses in check. The debate was elevated in importance
because of the financial concerns involved.
Since Congress granted Permanent Normal Trade Relations (PNTR),
however, the attention to human rights in China has all but withered.
While some individual Members of Congress have gallantly confronted the
abuses on behalf of the citizens in China, the lack of an annual debate
has muted Congress' voice.
Mr. Chairman, abandoning one-fifth of the world's population is not
a smart U.S. policy. I urge that the Congress resume reinvigorated
debate on human rights in China and that the Congress re-think
engagement without results.
recommendations
President Bush should raise Rebiya Kadeer's impnsonment with
China's President Hu Jintao when he meets with him at the APEC
Conference in Thailand in October and he should abandon the current
quiet U.S. human rights policy towards China, which fails the Chinese
people now, and in the long-term fails the U.S.
The Administration should:
Develop a comprehensive strategy to address human rights
issues in China.
Vigorously seek the release of prisoners of conscience held
in China for peacefully expressing their beliefs, particularly
Tibetan POCs, Phuntsog Nyidron, Ngawang Phulchung, as well as
all prisoners still held in connection with the 1989 pro-
democracy protests.
Announce its intention to sponsor a resolution condemning
China's human rights practices at the 2004 United Nations Human
Rights Commission in Geneva, and begin now to seek
cosponsorship from other countries.
Take advantage of the 2008 Olympics in Beijing to demand
concrete benchmarks from the Chinese authorities for human
rights progress in China.
Seek information on the whereabouts and secure the freedom
of movement of Gedun Choekyi Nyima, the Dalai Lama's choice as
the 11th Panchen Lama.
Demand the revocations of all forms of administrative
detention that are imposed without charge, trial, or judicial
review.
Thank you for inviting Amnesty International for this important
hearing.
The Chairman. Well, thank you very much, Mr. Kumar. As you
noted, many Senators do take these human rights issues very
seriously.
Mr. Kumar. Thank you.
The Chairman. I would just say, parenthetically, before
moving on to the next witness, that the committee is preparing
a sense of the Senate resolution to the Chinese with regard to
Miss Kadeer, encouraging her release, encouraging President
Bush to raise the issue at APEC if she has not been released
before that point. So we appreciate your highlighting the
circumstances which would undergird our resolution.
Mr. Kumar. Thank you very much.
The Chairman. It's a pleasure to have Secretary Harold
Brown here. He has testified before many, many committees over
the years and has offered distinguished service to our country,
and it's a personal privilege to have you here today, sir. And
will you please proceed?
STATEMENT OF HON. HAROLD BROWN, COUNSELOR AND MEMBER, BOARD OF
TRUSTEES, CENTER FOR STRATEGIC AND INTERNATIONAL STUDIES,
WASHINGTON, DC
Mr. Brown. Thank you very much, Mr. Chairman, for those
kind words. I reciprocate your high regard.
Mr. Chairman, members of the committee, I'm grateful for
the chance to appear today to talk to you about Chinese
military capability.
China clearly is a rising power. And in the past, conflicts
have often occurred between such a power and the existing
leading power. In fact, as was pointed out 2,500 years ago, in
the competition for the power nations go to war for reasons of
honor, fear, or interest. And the fear, of course, is often
engendered by the military capability of other powers. Thus one
element in the events and perceptions that lead to such
conflict is the growth of the military capability of the rising
power.
With that in mind, the Council on Foreign Relations
sponsored an independent task force that looked at Chinese
military power and how it may evolve over coming decades. I
chaired it, and retired Admiral Joe Prueher, who had been
CINCPAC and also had been Ambassador to China, was Vice
Chairman. We looked at Chinese military power, but also looked
at the political, economic, and technological factors that
affect that power.
You have a copy of the report. I won't try to summarize it.
The executive summary is 31 pages long. But I'll make a few
remarks about where I think the group came out.
The first conclusion is that China is modernizing its
military capabilities--unevenly, but across the board. And it's
doing so for several purposes. One is maintaining domestic
stability and ensuring regime security. The second is to
develop limited power projection capabilities for conflict
scenarios along China's periphery, especially beyond the Asian
land mass and, in particular, toward Taiwan, which the PRC, of
course, regards as a matter of Chinese sovereignty. And, in
addition, China sees, as a rising power, that an improved
military capability is a natural concomitant of and increases
its international prestige and influence. That's the honor
segment.
China's Armed Forces are at least two decades behind the
United States in military capability. That's a key conclusion
of our examination. And by that measure, the U.S. outclasses
the PRC, not only globally, but in East Asia. And given the
important condition of continued allocation of resources by the
United States, the U.S. will continue to outclass the PRC in
military capability for decades to come. However, if you look
at present trends--that is, for example, if you assume Japan
continues to forego a role as a major regional military power--
China will, during that period, become the predominant military
power among the nations of East Asia.
In addition, although the United States will outclass
Chinese military capability, we could get some nasty surprises,
especially if we don't pay enough attention to PLA capabilities
and the PRC strategy or if we don't track their development
carefully. As has been suggested earlier, the Taiwan Strait is
the area of greatest military concern in the bilateral balance.
During the next decade, and during the past decade, the main
focus of Chinese military capability has been and is focused on
the possibility that the political situation develops so that
the PRC decides to use military force to intimidate or attack
Taiwan in order to obtain a favorable political outcome or
political control. The Chinese are aiming at having the
military capabilities and tactics that will enable them to
achieve that result.
In order to do so, China would have to prevent effective
U.S. intervention, either by acting very quickly or by using
its anti-ship missiles and submarines to slow and to interfere
with operation of U.S. naval forces. I have no doubt as to the
military outcome of such a conflict. It would be victory for
the United States. But it would be a disaster for everybody
concerned, and there would be serious risks and costs to the
U.S. military. Moreover, what we might regard as a military
victory, they might well regard as a political victory,
depending on the effect on the political outcome in Taiwan.
The Council on Foreign Relations task force, and I myself,
feel that Taiwan is essentially a political situation and needs
to be met politically. The Taiwanese, of course, depend on a
U.S. commitment to prevent military disaster to them. And that
they regard it as an issue of political commitment rather than
a matter of defending themselves militarily is shown, I think,
by the following. The Taiwan Government pushes the United
States very, very hard to make a commitment to sell them
advanced military equipment. But once they have the commitment,
they're not very eager to actually make the purchases.
Let me now turn to some more specific PLA programs. The
most successful ones are in the area of ballistic missiles and
nuclear weapons. For example, the short-range ballistic missile
that's been mentioned before constitutes a major part of the
PRC's threat to Taiwan. Their nuclear-armed long-range missiles
are rather few in number--maybe a couple of dozen ICBMs, a
ballistic missile submarine that seldom goes to sea--and that's
their nuclear deterrent vis-a-vis the United States. They
appear to have been satisfied with a minimal deterrent of this
sort. I believe, though, that they could and would buildup
their long-range ballistic-missile force to whatever level is
necessary to preserve that deterrent in the face of a future
U.S. ballistic-missile system.
They've also been improving their ground-force equipment.
But their personnel are not really up to modern standards. The
bulk of their enlisted force is poorly educated and poorly
trained conscripts.
To take another example, they can't themselves indigenously
produce advanced aircraft and maritime forces. That's why they
have to buy much of their equipment from foreign suppliers.
They have little or no joint-force training. Their pilots fly
few hours a month, and even fewer over water. Their
organization is in the obsolete Soviet-style military-region
style, rather than in unified commands. And the Chinese
industrial production base for conventional arms, unlike their
civilian manufacturing industry that's so successful in
international and even in high-tech trade, on the military-
production side is still part of the state-owned enterprise
system that drags down Chinese economic growth. So it's not
efficient, and its products aren't of the best.
As I said at the beginning, China is pursuing a deliberate
and focused course of military modernization aimed at shifting
from a military with a continental orientation--large land
forces, in-depth defense--to a military with combined
continental and maritime orientation--smaller, more mobile,
more technologically advanced. So we have to watch for
development of key areas in order to help gauge the pace at
which that modernization is proceeding.
We identified five categories: command control
communications, computers, intelligence, surveillance, and
reconnaissance--that is, C4ISR, as it's called; joint
operations; precision strikes; combat support; and training.
And we have some indicators that would represent major shifts
from the current priorities: a crash program to build more
amphibious warfare ships, expanded acquisition of more advanced
fighter aircraft by the PLA's naval air force, or a dramatic
increase in the pace of submarine force modernization. All
those would be indicators of a shift in Chinese military
strategy.
And we have some recommendations, which I support. One is a
broader military-to-military dialog, but one designed to
achieve specific goals. Greater transparency in the PLA budget
process and a strategic dialog over missile defense and nuclear
modernization would be two of them. And we also think that
there should be so-called track two--that is, private but with
government knowledge--talks on crisis-management issues,
recognizing that in the past such events as the accidental
bombing of the Chinese Embassy in Belgrade and the collision of
U.S. and PRC military aircraft near Hainan Island, in 2001,
weren't handled very well, especially on the Chinese side. In
that manner, we should seek improvement in how such political
and military crises are addressed.
Thank you very much, Mr. Chairman.
[The prepared statement of Mr. Brown follows:]
Prepared Statement of Hon. Harold Brown, Counselor and Member, Board of
Trustees, Center for Strategic and International Studies
Mister Chairman and members of the Committee, I am grateful for the
opportunity to appear before you today to talk about Chinese military
capability. China is clearly a rising power. In the past, conflicts
have often occurred between such a power and the existing leading
power. One element in the events and perceptions that have led to such
conflicts is the growth of the military capability of the rising power.
With that in mind, the Council on Foreign Relations sponsored an
independent Task Force that looked at Chinese military power and how it
may evolve over coming decades. I chaired that Task Force and Admiral
Joseph Prueher, formerly Commander in Chief of Pacific Forces was Vice
Chairman; the group met half a dozen times over a period of a year and
there were meetings of sub groups that dealt respectively with
political, economic and technological factors. You have a copy of the
report, but I will take a few minutes to summarize where I think the
group came out.
1. China is modernizing its military capabilities, unevenly but
across the board. The capabilities sought have several purposes. The
first is to help maintain domestic stability and ensure regime
security. The second is to develop limited power projection
capabilities for possible conflict scenarios along China's periphery,
especially beyond the Asian land mass, and in particular towards
Taiwan, which the PRC regards as a matter of Chinese sovereignty.
Elsewhere along its periphery it is intended to defend what it sees as
its territorial interest. And as a rising power, China sees an improved
military capability as a natural concomitant, increasing its
international prestige and influence.
2. The PLA (which is China's name for all of its armed forces) is
at least two decades behind the US in military capability, by which
measure the US outclasses the PRC not only globally but in East Asia.
Moreover, given continued allocation of resources, the US will continue
to do so for decades to come. On present trends, however (for example,
assuming Japan continues to forego a role as a major regional military
power) China will during that period become the predominant military
power among the nations of East Asia.
3. That said, we could get some nasty surprises, especially if we
don't pay sufficient attention to PLA capabilities and PRC strategy, or
if we don't track their development carefully.
The Taiwan Strait is the area of greatest military concern in the
bilateral balance. During the next decade, a main focus of Chinese
military development is, if the political situation develops so that
the PRC decides to use military force to intimidate or attack Taiwan so
as to obtain a favorable political settlement or political control, to
have the military capabilities and proper tactics to achieve that
result. To do so China would have to prevent effective US intervention,
either by acting very quickly (a challenge to US intelligence
capabilities) or by using its anti-ship missiles and submarines to slow
and interfere with the operation of a US naval task force. There is no
doubt in my mind as to the military outcome of such a conflict--victory
for the US. But there could be serious risks and costs to the US
military and what we would regard as a military defeat for the Chinese
they might well regard as a political victory, depending on the effect
on the political situation in Taiwan.
4. If I could now turn to some more specific PLA programs, I would
note that their most successful ones are in the area of ballistic
missiles and nuclear weapons. Short-range ballistic missiles constitute
a significant part of the PRC's threat to Taiwan. Nuclear-armed long-
range missiles, rather few in number--a couple of dozen ICBMs and a
ballistic missile submarine which seldom goes to sea--constitute their
nuclear deterrent visa-vis the US. They appear to have been satisfied
with a minimal deterrent of this sort. My own judgment is, however,
that they could and will build up their long-range ballistic missile
force to whatever level is necessary to preserve that deterrent in the
face of a future US ballistic missile defense system.
The PLA also has been improving its ground-force equipment. But, as
PRC military commentators themselves observe, the bulk of its enlisted
force consists of poorly educated and trained conscripts. Moreover,
indigenous production capability for advanced aircraft and maritime
forces is unsatisfactory, which is why they have to purchase much of
such equipment from foreign suppliers. There is little or no joint-
force training; their pilots fly few hours per month and even fewer
over water. PLA organization is by military region rather than in
unified commands. Their C4ISR (Command Control Communications,
Intelligence, Surveillance and Reconnaissance) capabilities are still
relatively primitive. And the Chinese industrial production base for
conventional arms, unlike their civilian manufacturing industry that is
so successful in international--including high tech--trade, remains
part of the state-owned enterprise system that drags down Chinese
economic growth; correspondingly, it is inefficient and its products
not of the best.
5. One way to look at the PLA is to compare resources devoted to it
with those devoted elsewhere. By that measure, China is in a class with
the UK, France, Japan and Russia. It is behind them technologically,
but fields a larger force. It is probably less able to project power
outside of its contiguous landmass, but could be formidable on the
Asian landmass.
6. China, as I said at the beginning, is pursuing a deliberate and
focused course of military modernization, aimed at shifting from a
military with a continental orientation requiring large land forces for
in-depth defense to a military with a combined continental and maritime
orientation that requires a smaller, more mobile and more
technologically advanced ``active peripheral defense'' capability. It
is therefore important for the US to watch for development of key areas
to be used to help gauge the pace at which that modernization is
proceeding. These fall into five categories: C4ISR; joint operations;
precision strikes; combat support; and training. And there are some
indicators that would represent major shifts away from the current
priorities, greatly changing the nature of the Chinese modernization
program, such as crash programs to build more amphibious warfare ships,
expanded acquisition of more advanced fighter aircraft by the PLA naval
air force or a dramatic increase in the pace of submarine force
modernization.
Finally, the Task Force made a few other recommendations. One is
that there should be a broader military-to-military dialogue. But it
should be designed to achieve specific goals, including greater
transparency in the PLA budget process and a strategic dialogue over
missile defense and nuclear modernization. There should also be so-
called Track Two talks on crisis management issues. In the past such
events as the accidental bombing of the Chinese embassy in Belgrade and
the collision of US and PRC military aircraft near Hainin Island in
2001 were not handled very well, especially on the Chinese side. We
should seek improvement in the manner in which such political-military
crises are addressed.
Thank you Mister Chairman.
The Chairman. Well, thank you very much, Secretary Brown.
Let me say each one of you, in your testimony, has offered
remarkable information for the committee, but, likewise, for
the American people, and we appreciate your preparation.
Let me just say, as I've already mentioned to you, Mr.
Kumar, that the committee takes seriously the human rights
issues, and I have indicated at least one way in which we'll be
progressing in a fairly conspicuous resolution.
I would say to you, Dr. Lardy, that there are at least two
pieces of legislation that I'm aware of in the Senate,
introduced by people outside of our committee, but obviously of
deep interest to us, affecting the currency situation in China.
The net of them is to express alarm, with regard to the fact
that our Secretary of the Treasury was not given what he wanted
and is threatening retaliation of various sorts. So this
debate, I think, as reflected in many of our committee members'
anxiety about ongoing constituent meetings in our States, has
become a very hot issue.
Now, it may be, as you have pointed out, that this is too
easy or fast a fix, or, even if we got our wish, that the
effects might not be very good, either for us or for the
Chinese. Yet it reflects a profound feeling of wanting some
leadership, at least in the Congress and the administration and
academic America, as to how we proceed. And that question kept
arising with Secretary Kelly earlier on.
In other words, there is a perception in my State, as in
most, that a large number of jobs that were performed by people
in Indiana a short time ago are now being performed by people
in China.
Now, some academics are advising us to get used to this
fact, because manufacturing is a part of the American economy.
It was 16 percent last year; it's still 16 percent this year.
Productivity increases of 5 and 6 percent are dramatic, but
they imply that you need fewer people doing that manufacturing
work. So, as a result, we have been advised to get used to the
fact that there are going to be fewer and fewer manufacturing
jobs. Now, that might be the way history finally settles it,
but people are not yet used to this fact at all.
Now, in fact, in the past, the usual problem was with NAFTA
and the thought that jobs were proceeding to Mexico. Mexican
friends come to us and point out that jobs have proceeded right
on through Mexico to China. And as you mentioned, maybe this is
a problem of Asian nations, which also are lamenting the fact
that the Chinese, because they have better capitalization, do
it better. Huge amounts of capital have been coming in from
many, many countries. We saw today, for example, that in
certain standards of electronics or communication, the Chinese
may decide to set their own standards, not to utilize ours.
China may try to pay royalties or try to hue to the mark of
what was an international situation at that point. So the issue
will not go away.
Now, the question that you have raised is an important one,
and that is that--and I think this is news for most of us on
the committee--the imports of China are very, very substantial.
If you subtract those from the problems that we have, the
Chinese still have a balance, but it's not a big one. On the
other hand, critics might say, ``Well, the Chinese are
importing from other Asian nations. These nations are poor, and
they have low wage rates, too.'' We deserve the same conditions
with regard to workers that we would charge that the Chinese
have, which would not be very good, at least in our viewpoint.
They are getting all this cheap input. Even though they're
paying for it with money, they're selling it to the rich
nations--namely, to us--and so the flow still is not very
salutary.
Let me just ask you, as an economist, in historical
perspective, sometimes these things never go in one direction
for a long time. You've pointed out in your testimony a
potential banking bubble, or at least crisis, of loans that
might be repaid. Some have argued that this is one reason that
our Secretary of the Treasury was initially rebuffed, that the
Chinese made too abrupt a change here. It could create havoc
with regard to their banking system. It could lead to all kinds
of financial difficulties, with repercussions that are
profound, beyond those that we know. Can you give us any
roadmap that may offer comfort to people in the United States,
who are deeply concerned about the loss of jobs and what they
fear is an unfair playing field? What should our Secretary of
the Treasury's policy be? What should be the policy of the
Secretary of State or anybody else who is dealing with the
Chinese on these economic issues presently?
Dr. Lardy. Well, as I suggested, I do think the Secretary
of the Treasury should be pushing China to revalue. I think
there's a good chance that, over time, they will increasingly
see that this is even in their own interest.
I didn't have a chance to say, in my opening remarks, but I
would say now, I do believe there's a fairly widespread view
that if the Chinese were to move on their currency, we would
see other Asian countries move, as well. Korea, Taiwan, maybe
even Japan would move significantly. They are very reluctant,
given China's rise as a major manufacturing power, to move in
advance of China's move.
I mentioned I thought simply a Chinese revaluation wouldn't
take more than $10 billion off our deficit with them, which is,
you know, trivial in the context of a current account deficit
of almost 600 billion U.S. dollars. But if the other Asian
countries moved, as well, which is a possibility as I just
mentioned, the cumulative weight in our trade is something
closer to 30 percent. And that would have a much more
significant effect on our overall current account balance. It
still would not change the bilateral balance, and I think we
ought to be giving more attention to our global position rather
than simply to our position with China.
The Chairman. So we ought to be having a multilateral talk,
as opposed to simply approaching the Chinese, on the currency
issue.
Dr. Lardy. Yes. That would be my view.
The Chairman. Secretary Brown, was there a hint in your
testimony that if the United States proceeds with missile
defense in a big way, this could lead China from at least a
fairly modest number of ICBMs to a larger number? In other
words, is it fair to say they're just simply going to leave
things as it stands, whether we do missile defense or not?
Mr. Brown. My own judgment would be that the Chinese are
going to increase the number of their long-range ballistic-
missile force in any event. But I think that the pace would be
substantially affected. The pace and the total size, both,
would be substantially affected by the size of a U.S.
ballistic-missile defense, that is, our national missile
defense program.
The Chairman. Dr. Campbell, you mentioned an important
point about which many of us are reading. Especially younger
South Koreans, in the 30s generation and what have you, are
finding a very strong tie with China. Some even are knotting a
strong tie with North Korea. That is, South Koreans are
rediscovering the North. They have much more in common than we
would think that they would find.
At the same time, the Chinese, in the negotiations we're
having, are very reticent to impose any further economic
sanctions. And again and again we keep hearing, simply because
they want North Koreans to stay in North Korea, that to impose
economic sanctions at this point, they believe, would be to
lead to some flight of desperation of North Koreans before they
starve coming into China or elsewhere. This is difficult for
Americans to follow, and this is why your testimony is very
important, to educate us as to the nuances of these
relationships.
What should be our advice to the Chinese in this respect?
They share our thought that nuclear development is unhealthy in
that area and that this is a genuine threat, and yet, at the
same time, the North Koreans have not been particularly
responsive thus far to whatever has been said to them. Clearly,
most observers of this point out how awesome military activity
would be for everybody involved. So if that was taken off the
table, we get back to some economic sanctions or some
disapproval of that sort of which the Chinese are the major
instrument. What is likely to be their reaction down the trail
to these sorts of pressures?
Dr. Campbell. Thank you, Senator. You raise a host of
extraordinarily important and difficult questions on the Korean
Peninsula.
I would just say that oftentimes with Chinese friends, they
will say one thing publicly and then occasionally do some
things differently privately. I think that, for a variety of
reasons, they are ramping up privately very substantially the
pressure on Pyongyang. And I wouldn't be at all surprised if
the reports that you and others referred to in the Los Angeles
Times today, and elsewhere, that suggest that there may be some
slowing down of activities at various nuclear facilities in
North Korea, turn out to be true. And I think that will largely
be because of China putting a very stiff arm on them.
What's animated Chinese pressure, I think, is not only
concern about North Korea--and I think they're very worried
about quite a provocative leadership there--China is also a
little bit worried about the United States. They look at our
activities on the peninsula, and they're not completely clear
where we're coming down. We're very reluctant to have bilateral
dialogs. It seems almost to be, sort of, an issue of principle
for us, where it really should be just a tactical concern. And
they don't want us to do anything that's unpredictable either.
And I think part of that's tactically motivated by the
administration.
So I think China will play a more powerful role, not in the
United Nations, not formal sanctions, but behind the scenes.
The first issue that you referred to is the one that I
worry the most about. I think our natural ally, the nation in
Asia, in fact, that I think we have the closest spirit to, in
many respects, is South Korea. The most worrisome thing that
we've really witnessed in the last year is a very substantial
degradation of our relations. It's not a crisis between
Washington and Seoul, but there is a mounting anti-Americanism
in South Korea. I think South Korean politicians have played
this in a most unfortunate way. And if I were, you know, sort
of, thinking about the future, one of the things that we have
to keep in mind is the long game on the Korean Peninsula. And
our interests are to have a close relationship with the
successor regime on the peninsula. And that will be dominated
by the political power in South Korea. And keeping that
foremost in mind is absolutely essential, and I think we've
lost a little bit of sight of that in recent months, and it's
very important to keep that clearly understood.
The Chairman. Well, thank you for your alert and your
analysis.
I would love to be given the opportunity to ask questions
of you for quite awhile, but I'm going to observe that the
Senate has gone into recess. We'll be having a memorial service
at noontime.
And so, in respect, obviously to that and to my colleagues,
at this time I will bring the adjournment gavel down. But I
thank each one of you very much for your papers, and we will
try to make use of the wisdom you've given to us.
Thank you very much. And the hearing is adjourned.
[Whereupon, at 11:55 a.m., the committee adjourned, to
reconvene subject to the call of the Chair.]
----------
Responses to Additional Questions Submitted for the Record
Responses of Hon. James A. Kelly, Assistant Secretary of State, Bureau
of East Asian and Pacific Affairs, to Additional Questions for the
Record Submitted by Senator Sam Browaback
Question 1. What is the Department proposing to do to ensure that
the Bridge Fund has adequate and consistent funding during this
critical time so that it can carry out its important work in the
priority areas identified by the Dalai Lama?
Answer. The Department's Special Coordinator for Tibetan Issues and
the Bureau of East Asian and Pacific Affairs, in coordination with
USAID, are looking forward to continuing to work with the Bridge Fund
in carrying out cultural preservation, environmental conservation, and
sustainable development programming in Tibetan regions in China. It has
always been our goal to disburse funds in a timely way, while at the
same time fulfilling the Department's and USAID's internal regulations
and due diligence requirements.
Question. 2. Has the Department, together with other agencies of
the U.S. Government, formulated a policy for U.S. public and private
investment in the Lhasa-Golmud railroad? Have you or other U.S.
officials raised concerns about this railroad with Chinese officials?
Answer. We are closely monitoring the social and environmental
impact of China's Western Development Initiative currently underway in
Tibetan regions, including the railroad. We are concerned that the
construction of the railway could accelerate the movement of Han
Chinese into the Tibet Autonomous Region, impact the Tibetan culture
and way of life, and have a deleterious effect on the fragile ecosystem
of the Tibetan plateau. In addition, as noted in the Department of
State's Human Rights Reports, we are concerned about the economic
marginalization associated with non-Tibetans benefiting
disproportionately from government-funded infrastructure and
development projects in Tibetan regions and have made our views known
to the Chinese government.
Question 3. What is the administration doing to let the Chinese
Government know that the case of Yang Jianli needs to be resolved
swiftly and that this type of treatment is unacceptable?
Answer. As I noted during my testimony, Dr. Yang Jianli's case is a
priority for this administration. Dr. Yang's incommunicado detention
for over a year is in blatant violation of China's own laws, as well as
international law, as evidenced by the findings of the United Nations
Working Group on Arbitrary Detention. His treatment during detention is
also troubling.
Since his detention in China in April 2002, we have raised Yang
Jianli's case publicly and privately on an almost weekly basis. U.S.
Ambassador to China Clark Randt, other senior members of the
administration, and I personally have raised Dr. Yang's case with our
Chinese counterparts repeatedly, conveying our serious concerns over
denial of his due process rights. For example, I raised Dr. Yang's case
with Chinese Ambassador Yang Jiechi the afternoon of the September 11
SFRC testimony, urging Dr. Yang's release. Assistant Secretary of State
for Human Rights, Democracy and Labor Lorne Craner has called for Dr.
Yang's release, and discussed the case at length during the December
2002 session of the U.S.-China Human Rights Dialogue in Beijing. In
addition, our Embassy in Beijing requested to observe Yang's August 4
trial. Although that request was denied, Embassy officers have
continued to urge the PRC to bring Yang's case to an expeditious
conclusion and return him to his wife and family in the U.S. We will
continue to raise his case at every opportunity.
Administration officials are also in regular contact with Dr.
Yang's wife, Christina Fu, and other family members in the United
States and China, and share with them any developments. Over the past
few months, Ms. Fu has met with various State Department officials,
including Under Secretary for Global Affairs Paula Dobriansky and
Assistant Secretary Craner, to discuss her husband's situation.
I want to assure you again that we will continue to do everything
possible to ensure that Dr. Yang is treated fairly and humanely and
will urge that his case be resolved speedily.
______
Responses of Hon. James A. Kelly, Assistant Secretary of State, Bureau
of East Asian and Pacific Affairs, to Additional Questions for the
Record Submitted by Senator George Allen
Question 1. As you are aware, in January this year I introduced S.
243. The bill authorizes the administration to initiate a United States
plan to endorse and obtain observer status for Taiwan at the WHO
meeting. This bill was passed by both Houses of Congress and signed
into law by President Bush. Even with the SARS situation, Taiwan was
not able to become an observer in WHO. Could you tell me more about
what the State Department will do in addition to the report you
submitted to Congress?
Answer. The Department of State fully supports the overall goal of
Taiwan's participation as an observer in the World Health Organization
(WHO). Taiwan can make important contributions to improving global
health and its participation as an observer is in the interests of the
international community. We have therefore urged the WHO and its
members to find appropriate ways for Taiwan to participate, including
observer status, and we will continue to do so. Under the World Health
Assembly's (WHA) rules of procedure, however, a majority of the 192
member states would have to approve a resolution to confer observer
status on Taiwan. The majority of WHO member states have not yet been
willing to approve a new agenda item at the WHA on observer status for
Taiwan. This step is necessary before a resolution could be considered.
Our longstanding policy is to support finding ways for Taiwan's
voice to be heard in organizations in which Taiwan cannot participate
as a member. In 2001 and again last year, we worked intensively with
Taiwan representatives in Washington, Taiwan, and Geneva in order to
advance the goal of participation by Taiwan in the WHO. We have held
annual strategy meetings to determine how best to advance Taiwan's
legitimate interest in contributing to the work of the WHO.
Taiwan's problem obtaining observer status is not due to a lack of
U.S. commitment. We have a realistic appreciation for the challenges
ahead, however.
Question 2. When President Bush said the United States will take
whatever it takes to help Taiwan defend itself, it sends a very clear
message to the PRC that our policy toward both sides of the Taiwan
Strait is based on peaceful resolution embodied in the Taiwan Relations
Act of 1979 and the Six Assurances of 1982 (please see note). This
clarity strategy reduces miscalculation and recklessness. While United
States needs cooperation from China to tackle North Korea and Iraq
issues, can you, Secretary Kelly, reiterate that the TRA and the Six
Assurances remain the comerstone of our policy towards Taiwan and the
PRC?
Answer. The U.S. has a ``one China'' policy, first articulated in
the Normalization Communique of 1979. ``The Government of the United
States of America acknowledges the Chinese position that there is but
one China and Taiwan is part of China.'' The Taiwan Relations Act (TRA)
has provided the foundation for our unofficial relationship with Taiwan
since normalization of diplomatic ties with the PRC in 1979. We remain
committed to our obligations under the TRA to make available defense
articles and services to enable Taiwan to maintain a sufficient self-
defense capability and provide for Taiwan's legitimate defensive needs.
In doing so, the United States is careful to provide weapons that are
defensive in nature and which would not destabilize the cross-Strait
situation.
Our position continues to be embodied in the ``six assurances''
offered to Taiwan by President Reagan. We will neither seek to mediate
between the PRC and Taiwan, nor will we exert pressure on Taiwan to
come to the bargaining table. The United States does not consult with
the PRC on arms sales to Taiwan. No timeframe has been set for
reductions of U.S. arms sales or for their termination.
The U.S. has an abiding interest in the peaceful resolution of
cross-Strait differences. Our policy has been consistent for over 20
years. It is articulated in the Taiwan Relations Act, the three
Communiques, and the Six Assurances.
Question 3. As the PRC deploys hundreds of missiles across the
Taiwan Strait, have you discerned any significant differences or
changes in the military balance in the region that might affect the
U.S. interest?
Answer. Modernization and training developments in recent years
highlight China's continuing effort to improve quantitatively and
qualitatively the capabilities of its conventionally-armed SRBM force.
There are approximately 450 SRBMs already in the deployed inventory;
this number is expected to increase by over 75 missiles per year over
the next few years. The accuracy and lethality of this force also is
expected to increase through the use of satellite-aided guidance
systems. As China increases the accuracy and lethality of its
conventional ballistic missile arsenal, a growing and significant
challenge is posed to U.S. forces in the Western Pacific and to Taiwan.
We seek the reduction of cross-Strait tensions. We have called on
the PRC to renounce the use of force and reduce military deployments
targeted against Taiwan. We encourage the PRC to show more transparency
in this area to build trust and reduce tensions across the Taiwan
Strait. We are convinced we can do this as we pursue with the PRC a
broad range of U.S. strategic interests ranging from human rights,
counter-terrorism and non-proliferation to regional stability and
trade.
Our interaction with the PRC on these matters serves global
interests. We believe that it also strengthens mutual understanding
between our two countries and supports U.S. and Taiwan interests in
security, stability, and prosperity.
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