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S E C R E T SECTION 01 OF 04 BEIJING 000661 

SIPDIS 

SIPDIS 

E.O. 12598: DECL: 02/23/2028 
TAGS: PREL CH
SUBJECT: Prospects for U.S.-China Relations 

Classified by Ambassador Clark T. Randt, Jr. Reasons 1.4 (b) and (d). 

SUMMARY 
------- 

¶1. (S) The United States and China share important and growing 
political and economic interests that will bind us indefinitely, 
despite frictions. Where interests vary or compete, we share a 
common interest in managing our differences. In the medium term, 
China's core foreign policy goals -- securing access to energy 
supplies and maintaining a stable international environment in order 
to pursue domestic economic development -- will keep China as a 
status quo power. Over time, China's growing strength will lead to a 
foreign policy more willing to confront the United States but also 
better able to take up the responsibilities of a global stakeholder. 
China will continue to demand more from the United States on Taiwan 
than we are willing to give, and Taiwan will remain a potential 
flashpoint. As we face an increasingly self-confident and powerful 
China, we can and should continue to use bilateral policy 
instruments, including high-level engagement (such as the Senior 
Dialogue and Strategic Economic Dialogue), China's multilateral 
commitments, and the Chinese desire to build its international image 
and standing to protect U.S. interests, spur positive change in China 
and increase Beijing's stake in international institutions and its 
adherence to international norms. End Summary. 

ECONOMIC TIES THAT BIND 
----------------------- 

¶2. (C) The United States and China share enormous economic interests. 
China is the top U.S. trade partner outside of North America, and 
public and private sector analysts agree that China's share of our 
trade will continue to rise. Exports have been a primary driver of 
China's growth. Export-oriented employment, along with technology 
transfers and other indirect benefits of foreign investment and 
trade, are major ingredients of China's economic miracle. Similarly, 
low inflation and strong growth in the United States over the last 
two decades stem in part from low-cost Chinese imports and financial 
inflows. It is in the interests of both the United States and China 
to maintain the benefits created by our complementary economies while 
correcting current imbalances by continuing to pressure China to open 
markets, particularly in the service sector, and to significantly 
improve the protection of intellectual property rights. At the same 
time, frictions need to be managed carefully to avoid harming our 
common economic interests. 

POLITICAL COOPERATION 
--------------------- 

¶3. (C) Shared overall U.S.-China interests in peace, security and 
prosperity likewise are dogged by frictions. Differences over 
values, political systems, specific goals and means will continue. 
The list of areas of political and security friction is long and 
includes China's authoritarian political system, China's support for 
unsavory regimes, China's breakneck military modernization, China's 
paranoid fear that the United States secretly promotes regime change 
and "separatists" in Taiwan, Tibet and Xinjiang, growing nationalism 
and the sense in some quarters in both Washington and Beijing that 
the United States and China are commencing a long-term struggle for 
global political, economic and military supremacy. Countering these 
differences is the buildup of mutual trust between the U.S. and 
Chinese leadership and the willingness to work together in an 
increasingly broad spectrum of common strategic interests. China's 
realization of its own interest in a stable, non-nuclear Korean 
Peninsula and frustration with an inept North Korean leadership 
seemingly incapable of creating an economy that can sustainably 
support its own people, leading to constant refugee outflows, has led 
to close cooperation with the United States in the Six-Party Talks. 
The evolution in China's position on Darfur, driven by the 
Olympics-related international publicity concerning China's role in 
abetting genocide, shows that extreme diplomatic and public pressure 
can redirect Chinese policy to a degree. China's cooperation on 
Burma and Iran has been grudging and limited, but real. We have been 
able to leverage China's growing interdependence and concern for its 
global public image into support for multilateral actions that 
further U.S. goals. 

FAMILIARITY BREEDS FRICTION 
--------------------------- 

¶4. (C) The expanding breadth, scale and intensity of U.S.-China 
engagement bring additional opportunities for friction as well as 
cooperation. China's gradual approach to exchange rate flexibility, 
slowness on further trade liberalization, weak IPR protection and 
other barriers to trade and investment require constant attention. 
China's perception that U.S. assertiveness on WTO commitments, import 
regulation, investment cases and product safety is discriminatory 
requires education and explanation. Such frictions could become more 
acute should the economy worsen, protectionism rise, or sensitivity 

BEIJING 00000661 002 OF 004 


over foreign investment sharpen in either country. Politically, 
differing assessments on the urgency of issues like Iran's nuclear 
program and appropriate tactics to realize shared strategic goals 
will mean China and the United States continue to butt heads 
diplomatically. Divergent views on democracy and human rights will 
continue to be a sore point in the bilateral relationship. Managing 
day-to-day frictions with an eye to larger interests will be the 
greatest challenge for policy-makers. 

RHETORIC: STRATEGIC REBALANCING 
------------------------------- 

¶5. (C) China's rise and emergence as a global power is a powerful and 
popular theme in Chinese contemporary culture, with hundreds of 
books, major TV series, countless media articles and academic studies 
devoted to it. Official public statements on foreign policy stress 
"democratization of international relations" and a more "multi-polar" 
world, contrasted with U.S. "unilateralism." Many scholars, 
officials and ordinary citizens believe China's past weakness has 
forced it to endure "injustices" from the United States, like the 
Taiwan Relations Act and U.S. arms sales to Taiwan, and Chinese have 
no trouble linking these injustices to a centuries-long string of 
humiliations China perceives itself as having suffered at the hands 
of foreign powers. MFA officials often complain informally (and 
unfairly) that the United States demands China address U.S. concerns 
while ignoring China's concerns. As China's international presence 
and nationalist sentiment grow, commensurate with greater political, 
economic and military might, Chinese analysts anticipate a more 
assertive Chinese foreign policy and a greater readiness to confront 
the United States. 

REALITY: STATUS QUO POWER 
------------------------- 

¶6. (C) Despite the flag-waving "rising China" theme in popular 
culture and official media promising a more assertive Chinese 
international stance, the reality of China's foreign policy for at 
least the next five years is that China is committed to the 
international status quo as it reaps the benefits of U.S.-policed 
globalization. President Hu's "Harmonious World" foreign policy, 
officially sanctified at the 17th Party Congress in October, 
explicitly endorses the existing world order and declares that 
China's interest is in maintaining a stable international environment 
where it can pursue domestic economic and social development goals. 
China's foreign policy leaders take great pains to highlight China's 
"developing country" status as a way to offset international calls 
for China to play a more significant international role, and to 
expend more material and political resources, commensurate with its 
"emerging power" status. In January, Executive Vice Foreign Minister 
Dai Bingguo held the fifth session of the U.S.-China Senior Dialogue 
in his poor rural home province of Guizhou rather than Beijing to 
make the point that China remains poor and is confronted with 
economic development challenges on a large scale. Continued access 
to energy supplies and raw materials on the international market is 
essential to China's continued economic growth, which means continued 
reliance on global peace and stability and the existing global 
security system to protect such shipments. As XXXXXXXXXXXX
 told XXXXXXXXXXXX, "when it comes to the basic Chines
 interest in securing  energy supplies and raw materials for our
economic growth,  free-riderism works for us right now." 


IRRESPONSIBLE STAKEHOLDER? 
------------------------- 

¶7. (C) Internal debate continues in China regarding its appropriate 
international role. Some foreign policy figures argue China should 
seize opportunities to lead on global issues like climate change, 
nonproliferation and mediation of international disputes. Contacts 
have said these remarks reflect internal government debates on 
balancing global with purely national interests. The feeling in 
China that China remains too poor and underdeveloped to be much of a 
global stakeholder remains strong, although it would appear that 
China's standard of "developed" is increasingly the United States. 
One academic said, "the United States still reaps almost all of the 
benefits of 'international public goods' and should expect to bear 
almost all of the costs." This argument, along with the frequent 
pious invocation of "non-interference in internal affairs" provides a 
thin political justification for China's fundamentally mercantile 
pursuit of resources in Burma, Iran, Sudan and other pariah states. 
The tension between China's long-term, broad global interests and its 
short-term, naked national interests will persist in Chinese foreign 
policy for some time. So far, public opinion has been the most 
effective tool in blunting the Chinese effort to profit from its 
rogue-state relationships. The Chinese want to build an 
international image as a responsible power and are sensitive to 
accusations that they facilitate the abuses of rogue regimes. The 
Chinese cooperation on Darfur after international outcry began to 

BEIJING 00000661 003 OF 004 


threaten another core interest (a successful Olympics) demonstrates 
how public opinion can provide effective motivation. 

ACTIVISM VS. NON-INTERFERENCE 
----------------------------- 

¶8. (C) Part of the debate over China's role as stakeholder stems from 
differing views on China's long-standing, expedient policy of 
"non-interference." Since the beginning of the reform era, China has 
generally followed Deng Xiaoping's advice to maintain a low profile 
and focus on its own development. In this spirit, China's pledge of 
"non-interference" in other nations' affairs became a pillar of 
China's declared foreign policy. More recently, some have viewed 
President Hu Jintao's trademark "Harmonious World" policy as a subtle 
renunciation of non-interference that acknowledges the need for China 
to be engaged in a globalized world. One prominent foreign policy 
expert told us that while China is still "feeling its way" on an 
activist foreign policy, Beijing will continue to move toward greater 
engagement and less "non-interference." XXXXXXXXXXXX said
more bluntly that China's non-interference policy "has  always been
flexible" and that China is comfortable in an activist  role whe
 it wants to be. 

HUMAN RIGHTS 
------------ 

¶9. (C) As economic success increases China's confidence that China 
can develop without Western-style democracy, resistance to U.S. 
promotion of human rights may intensify. At the same time, Chinese 
leaders see the utility of a limited expansion of civil society, 
including improvements in the rule of law and a stronger role for 
approved religions, NGOs, charities and other actors in areas that 
contribute to social stability and do not challenge Communist Party 
rule. China is open to U.S. experience in these areas, though 
Chinese leaders will tolerate only slow and limited change. In areas 
such as Tibet and Xinjiang, the fear of separatism leads to tighter 
restrictions on the growth of civil society. We should continue to 
press the Chinese to resume our formal human rights dialogue to 
provide a bilateral channel for a regular, high-level exchange of 
views. In such discussions, we should continue to express our 
serious concerns over Beijing's human rights record and appeal to 
China's growing awareness that greater respect for human rights, 
religious freedom and the rule of law will serve to promote the very 
development and social stability that China seeks as well as to 
improve China's international image. 

THE ROLE OF SOFT POWER 
---------------------- 

¶10. (C) China actively pursues educational exchanges, cultural 
performances, youth exchanges and other instruments of "soft power." 
Development assistance to resource-rich nations has also grown and 
remains generally without conditions (except with respect to the 
Taiwan issue). China is also making attempts to break into what it 
sees as an undesirable Western, and specifically American, monopoly 
of the international news media and to offer an alternative to 
ubiquitous American popular culture. Soft power is a useful arrow in 
the Chinese foreign policy quiver but should not be overestimated. 
Chinese culture tends toward exceptionalism rather than universality; 
i.e., many things about Chinese culture, in the Chinese view, are 
appropriate (or even intelligible) to Chinese alone. Moreover, China 
senses that its traditional low profile and attempts not to be seen 
as competing with the values and political systems of other countries 
are part of its attractiveness. The Chinese acknowledge both the 
limits of soft power and that China's reliance on soft power is in 
large measure due to the fact that China, in the near-term, lacks 
hard power. 

TAIWAN 
------ 

¶11. (S) China has long identified Taiwan as one of its core 
interests. Chinese leaders see preventing Taiwan's formal 
independence as crucial to their legitimacy, and the United States is 
committed to the defense of the status quo absent agreement to a 
change by the peoples on both sides of the Strait. Taiwan will 
continue to be the largest threat to U.S.-China relations, 
potentially resulting in armed conflict. Though China always wants 
more, for the past two years Chinese leaders have appeared relatively 
satisfied with and even appreciative of U.S. policy toward Taiwan, 
despite rhetoric to the contrary. U.S. disaffection with Chen 
Shui-bian and explicit U.S. opposition to the DPP referendum on UN 
membership in the name of Taiwan have eased China's anxieties to a 
degree. Nevertheless, our uneasy modus vivendi on the Taiwan issue 
is fragile. Beijing may mistakenly come to believe, despite our 
constant disclaimers, that we are willing to "manage" Taiwan in 
partnership with China over the heads of Taiwan's democratically 
elected leaders. Taiwan's next President may win a few short-term, 
small concessions from China. However, thwarted Chinese expectations 

BEIJING 00000661 004 OF 004 


of progress toward reunification or of a U.S. willingness to "manage" 
Taiwan could lead to a rocky medium term. 

CHINA'S EXPANDING "CORE INTERESTS" 
---------------------------------- 

¶12. (S) In addition to Taiwan and other sovereignty concerns (e.g., 
Tibet and the Dalai Lama and Xinjiang and Rebiya Kadeer), China has 
begun to articulate additional "core interests" in Chinese foreign 
policy. So far, these core interests center on China's access to 
energy resources. Thus, in Iran and Sudan China has resisted 
international sanctions that would affect its energy cooperation. 
Recently, China has suggested that cooperation in the UNSC and in 
other areas is contingent on the U.S. not sanctioning Sinopec's 
investment in Iran's Yadavaran oilfield. U.S. policy will need to 
ensure that when we challenge China's self-defined core interests, we 
do so deliberately and advisedly. 

ROLE OF U.S. POLICY 
------------------- 

¶13. (C) Many aspects of the U.S.-China relationship are not amenable 
to foreign policy intervention. China's growth and slow settling 
into the role of a great power result from largely economic and 
historical trends. Similarly, tensions over Taiwan, given the firm 
parameters of U.S. law and our interests in ensuring a peaceful 
resolution of issues affecting a democratic Taiwan, will be 
uavoidable. Nonetheless, we can protect our economic and political 
interests, spur positive change in China and increase Beijing's 
realization of its stake in effective international institutions and 
international norms. China's changing worldview and increasing 
interest in how it is perceived on the international stage will 
create new opportunities to influence China. Pursuing an 
increasingly close and cooperative U.S.-China relationship will 
require constant attention and frequent high-level meetings and 
dialogues to expand our common interests, manage our differences and 
prevent misunderstandings and misperceptions in a rapidly changing 
world. 
RANDT