Congressional Research Service

Library of Congress

Washington, D.C. 20540

Memorandum: September 24, 1999

SUBJECT: Trip Report to China, August 7 - 22, 1999

FROM: Kerry Dumbaugh Specialist in Asian Affairs Foreign Affairs, Defense, and Trade Division


From August 7-22, 1999, a delegation of congressional staff, plus one former congressional staff member, visited the People's Republic of China (PRC) and the Hong Kong Special Administrative Region. The China portion of the trip, which lasted twelve days, was jointly sponsored by the Washington-based U.S.-Asia Institute and the Chinese People's Institute for Foreign Affairs (CPIFA) in Beijing. The latter portion of the trip, four days in Hong Kong, was jointly sponsored by the U.S.-Asia Institute and the Hong Kong based Better Hong Kong Foundation (BHKF).

Over the two decades of its existence, this jointly sponsored program has intended to provide congressional staff with the opportunity to see and experience the situations in China and Hong Kong for themselves. In addition, it has provided staff with the opportunity to meet and hold discussions with a broad group of people, including national and local Chinese officials, senior government officials in Hong Kong, scholars working in academic and research institutes, members of the Chinese and American business communities, journalists, religious leaders, and others. The cooperation and personal contacts that have developed between the U.S.-Asia Institute, CPIFA, and BHKF over the years has often resulted in special access for the congressional staff visitors, both to important institutions and leaders at senior levels, and also to parts of China not normally frequented by outside visitors. Such was the case with, the 43rd Congressional Staff Group, which, in addition to Hong Kong, Beijing, and Shanghai, also visited Urumqi, Turfan, and Kashgar, in China's far northwest Xinjiang-Uighur Autonomous Region. This report briefly summarizes the discussions and findings of the staff delegation visit, and closes with some general observations and conclusions.

Key Issues

As is often the case when Chinese officials speak with American guests, those the group met with stressed the importance China places on U.S.-China relations, using phrases like "stable, good, and predictable" in describing China's wishes for the relationship. Still, throughout the visit - not only in Beijing, but elsewhere in China and in Hong Kong discussions touched on (and often were preoccupied by) key problems in U.S, -China relations. The three primary problems most often mentioned were: Taiwan and the "one China" policy; the NATO bombing of the Chinese Embassy in Belgrade (on May 8, 1999); and the status of China's application for accession to the World Trade Organization (WTO). With the exception of the recent embassy bombing incident, these issues have become routine components of U.S.-China discussions in recent years. In addition, Chinese and Hong Kong representatives alike continually stressed the overriding importance China assigns to its own rapid and vigorous economic development. Other bilateral or domestic problems that the congressional group raised -- the crackdown against the Falun Gong spiritual movement, ethnic challenges to Chinese authority in Xinjiang, potential domestic opposition to the painful economic medicine necessary for WTO accession-- were generally turned aside or minimized by Chinese officials in light of these other three primary bilateral problems.

Taiwan, The issue of Taiwan's status has been a variable but consistent source of tension in U.S.-China bilateral relations. The month before the congressional staff group's departure for China, tensions had heightened when Taiwan's President Lee Teng-hui, made a statement suggesting that Taiwan was abandoning the so-called "one China" policy it had followed for decades.(1) In the congressional group's meetings, Chinese officials dwelt at length upon this issue and were unwavering in their condemnation of Lee's statement. More than once, Chinese officials told the congressional staff group not to underestimate the seriousness and determination of the Chinese government in reunifying Taiwan with the Chinese motherland. China "cannot tolerate a deliberate attempt to block" attempts to reunify with Taiwan, were the words of one Chinese official. President Lee himself was criticized particularly, both in group meetings and in private conversations, and no Chinese official expressed any doubt that Lee was a "splittist" (a buzzword for an independence advocate) of the worst order.

One member of the congressional group occasionally asked about the prospects for a "grand bargain'' on Taiwan, where Taiwan would agree not to declare independence and China would agree not to use force against Taiwan. Chinese views on whether such a thing was possible did not appear fervent one way or the other, although no one seemed to reject it out of hand. Members of the congressional group also occasionally asked whether China had a time frame for its reunification goals. There was no set times, according to Chinese officials, but "the sooner the better" was a phrase used on more than one occasion. Some on the American side came away with the impression that China felt it may be running out of time on the Taiwan question; one Chinese official mentioned that an increasing number of Taiwan residents, especially those of younger generations, felt no identity with mainland China. Although Chinese officials continued to describe China's goal as one of peaceful reunification, "we will act" if Taiwan declares independence, according to one official.

When asked about Taiwan, Hong Kong officials also consistently echoed the "one China" line, although not with the same ideological fervor as in the mainland. Some Hong Kong officials side-stepped the issue by saying that such issues involving "national unity" were properly the purview of central government authorities in Beijing, not a matter for Hong Kong. One Hong Kong official thought that the current controversy over Taiwan was serious enough that military conflict was likely in the next few months, although this was not a view the group heard elsewhere. Still another Hong Kong spokesman ended a conversation about China's WTO accession with the admonition that it was necessary for the United States to 'walk the tightrope' on the Taiwan issue.

Chinese Embassy Bombing. At times overshadowing the Taiwan issue, the NATO bombing of the Chinese Embassy in Belgrade on May 8, 1999, was a prominent feature of Chinese discussions with the congressional staff group. One noteworthy point is that while Chinese press accounts in the weeks following the bombing had generally referred to the "NATO" bombing rather than the "U.S." bombing of the embassy', that distinction was not apparent in Chinese discussions with the American group. Consistently, Chinese officials singled out the United States. They strongly implied that U.S. technological prowess meant that the bombing could not possibly have been accidental, Such assertions were generally raised as rhetorical questions rather than blatant accusations, and were often attributed to broad popular sentiment in China rather than to official Chinese views. Statements in response by the congressional group -- pointing out examples of other U.S. military accident despite technological advantage, for example -- were either dismissed or ignored. In the words of one Foreign Ministry official, the embassy bombing had "dealt a major blow to U.S.-China relations" from which the relationship had not yet recovered. Future relations depended on the "proper handling" of the embassy bombing issue, although this term was never defined. In this respect, according to one official, progress was being made. Presidents Jiang and Clinton had already exchanged two phone calls about the bombing incident, and two rounds of talks had been held. In any event, according to one official, U.S.-China relations were ''too important" to be held hostage to any single issue.

WTO Accession. China's long-pending application to join the WTO was the third issue most often discussed during the trip. In general, Chinese officials expressed surprise and regret that a deal on WTO was not concluded when Premier Zhu Ronji came to Washington in April 1999, offering much broader concessions than China had ever offered before. At least some on the American side agreed with this sentiment. As one Chinese official put it, an "opportunity was missed" somehow in April, and further progress on WTO talks had been halted by the bombing of the Chinese embassy in Belgrade. Frequently, the American side asked for an assessment of the likely pace for reaching an agreement on WTO, particularly since the congressional window to act on an agreement before the year's recess was quite small. In one instance, the Chinese response to this question was that China had "quickened the pace" on its WTO talks, although the specific reference was to China's discussion of bilateral agreements with Japan and Australia, not discussions with the United States. One member of the American group asked about side agreements that came out of the April 1999 discussions (such as the agreement on agriculture), saying that it was his understanding that these agreements were "stand alone" deals to be implemented separately from any WTO agreement. The official responding to this question said that China viewed these side agreements as part of the WTO negotiation, to be implemented only after an agreement was reached on WT0. (2)

In two separate instances, Chinese officials appeared to be speaking from the same script, saying that China had already been waiting for 13 years, and asking rhetorically whether China had to wait another 13 years. On several occasions, the American delegation asked for an assessment of the costs and benefits to China of gaining WTO access, seeking to find out who in China would be hurt by, and therefore be opposed to, WTO accession. Chinese officials emphasized that the textile industry would be a chief beneficiary, although most officials minimized the domestic costs that WTO accession would bring, In two instances where officials were more specific about the costs, they referred to China's telecommunications, financial, and service industries as being most adversely affected. These sectors would be hurt, according to one official, but "no group is opposed" to WTO accession -- what they needed was "a longer grace period," No Chinese official hinted that there might be disagreement or widespread opposition within the Chinese leadership or bureaucracy over WTO accession. Generally, discussants from both the Chinese and American sides agreed that the meeting of Presidents Clinton and Jiang at the APEC meeting in September offered the best prospect for concluding an agreement on WTO in 1999. Both sides also generally agreed that conclusion of a WTO agreement would be easier before what increasingly came to be called the "Seattle Round" of WTO ministerial talks, scheduled for November 1999.

Economic Issues. In Beijing, the congressional staff group received an independent briefing about the remaining serious problems in China's economy, and the stresses that the Chinese leadership is feeling about the pace of and prospects for reform. (3) Real economic growth in China in 1998 was purported to be several percentage points lower than the official rate of 7.8% -- perhaps as low as 4%. Pressures from state-owned-enterprises (SOE's) and segments of the economy likely to be hurt by WTO accession had slowed the implementation of economic reforms, although the reform process was still continuing. From Chinese officials, the group heard that the Chinese economy was "doing very well," with a GDP growth rate of 7.6% for the first half of 1999. The group heard a raft of statistics about bilateral trade figures, all of which appeared to indicate that Sino-American trade was increasing. Widespread flooding in China and the Asian financial crisis were the only specific challenges to the economy that Chinese officials mentioned. In conversations outside the official discussions, it was clear that the major challenge now facing the central government is the impact of economic restructuring on the social safety net as large numbers of state enterprises have been downsized or have gone out of business. These state enterprises have been the defacto social safety net for much of China's workforce, providing housing, health care, and retirement benefits for employees. There are no comparable government benefit programs. It was pointed out that if China joins the WTO, the increased pressures of having to compete in a dynamic world market could exacerbate such social problems.

Other Issues, In addition to the three issues discussed above, the group's meetings encompassed a broad range of other subjects. In contrast to the three main "problem" issues, which generally were raised by the Chinese, discussions on the following topics were most often raised by the American delegation,

Falun Gong. As one American official the group met with explained, China's crackdown on the Falun Gong spiritual group reflected that the government was showing "very little tolerance" for potential challenges to it's authority, particularly in this, the year of the 50th anniversary of the founding of the PRC. When asked, Chinese officials tended to dismiss the group's significance. In private conversations, Chinese officials often dwelt on the more mystical beliefs of Falun Gong, calling the group "superstitious" and a "cult."

Environment/Energy. Questioned about China's environmental situation, one Chinese official was candid about China's "serious problem," saying that of the top ten most polluted cities in the world, seven were in China. (4) China was turning into an energy importer, said another official, and "welcomes" improvement in U.S-Iraq relations because of the important need for a stable oil supply. One of the American delegation members commented positively on the progress China had made on its energy and environmental problems since her last visit five years before. Then, Chinese officials pointed to environmental laws on the books now; there was a marked change in official attention and attitude toward regulatory standards and enforcement, resulting in noticeable improvement in urban air quality in Shanghai and Beijing. The senior leadership was said to have focused attention on air pollution sources, especially coal, and have adopted ameliorating measures such as increased investment in natural gas, phase-out of leaded gasoline (effective in 2000), and the imposition of tailpipe standards on new passenger vehicles. In addition, many cities are now making serious investment in improving water quality through investment in sewage treatment and water purification systems.

North Korea. One official urged the United States to "be more patient" with North Korea. China has not provided North Korea with any nuclear assistance, according to another official North Korea's nuclear reactors were from Russia.

Japan. Chinese officials addressing questions about Japan expressed concern about rising militarism there. One official mentioned that Japan still had not "genuinely regretted" its actions in World War II. Chinese officials seemed most concerned about revisions in the U.S.-Japan Security Alliance guidelines.

Spratly Islands. Officials maintained that China has undisputed sovereignty over the islands, According to one official, China "won't do anything" to interfere with shipping in the South China Sea.

Yinhe. To the surprise of some in the American delegation, one official, in a discussion on U.S.-China relations generally, brought up the issue of the "Yinhe," a Chinese ship which briefly became an issue in late July 1993. (5) The Yinhe incident had been "most damaging" to the feelings of the Chinese people, the official said, and the Chinese government had had to "swallow the bitter pill" in allowing the ship to be inspected by American officials.

U.S. Port Calls in Hong Kong. The Americans brought up the issue of China's decision to suspend Port calls in Hong Kong by U.S. Navy ships in the wake of the Belgrade embassy bombing. 0ne official said that the Chinese Defense Ministry was responsible for making these determinations. (6) These decisions, the official said, were being made on a "case-by-case basis."

The U.S. Congress. Chinese officials expressed concern about "anti-China initiatives" coming out of the U.S. Congress, in one instance mentioning the Report on U.S. National Security and the People's Republic of China -- the so-called "Cox Report" -- on allegations about Chinese breaches of U.S. national security.(7) Several officials said that the U.S. Congress should act "with restraint" or "with prudence."

Missile Proliferation. According to one official, China has stopped selling shore-to-ship missiles to Iran. This was referred to as a decision "made by President Jiang" when he gave an interview in Newsweek Magazine in 1998.

Freedom of the Press. Questioned about controls on the media in China, one Chinese official maintained that China had a free press. On the same subject, one American official the group met with in China said that China by no means had a free press, within an American context of that term, but that the press in China now was significantly more diverse and had greater latitude than in the past.

The Xinjiang-Uighur Autonomous Region (XUAR)

In addition to visits to coastal cities, the American group had the opportunity to go to Xinjiang, the desolate but resource-rich area in China's far west that is not widely visited by Americans, even by officials from the U.S. Embassy in Beijing. (8) The delegation began its visit to Xinjiang in Urumqi, its largest city, with a population of about 1.4 million; visited areas in Turfan; and ended with several days in Kashgar, the oasis city at the westernmost edge of the Chinese border.(9)

It is difficult to be in Xinjiang without coming away with strong impressions about the immense challenges that this region presents to the Chinese government, particularly to Chinese economic development goals, the importance of which were stressed time and again to the group throughout its two-week visit. Starting from the most fundamental level, for instance, the group was impressed by the logistical difficulties presented in simply traveling across this vast region. The group's time in Kashgar largely was governed, we were told, by the fact that the single connecting flight from Kashgar through Urumqi to Shanghai, the group's next destination, was scheduled only on alternate days. In every other way, it was evident that Xinjiang lags far behind the coastal areas of China in economic development and infrastructure. Things done easily by the foreign traveler in Beijing or Shanghai are done with great difficulty in Xinjiang, from travel to phone calls to communication.

In addition to the immense distances to be traveled, Xinjiang's most visible challenges are its topography and diverse population. The terrain varies from forested mountains with thin, chilled air to the unrelenting heat of the Taklamakan Desert that comprises much of the region. The population offers comparable cultural extremes. Xinjiang is home to a large Muslim population of non-Chinese, the great majority of whom are Uighurs, with the rest being an assortment of Hui, Kazakh, Tajik, and a host of other ethnic Turkic groups. In language, behavior, and dress, this population was markedly different from those in the coastal areas of China that most visitors encounter. According to press reports in recent years (including reports from the official Chinese press), activist groups within this population resent Chinese rule and are seeking to establish an independent Muslim state. Reports indicate that in some cases these elements are working actively, even violently, in support of these goals. Judging from press reports and official statements, such activity is ruthlessly suppressed by the Chinese government.

Despite the inclusion of a visit to Xinjiang in the American delegation' s itinerary, the Chinese officials the group met with did not initiate discussions about this region, and appeared to minimize potential problems there. Asked questions about Xinjiang's energy resource potential, Chinese officials did not respond in any detail. In one case, a Xinjiang official appeared to dismiss any further oil, development potential in the region, Chinese officials routinely referred to the "47 different ethnic minorities" in Xinjiang, greatly downplaying the fact that by far the majority of this ethnic population is comprised of just one of these groups, the Uighurs, about whom reports of anti-China activity are the most frequent, When asked specifically about widespread reports of ethnic tensions in the region, one Chinese official responded that Chinese and ethnic minority groups in Xinjiang "are getting on very well together." Indeed, to the casual visitor who did not speak Uighur, this appeared to be the case; members of the American group walked freely and alone throughout parts of Kashgar and Urumqi, watching normal daily activities without noticing particular tensions or hostilities. Several officials and guides the group met with introduced themselves as Uighurs; all of these appeared fluent in Chinese.

On the other hand, despite this surface appearance of normalcy in Xinjiang, one disturbing incident suggested a more complicated picture. When one of the American group arranged to meet privately with an acquaintance, a wealthy Uighur businesswoman, in the lobby of the hotel in Urumqi where the group was staying, the woman was arrested by Chinese security forces while on her way to the meeting. That incident, which continued to cloud the rest of the congressional staff delegation's visit, suggested that underlying ethnic tensions are more serious and perhaps more prevalent than Chinese officials are willing to admit. (10) Given the circumstances, the incident also reinforced the extreme sensitivity that Chinese officials have with respect to the situation in Xinjiang.

Hong Kong

Typical of Hong Kong efficiency, the congressional staff delegation's schedule In Hong Kong was crammed with official meetings, with scarcely an unscheduled moment. Compared with the formal, question-and-answer style of meetings in mainland China, the more informal discussion-style of the Hong Kong meetings, with diverse views and disagreements freely exchanged was a refreshing change. The delegation met with Hong Kong government officials, members of the Chinese and foreign business communities, members of trade and economic groups, and members of various political parties. In addition, in private meetings, some members of the group met with members of the academic community, medical science community, and the press, Some general topics (among many) and an idea of the wide range of views are presented below.

Economic Issues(11) Discussions in Hong Kong are generally heavily weighted to economic and trade issues and conditions, and this visit was no exception. Even discussions on political or social issues dwelt at length on economic implications. Hong Kong spokespersons were candid about the effects of the Asian financial crisis on Hong Kong, and on Hong Kong's somewhat slower recovery than other Asian countries, especially Singapore. After the unprecedented intervention in the market by the Hong Kong government, monetary authorities took action to buffer the impact of short-term capital flows. A discount window, similar to that of the U.S. Federal Reserve, was established to allow the exchange of assets for liquidity. They were confident that Hong Kong's economy was on the upswing and that growth would continue to increase. Few expressed worry about growing competition either from Singapore, Shanghai, or elsewhere in China -- that might erode Hong Kong's importance as a key financial center.

Concerning China's WTO accession, all in Hong Kong (which already has WTO membership) expressed surprise that the United States had not concluded an agreement with China during Premier Zhu Rongji's meetings in Washington in April 1999. One official said that the resulting delay had meant that China's enthusiasm for the deal had been "allowed to cool." In addition, discussants on both the American and Hong Kong sides often emphasized that the benefits of China's WTO membership would accrue mainly to the United States, since U.S. access to the China market was seriously limited, while China already received WTO benefits from the United States.

Views on whether China would devalue its currency, the renminbi, were varied. Some felt it was ''not a question of whether, but when," and suggested that many in the business community expected a devaluation of 15%. For this reason, international investors were holding off, waiting for the inevitable devaluation. According to another view, the Chinese government was unlikely to devalue because that would reward people for avoiding foreign exchange controls. Views also were somewhat varied on reform of Chinese SOE's (state-owned-enterprises); according to one view, SOE reform is a crucial problem for the Chinese government, and the process has been more difficult than China's economic planners had anticipated. In the opinion of an economist for the Hong Kong Monetary Authority, Chinese monetary authorities were unlikely to devalue before the end of the year. He noted Beijing's desire not to reward people who have been evading foreign exchange controls, and suggested that authorities were laying the groundwork for a broader change in monetary policy. In his view, the worst economic scenario looming for Hong Kong would be if inflation were to ignite in the United States, causing a significant hike in interest rates. Since the Hong Kong dollar is pegged to the U.S. dollar, a rise in U.S. rates would for force an increase in Hong Kong rates which would be a serious damper on economic recovery.

The American group was told that the Hong Kong stock market, the Hang Seng Index, has recently initiated a "Growth Enterprise" market, in which small and medium companies with no track record in profits, such as new Internet service providers, could be listed an a so-called "Second Board" of the exchange. (Companies wishing to be listed on the "Main Board" must be able to show three years of profit records.) According to an official at the Exchange, volatility is a natural feature of the market, and "good firewall management" is the key to dealing with market volatility. The Hong Kong government was said to be still in the process of determining what to do with its stock holdings acquired during the government's unprecedented intervention in the market in August 1998. Exchange officials were said to be recommending the creation of a Trust, in which private investors could be gradually allowed to buy out the government's holdings. (12)

Hong Kong's "Identity." On a surprising note, several sectors of the Hong Kong community spoke at length about a current debate concerning what kind of future Hong Kong wanted for itself, amounting to a search for a "Hong Kong identity." Apparently, finding a solution to this question has become the focus of committees and discussion groups formed for the purpose. Two distinct views were aired: Hong Kong should develop resources to strengthening and solidifying its current identity as an international financial and services sector; or instead, should focus on gaining prominence as a high-technology manufacturing center. One critic of current policy said that the Hong Kong government was trying to have it both ways, and that the new "Cyberport" project was evidence of the government's bid to attract high-technology manufacturing and related industries to Hong Kong. (13) According to this critic, pursuit of these dual objectives was a mistake on the government's part; after all, according to this observer, New York was secure in pursuing its identity as the world's foremost financial and services center, and did not spend time worrying about the fact that it was not also an industrial and manufacturing center.

Hong Kong Autonomy. Discussions occasionally turned to an analysis of the implications a particular issue would have for Hong Kong's autonomy, guaranteed in the Basic Law which serves as Hong Kong's defacto constitution. For instance, in discussions of the Asian financial crisis and other economic and trade issues, observations would periodically be made that on economic matters in Hong Kong, the Chinese government was decidedly uninvolved in Hong Kong's affairs. The same was true on discussions about crime, corruption, and enforcement of export controls and intellectual property rights; on these issues, Hong Kong observers were quick to point out the continued effectiveness and autonomy Hong Kong exercised in these areas, which operated with independence from Chinese government interference. On other issues, however, the "autonomy" question was murkier. For instance, in the case of the decision by Hong Kong's Court of Final Appeal (CFA), which was effectively overturned by China's National People's Congress Standing Committee (NPCSC) upon a request by the Hong Kong government, views were divided as to whether this interfered with Hong Kong autonomy or not. (14) Likewise, the "autonomy" question surfaced with respect to China's decision in mid-May 1999 to suspend routine port calls of U.S. Navy ships. Although Hong Kong observers generally dodged this issue by saying it was within China's legitimate sphere of authority as either a "foreign affairs" or a "defense" matter, American observers questioned whether the nature of routine ship visits for the purposes of recreation and resupply really fell under either category. Some Hong Kong observers expressed hope for a resumption of the ship visits because of the adverse impact the suspension was having on Hong Kong's economy.

In several discussions, the Hong Kong side commented that Hong Kong was going to be moving closer to China in a trend that would prove inexorable. The scarcity and cost of land in Hong Kong was mentioned as but one example of this trend. Hong Kong residents, faced with exorbitant costs for minimal housing space, were beginning to find it attractive to contemplate moving 40 or 50 miles into the China mainland, where roomier housing cost significantly less. Although current infrastructure deficits made commuting to work in Hong Kong problematic from this distance, infrastructure problems were considered a temporary condition. As a result, large numbers of future Hong Kong 'residents" could actually live in China, a situation that would further blur the boundaries and differences between the two regions, and that had corresponding implications for questions about Hong Kong's autonomous decision-making.

The Report of the Cox Committee. On a few occasions throughout the delegation's visit, both in China and in Hong Kong, Chinese officials and others would mention the so called "Cox Report," the final report of the Select Committee on U.S. National Security and the People's Republic of China. (15) Generally, and not surprisingly, these officials disagreed with the report's conclusions about alleged Chinese espionage in U.S. nuclear science research labs. One meeting in Hong Kong, however, bears special mention. In this meeting, several members of the American delegation met privately with members of the Chinese academic and business communities. All of these participants had strong and lengthy connections with the United States, some having spent decades teaching in American educational institutions, often after having been educated in the United States themselves. Without exception, this group expressed observations and even anxieties about what they saw as the racial implication of the Cox Report, particularly given several subsequent newspaper articles appearing to suggest that the large Chinese-American population working in the sciences were potential security risks. Some Chinese Americans these individuals knew had already felt subtle discrimination, as though they were not trusted by their colleagues, and younger Chinese Americans wondered whether they would be able to find good jobs with the university degrees they were pursuing in scientific fields. These observers worried about the possibility of a new, McCarthy-like era in the United States.

Just as worrisome, they felt, was a corresponding rise in nationalism in China. One, who had lived in the United States for nearly two decades, said university professors in China accused her of being 'unpatriotic" when she questioned their conclusions about the NATO bombing of the Chinese Embassy in Belgrade. If this kind of "blind nationalism" were possible even among highly educated elites, this observer felt, the bulk of China's population may be significantly more vulnerable.

Concluding Observations

Overall, the American group's visit to China was conducted in an atmosphere of mixed signals that have become familiar components of U.S.-China relations in recent years. On the positive side, the delegation was provided with a well-executed itinerary and treated cordially even though the trip took place during a time of high tension and uncertainty in U.S.-China relations. Moreover, the group was able to travel in the Xinjiang-Uighur Autonomous Region, a unique and extraordinarily sensitive region that has seen increased ethnic activism and even violence in recent years.

Despite the overall warm reception, the meetings that the American group had can be described as "frank" in the traditional diplomatic parlance which signal lack of agreement. The discussions found few issues on which U.S. and Chinese interests appeared compatible,

Instead, the Chinese side tended to give detailed descriptions of the problems in bilateral relations, generally implying that the United States bore clear culpability for existing problems. Some in the American group felt that the discussions seemed excessively focused on bilateral political problems, and they wondered whether this was a tactical move to avoid serious discussion of China's structural economic difficulties, or the problems of economic restructuring and its potential consequences for social stability. The American side tended to raise a much broader array of issues and were at times frustrated that Chinese officials gave oblique replies or answers that did not appear to reflect known realities. There often was little or no variation in the responses different Chinese officials made to similar questions. With the exception of a discussion serious environmental problems in China, on which one official was quite open, Chinese officials offered no analytical assessment of the domestic economic or political problems that the Chinese government officials were facing. In spite of official statements the group heard about benign ethnic relations and peaceful conditions in Xinjiang, the arrest of the Uighur business woman coming to renew her acquaintance with a member of the group cast doubt upon these assertions and created a shadow that hovered over the remainder of the group's visit.

In addition to current tensions in U.S.-China relations, some of the atmosphere surrounding the groups visit in China may be attributable to the pending 50th anniversary of the founding of the People's Republic of China on October 1, 1999. In the past, such auspicious dates have been known to be the rallying point for opposition groups to express dissatisfaction with or stage demonstrations against the government. Chinese officials have been extremely attuned to this possibility and are particularly determined that nothing occur to detract from the National Day celebrations designed to highlight the country's extraordinary accomplishments under Chinese Communist Party rule.

In contrast with China, the atmosphere in Hong Kong appeared rich with diversity and dialogue. Discussions involved much give-and-take. Hong Kong residents disagreed with one another and were more willing to criticize the Hong Kong government decision on substantive grounds. Hong Kong discussants were candid in their feelings about future problems Hong Kong faced. Still, the effects of Beijing's renewed sovereignty seemed reflected in small ways. Hong Kong observers shied away from issues on which Beijing had taken a strong stand, such as Taiwan's status or the issue of US Navy port calls in Hong Kong. Even the positions of the Hong Kong democrats, Hong Kong most vocal and democratic-minded political party, seemed somewhat more guarded in the new political environment.


1. On July 10, 1999, President Lee gave an interview to a German radio station, Deutsche Weilte, in which he said that future Taiwan-China talks should be conducted on a "state-to-state" basis. Beijing objected strenuously to the statement, saying it proved that Lee had fundamentally changed previous policy in which Taiwan had claimed that there was only "one China" of which Taiwan was a part. China adheres to the "one China" policy, and claims Taiwan as a "break-away" province that belongs to China. Taiwan officials continue to insist that Lee's statement was not a policy change, but a "statement of fact" meant to reflect that the island government's 85-year existence entitled it to a status equal with China's in cross-strait dialogue.

2. The official responding to this question was from the Ministry of Foreign Trade and Economic Cooperation, or MOFTEC.

3. This briefing was given by officials from the U.S. Embassy in Beijing, at the congressional staff group's request.

4 China's environmental problems, at least in terms of air quality, are apparent to anyone who breathes in Chinese cities. Smokestacks belching yellow and black smoke, reminiscent of late 19th century America, are a common sight.

5. American officials at the time had suspected that the Yinhe was on its way to Iran carrying a cargo that included chemicals used in manufacturing mustard and nerve gases. The U.S. Navy followed the Yinhe for several weeks, and the United States demanded the right to board and search her. Eventually, Saudi Arabia agreed to allow the Yinhe to dock in Dammam for a joint inspection by Chinese, Saudi, and U.S. representatives. That inspection, conducted on September 4, found no evidence of any chemical weapons materials on board. The Chinese government demanded a public apology from the United States and compensation for financial losses caused by the delay.

6. In recent years, the U.S. Navy has made about 70 port calls in Hong Kong annually.

7. The unclassified version of this report was issued on May 25, 1999.

8 The Tarim Basin and Taklamakan Desert both in Xinjiang, are thought to be rich in oil and natural gas reserves.

9 Urumqi, Xinjiang's largest and most developed city, also has the largest population of Chinese. Kashgar, on the westernmost Chinese border, appeared largely populated by Uighurs and other ethnic Muslim groups. This was evident in culture, language, dress, and behavior,

10. The Uighur acquaintance, Rebiya Kadeer, is a well-known entrepreneur in Xinjiang, and routinely described in press accounts as the "wealthiest woman in Xinjiang." In 1994, she was the subject of an article in the Asian Wall Street JournaI (on September 22, 1994) about her rags-to-riches story and her entrepreneurial skills. The American congressional staff delegation later received confirmation that Ms. Kadeer had been arrested, along with some of her sons, and charged with "providing state secrets" to foreigners. A subsequent press article cited a Chinese official as saying that Ms. Kadeer' s businesses had been closed as a result of her arrest, that they "had ceased to exist." As a result of the arrest, the U.S. State Department protested to Beijing.

11. This section in particular reflects the comments of a congressional staffer on the American delegation who is an economist.

12 In an unprecedented move in August 1998, the Hong Kong government intervened in stock, futures, and currency markets to fight off what officials termed "double and triple playing" by "manipulators" taking advantage of market conditions. Despite these economic problems, Hong Kong government officials continue to assert that Hong Kong's economic fundamentals are strong.

13 In the words of a Hong Kong Economic and Trade Office news release dated March 5, 1999, Hong Kong's Cyberport is "an international multi-media and information services center that would create sustained, long term benefit to the economy through the development of high value added services.

14 The January 1999 CFA decision concerned the Court's interpretation of Article 24 of Hong Kong's Basic Law concerning who had the 'right of abode" in Hong Kong. Unhappy with the CFA interpretation, which appeared to significantly broaden the category of persons eligible for Hong Kong residency, the Hong Kong government announced on May 18, 1999, that it would ask China's NPCSC for its "interpretation" of the original Basic Law provision. The resulting "interpretation" decision by the NPCSC restricted the category of eligible residents, effectively negating the broader aspects of the CFA decision. Although the Basic Law specifically reserves to the National People's Congress the right to amend or interpret the Basic Law, the Hong Kong government's request was criticized in that it appeared to undermine the "finality" implied in a Court of Final Appeal decision, and raised questions about the future credibility and independence of Hong Kong's judiciary.

15 The original classified version of this report by the Select Committee on U.S. National Security and Military/Commercial Concerns with the People's Republic of China was ordered to be printed on January 5, 1999. The declassified version, as amended, was made available on May 25,