I. Introduction

Allow me to begin by thanking you, Mr. Chairman, and the members of this distinguished Subcommittee for the opportunity to take part in the hearings you are holding today on the topic of the situation in Northeast Asia following the catastrophic September 11 terrorist attacks and the beginning of what promises to be a long war against terrorism. I will focus my comments on the impact of the changed security environment on U.S. relations with China and the situation across the Taiwan Strait. I will also highlight several key issues and trends pertaining to China that have important implications for U.S. interests and policy and thus warrant continued close attention by Members of Congress. As a student and observer of Chinese security and foreign policy, I am looking forward to this timely and important exchange of views.

The main thesis of my remarks is that U.S. and Chinese interests overlap to some extent in combating terrorism. The re-ordering of American security priorities in the wake of the September 11th attacks has provided an opportunity for Washington and Beijing to work together toward a common goal and this has contributed to an improvement in the overall atmosphere of the bilateral Sino-U.S. relationship. However, U.S. and Chinese interests in fighting terrorism are not identical and, in some important ways, they potentially conflict. Moreover, the long-standing areas of friction in the bilateral relationship remain unchanged and they require close attention as well as careful management. It is thus premature to conclude that Sino-American relations are on a steady, upward course. As for relations across the Taiwan Strait, the political stalemate continues and is unlikely to be broken in the coming months, but tensions are not high. The expansion of cross-Strait economic and social interaction provides both China and Taiwan with a growing stake in peacefully resolving their differences.

II. China’s Interest in Combating Terrorism

As President Bush noted at the Asia Pacific Economic Conference in Shanghai last month, Chinese President Jiang Zemin’s expression of condolences and his declaration of China’s condemnation of the heinous crimes committed on September 11 were conveyed "immediately," and with "no hesitation" and "no doubt." Subsequently, Beijing responded in various ways to support the U.S.-led global effort to eradicate the scourge of terrorism. There are several compelling reasons why it is in China’s interests to side with the United States in fighting against terrorism.

First, maintaining a good relationship with the U.S. is indispensable for China’s continued economic growth. Without sustained high-levels of U.S. direct investment and an open U.S. market for Chinese goods, China’s aspiration to become a middle-level developed country by 2050 will be difficult, if not impossible to realize. The preservation of a favorable security environment for China and the achievement of reunification with Taiwan are also in part contingent on the state of Chinese ties with the United States. Beijing seized on the opportunity presented by the tragedy of September 11 to mute differences with Washington and focus on a common security concern.

Second, in recent years, Chinese concern about the Islamic separatist movement in Xinjiang has been on the rise. Although not all those who advocate separatism employ violent means, there have been incidents of terrorist attacks and bus bombings by Uighur radicals. The Chinese claim that about 1000 Uighur separatists have received training in Bin Laden’s training camps. Eliminating the Taliban government in Afghanistan might help eradicate the terrorist threat to China's western region.

Third, China is increasingly dependent on imported crude oil and has a strong interest in stable, low oil prices as well as an unimpeded oil supply. If radical Islamic fundamentalism spreads to major oil-producing countries, this will drastically increase world oil prices and threaten to undermine China’s economic development. At present, China's annual oil imports account for nearly a third of the country's total oil consumption. As the economy develops, the demand for oil is expected to increase sharply, as efficiency demands require China to rely less on coal. Demand for oil in China is forecasted to increase sharply in the coming decades and the total volume of China's oil imports by 2020 will likely account for at least half of its total oil consumption. In 1999, China's oil imports from the Middle East accounted for 46.2 percent of its total oil imports, including Muslim countries such as Iran, Oman and Saudi Arabia.

III. Beijing’s Contribution to the Global Anti-Terrorist Campaign

China’s has contributed to the U.S.-led global effort to punish the perpetrators of the September 11 attacks and exterminate terrorism in the following ways:

· On the diplomatic front, the Chinese have voted in favor of anti-terrorism resolutions in the United Nations Security Council. In mid-September, they dispatched a vice foreign minister to Pakistan to shore up that country’s support for opposing Bin Laden and the Taliban government in Afghanistan that provides him sanctuary. Beijing also agreed to re-direct the agenda of the Shanghai APEC meeting, originally designed to showcase China’s economic miracle, to the U.S.-led war against terrorism.

· In the financial sphere, Beijing has promised to do its utmost to freeze the assets of terrorist organizations and cut off the flow of funds to terrorists.

· The Chinese have been helpful in providing intelligence and information on terrorist networks. Such information might come from spies monitoring the activities of terrorists or from listening posts capable of eavesdropping on communications in Afghanistan that China maintains on its northwestern border. China has also sealed its border with Afghanistan and is moving toward agreeing to a U.S. request to open an FBI office in Beijing.

· China has supplied a significant amount of food relief for refugees from Afghanistan. Beijing announced $1.21 million in emergency aid to Pakistan; agreed to provide $121,000 to UNHCR; and announced it will provide an additional 60 truckloads of humanitarian supplies valued at $1.7 million.

There is more that Beijing can do to support the global anti-terrorism campaign. For example, the Chinese could offer the use of Chinese airfields and airspace to support humanitarian or combat operations against Afghanistan. They could also seek to control exports of small arms that might reach terrorist groups. The Chinese and the other five members of the Shanghai Cooperation Organization (Russia, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan) could invite the United States to participate as an observer in the SCO, a regional multilateral organization that was created in part to strengthen cooperation to curb terrorism. SCO members have pledged to share information and plan to establish a "Shanghai Cooperation Organization Anti-terrorist Center" in Bishkek. They will also cooperate to deter illegal trading of weapons and narcotics, illegal immigration, and other forms of international crime.

IV. U.S.-Chinese Interests Overlap but Differences Persist

While U.S. and Chinese interests converge in the eradication of terrorist training camps and support networks in Afghanistan, the two countries do not necessarily agree on the best means to achieve this objective. China has not explicitly endorsed the U.S. military action in Afghanistan and continues to warn that anti-terrorist actions should have "clearly defined targets," should "hit accurately," and "avoid innocent casualties."

If the war against terrorism is widened to target other countries, China’s support may waver, especially if the U.S. seeks global cooperation in imposing sanctions and curtailing business with these countries. Chinese firms have significant business interests in Iran and to some extent with Iraq, and may be reluctant to end these ties. Moreover, American and Chinese broader national security interests beyond exterminating terrorists are by no means identical. Beijing doesn't want the U.S. global campaign against terrorism to bolster America's position as the sole superpower in a unipolar world. And the Chinese worry that the U.S. will gain a permanent military foothold close to China’s borders, in Central Asia as well as in Afghanistan. Another area of divergence is U.S. development and deployment of missile defense systems, which the Chinese continue to resolutely oppose.

The Chinese have not sought quid pro quos for their positive contributions to the war against terrorism, but they hope—perhaps even expect—that there will be some payback. Beijing anticipates that the U.S. focus on terrorism will mute American criticism of its harsh treatment of Uighur separatists in Xinjiang. While the U.S. should support Chinese efforts to root out and punish terrorists, we should be wary of Beijing’s practice of lumping together terrorists, separatists and dissidents. "The war on terrorism," Bush asserted in Shanghai, "must never be an excuse to persecute minorities."

Beijing also hopes that by backing the war against terrorism, Washington will be more sympathetic and accommodating to Chinese aspirations for reunifying the Mainland with Taiwan. The Chinese would like to see a reduction in U.S. arms sales to Taiwan and U.S. pressure on Taiwan President Chen Shui-bian to accept Beijing’s “one-China principle” and to enter into negotiations with the Mainland. Trade-offs involving Taiwan’s security must not be entered into. The United States should remain firm in its commitment to assist Taiwan in maintaining a sufficient self-defense capability, as articulated in the Taiwan Relations Act. The PRC continues to deploy forces across the Taiwan Strait specifically aimed at Taiwan—and at U.S.—capabilities. The provision of adequate weapons to Taiwan to defend itself remains an important part of America’s policy aimed at deterring the use of force and promoting a peaceful resolution of cross-Strait differences. The Bush administration has appropriately reassured Taipei that Chinese assistance in the US-led anti-terrorism coalition will in no way affect US policy towards Taiwan, including arms sales to the island.

The common menace of terrorism has provided an opportunity for U.S.-Chinese collaboration on a security matter that is of concern to both countries, although the urgency is far greater for Washington than it is for Beijing. At the same time, the issues that divide the U.S. and China remain and thus it is erroneous to conclude that Sino-American relations have been fundamentally transformed or are on the path to a steady partnership. Differences on human rights persist, particularly freedom of expression and the freedom to voice and practice one’s personal faith. Tibet is another area of divergence. The U.S. should unfailingly continue to support the preservation of Tibet's unique religious, cultural and linguistic identity and the protection of the human rights of all Tibetans. We should also continue to be, clear and straightforward with China about our interests in maintaining freedom of navigation in international waters and airspace.

Chinese arms sales around the world and Beijing’s failure to adequately curb the proliferation of weapons of mass destruction are also contentious bilateral issues. U.S. concerns now center mainly on Chinese exports of ballistic missile technology to Pakistan and exports of dual-use technology to Iran that can be used for chemical and biological weapons. The current military conflict in Afghanistan and the threat of WMD terrorism have transformed these issues from abstract proliferation concerns into concrete threats to American and other human lives. If Pakistan’s nuclear weapons fall into the hands of Islamic terrorists, the blame will be laid on Beijing, which provided substantial assistance to Pakistan's nuclear weapons program in the 1980s. China also has yet to fulfill a promise made last November to publish a list of missile components barred from export and establish a system of enforcement.

V. Political Stalemate Likely to Persist Across the Taiwan Strait

The tragic events of September 11 have had little, if any, immediate impact on relations across the Taiwan Strait. Unfolding security cooperation between the U.S. and China to counter terrorism has created uneasiness in Taiwan, however, where many are worried that U.S.-Chinese cooperation could come at Taipei’s expense. This anxiety is understandable, since Taiwan has been the victim in the past of shifts in the US view of its strategic interests. There is also concern in Taiwan that the Mainland may take advantage of the opportunity created by Washington’s political and military distraction to step up intimidation of Taiwan or cause instability on the island.

So far, Taiwan’s fears appear to be unfounded. The Bush administration has reassured the government in Taipei that its policy has not changed and that Taiwan’s interests won’t be sacrificed for the sake of achieving other pressing U.S. foreign policy goals. China’s strategy and tactics toward Taiwan also show no signs of revision. Beijing continues to adhere to a policy toward Chen Shui-bian of “listening to his words and watching his deeds,” while pursuing “united front” tactics of expanding contacts with Taiwan’s opposition parties and wooing businessmen and investors.

Tensions across the Strait are not high, but political differences remain acute. Beijing continues to insist that Taipei recognize the existence of one China before it will deal directly with the DPP government in Taiwan. President Chen Shui-bian remains unwilling to agree to the Mainland’s preconditions for cross-Strait talks, preferring instead to put all issues up for discussion. He has questioned the PRC’s interpretation of a verbal agreement between the two sides in 1992 as a “consensus” on the one-China principle. Chen continues to call for cross-strait reconciliation on the basis of the principles of democracy, parity, and peace, and demands that the will and right of choice of the 23 million people of Taiwan be respected and upheld.

The downturn in Taiwan’s economy in the past year and sharp political infighting which has hampered the ability of President Chen to work effectively with the legislature to implement his agenda of political and economic reform have ironically contributed to the enhancement of stability across the Strait. Beijing sees Taiwan as mired in domestic difficulties and thus unable to take provocative separatist actions. Time is once again judged to be on China’s side as Taiwan’s economic dependence on the Mainland increases concomitant with an expansion of cross-Strait social and cultural interaction.

On December 1, Taiwan will hold island-wide elections for legislators and local magistrates. Following the elections, President Chen has pledged to form a coalition government. In one possible scenario, a coalition comprising elements of the Kuomintang and the People’s First Party may produce a compromise on a pro-active policy toward the Mainland, particularly in the economic sphere. Beijing may then be persuaded that there are potential benefits to ending its policy of isolating the ruling party in Taiwan and there may be a window of opportunity for a breakthrough in the cross-Strait stalemate. An alternative outcome of Taiwan’s elections could be an alliance between the DPP and the recently formed Taiwan Solidarity Union, backed by former Taiwan President Lee Teng-hui, which would diminish the likelihood of new flexibility emerging in the policies of both sides of the Strait and reduce the odds of a resumption of cross-Strait dialogue in the near term.

In my view, the standoff in relations between Beijing and China will probably continue for another year or so. A leadership succession is already underway on the Mainland that is likely to distract Beijing’s attention along with other urgent domestic issues such as sustaining economic growth and preserving political and social stability. The 16th Party Congress will be held next fall that will begin the process of generational change in China. The selection of new party and government leaders will not be completed until the National People’s Congress in March 2003. The task of charting a course for China’s future, including its relationship with Taiwan, will likely fall, to China’s fourth generation leaders.

One positive sign for cross-Strait stability is the growing economic and social ties across the Strait. Two-way trade reached more than $30 billion dollars last year, of which Taiwan enjoyed a surplus of US$15 billion. Taiwan investors have poured some US$60 billion into the Mainland since the late 1980s. More than 300,000 Taiwan merchants, manufacturers and traders have chosen to reside on the Mainland. The impending entry of China and Taiwan into the WTO is likely to lead to a further substantial increase in cross-Strait trade. Although economic interdependence will not in itself resolve the political impasse, it is creating growing constituencies on both sides of the Strait that need stability and predictability.

Last week, Taipei lifted the controls on cross-strait economic and trade exchanges—including scrapping the $50 million ceiling on individual Mainland investment cases—which promises to further promote direct investment and trade. By ending the “no haste, be patient” policy that Lee Teng-hui put in place to limit investment in the Mainland and prevent China from gaining access to Taiwan's technologically sophisticated industries, Taiwan hopes that companies will send home more of their profits from China.

New regulations are expected to be issued soon that will determine which categories of technologies to allow into China. Some controls are likely to remain in place in the computer industry, for example on the manufacture of semi-conductors, as well as on infrastructure projects like bridges, and roads, which run the risk of helping the PLA deploy forces along the Straits. The Taiwan government also plans to urge businesses to adopt a policy of greater regional diversification to avoid excessive financial risk as well as over-dependence on the Mainland that may increase Taiwan’s political vulnerability. Government efforts to circumscribe investment in China are likely to run into the perennial determination of the business community to seek profit, however, and are unlikely to be any more successful in the future than they have been in the past.

The United States has a strong, abiding interest in the peaceful resolution of differences between Taipei and Beijing. We should continue to urge both sides of the Strait to resume dialogue as soon as possible. Destabilizing actions by either side should be discouraged. The U.S. should avoid inserting itself in between Taiwan and China and steer clear of suggesting solutions to their disputes. Most importantly, U.S. policy should remain clear and consistent to prevent misunderstanding and miscalculation in what remains a volatile and dangerous part of Northeast Asia.

VI. Key Issues and Trends

Mr. Chairman and members of the Subcommittee, I would like to close my remarks by highlighting several key issues and trends pertaining to China that have important implications for U.S. interests and policy and thus warrant continued close attention by Members of Congress.

U.S. and Chinese Security Interests, Converging or Diverging?

Facing a common threat of terrorism, Beijing and Washington have seized the opportunity to collaborate and cooperate to their mutual benefit. Whether this convergence of interests is sustainable and creates an environment in which differences in other areas of the relationship can be narrowed remains uncertain. China’s desperate hopes for better Sino-U.S. relations have masked the potential worries that the Chinese harbor about the U.S.-led war against terrorism. These include: 1. Transformation of U.S.-Russian relations and a possible compromise on the Anti-Ballistic Missile Treaty that allows the U.S. to proceed with development and deployment of missile defense systems; 2. Improved U.S. relations with Central Asian states on China’s borders with an enduring military/security feature; 3. Closer U.S. relations with Pakistan, China’s long-standing ally; 4. A strong U.S.-led global coalition that may bolster America's position as the sole superpower in a unipolar world.

China’s Pending Leadership Succession

Over the next two years, China's top leadership will change. President Jiang Zemin, Premier Zhu Rongji and National People's Congress Standing Committee Chairman Li Peng will retire, as will other lesser-known senior figures, both civilian and military. Vice President Hu Jintao, a party functionary who is largely unknown to the Chinese people as well as to the outside world, is likely to assume the important posts of party chairman and president. It remains uncertain whether Jiang Zemin will continue to exercise influence from the behind the scenes. Jiang is increasingly denigrated by the Chinese people for having accomplished little during his tenure and is under pressure to hand over power to the younger generation. A smooth and stable leadership transition is critical for China’s future. Failure to carry out this process smoothly will have profound implications not only for the Chinese people, but also for the region and for American interests.

Growing Nationalism and Anti-Americanism in China

Rising nationalism and anti-Americanism are creating a very volatile mix in China. The Chinese public views the United States as increasingly posing obstacles to China’s emergence as a great power and to the reunification of China and Taiwan. Events in recent years such as the 1999 accidental bombing by NATO planes of the Chinese embassy in Belgrade and the collision between a Chinese fighter jet and a U.S. surveillance plane last April are viewed as evidence of American hostility toward China. The Chinese leadership has not made the case to the Chinese people that it is in their country’s interest to cooperate with the United States. Most Chinese do not feel an urgent, direct threat from terrorism, as do many Americans. Chinese leaders will have great difficulty sustaining popular support for siding with the United States if the war in Afghanistan drags on with high civilian casualties and the global coalition begins to crumble.

Implications of China’s Entry into the WTO

While China's entry into the World Trade Organization will almost unquestionably have a positive impact on China’s economy and society in the long run, it should be recognized that in the short run WTO membership is bound to pose unprecedented economic and political challenges to the Chinese government. WTO entry will likely increase the pains of reform and intensify pressures on the government. The Chinese government's ability to cope with these short-term difficulties is not certain, due to an inherently weak political system and rising social and political stress in Chinese society. U.S.-China relations could also be challenged by increased friction in the areas of trade and human rights. During this inevitable period of wrenching transformation in China, the United States should continue to promote rule of law, democracy and human rights. I especially urge Members of Congress to support funding for rule of law initiatives in China. Helping China to create fair laws that conform to WTO’s regulations will bring huge benefits to the Chinese people.

China’s Military Buildup Opposite Taiwan

China’s military deployments against Taiwan proceed at a measured, but steady pace. Its buildup of short-range ballistic missiles (currently numbering 300-350, compared to 30-50 in 1995-96) is especially alarming. Beijing regards these missiles as essential to deter Taiwan from moving toward a declaration of independence. Taiwan has no reliable defense against these missiles. Chinese leaders have recently emphasized that they prefer to achieve reunification peacefully, but they refuse to renounce the use of force against Taiwan and have not abandoned the position that Taipei’s indefinite postponement of talks with the Mainland may invite a PRC attack. The U.S. must continue to provide for Taiwan with defense weapons, but ultimately security for Taiwan will remain elusive in the absence of a political solution. The arms race underway in the Taiwan Strait is ignored at our own peril.