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U.S.–CHINA RELATIONS

HEARING

BEFORE THE

SUBCOMMITTEE ON ASIA, THE PACIFIC, AND 

THE GLOBAL ENVIRONMENT

OF THE

COMMITTEE ON FOREIGN AFFAIRS 

HOUSE OF REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

MARCH 27, 2007

Serial No. 110–36

Printed for the use of the Committee on Foreign Affairs

(

Available via the World Wide Web: http://www.foreignaffairs.house.gov/
(II)

COMMITTEE ON FOREIGN AFFAIRS 

TOM LANTOS, California, Chairman 

HOWARD L. BERMAN, California 

GARY L. ACKERMAN, New York 

ENI F.H. FALEOMAVAEGA, American 

Samoa 

DONALD M. PAYNE, New Jersey 

BRAD SHERMAN, California 

ROBERT WEXLER, Florida 

ELIOT L. ENGEL, New York 

BILL DELAHUNT, Massachusetts 

GREGORY W. MEEKS, New York 

DIANE E. WATSON, California 

ADAM SMITH, Washington 

RUSS CARNAHAN, Missouri 

JOHN S. TANNER, Tennessee 

LYNN C. WOOLSEY, California 

SHEILA JACKSON LEE, Texas 

RUBE ́ N HINOJOSA, Texas 

DAVID WU, Oregon 

BRAD MILLER, North Carolina 

LINDA T. SA ́ NCHEZ, California 

DAVID SCOTT, Georgia 

JIM COSTA, California 

ALBIO SIRES, New Jersey 

GABRIELLE GIFFORDS, Arizona 

RON KLEIN, Florida 

VACANT 

VACANT 

ILEANA ROS-LEHTINEN, Florida 

CHRISTOPHER H. SMITH, New Jersey 

DAN BURTON, Indiana 

ELTON GALLEGLY, California 

DANA ROHRABACHER, California 

DONALD A. MANZULLO, Illinois 

EDWARD R. ROYCE, California 

STEVE CHABOT, Ohio 

THOMAS G. TANCREDO, Colorado 

RON PAUL, Texas 

JEFF FLAKE, Arizona 

JO ANN DAVIS, Virginia 

MIKE PENCE, Indiana 

THADDEUS G. MCCOTTER, Michigan 

JOE WILSON, South Carolina 

JOHN BOOZMAN, Arkansas 

J. GRESHAM BARRETT, South Carolina 

CONNIE MACK, Florida 

JEFF FORTENBERRY, Nebraska 

MICHAEL T. MCCAUL, Texas 

TED POE, Texas 

BOB INGLIS, South Carolina 

LUIS G. FORTUN ̃ O, Puerto Rico 

ROBERT R. KING, Staff Director 

YLEEM POBLETE, Republican Staff Director 

SUBCOMMITTEE ON ASIA, THE PACIFIC, AND THE GLOBAL ENVIRONMENT

ENI F. H. FALEOMAVAEGA, American Samoa, Chairman 

ADAM SMITH, Washington 

GARY L. ACKERMAN, New York 

GREGORY W. MEEKS, New York 

DIANE E. WATSON, California 

RUBE ́ N HINOJOSA, Texas 

ALBIO SIRES, New Jersey 

DONALD A. MANZULLO, Illinois 

DAN BURTON, Indiana 

DANA ROHRABACHER, California 

EDWARD R. ROYCE, California 

STEVE CHABOT, Ohio 

JEFF FLAKE, Arizona 

LISA WILLIAMS, Subcommittee Staff Director 

DAVID RICHMOND, Subcommittee Professional Staff Member 

NIEN SU, Republican Professional Staff Member 

VILI LEI, Staff Associate 
(III)

C O N T E N T S 

Page

WITNESS 

Thomas J. Christensen, Ph.D., Deputy Assistant Secretary, Bureau of East 

Asian and Pacific Affairs, U.S. Department of State ........................................ 4

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

The Honorable Eni F.H. Faleomavaega, a Representative in Congress from 

American Samoa, and Chairman, Subcommittee on Asia, the Pacific, and 

the Global Environment: Prepared statement ................................................... 3

Thomas J. Christensen, Ph.D.: Prepared statement ............................................. 7
(1)

U.S.–CHINA RELATIONS 

TUESDAY, MARCH 27, 2007

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON ASIA, THE PACIFIC,

AND THE GLOBAL ENVIRONMENT,

COMMITTEE ON FOREIGN AFFAIRS, 

Washington, DC. 

The subcommittee met, pursuant to notice, at 2:04 p.m. in room 

2200, Rayburn House Office Building, Hon. Eni F. H. Faleomavaega (chairman of the subcommittee) presiding. 

Mr. FALEOMAVAEGA. The hearing will come to order. I would like 

to first give my opening statement, and then hopefully Mr. Manzullo, my distinguished ranking member, will join us and have his 

opening statement also be made part of the record. 

United States-China trade has risen from $5 billion in 1980 to 

$343 billion trade relationship with our country. China is now the 

second largest trading partner of the United States, and the second 

largest source of imports, and the fourth largest export market. 

However, serious issues affect this relationship. Our trade deficit 

with China rose from $30 billion in 1994 to $232 billion last year, 

making this the largest United States bilateral trade imbalance. 

China’s current policy is also a point of contention with many analysts. They question that China’s policy of buying foreign reserves 

will influence the value of its currency against the dollar, constitutes a form of currency manipulation, intended to make its exports cheaper and imports into China more expensive than they 

would be under free market conditions. 

China’s record on intellectual property rights is considered by the 

United States to be one of the most serious and contentious deficiencies of the World Trade Organization’s obligations. As a global 

economic power, China’s rise in power is beneficial in many ways, 

not only to our own country, but also poses concern for American 

workers, especially as China moves from the low-cost, labor-intensive manufacturing system to a more advanced industry, such as 

the auto industry and high technology products. 

China’s growing demand for energy with a population of 1.3 billion people will definitely create new challenges as the United 

States also competes for these same resources. China also continues to make investments throughout Asia, Latin America, Africa, and even in the South Pacific. 

Two weeks ago during our subcommittee hearing on U.S.-Pacific 

relations, the State Department expressed concern that the People’s Republic of China and Taiwan are engaged in checkbook diplomacy to obtain favors from the South Pacific Island nations. I 
2

find it hard to believe that this administration would accuse China 

of checkbook diplomacy, when our own Government transferred billions of dollars in cash—and I mean cash, $100 bills—for distribution to the Iraqi people as part of our national policy that has now 

created a terrible mess in that region of the world. 

Personally, I want to commend the people and the leaders of 

China for providing real substantive assistance to the island nations of the Pacific. In his meeting in April last year with the island nation leaders, Chinese Premier Wen Jiabao announced that 

his country will establish about a $400 million trust fund, whereby 

Pacific Island nations can obtain low-interest loans to develop their 

agricultural, fishery, tourism, telecommunications, and aviation 

needs. China will also be offering to train approximately 2,000 

qualified persons coming from the island nations. 

I am saddened by the fact that United States foreign policy in 

the Pacific continues to be known throughout the region as one of 

benign neglect, and I am hopeful that given China’s activity in the 

region, our own State Department will follow soon to be more 

proactive in offering assistance to the Pacific Region. 

Regarding the environment, China’s rapid growth has had a serious impact on the environment, being that China has a heavy dependence on soft coal, and is now second only to the United States 

as the largest contributor of carbon dioxide emissions. Beijing has 

made efforts to address its environmental problems, and has undertaken to develop cleaner technology, including hydropower, 

projects such as the Three Gorges Dam, which is now in operation, 

I believe, but are also being criticized. I sincerely hope that I will 

be able to visit the Three Gorges Dam some day, and engage, have 

discussions on the benefits of the project, as well as the downside 

about how this project will affect China’s neighbors. Discuss also 

issues affecting global warming. 

Finally, I am interested today in determining where we are now 

as a result of China’s recent anti-satellite test, conducted on January 11, 2007. The test confirmed China’s long-suspected anti-satellite program capability. 

I am not a rocket scientist, but when a country like China is capable of firing a missile that can destroy a satellite traveling at 

18,000 miles per hour, I consider that advanced technology. 

The problem is that our country, along with the Russians, have 

already developed this technology since the 1980s. The fear, of 

course, is the potential of nations shooting at each other—call it 

warfare in space, if you will. Not only do we destroy spy satellites, 

but some satellites play a very important role in telling us where 

typhoons and hurricanes are coming from. 

I am curious if China is a member of the international agreements that address the serious problem of keeping aerospace open 

and safe for all nations to operate in. And I hope Secretary 

Christensen will let us know where China stands on this issue of 

aerospace and missiles and satellites. 

I will dispense with the opening statement of my distinguished 

colleague from Illinois, Mr. Manzullo, when he comes in. But I do 

want to say that on behalf of the subcommittee, I want to welcome 

Dr. Tom Christensen, who currently serves as Deputy Assistant 
3

Secretary in the Bureau of East Asian and Pacific Affairs, with a 

responsibility primarily toward China, Taiwan, and Mongolia. 

Dr. Christensen is on public service leave from Princeton University, where he is Professor of Politics and International Affairs, and 

the Director of the Princeton/Harvard China and the World Program. His research and teaching focuses on China’s foreign relations and the international relations of East Asia. 

Before arriving at Princeton 4 years ago, Professor Christensen 

taught at Cornell University and MIT. He received his Bachelor’s 

degree from Haverford—is that Haverford? I am still learning 

English. 

Mr. CHRISTENSEN. Haverford College. 

Mr. FALEOMAVAEGA. Haverford College, a Master’s in International Relations from the University of Pennsylvania, and his 

Doctorate for Political Science from Columbia University. I guess 

Professor Christensen would rather stay with the Ivy League 

schools, is that what they call them? You should come to UC 

Berkeley; you might learn something there, too. 

Professor Christensen has served on the board of directors executive committee of the National Committee on U.S.-China Relations. 

He is a life member of the Council on Foreign Relations. And as 

an academic, he is consulted often with the U.S. Government, and 

in 2002 was presented with a Distinguished Public Service Award 

by the U.S. Department of State. 

The subcommittee is truly honored to have you, Secretary 

Christensen, with us. And I would like now to give you a chance 

to share with us your comments and your observations concerning 

this important country, the People’s Republic of China. Please proceed. 

[The prepared statement of Mr. Faleomavaega follows:]

PREPARED STATEMENT OF THE HONORABLE ENI F.H. FALEOMAVAEGA, A REPRESENTATIVE IN CONGRESS FROM AMERICAN SAMOA, AND CHAIRMAN, SUBCOMMITTEE ON

ASIA, THE PACIFIC, AND THE GLOBAL ENVIRONMENT

US-China trade has risen from $5 billion in 1980 to $343 billion in 2006. China 

is now the second largest trading partner of the US, the 2nd largest source of imports, and the 4th largest export market. 

However, serious issues affect the relationship. Our trade deficit with China rose 

from $30 billion in 1994 to $232 billion in 2006 making this the largest US bilateral 

trade imbalance. 

China’s currency policy is also a point of contention with many analysts suggesting that China’s policy of buying foreign reserves to influence the value of its 

currency against the dollar constitutes a form of currency manipulation intended to 

make its exports cheaper and imports into China more expensive than they would 

be under free market conditions. 

China’s record on intellectual property rights is considered by the US to be one 

of its most serious deficiencies to its World Trade Organization (WTO)’s obligations. 

As a global economic power, China’s rising power is beneficial in many ways to 

the US but also poses concern for American workers especially as China moves from 

low-cost labor intensive manufacturing to more advanced industries such as autos 

and high technology products. 

China’s growing demand for energy with a population of more than a billion people will create new challenges as the US also competes for these resources. 

China also continues to make investments in Africa and the South Pacific. Two 

weeks ago, during our subcommittee hearing on US-Pacific relations, the US State 

Department expressed concern that the People’s Republic of China and Taiwan are 

engaged in ‘checkbook diplomacy’ to obtain favors from South Pacific Island nations. 

I find it hard to believe that this Administration is accusing China and Taiwan of 

checkbook diplomacy while our own government transferred billions of dollars in 
4

cash for distribution to the Iraqi people as part of our national policy that has now 

created a terrible mess in that region of the world. 

Personally, I want to commend the people and leaders of China for providing real, 

substantive assistance to the island nations of the Pacific. In his meeting in April 

last year with the island nation leaders, Chinese Premier Wen Jibao announced 

that his nation will establish about a $400 million trust fund whereby Pacific island 

nations can obtain low interest loans to develop their agricultural, fishery, tourism, 

telecommunication and aviation needs. China will also be offering training opportunities for some 2,000 qualified persons from among island nations. 

I am saddened by the fact that US foreign policy in the Pacific continues to be 

well known throughout the region as one of ‘benign neglect’ and I am hopeful that 

given China’s activity in the region our own US State Department will follow suit 

and be more pro-active in offering assistance to the Pacific region. 

Regarding the environment, China’s rapid growth has had a serious impact on the 

environment being that China has a heavy dependence on soft coal and is now second only to the United States as the largest contributor to CO2 emissions. 

Beijing has made efforts to address its environmental problems and has undertaken to develop cleaner technology including hydro-power. Projects such as the 

Three Gorges Dam are underway but are also being criticized. It is my intention 

to visit the Three Gorges Dam in the very near future and engage in discussions 

about the benefits of the project as well as the downside about how this project may 

be affecting China’s neighbors. 

Finally, I am interested today in determining where we are now as a result of 

China’s recent anti-satellite test conducted on January 11, 2007. The test confirmed 

China’s long suspected anti-satellite program and capability. But, given that this 

test followed three previous ASAT tests, did the test show a threat to the United 

States or was China responding to the Bush Administration’s National Space Policy 

of 2006? 

I welcome Deputy Assistant Secretary Christensen and I look forward to his remarks. However, first I would like to recognize our Ranking Member for any opening remarks he might have.

STATEMENT OF THOMAS J. CHRISTENSEN, PH.D., DEPUTY ASSISTANT SECRETARY, BUREAU OF EAST ASIAN AND PACIFIC 

AFFAIRS, U.S. DEPARTMENT OF STATE 

Mr. CHRISTENSEN. Thank you. Chairman Faleomavaega, Representative Manzullo, and the other distinguished members of the 

subcommittee, I thank you for inviting me to discuss with you 

today the extremely important topic of United States-China relations. It is an honor for me to be here. 

I have submitted a lengthy written testimony, and this afternoon 

I will make a brief set of comments about broad themes in the 

United States-China relationship. And I look forward to your comments and questions. 

As President Bush and Secretary Rice have said on multiple occasions, we seek a candid, cooperative, and constructive relationship with China. In pursuing such a relationship, we recognize our 

significant common interests, and we seek to expand areas of cooperation. 

We also address frankly our very real differences, particularly on 

issues like human rights, economic imbalances, and military affairs. 

We engage with the Chinese on a multitude of dialogues. Two of 

the most important of these are the Senior Dialogue, led by Deputy 

Secretary Negroponte of the State Department, and the Strategic 

Economic Dialogue under the leadership of Secretary Paulson, at 

Treasury. 

The former dialogue, the Senior Dialogue, focuses on long-term 

security in political affairs, while the latter, the Strategic Economic 

Dialogue, deals with long-term cross-cutting economic issues. 
5

In all of these dialogues we emphasize three things. First, United 

States-China relations are very far from a zero-sum game. We have 

a lot of common interests to pursue. 

Second, we believe that what we ask of China in these dialogues 

is not only good for the United States and for the international 

community, but for China itself as it looks toward its long-term future. 

Third, we seek more than just a stable bilateral relationship. We 

seek a greater cooperation in tackling common problems in third 

areas of the world, both within the region, and outside of the region; and we believe that China will benefit greatly itself by helping stabilize the international system from which it benefits so 

greatly. 

First let me say something about our engagement on security affairs and politics. On North Korea we have had very deep cooperation in the Six-Party Talks process. We have worked closely with 

China in drafting and passing all the key measures related to 

denuclearization of the Korean Peninsula, including two U.N. Security Council resolutions, 1695 and 1718, a September 19, 2005, 

joint statement, and the February 13, 2007, initial action plan. 

I have studied Chinese foreign policy most of my adult life, and 

I think it would have been very hard to imagine just several years 

ago that China would be cooperating with the United States so 

robustly in a multilateral framework like the Six-Party Talks to 

help bring about denuclearization of the Korean Peninsula, and 

passing and approving in the U.N. Security Council legislation that 

sanctions North Korea for its behavior. 

On Iran, the situation is more mixed. We remain concerned that 

China sends mixed signals to the Iranian regime at a time that it 

is acting in violation of its international commitments regarding 

nuclear weapons development. In particular, we are concerned 

about China seeking new energy deals with Iran under those conditions. 

Despite those concerns, China has signed on to U.N. Security 

Council Resolution 1696, 1737, and most recently this past weekend, U.N. Security Council Resolution 1747. All of these measures 

are designed to pressure Iran back into compliance with the international community’s demands that it halt its highly enriched uranium production processes. 

We look forward to further cooperation with China on this key 

issue in the future with China, and we urge China to stop sending 

mixed signals to the Iranian regime. 

On Sudan, we really need China to use its very significant influence with the Bashir Government in Khartoum to accept a robust 

hybrid United Nations-African Union peacekeeping force to help 

the people of Darfur, and protect the people of Darfur. We have 

seen some positive movement on this score in recent months, particularly from China’s permanent representative at the United Nations, Wang Guangya, who has encouraged the Bashir Government 

to accept the U.N. three-phase plan in accord with the Addas 

Ababa Agreement of late last year. 

But we need China to do much more on this account. We need 

to get those peacekeepers into Sudan to protect the people of 
6

Darfur, and we need China to use its significant influence to help 

bring about that outcome. 

I would like to say something about our economic dialogues. 

Under the umbrella of the Strategic Economic Dialogue, we pursue 

many economic dialogues with China. And in those dialogues, we 

do so in the spirit of emphasizing our two nations’ shared interests 

in economic engagement. 

The record since China’s accession to the World Trade Organization in 2001 is a good example of why economic relations between 

the United States and China are not a zero-sum game. 

Since 2001 China’s economy has grown quickly, which is obviously to the benefit of China, and United States exports to China 

have grown five times faster than our exports to the rest of the 

world. In 2006, United States exports to China were approximately 

55 billion U.S. dollars, and they were up 32% over 2005. This is 

compared to a growth in 18% of our imports from China. 

We do address our economic imbalances, which we take very seriously. And as Chairman Faleomavaega referenced, there is a 

$232 billion trade deficit between the United States and China, 

and we take that very seriously. We deal with it in the Strategic 

Economic Dialogue and in other forums in which we engage the 

Chinese, and we try to address these issues in strategic long-term 

ways by addressing issues such as the need for greater flexibility 

in China’s currency, impressing upon the Chinese that it is in their 

benefit and it is in our benefit for them to have better IPR protection—intellectual property rights protection—inside of China, and 

greater international access to China’s financial markets. 

We also encourage China to place its future growth more solidly 

on domestic demand. Such an outcome would provide greater opportunities for United States businesses in China, and would also 

create more stability in China’s long-term economic growth. So 

again, this would be a win-win situation. It would be a positivesum outcome for both countries. 

We have many dialogues with China on energy and the environment, including the Strategic Economic Dialogue. And as I am sure 

you know, Secretary Paulson is a devoted environmentalist and 

brings great passion to this topic. 

We push for cleaner energy. China currently provides 70% of its 

energy by burning coal, and we push China to consider the use of 

cleaner coal technologies and technologies that would provide 

greater efficiency in China’s energy use. 

We also raised the long-term theme of energy security for China. 

We urge China to accept the commonly held wisdom that the best 

way to have energy security is through a free-flowing marketplace 

for energy resources around the world, and the development and 

proper use of strategic petroleum reserves, rather than heavy reliance on equity shares in energy resources in nations with dangerous regimes. 

We want China to have greater interaction with the International Energy Agency, and we seek greater coordination between 

China and the other net consumers in the international marketplace. 

There are some real problems, and we deal with these frankly, 

both through our dialogues, and we do so using other measures 
7

when we consider it prudent and necessary to adopt those other 

measures. 

As I suggested, China’s record generally since joining the WTO 

has been positive, and has produced positive results. But there are 

some real persistent problems that we take very seriously. 

To just address one of those problems, China’s Government subsidies to firms that compete with United States firms and other 

firms drew a WTO complaint. China has already begun responding 

to that WTO complaint. We will see if China continues to do so. 

We also addressed the very real problems in intellectual property 

rights protection, which cost American and other businesses quite 

a bit of money. And as I suggested before, it is not in China’s longterm interest, as China needs to develop an innovation economy of 

its own; therefore, it will need intellectual property rights protection moving forward. 

We take human rights and religious freedom extremely seriously, 

and we raise this in almost every dialogue that we have, every 

meeting that we have with the Chinese. We raise both individual 

cases, and we raise systemic problems in the Chinese system, including reform through labor and other policies at home in China. 

And we take this issue extremely seriously. 

We also remain concerned about the lack of transparency in China’s fast-paced military modernization. We have sought more dialogue with China at a very high level to engage the Chinese on 

what goals they have for this modernization, where is this process 

leading, and where are we going to be down the road if this modernization process continues. And we would like more transparency 

about that. 

In particular, the ASAT tests that Chairman Faleomavaega referred to earlier, the direct-ascent anti-satellite weapons test by 

China underscores the lack of transparency in that military modernization process. We seek to engage the Chinese at a high level 

on such issues. 

I will close by saying we particularly remain concerned about the 

fast-paced military buildup across from Taiwan, which we consider 

a force for instability in cross-strait relations. 

We remain steadfastly supportive of our One-China policy, based 

on the Three Communique ́s and the Taiwan Relations Act, and we 

believe that policy has been a force for stability under often difficult circumstances in the past several years. We believe that policy is constructive, and we will stay with that policy. 

I will finish with those comments, and I look forward to your 

questions and comments. Thank you very much. 

[The prepared statement of Mr. Christensen follows:]

PREPARED STATEMENT OF THOMAS J. CHRISTENSEN, PH.D., DEPUTY ASSISTANT SECRETARY, BUREAU OF EAST ASIAN AND PACIFIC AFFAIRS, U.S. DEPARTMENT OF

STATE

Chairman Faleomavaega, Representative Manzullo, Members of the Subcommittee, thank you for inviting me to discuss with you the extremely important 

topic of U.S.-China relations. 

President Bush has stated that he welcomes a China ‘‘that is peaceful and prosperous.’’ And, he has called for a U.S.-China relationship that is ‘‘candid, constructive, and cooperative.’’ The relationship as a whole has a solid foundation and has 

improved in recent years in some key areas of cooperation. That said, we continue 

to engage China candidly where we have real differences and concerns, including 
8

in areas such as human rights, trade, and military affairs. We engage China 

through a broad array of dialogues. In all of our interactions with China, we seek 

to further U.S. national interests by encouraging China to adopt measures at home 

and abroad that will benefit the United States, the international community, and 

China itself as it seeks long-term, stable development and greater integration into 

the international economy and multilateral institutions. Rather than trying to contain China, we are trying to help shape its choices as it rises in influence so that 

China plays a responsible and stabilizing role in the international system. Despite 

some areas of real friction, U.S.-China relations are far from a zero-sum game, and 

if we manage the relationship well on both sides of the Pacific, we should be able 

to keep it that way. 

There is little to debate in the proposition that China is a growing power—a leader in the Asia Pacific region with significant influence around the globe. We witnessed China’s impact on the international system late last month: A sharp drop 

in the Shanghai stock market helped set off a wave of stock selling around the 

world. Fortunately, the global sell-off was a short-term phenomenon, but the Chinese market drop was a factor in triggering it, something hard to imagine just a 

few years ago. That event reminds us that what now happens in China can affect 

us and the rest of the world. The stock sell-off in Shanghai should serve as a lesson 

for China, as well. To ensure continued prosperity, China must continue down the 

path of reform of its financial and other sectors in its economy, while also embracing 

change in its society. More broadly, China—having integrated into and benefited 

from the global system—must ensure that its actions and its policies are good not 

just for China, but also for the world community, on which China’s economic 

progress so heavily depends. 

After almost 30 years of unprecedented, increasingly market-driven, economic 

growth, China has become one of the world’s largest economies. It is now the world’s 

third-largest trading nation. China has become one of the world’s top manufacturers. Its middle class seeks all the material benefits of a modern economy. The flow 

of its overseas direct investment increased 81 percent in 2005 to $7 billion, according to China’s Ministry of Commerce. 

It is also important, however, to note that China faces enormous challenges at 

home. In general, it remains a poor country, with per-capita GDP about one twentyfifth that of the United States. The income gap between rural and urban residents 

is large and widening, and there is significant social unrest, particularly in semirural areas surrounding China’s booming industrial centers. By the Chinese government’s own count, there were some 87,000 disturbances of public order in China in 

2005. Environmental degradation is widespread and has only belatedly emerged as 

a public issue. More than 300 million Chinese do not have access to clean water. 

The country lacks an adequate social safety net, amid an aging society. It is deficient in the energy resources and infrastructure it needs to fuel continued economic 

growth. China’s leaders are struggling to root out systemic corruption. 

The choices that Chinese leaders make to promote continued economic growth, 

while addressing the very real challenges at home, will have repercussions around 

the globe. China must address its growing global trade surplus and increase the 

flexibility of its currency, to ensure the health of its own economy as well as that 

of the world. China’s voice matters on key international issues, such as ensuring a 

denuclearized Korean Peninsula, stemming Iran’s nuclear weapons ambitions, and 

ending the violence in Darfur. China also needs to play a positive role in international efforts to promote energy security; combat terrorism, proliferation, and organized crime; and safeguard against pandemic disease. And, China has increasing 

interests in areas where it did not have a significant presence before, such as Africa, 

the Middle East, and Latin America. 

As China’s integration into the international system deepens and as its diplomatic 

influence increases, it becomes even more important that we encourage China to 

join us in actions to strengthen and support global security and prosperity for both 

our countries and the world. Our goal is to help China frame its choices, to encourage it to act responsibly in a manner commensurate with its growing wealth, stature, and influence. It is also important that we address the issues that divide us 

in a forthright and constructive manner. With that goal in mind, we have dozens 

of ongoing dialogues with China, on issues ranging from international security to 

investment regulations, to rule of law, to health care to nonproliferation to science 

and technology cooperation. Two of the most important are the Senior Dialogue, 

which focuses on broad political and strategic themes and is led by Deputy Secretary of State Negroponte, and the Strategic Economic Dialogue, led by Treasury 

Secretary Paulson. Our discussions are frank and candid, and where we have found 

common ground, we have made progress. Where we have differences, we encourage 
9

China to understand our concerns and change its behavior in ways that will advance not only our interests, but also its own. 

When our differences cannot be resolved through dialogue, we turn to other mechanisms available to us, such as seeking resolution of trade disputes through the 

World Trade Organization or imposing sanctions on Chinese companies that sell to 

other countries materials and technology for weapons of mass destruction. We press 

China hard on matters we believe are fundamental to the world’s security and 

peace. 

We maintain a robust presence throughout Asia and strong bilateral alliances in 

the region. This posture is the bedrock of our Asia policy, and it is fully in keeping 

with our efforts to encourage China to engage responsibly in the international community. Through our diplomatic interaction and in our regional presence, we provide strong incentives for Beijing to use its rising influence in ways that will benefit 

China, the region, and the world. 

Please allow me to outline the areas in which we are working with China to advance global peace and security, to strengthen respect for human rights and religious freedom, and to foster our countries’ economic prosperity. 

Toward global peace and security 

The United States encourages China to work with us to build and strengthen the 

global system and advance global peace and security. We appreciate China’s positive 

contributions, and we urge China to do more. China has played a critical role as 

host of the Six-Party Talks aimed at achieving a denuclearized Korean Peninsula. 

China was instrumental in brokering the September 19, 2005, Joint Statement, 

which, when implemented, will get North Korea out of the nuclear business. In February of this year in Beijing, China again played a key role in helping get North 

Korea back to the Six-Party Talks and reaching agreement on the Initial Actions 

plan. China has supported strong measures, including sanctions, in the United Nations to press North Korea to end its nuclear program and has been key to getting 

Pyongyang to negotiate on a multilateral basis. The Administration is committed to 

continuing to work closely with China to achieve North Korea’s complete, irreversible, and verifiable denuclearization; adopt more responsible behavior; and, implement the September 2005 Joint Statement. 

As Assistant Secretary Hill has pointed out, the Six Party Talks process is focused 

on denuclearization but also has broader goals. Through working groups and the 

prospect of a future Northeast Asia security mechanism following on from a successful Six-Party process, the talks aim to reduce mistrust and tensions between former 

enemies, including China and Japan, over the long haul. 

China shares our assessment that Iran must not obtain nuclear weapons capability. Last week, China joined the United States and other P–5 members in urging 

quick approval by the UN Security Council of a draft resolution that would impose 

additional Chapter VII sanctions on Iran as a result of its failure to comply with 

UNSCR 1737, which required Iran to completely and verifiably suspend its uranium 

enrichment activities. We also expect China, as a permanent member of the UN Security Council, to expand its efforts to increase targeted pressure on the Iranian regime through bilateral financial measures, by increasing efforts to block transit of 

proliferation sensitive materials to and from Iran, including between Iran and North 

Korea, and by ending its unhelpful weapons sales to Tehran. On this last point, we 

expect China will implement its obligations under UNSCR 1747 to curtail sales of 

certain arms equipment to Iran. We, of course, remain concerned over reports that 

Chinese companies may be moving toward investments in Iran’s oil and gas sector. 

We have made clear to Beijing that these types of investments, along with continued 

arms sales, send the wrong signal to the Iranian regime and raise serious concerns 

under U.S. law. 

China needs to do more on vital multilateral issues. This is particularly true on 

Sudan, where China, with some justification, is seen as Khartoum’s patron and benefactor. We appreciate China’s public support of the conclusions of the November 16 

high-level consultations in Addis Ababa and the three-phase plan for the deployment of a robust UN/AU hybrid peacekeeping force under UN command and control. 

At the same time, we expect China, which purchases the majority of Sudan’s oil exports, to do much more to exercise its significant leverage with Khartoum to persuade President Bashir to unequivocally accept the UN/AU force. Such action has 

gained urgency with Bashir’s March 6 letter to UN Secretary-General Ban Ki-moon, 

which represents a rejection of the Addis Ababa conclusions and commitments 

under the Darfur Peace Agreement. 

There are other areas where we have differences. China has resisted international 

efforts to put pressure on the military regime in Burma, vetoing a related UNSC 

resolution. It has a mixed record on efforts to stem the proliferation of weapons, es-
10

pecially those related to missile technology and weapons of mass destruction. It 

needs to do more to rein in the proliferation activities of its own companies. We, 

and its neighbors, view with increasing concern China’s lack of transparency on the 

pace, scope, and direction of its military modernization. Its January 11 test of a direct ascent anti-satellite weapon—a test that China still has not sufficiently explained—highlighted these concerns. The development and deployment of such an 

offensive system appears inconsistent with China’s stated goal of ‘‘peaceful rise.’’ We 

also remain deeply concerned about the growing arsenal of missiles and other military systems arrayed against Taiwan, as well as Beijing’s refusal to renounce the 

use of force against Taiwan. We believe these circumstances constitute important 

factors for instability in cross-Strait relations. We continue to urge China to reduce 

those threats and increase cross-Strait dialogue, including direct talks with Taiwan’s democratically elected leaders. At the same time, we remain mindful of our 

obligations under the Taiwan Relations Act (TRA) to make available to Taiwan defense articles and services necessary for Taiwan to maintain a sufficient self-defense. We will continue to implement our successful and quite stabilizing one-China 

policy—based on the three U.S.-China Joint Communique ́s and the TRA. We insist 

on a peaceful resolution of cross-Strait differences; we do not support Taiwan independence; and we oppose unilateral changes to the status quo by either side of the 

Taiwan Strait. 

With China seeking markets for its products and looking for new or untapped 

sources of energy and other raw materials to meet growing domestic demand, its 

involvement in Africa and other regions has broadened and intensified. While we 

welcome many positive features of this engagement, we also have expressed our concerns about potentially negative impacts of China’s approach to development assistance and lending. We are concerned that China’s stepped-up lending to developing 

countries risks saddling them with additional debt, and we would like China to do 

more to coordinate its aid programs with other donors. In addition, we are troubled 

by China’s continuing close relations with problematic regimes, relations that may 

be encouraged by China’s legitimate need for energy and resources, but that do not 

always take into account larger ramifications for peace and security. Sudan and 

Iran are obvious examples, but we could point to Beijing’s relations with Zimbabwe 

and Venezuela as well. We encourage China to become involved overseas in ways 

that enhance rather than undercut international efforts to nurture good governance, 

democracy, human rights, and sustainable growth. 

These issues—together with human rights, which I will address later—are among 

the important matters that we discuss in the Senior Dialogue, which grew out of 

a commitment made in 2004 between President Bush and President Hu to develop 

a regular forum to discuss longer-term political and security issues. We have held 

three rounds of the Senior Dialogue, and Deputy Secretary Negroponte is scheduled 

to host the next round in Washington in June. The dialogue allows both sides not 

only to discuss the pressing issues of the day, but also to take a broader look at 

our relations and discuss how we might better cooperate and coordinate actions in 

various regions of the world and on transnational issues that affect us all. In addition, the State Department has held regional sub-dialogues under the Senior Dialogue framework. 

As we focus on China’s rising power, we must not neglect mention of China’s relationship with its western and southern neighbors, India, the nations of Central Asia, 

and ASEAN. We find it helpful that India and China are talking about a range of 

issues, including economic cooperation, combating terrorism, and efforts to settle 

outstanding border disputes. China also has sought improved relations with Central 

Asian countries and has supported regional efforts to promote greater economic cooperation and security, goals we support. China offers the potential to serve as an 

economic partner, particularly by providing an additional route for the export of the 

region’s energy to world markets. We encourage China to work jointly with the 

United States and others to facilitate new trade links that will further integrate 

Central Asian countries into the global economy. We support World Trade Organization membership for all Central Asian countries and believe China, as a member, 

can help to encourage reforms and policies consistent with its principles. As with 

China’s robust multilateral and bilateral engagement with Southeast Asia, we do 

not perceive a zero-sum competition between Chinese and American diplomatic efforts in South and Central Asia. 

Respect for human rights 

The United States and China engage in frank exchanges of views on issues on 

which we have strong disagreements. This is particularly true in regards to human 

rights. We urge China at every opportunity to respect the basic human rights of its 

people, rights that not only are provided in China’s own constitution, but also are 
11

internationally recognized standards. We have expressed our concerns about the 

monitoring, harassment, intimidation, and arrest of journalists, Internet writers, defense lawyers, religious and social activists, and human rights defenders seeking to 

exercise their rights under Chinese and international law. We also have consistently 

called on China to respect its people’s right to speak, assemble, and publish; worship; and plan their families as they choose, free of coercion. We will continue to 

raise these and other issues of concern, as well as individual cases of political prisoners. We also will support efforts by China and its people to engage in systemic 

reform, through our rule of law and civil society programming. 

Under Secretary Dobriansky recently testified on our ongoing efforts to promote 

greater dialogue by the PRC government with the Dalai Lama and his representatives and to safeguard Tibet’s unique cultural and religious heritage. Let me simply 

reiterate that Tibet issues remain important human rights and religious freedom 

concerns for the United States, as does the treatment of minority communities in 

areas such as Xinjiang. 

On all of these fronts, our message is clear: Whenever China restrains its people’s 

freedoms, it limits their ability to achieve their full potential and to contribute to 

the ‘‘harmonious society’’ that President Hu has invited all Chinese citizens to build. 

China cannot be considered a leader in the international system until it develops 

a more open, transparent, and free society, unleashing the innovation and creativity 

of its own people. There also are clear international benefits for China. Much has 

been said and written about China’s ‘‘peaceful rise.’’ However, without a more open 

and democratic domestic system, based on the rule of law, and, therefore, a predictable political environment, it will be more difficult for China to achieve and maintain the internal stability and the trust among its neighbors necessary to achieve 

a smooth transition to a leading role in the international community. 

Fostering economic prosperity 

Together, the United States and China accounted for more than 50 percent of the 

world’s economic growth over the last five years. Increasingly, China’s continued 

economic success is tied to our own success. Since joining the WTO, China has been 

our fastest growing major export market, demonstrating the benefits of engagement 

with China on trade issues. U.S. exports to China grew 32 percent last year, while 

imports from China grew 18 percent. Clearly, our companies are finding increasing 

opportunities in China, and these provide important economic benefits to U.S. investors, U.S. producers that benefit from low-cost inputs to production, American workers in companies that are increasing profits and competitiveness by capitalizing on 

the efficiencies involved in our economic interactions with China, and consumers 

who benefit from the low cost of goods. A growing number of U.S. firms are seeking 

to take advantage of the opportunity to provide goods and services to the rapidly 

increasing Chinese middle class. 

That said, there are significant challenges in the U.S.-China economic relationship, brought about by China’s incomplete transition to a market economy and underscored by our $232.5 billion trade deficit. To meet those challenges, we work with 

China on economic and trade issues in a number of forums. The high-level Strategic 

Economic Dialogue addresses the entire range of our economic relations and how 

our respective policies affect the global economy as a whole. Other dialogues, including the Joint Commission on Commerce and Trade and the State Department’s dialogue with China’s National Development and Reform Commission, continue to address important issues and produce significant accomplishments. The essential goal 

is to ensure that the benefits of our growing economic relationship are fairly shared 

by citizens of both countries. 

In many of our economic dialogues, we address some of the underlying causes of 

the imbalances in our economic relations, and we do so in ways that we believe will 

benefit not only the United States, but also China itself over the longer run. For 

example, China needs to do more to protect and enforce intellectual property rights. 

Its failure to do so not only causes our companies to incur millions of dollars in 

losses through counterfeiting and piracy and raises health and safety concerns, but 

also deters certain foreign investments in China and removes incentives for its own 

industries to innovate. In the near term, we continue to encourage China to increase 

the flexibility of its exchange rate and strengthen and reform its financial markets. 

As Secretary Paulson has said, ‘‘Strengthening and reforming financial markets will 

ultimately allow the Chinese to freely float their currency.’’

Perhaps the best long-term answer to large-scale deficits lies in the long-term restructuring of China’s economy, so that domestic demand, not exports, will fuel its 

growth. Chinese leaders have outlined the goal of weaning their country off excessive dependence on exports and fixed-asset investment and toward a more consumption-based society. China also must face up to serious domestic problems, including 
12

the need for a public/private social safety net with health and retirement programs 

that would instill in Chinese families the confidence to spend more and save less. 

But, as Secretary Paulson has argued, Beijing is moving cautiously and perhaps too 

slowly as it is attempts to rebalance the economy. 

We work with China to promote balanced and strong growth and prosperity in 

our two nations. We seek ways to ensure that our economic relationship is mutually 

beneficial. At every opportunity, we remind the Chinese that their market-opening 

reforms not only are beneficial to us and the world, but also serve their own longterm interests. Staying on the reform path will ensure the continued growth and 

stability of their economy—something we underscore when we see Beijing backslide 

or pursue mercantilist-style policies. 

Through this cooperative approach, we have seen positive results. Tomorrow, 

United Airlines will launch the first direct flight between Washington and Beijing—

a symbol of the increased interaction between our countries. To further expand civil 

aviation and tourism, we have been pressing for an ‘‘open skies’’ agreement within 

the Strategic Economic Dialogue. 

We are working in other ways to increase exchanges between China and the 

United States, for example, making our system for processing visa applications as 

efficient as possible, in a manner that facilitates legitimate travel by China’s rapidly 

growing middle class, yet maintains security. Meanwhile, China needs to bring 

home the more than 40,000 Chinese who have been convicted of crimes or are in 

the United States illegally and have received final orders for their deportation. 

We also are witnessing progress in our cooperation on energy and environment 

issues. The United States and China are the world’s largest energy consumers, both 

heavily dependent on coal and oil. We both understand the need to work together 

to ensure stable energy markets and to support energy-efficient and cleaner technologies and the common goal of energy security. We encourage China to continue 

its cooperation with the International Energy Agency and coordinate with IEA and 

other major consuming countries as it develops its Strategic Petroleum Reserves, 

which will contribute to global energy security and minimize shocks to the energy 

market. China’s commitment to clean energies, including nuclear power, was demonstrated in its decision in December to purchase four nuclear reactors from Westinghouse in a deal valued at between $8 billion and $10 billion—a deal signed, not 

coincidentally, in conjunction with the Strategic Economic Dialogue in Beijing in December. China has said it plans to build 30 more reactors over the next 15 years. 

China’s dependence on industrial expansion to achieve fast economic growth has 

hurt its environment. Chinese leaders have begun to take notice, but solutions that 

would improve energy efficiency and reduce pollution have moved more slowly than 

China’s recent economic growth. A shift to market pricing in China’s energy sector—

including the elimination of remaining price controls on fuels and liberalization of 

electricity prices—would spur more efficient use of energy. 

More broadly, China’s leaders have come to recognize that inefficient energy use 

restrains the nation’s economic growth. China is starting to address pollution issues 

as it prepares to host the 2008 Olympics in Beijing. Through our dialogues, we are 

working with them on ways to tackle environmental problems throughout China. 

We also believe that American firms, with world-leading technologies, can profitably 

work in China on these problems. 

We are engaged with China in a multitude of bilateral and multilateral forums 

dealing with energy and the environment. China brought together the United 

States, South Korea, Japan, and India in the first Five-Party Energy Ministerial in 

December, which addressed energy stability, security, and sustainability. We are 

partners in the Asia-Pacific Partnership on Clean Development and Climate, a collaborative effort with the private sector to implement projects that will improve energy security, air pollution, climate change, and efficiency in a variety of energy-intensive sectors. We work together in the APEC Energy Working Group in pursuit 

of the goals of the APEC Energy Security Initiative. 

Although we believe that we have many common interests with China, we are realistic and recognize that dialogue does not always produce desired results. So, 

whenever appropriate, we take tough action to resolve our economic and trade disputes with China. Under this Administration, 31 anti-dumping orders have been 

issued against China. We requested consultations with China through the WTO 

over China’s discriminatory treatment of imported auto parts and its use of prohibited subsidies. A month after filing our complaint on subsidies, China abolished one 

of the disputed subsidy programs, and we hope China will follow with action on the 

remainder soon. In addition, USTR is in discussions with China about our concerns 

over China’s compliance with its WTO obligations in the area of IPR enforcement. 
13

Conclusion 

We seek China’s continuing integration as a responsible member of the global 

economy and international system. With China’s rise to global prominence, its leaders must heed how their security, economic, environmental, and social policies affect 

not just China’s population of 1.3 billion, but the 5.2 billion people beyond its borders. As a regional power with increasing global reach, China will be expected to 

use its increasing influence to support international efforts to safeguard peace and 

security. As a mature trading partner, China will be expected to play a greater role 

in strengthening the global trading system—including the Doha round. We continue 

to work hard to ensure China recognizes the benefits of these roles. 

We also work hard to ensure that China recognizes the mutual benefits of cooperation. I have outlined this afternoon the numerous areas where we cooperate. 

I also have identified the serious differences we continue to discuss with the Chinese. We seek to build a mature relationship with China based on an increasing 

sense of mutual trust and to confront and resolve our differences. Whenever possible, we will continue in the spirit of cooperation in our ties with China, aiming 

for a relationship that is productive and prosperous and benefits not just the United 

States and China, but also the world. 

Thank you for the opportunity to speak before you. I would be pleased to take 

your questions.

Mr. FALEOMAVAEGA. Thank you very much, Secretary 

Christensen. I am not a mathematician, but I was just trying to go 

through the numbers here. 

Our nation’s history now evolves in some 220-some years since 

the Revolution of 1776, and we are barely above 300 million population. Yet, when the People’s Republic of China was founded in 

1949, they had 400 million people that they had to feed and provide for, even though it was under the regime of Mao Tse Tung. 

And that is some 58 years that this country has had to move from 

that period of 400 million people they had to provide for. We are 

barely 300 million as a population that have to contend to do these 

things. 

I wanted to ask you on the situation of the relationship between 

China and Taiwan, I know this has always been one of the most 

contentious issues that we, ourselves, even here in the Congress 

have had to contend with in trying to figure where, in your best 

opinion, are we headed for. 

Because by my last reading through some of the media reports, 

it appears that the President of Taiwan, President Chen, had recently made a statement that they want to become independent 

from China. And of course, this is almost sacrilege as far as the 

Chinese leaders are concerned. 

I wanted to know, if there is such a strong movement within Taiwan that they want to become independent and as a sovereign 

country, separate and apart from China, are they serious about 

this that President Chen has announced recently that they want to 

become independent? 

Mr. CHRISTENSEN. Well, our position on this is that we look to 

President Chen to fulfill his commitments to President Bush and 

to the international community that he has offered in both of his 

inaugural addresses. And as a State Department spokesperson said 

recently, we considered his recent speech labeled ‘‘The Four Wishes,’’ in which he expressed a wish for Taiwan independence to be 

unhelpful and inconsistent with those earlier pledges. 

And we look to him to abide by those commitments that he has 

made, because we believe they are a source for stability in crossstrait relations. And we believe peace and stability in cross-strait 
14

relations, and a peaceful resolution of cross-strait differences, is in 

the interest of the United States. That is what we have to worry 

about first and foremost—our own national interest. But we also 

believe very firmly that this is in the best interest of both mainland 

China and Taiwan moving forward. We believe there is no greater 

beneficiary of peace and stability in cross-strait relations than Taiwan itself. 

You see the results of our One-China policy going back to 1972 

in the cross-strait relationship that has, we believe, been stabilized 

by that One-China policy. Taiwan has benefited mightily from that 

relationship. It has developed its economy in a very impressive 

fashion; it has developed its society and its education base in a 

very impressive fashion; and it has developed a democracy in a 

very impressive fashion, all under the rubric of peace and stability 

in cross-strait relations. 

So we look for a peaceful settlement of those differences. A resolution that is acceptable to both sides of the Taiwan Strait. And 

that is the purpose of our One-China policy, which we believe is a 

stabilizing force. And we believe that whatever outcome the two 

sides settle upon should be reached peacefully. 

So that is basically our position on these things. We believe that 

stability can be maintained in cross-strait relations, and our basic 

position is that we do not support Taiwan independence; that we 

oppose unilateral changes to the status quo by either side; and we 

look for the peaceful resolution of those cross-strait differences that 

I referred to earlier. 

Mr. FALEOMAVAEGA. I recall years ago, when President Clinton 

had to call two battle groups to the Taiwan Strait, it had become 

so tense that we were just about to go to war over Taiwan. 

And I want to know, what is the commitment of this administration toward that same intention of the part of what was shown demonstrably by force of arms that we were willing to defend Taiwan 

if China were to attack Taiwan. Are we still in that realm of an 

understanding? Or is it, has it changed? 

Mr. CHRISTENSEN. No, there hasn’t been a change in our policy. 

We abide by the Taiwan Relations Act, which calls on the government to provide military items of a defensive nature to Taiwan to 

help bolster Taiwan’s defensive capabilities, and also calls on the 

United States to maintain the capabilities to assist in Taiwan’s defense. 

I would say that our policy on that matter is consistent with past 

administrations, and does not change. And I would just point out, 

as you would recognize better than most audiences to which I 

present that point, that is an Act of Congress. That is a law, and 

we abide by that law very carefully. 

Mr. FALEOMAVAEGA. Now I can take a breather, now that my distinguished ranking member has just arrived. And I would like to 

give him the opportunity to share with us his opening statement, 

and we will proceed from there. 

I covered for you. [Laughter.] 

Mr. MANZULLO. Thank you very much. 

Mr. FALEOMAVAEGA. That is okay, I understand. 

Mr. MANZULLO. How did you get up here so fast? 
15

Mr. FALEOMAVAEGA. Well, I can’t cast my symbolic vote, so I 

thought I might as well come ahead of you and start the ball rolling. 

Mr. MANZULLO. That is one advantage for not voting, huh? 

Mr. FALEOMAVAEGA. And disadvantage, too, because you feel like 

you are a second-class citizen sometimes. But that is all right, I 

will forgo that for now. 

Mr. MANZULLO. Well, you are a first-class citizen and a first-class 

chairman. 

Dr. Christensen, I want to thank you for coming before the subcommittee to testify on United States-China relationship. Your testimony on the status of a relationship with PRC cannot be given 

at a better time, given the number of recent trade, economic, and 

security developments within the country. 

During my tenure as chairman of the U.S.-China Interparliamentary Exchange, we had a lot of battles on boosting export opportunities and improving competitiveness for America’s manufacturers. 

China recently announced its intent, and this is of great concern 

to us, a massive state-owned investment that strikes me as yet another attempt by the Chinese to subsidize its domestic industries. 

According to press reports, this entity, which will report directly to 

the State Council, actively manage a portion of China’s over $1 trillion foreign exchange reserves. While exact details remain scarce, 

it is clear that a key purpose for creating this vehicle is to leverage 

China’s enormous foreign exchange reserves to support strategic 

domestic industries, particularly in telecommunications, transportation, and energy sectors. 

To me, this seems to fly in the face of world trade rules against 

these subsidies. In fact, we plan on writing a letter to the People’s 

Republic of China, and also to the WTO, that this should be protested in advance, because it is an obvious state manipulation of 

currency. 

I understand that managing relations with China takes a lot of 

time and patience. We must do everything possible to keep the Chinese market open for American businesses. And I am sorry that I 

missed your initial opening statement. 

Mr. FALEOMAVAEGA. You didn’t miss much. 

Mr. MANZULLO. I am sure I did. And your opening remarks. And 

I am here to listen to more of what you have to say. We need a 

bigger room here. 

Mr. FALEOMAVAEGA. I realize that. We will try and see if we can 

get a bigger room. 

Mr. MANZULLO. Thank you, Chairman. 

Mr. FALEOMAVAEGA. All right. I am going to just continue the 

dialogue, and you are more than welcome to jump in any time you 

want. 

We are absolute believers in the free market system, Dr. 

Christensen. We want to trade with China. I am a firm believer of 

free trade, and also fair trade. I don’t know about my colleague 

from Illinois; if it is just free trade, the hell with fair trade. But 

I do believe in fair trade, as well. 

But let us pursue. I was asking Dr. Christensen about Taiwan, 

given President Chen’s recent announcement that Taiwan should 

become a sovereign and independent country from China. And of 
16

course, this is causing a lot of heartburns on the part of the officials of the People’s Republic of China. And the fact that historically we even had to almost come to blows with China years ago, 

when President Clinton had to call in two battle groups to—I don’t 

known if it was saber-rattling or whatever it was. But I was not; 

certainly many of our colleagues in the Congress were not very 

happy with this. 

And I do want to thank President Bush for his affirmation of this 

situation, and not to let China ever with the United States to go 

into war and end up with a nuclear conflagration that we don’t 

need at this point in time, for this planet’s well-being. 

China’s military buildup. I recall former Secretary Rumsfeld was 

touring Asia, and he made a speech there. I think I believe it was 

a conference, expressing very serious concerns about the military 

buildup of China, now somewhere between, around $92 billion. And 

to let you know, Secretary Christensen, he was the laughingstock 

of all the Asian leaders, because the response was how can you say 

that China’s military buildup and $92 billion, when our own military defense is now somewhere between $480 billion a year. 

And I just wanted to know now—this is how smart the Chinese 

are—don’t build aircraft carriers; they are too expensive. But build 

submarines. Now they have got over 100 submarines floating all 

over the place. And they are more lethal and more dangerous, in 

my humble opinion, than the aircraft carriers, a multi-billion-dollar 

piece of military equipment that we find it hard sometimes even 

to sustain. 

But I wanted to ask you your response about China’s military 

buildup. Are we seriously concerned about this? Or it is a given 

right for every nation to have its own defense system built. 

I understand Japan, expenditures for its defense force military 

structure is the second largest in the world, second only to the 

United States. And I just wanted to ask your response of that. 

Mr. CHRISTENSEN. Yes. Thank you for your question. We do pay 

very careful attention to Chinese military modernization trends. 

We note the fact that China has had double-digit increases in defense spending in every year of this decade, most recently an 18% 

increase. And these are increases in real terms, because China has 

had very low inflation, or, in some years in this decade, no inflation. So these are increases in real terms. 

And what we would like to know, and your question gets at some 

of those core issues, what we would like to know is where are these 

trend lines leading. You have had a near-tripling in China’s defense spending in this decade, since 1999. And I think that what 

you are looking at is a situation where we would like to know more 

about where China is heading, what the purposes of this modernization are. 

And you mentioned the defense budget. There are all sorts of estimates about what China’s real defense budget is. And this gets 

at the core issue of lack of transparency. We don’t think it is in our 

interest for China not to be more transparent about its defense 

modernization. And I personally don’t believe it is in China’s own 

interest either. 

And that is our position in the U.S. Government, as well, which 

is that it is not in China’s own interest to be non-transparent about 
17

its defense modernization, because it makes it more difficult for 

China to reassure its neighbors as it grows in power and influence. 

So we think it is in both of our countries’ interests for China to 

be more transparent about what it is doing with its military modernization, how much money it is spending, where it is spending 

that money, for what purposes. What sort of doctrinal shifts might 

be going on within the Chinese military, as it attains some of the 

new capabilities to which you refer? 

We believe this would be a good outcome for everybody involved, 

if China could engage us and engage the world more clearly about 

what it is doing in its defense modernization. 

Now, we don’t view China as an adversary. We have to pay attention to these trends. And where we are most concerned in the 

near to medium term is the very fast-paced military modernization, 

I should say, military buildup across from Taiwan, which we see 

as a force for instability in cross-strait relations. 

For all of the reasons I stated before, I really believe that we 

need to have peaceful and stable cross-strait relations moving forward. And part of that is our adherence to our One-China policy, 

which you referred to before. President Bush and others have reiterated that One-China policy in a clear and consistent fashion, and 

in a timely fashion, so as to create stability across the Taiwan 

Strait. 

Part of that is the Taiwan Relations Act and our commitment to 

assist Taiwan in its self-defense capabilities, and to maintain the 

capabilities to assist in Taiwan’s defense if the President were so 

to choose. 

And I think both of those parts of our, both of those elements of 

our One-China policy are forces for stability. And I think, as I said 

in my opening remarks, I think that in many ways the last several 

years have been the finest hour for that One-China policy. Because 

there have been political trends and social trends in Taiwan that 

you referred to before, pushing in a direction that could lead to a 

position that would constitute a unilateral change in the status 

quo, that we believe would be destabilizing. And in addition, you 

have that very real military buildup across from the Taiwan Strait 

that we believe is also destabilizing. 

So there have been some real challenges in cross-strait relations, 

and we believe the Bush administration has been as clear, as consistent, and as timely as possible in stating publicly, and in a 

transparent way, our position on the One-China policy. We believe 

that has been a major force for stability in what otherwise could 

have been a quite unstable time. 

Mr. FALEOMAVAEGA. Do you share with us—and I will refer that 

we are joined with one of our senior members of the committee, the 

gentlelady from California, Congresswoman Diane Watson, previously served also as our Ambassador to the Federated States of 

Micronesia, has joined us, also. 

Mr. CHRISTENSEN. Thank you for having me, ma’am. 

Mr. FALEOMAVAEGA. Ms. Watson, would you like to make an 

opening statement? 

Ms. WATSON. I am sorry I missed the first part of the meeting. 

We are going to soon be traveling to China, next week, and I have 
18

carried legislation commending Hong Kong on its progress in terms 

of intellectual, protection of intellectual privacy. 

We have the Congressional Entertainment Industries Caucus. 

And from that caucus, we have been pushing many countries 

around the world to protect our intellectual property. I represent 

Hollywood, and as you know, we lose between $6 billion and $7 billion out of a $600 billion income revenue annually because of the 

intellectual property grab. 

And so can you bring us up to date on their enforcement of the 

laws that they have committed to? We have not seen that much 

progress since they then embraced our position, and we are losing. 

We lose jobs and family income because of it. So can you give us 

somewhat of a progress report, if you know? 

Mr. CHRISTENSEN. Thank you very much, Madame Congresswoman. I would be happy to respond to that. 

We engage on intellectual property rights on a consistent basis 

with the Chinese, and they have created some institutions at home 

to enforce intellectual property rights. We are very far from satisfied to date with the progress there, as you suggested, and we continue to engage with them on this. 

And I will say a couple of things. We do some very broad engagement on the issue, and we do some more specific engagement on 

the issue. And I would like to give you examples of both. 

At the broadest level, we engage them on the issue because, as 

I said in my opening statement——

Mr. FALEOMAVAEGA. Is your mic on? 

Mr. CHRISTENSEN. I believe it is. 

Mr. FALEOMAVAEGA. I don’t know if the people back there can 

hear you. 

Mr. CHRISTENSEN. Is the microphone on? Thank you. 

Mr. FALEOMAVAEGA. Move it a little closer to you, sir. 

Mr. CHRISTENSEN. Move it closer? 

Mr. FALEOMAVAEGA. Move it up closer to you. 

Mr. CHRISTENSEN. Will that work better, sir? 

Mr. FALEOMAVAEGA. Much better. I think the people in the back 

can hear better. 

Mr. CHRISTENSEN. Okay, thank you. We engage at a very broad 

level. And in that process, in the Strategic Economic Dialogue led 

by Secretary Paulson and other dialogues, what we try to convince 

the Chinese of is that if you want to be a great nation, a great 

leading power of the world, a leading economy of the world, like the 

other leading economies of the world and the other great nations 

of the world, you are going to have to enforce intellectual property 

rights. Because as you move up the economic ladder, it is going to 

be more and more important to your own economy to have innovation as part of your economy. And if you want to have innovation 

in your own economy, you are going to have to protect intellectual 

property rights. 

Because it is not only the victims in Hollywood and in Silicon 

Valley and elsewhere that are being ripped off by intellectual property rights violations in China, it is China’s own innovative class. 

They have their own software developers. They have lots of new engineers who are educated in various fields of expertise. And these 
19

people need to have intellectual property rights protection if China 

is to fulfill its own potential. 

And we find in these dialogues that we are finding an increasing 

number of Chinese elites who understand this fully. So that is 

helpful, at the broad level. 

Now, that doesn’t answer the mail in the near term for the concerns that you are suggesting, and I will just give you one example 

of the type of more nitty-gritty negotiation that we have with the 

Chinese, and some of the positive results that we have seen. And 

again, we are not satisfied on this issue, and I don’t want to give 

the impression that we are. But I want to give you a sense of what 

we are trying to do. 

In the Joint Commission on Commerce and Trade, which is a 

dialogue that we have between the Ministry of Commerce in China, 

the USTR Office, the United States Trade Representative’s Office 

here, and the Commerce Department here. In April 2006 they 

reached some agreements. 

Two of those agreements are notable. One is on standards, where 

we agreed with the Chinese that they would adopt United States 

standards for medical equipment transferred to China. Medical 

equipment was being blocked through arguments that that medical 

equipment didn’t quite meet Chinese standards, and the United 

States standards weren’t up to snuff. And obviously, we believe our 

standards are quite high. 

And then there is the second issue, which really relates more directly to your question, which is software for computers. You can 

walk around the streets of Beijing, and people will offer you all 

sorts of software for computers, or pirated movies, et cetera, and 

that is a real concern to us. 

And one of the measures that we got the Chinese to agree to was 

to load operating systems onto Chinese computers before they are 

sold. Now, if the computer that you buy in China has the operating 

system already on it, you therefore have no incentive to purchase 

a pirated version of that operating system on the street. And that 

we believe is a constructive, nitty-gritty type of approach. 

We continue to push China to have greater enforcement. We welcome any measures that we see that they have adopted in terms 

of institution building, et cetera. We work with them both on a 

technical level and a political level. We want to put a lot of energy 

behind motivating them to do this, but we also want to help teach 

them how to enforce intellectual property rights, and we engage 

them in those types of efforts, as well. 

So we take this extremely seriously. And as I said in my opening 

statement, it is one of our top economic issues on which we engage. 

And I really appreciate your comments. Thank you very much. 

Ms. WATSON. Mr. Faleomavaega, do I still have the time? 

Mr. FALEOMAVAEGA. Yes, you still have time. 

Ms. WATSON. Okay. When I was there back in the eighties 

throughout China, we went out to some of their clinics. And we did 

go to the university to see an operation done. It was acupuncture; 

it was heart surgery done with acupuncture. And it was fascinating 

to see them do that: Open-heart surgery, and just some needles 

stuck in the ankles. 
20

Could you very quickly tell us about their progress? Now, there 

I found that the village doctors were paid a salary preventing people from getting ill. When they became ill, they had to treat them 

free. So what has happened with that system? Can you comment 

on healthcare, and then comment on the educational system? 

Mr. CHRISTENSEN. Okay. Another very fine question. And I don’t 

want to ask you which year you went to China, but there is a 

chance you were in China before I was. My first trip was in 1987, 

and I am supposed to be an expert. 

I am in awe of your experience in China. I think you touch on 

an issue that is really at the core of some of the things we are trying to do in the U.S. Government engagement with China. And I 

will use your question as a launching board to try to explain what 

we are doing when we engage China on some of these economic 

issues. 

Rural healthcare in China is a huge problem. They did have a 

very strong social safety net to the degree that they had the capabilities necessary to fulfill their commitments to citizens under the 

old system, and they had very limited capabilities, to be frank. But 

there was some sort of health guarantee, insurance that you could 

get what was available to you out in the countryside. 

That system to some degree has declined in the reform period, 

and new institutions haven’t been built to replace them in every 

case. And rural populations now have a very difficult time getting 

access to healthcare at an affordable rate. 

Why does this matter to our economic exchange? It matters to 

our economic exchange, and it is something that we raise in the 

State NDRC, the National Development and Reform Council, and 

the State Department dialogue that we held with that council, and 

it comes up in the Strategic Economic Dialogue, as well. Why do 

these things come up in such a dialogue that is trying to deal with 

economic imbalances between the two countries? 

Well, there is a straightforward, but not exactly simple, answer. 

But it is very straightforward, as I think it is a quite easy logic to 

follow. 

And that is that when the poorer populations or the rural populations of China, or the urban populations of China, the working 

people of China, do not have that healthcare social safety net, what 

they tend to do is what any rational person would do; they tend 

to save lots of money so that they can pay for healthcare should 

there be a catastrophe in their families. They tend to save at higher rates than they would if they had good health insurance and 

they had a strong social safety net, some combination of government policies and free market insurance programs to assist in their 

protection against such catastrophic events. 

China’s savings rate is extremely high, and this contributes to 

the current account surplus in China, and it cuts down on the demand-driven growth that we believe China must build on for the 

future if it is going to have stable growth moving forward. 

So if we want to decrease the trade deficit with China, we have 

to deal with issues such as rural health. This may seem counterintuitive, but it is actually a very logical approach. And Secretary 

Paulson has championed this approach in the Strategic Economic 

Dialogue, which is designed to address such issues which cut across 
21

lots of different silos in their government, and frankly cuts across 

different agencies in our Government. 

We try to engage the Chinese in a way that says, ‘‘You need to 

do this. You know you need to do this.’’ They say this themselves. 

We are not telling them anything that they are not saying themselves. ‘‘You need a better healthcare provision network in your 

countryside. And you need to do it quickly, because it is not just 

going to solve that problem; it is going to solve several other problems that you face. And if we can help in any way in giving you 

advice on how to set up such networks, if we can help with expertise on the medical front or somewhere else, we are willing to do 

that.’’ Because we don’t see this as a zero-sum game, and we want 

those people to have better healthcare protection for its own sake, 

but also because it has all of these positive benefits on the side. 

So I think you have really touched on one of the core issues in 

the reform program in China, and I really admire your experience 

in China. And thank you very much for your very informed questions. 

Mr. FALEOMAVAEGA. I want to thank Ms. Watson for her question and her opening statement. 

We are also joined now with another senior member of our committee, who is our vice chairman of the subcommittee, the distinguished gentleman from New York, Greg Meeks. And he is also cochair of our Malaysia Caucus. He has many of his constituents living in Malaysia, and that is why he has taken such interest in this 

country in Southeast Asia. 

Mr. Meeks. 

Mr. MEEKS. Thank you, Mr. Chairman. Again, it is a good and 

exciting and challenging time for us to be working on United 

States-China relations. 

As we all know, China is a growing power that we should deny 

as a partner in seeking a politically and economically secure world. 

While we are still resolving issues with China related to trade imbalances, currency policy, intellectual property enforcement, human 

rights, and World Trade Organization compliance, to name a few 

challenges, I am hopeful that the United States’ relationship with 

China will continue to grow in a positive direction as China moves 

along the path of reform. 

Today’s hearing is an important part of reflection, and I am enthusiastic that we will have an opportunity to speak in particular 

about how China’s economic growth can provide the maximum benefit to China’s people and our own nation. I am especially encouraged that China’s economic growth has allowed significant poverty 

reduction. According to the World Bank, China alone accounted for 

over 75% of poverty reduction in the developing world over the last 

20 years. With positive improvements such as adult illiteracy rate 

that fell by more than half, from 37% in 1978 to less than 5% in 

2002, and an infant mortality rate that fell from 41 per 1,000 live 

births in 1978 to 30 in 2002. 

Nonetheless, I am still concerned that more than 135 million 

Chinese, many in remote and resource-poor areas in the western 

and interior regions still have consumption levels below $1.00 per 

day, often without access to clean water or adequate health and 

educational services. 
22

I hope that in the upcoming years, China can work to insure that 

economic growth translates to a widespread and balanced reduction 

in poverty. Despite a looming and often talked about trade deficit 

between the United States and China, and China and much of the 

rest of the world for that matter, I am encouraged that United 

States exports to China grew by 32% last year, while imports from 

China grew 18%. 

Additionally, China’s growth has benefitted the United States by 

providing a large export market, low-cost imports and inputs for 

production, lower interest rates, and vast business opportunities. 

However, we must stress in our interactions the need of China’s 

Government to expeditiously facilitate a balanced trading relationship through its policies. 

From a foreign policy perspective, I am encouraged that increased economic engagement with China and our interdependence 

has supported increased diplomatic engagement, such as our work 

with the Six-Party Talks with North Korea. 

Going forward, I hope that the many dialogues that are occurring 

between the United States officials and Chinese officials, especially 

the United States-China Strategic Economic Dialogue with Secretary Paulson, and a Senior Dialogue with Deputy Secretary 

Negroponte, are on target to create the space to balance China’s 

need for energy with the United States strategic efforts in key 

countries, like the Sudan and Iran. 

I look forward to discussing how we can help China help itself, 

without disrupting global efforts and international security and 

economic stability. Indeed, we need one another, and I think the 

opportunity currently presents itself that we, with China’s growing 

power, cannot have a Cold War type relationship with China, but 

a relationship that is built on interdependence and security on 

what is now the smallest earth that we have ever known. Because 

we share it together, and collectively, we can secure it together. 

And I look forward to asking questions and working on this committee with you, Mr. Chairman, because I think that it is, as I said 

earlier, a timely time, and an important time, for all of us, and particularly for our grandchildren and our great-grandchildren. Because as we develop that relationship today, it is important tomorrow. 

I have got my daughter, who is 7 years old, going to school learning Mandarin at this age, because that is how important I think 

our relationship is. 

Thank you, Mr. Chairman. 

Mr. FALEOMAVAEGA. Thank you, Mr. Meeks. I have not given a 

chance to my good friend for his 5 minutes and line of questioning. 

I would like to give this opportunity now to Mr. Manzullo for his 

questions. 

Mr. MANZULLO. Thank you. When a person leaves China, he is 

given a document by the Chinese Government as to the items that 

he cannot take with him on board the aircraft. Last time I was 

there—it was in the summer of 2005, and I don’t know if it has 

changed—I thought it very interesting that a couple of the items 

that you can’t take, and the Chinese want to sell us everything, are 

CDs and DVDs and sound recordings. 
23

I think there is a reason for that. We were in Kunming, along 

with, I think it was the largest Congressional delegation that has 

ever gone to China. And one of the members was Congresswoman 

Marsha Blackburn, who represents the little guys involved in the 

recording industry, a lot of country-western singers and songwriters, et cetera. 

Congresswoman Blackburn and I were in the town square in 

Kunming. Have you been there, Dr. Christensen? To Kunming? 

Mr. CHRISTENSEN. To Kunming? No, I have not been to Kunming 

yet, sir. 

Mr. MANZULLO. But it is a very interesting city. It is a beautiful 

plaza. And so I was there as the head of the delegation. We had 

a lot of people that surrounded me, made me feel important. So 

Congresswoman Blackburn split off. She went north and I went 

south, and took these guys with me. 

It didn’t take her but a minute or so to find the people that were 

selling DVDs. I mean, it is just rampant. The movies were being 

shown in the theaters in the United States; at the same time you 

could buy a DVD for a buck. 

There was absolutely no effort whatsoever; zero, on the part of 

the Chinese to stop this type of, these types of sales that were 

going on. Although interestingly enough is that the Chinese coined 

their own trademark for the upcoming Olympics. If anybody interferes with that, they are the first ones to say that that is protected. 

We have had a, it has just been—there has to be more than lip 

service for protecting intellectual property rights. We just had an 

incident involving a major company in our Congressional District. 

A company pirated their product. They even took the picture right 

off my constituent company’s Web site. And we were able, through 

some pretty intense negotiations, to stop a provincial government 

from giving a contract to a Chinese company that was an outright 

pirate. 

That was based upon the fact that we had been involved in this 

for a long time, and it really went to the highest diplomatic levels. 

I see no incentive, especially in Macao, where most of the 

pirating takes place, on the part of the Chinese to stop these types 

of IP violations. And I know they make arrests and stuff like that, 

but that is my opinion, that so far we have just seen too much 

weakness. And really no incentive on the part of the Chinese to 

crack down on this, because they are trying to employ 300 million 

peasants. And employing them making copyright violations just 

doesn’t seem to bother them. What is your comment on that? 

Mr. CHRISTENSEN. I appreciate your commentary very much, 

Representative Manzullo. And as I said earlier, we really do share 

your concerns on the intellectual property rights protection issue. 

And we do think that there are incentives for China to protect 

these intellectual properties, particularly as their economy, moving 

forward, tries to develop an innovative sector, which they claim 

they will want to do themselves. They want to develop software industries; they want to develop their own entertainment industries; 

they want to develop all these industries as their economy becomes 

more complicated. 

They have, as the previous speaker, Representative Meeks, 

pointed out pulled very many people out of poverty in the reform 
24

period. I think the vast majority of those were in industries that 

are unrelated to the ones that you are referring to, so I don’t think 

it is necessary for their poverty alleviation to practice these methods of pirating intellectual property rights from U.S., and not just 

U.S., but other advanced countries’ high-tech companies and entertainment industries. 

So what we do on the one hand is we try to convince those people 

who are skeptical of this reality that they need to do this for their 

own sake. We try to empower those within their system through 

these dialogues by reinforcing the arguments that they are making 

within their own system. And we do try to get into very detailed 

negotiations. 

As I suggested earlier, in the April 2006 agreement at the JCCT, 

where we negotiated and got the Chinese to accept the idea that 

they would load the software onto the computers before they are 

sold, which is hugely important, loading the operating systems onto 

the computers before they are sold. So we think that that is a useful thing. 

And we do reserve the right, moving forward, to use other methods. We have used WTO measures in other cases, and we can consider it in these cases, too, moving forward. And I am not in the 

USTR or in the Commerce Department, and I will have to defer to 

my colleagues about where the situation stands in their deliberations. But we certainly, as a foreign policy tool, reserve the right 

to use the WTO mechanisms to pressure the Chinese where we see 

appropriate. 

Mr. MANZULLO. Doctor, thank you. One of the problems is a lot 

of Americans have difficulty in believing that the provinces have so 

much power, because they really do. And the central government—

and we have talked to several people that are high in the central 

government—and I believe that there is a shift more toward trying 

to apply the rule of law than what we think. 

First of all, you don’t need an incentive to apply the rule of law. 

The WTO does not work on incentives; it is a court. And when 

somebody is in violation of, there is no defense saying that well, we 

are poor, we are backwards, we are developing, we need incentives 

to comply with the laws. That if you don’t comply with the law, you 

don’t comply with the law and suffer the penalties on it. 

I am also convinced that there is a lot that happens in the provinces that the central government simply has no control over. Such 

as there are different levels of political freedom, depending on 

where you go in China, dependent on the—it just depends upon 

where you are in the country. 

The other thing I wanted to talk about, and this is, you know, 

these Blackberries come in pretty handy. I was, on April 22, 2004, 

I was at a dinner with the, was it the U.S.-China Business Council? Yes, the U.S.-China Business Council. And Madame Wu Yi, 

who is the Vice Premier, spoke, and what she was, it was so astounding that I actually had to write it down and then put it in 

here so I could bring it up and impress you with the fact that this 

was such an astounding statement. [Laughter.] 

Then she distributed this in writing. And here is what she said. 

She was talking about the Chinese economy. Here is a quote. She 

says, ‘‘China has a market-based, managed, unitary floating ex-
25

change rate.’’ And I heard that, and I said she didn’t say that. No 

one can say that and believe it. Trying to impress us that China 

really was involved in the free market by having a market-based, 

managed, unitary floating exchange rate. 

What bothers me is that she really believed that this was a great 

step forward in China’s emerging economy in becoming more like 

the United States. I don’t know about you, but how can you have 

a market-based and managed and a unitary floating exchange rate? 

I don’t want to ask you that question, because you don’t know the 

answer, either. 

Mr. CHRISTENSEN. I am a simple political scientist. [Laughter.] 

Mr. MANZULLO. There you are. Even eating with three PhDs in 

Economics, you could never attack that. 

But what bothers me is that this is a mindset, it is a mentality 

that says regardless of what happens in the industrialization of 

China, regardless of what happens in our foreign relations, et 

cetera, that there is this element of ultimate control and great fear 

of letting anything go, and especially the RMB floating against the 

dollar. 

I want to return to the opening statement, and I will give you 

a copy of it. It is the article out of the Financial Times, dated 

March 9 of 2007. I just want to quote from here about this new 

state agency supposedly dealing with the non-private sector that 

still maintains the majority of the manufacturing and other financial bases in China. 

It says, ‘‘China’s decision to tightly manage the value of its currency,’’ talking about what is going on now, ‘‘means it must buy 

and hoard nearly all of the dollars coming into the country with 

RMB, then conduct extensive sterilization operations to prevent the 

extra money from fueling inflation. Though the reserves are held 

as assets on the balance sheet of the People’s Bank of China, central bank, many senior leaders have been eyeing the funds to make 

strategic investments in resources like oil, offshore, or to spend on 

social programs at home.’’

The head of the agency, Mr. Xiang Huaicheng, the Finance Minister, shed no light on the structure of the new agency, which has 

been the subject of extensive debate pitting the Finance Ministry 

against the Central Bank on some issues. The government has already announced that Lou Jiwei, the former Vice Minister of Finance, has been appointed to a position in the State Council, apparently in readiness to take leadership of the new agency. 

They want to put about $300 billion in it, which would be about 

a third to a fourth of the reserves, into these strategic investments. 

I mean, does this—I know you are not an economist, which may 

put you in a position to give us a more clear answer. But does this 

bother you, Dr. Christensen? 

Mr. CHRISTENSEN. Thank you for your question. I think it is an 

excellent question. 

What concerns me most about such activities is that any time 

you have the sterilization processes and you have this money being 

taken off of what would be a free market for capital investment, 

the investment is less likely to be going to the most efficient uses 

within the country. 
26

So if we look to the long-term economic stability of China, which 

I believe, along the lines of earlier statements and your own statements, is in the interest of the United States, as well as China, we 

would like China’s economy to be stable, moving forward. We 

would like to see a development of financial markets there that are 

free and open to competition, as we have in the United States. And 

I think that that would be the best use of these funds. 

And I don’t think, although Madame Wu Yi and the Chinese 

interlocutors that we deal with, we have tremendous respect for 

them, I don’t think that political leaders anywhere in the world 

pick and choose winners and losers in industry as well as the market. 

So we do not like the idea that financial markets are somewhat 

closed to international competition, which we believe would bring 

some of the best practices into China if there were, say, majority 

foreign holdings in brokerage firms——

Mr. MANZULLO. But that is Western talk. 

Mr. CHRISTENSEN. It is Western talk, but we believe it is——

Mr. MANZULLO. You know, I mean——

Mr. FALEOMAVAEGA. Will the gentleman yield? 

Mr. MANZULLO. Of course. 

Mr. FALEOMAVAEGA. I was listening very intently in terms of 

what you stated. I simply take that as a Marxist/Communist/Socialist definition of a free market system. [Laughter.] 

And if I recall, when the stock market crashed in 1929, we had 

to make some very serious adjustments. We had to nationalize so 

many different entities. In fact, the government had to take control 

of so many of our economic sectors simply because we went too 

much on the other side. And what happened was that we ended up 

nationalizing so many of our economic industries simply because 

we weren’t able to, there was no control system. 

And I don’t mean to portray this as suggesting that—I think it 

was Milton Friedman who did at one time visited Deng Jao Ping, 

and inspired him that China needed to get into some kind of a free 

market system. And this is the reason why we are now at this 

stage, where China now is really moving toward that direction, 

even though perhaps not fully in terms of how Westerners understand what a free market system is like. 

That was just my little two cents to that. 

Mr. MANZULLO. No, I guess—and I appreciate your two cents, 

which is worth a lot more than two cents. 

What I see, Dr. Christensen, I mean, I have studied Chinese history under Lord Lindsey Birker, an American University here in 

Washington. And it really got me interested in that whole area of 

the world, and never realized I would be elected to Congress and 

end up spending a lot of my time dealing with China. 

But China seems to want to have it both ways. They want to 

open up the markets here in the United States for their products. 

And when it comes to our guys trying to sell to them, with these 

standards, and especially with cooking the currency, I mean, I can 

point to people that make the photo mass system with the copper. 

What is that called? 

Mr. FALEOMAVAEGA. You are asking me? 
27

Mr. MANZULLO. Okay. What is the word I am looking for? Anyway, the people that make the motherboards, for example, here in 

the United States. Somebody help me with the word. What is it? 

Semi-conductors. Semi-conductors. 

We have lost almost all of our market share, and we continue to 

lose massive amounts. And when the folks were in the office, Doug 

Bartlett from Bartlett Electronics in my district, and he said look, 

Don, I can only compete so much with the Chinese. He said, the 

way I figure, with the cooking of the currency, they start with between a 20% and a 40% advantage. All the things we have done 

with the currency, it still hasn’t, you know. I mean, they will try 

to adjust it just by tweaking it once in a while whenever there is 

a political visit on it. 

I just don’t know how long China is going to be allowed to operate in the United States as a free enterprise system with the sale 

of their stuff here; yet in China, with the closed currency, when it 

comes to selling our stuff there. 

Mr. CHRISTENSEN. Thank you very much for your comments and 

your question. 

I would like to address the issue of China’s currency and how we 

deal with it. I can’t go into great technical detail because, as I said 

earlier, I am a political scientist, and I think I should leave it 

to——

Mr. MANZULLO. Well, this is a political issue. 

Mr. CHRISTENSEN. Yes, I think in terms of the meeting of Madame Wu Yi’s market-based, integrated unitary exchange rate, I 

think——

Mr. MANZULLO. It was market-based, managed, unitary floating 

exchange rate. 

Mr. CHRISTENSEN. I think I will skip that one, but I will talk a 

little bit about what China claims to be doing with its currency, 

and where it tends to be heading. And I will say what I have heard 

much more experienced people than myself say in my presence to 

the Chinese about this issue, and I will leave it to people at Treasury, my colleagues at Treasury, to maybe give you a more detailed 

answer about the currency issue and where they see it heading. 

But my own experience suggests that the Chinese Government 

claims to be moving in the direction of a free-floating currency; that 

they see this as a long-term goal for the Chinese system. They have 

great concerns about their financial stability, because they have 

great fragility in their banking system. So they are cautious about 

how they move forward when moving in that direction. 

There has been somewhat increased flexibility in their currency. 

Their currency has revalued by 7%, roughly 7%, since 2005, so we 

have seen a move in a positive direction. 

And what Secretary Paulson has said to the Chinese is that it 

may seem to you that given the fragilities in your system, that you 

should move extremely slowly and extremely cautiously. But it is 

his expert opinion—and I can’t question his expert opinion; he has 

a lot of experience in the international marketplace and the financial world—it is his expert opinion that China’s bigger mistake 

would be to move too slowly, not too quickly, in creating greater 

flexibility for its currency, and in related issues like increasing 
28

competition in financial markets within China, and allowing foreign firms to come in and compete in those financial markets. 

Again, not only to bring in capital into China, there is a lot of 

capital being brought into China, but also to bring in expertise. 

And part of the opening up of China to the outside world was to 

bring in foreign expertise to teach the Chinese better production 

methods, better management methods. And that should apply to 

the financial markets, as well. And I know that Secretary Paulson 

feels strongly about that and engages the Chinese on those 

grounds. 

In many of these cases, though, someone like Madame Wu Yi 

might be pushing in the same direction, saying that we want to 

move in the direction of a free floating currency. And what formula 

they use in that transition period again is beyond my capabilities 

to address. But they claim they would like to move in that direction. 

Secretary Paulson believes that they need to increase the speed 

by which they, accelerate the pace by which they increase that 

flexibility, and move toward a free floating currency. They claim 

they want to move in that direction. We are not satisfied with the 

pace. And we realize that there are some implications for our businesses, and we take that extremely seriously. 

So we do engage on this issue, and we consider it one of the more 

important ones that we deal with. 

And in terms of the state control of the investment environment 

in China, which could take the form of the state itself investing in 

firms and picking and choosing winners, this is not ideal. We do 

believe in free-market economics. The Bush administration does 

support those initiatives that move in that direction. 

We also see some regulations on investment that are a concern 

to us. There was one case in Shanghai that got a lot of press. A 

machinery company, a construction equipment company called 

Xugong. The Carlyle Group wanted to purchase this company. They 

make, I gather, I am not entirely certain, but I believe they make 

steamrollers and such things, construction equipment. 

When Carlyle made a bid to get a majority share of this company, China balked and claimed that this was an industry related 

to national security; that if this construction equipment company 

had fallen into foreign hands, this would somehow compromise China’s national security. 

And those types of measures we are also concerned with, because 

we think they create unfair competition. I believe they reached a 

settlement recently where Carlyle Group will invest less than a 

majority share. But we do watch those things, and we hope they 

don’t become broad trends. We want the Chinese market to open 

up. 

And if you go back to 1978, I think it is very hard to fail to recognize that the Chinese system has opened up significantly from 

where it was in those earlier periods, with great benefits to us and 

great benefits to the Chinese. But that doesn’t mean that we 

should tolerate unfair practices, and it doesn’t mean that we should 

do anything but push back and try to get results when we see our 

companies at a competitive disadvantage, and we see imbalances 

that need to be rectified. 
29

Mr. FALEOMAVAEGA. The gentleman from New York, Mr. Meeks. 

Mr. MEEKS. Thank you, Mr. Chairman. You know, I come at this 

as is the glass half empty or is the glass half full. I look at it as 

always being half full. 

And I will associate myself with concerns, for example, in dealing 

with intellectual property protection and having open markets. You 

know, our market is open, and I would like to think that we can 

compete fairly in China, with their markets open and access to individuals here. And I think that helps make us interdependent 

upon one another when we have fair and equal trade. Where of 

course our markets are needed by them because of our economy. 

And the stronger their economy gains, I would see that that is an 

opportunity for us to also get into their market, which we can’t do 

right now. 

So I agree with Mr. Manzullo that we have got to figure out ways 

in which we could make it fairer for our companies to also be able 

to get into the markets of China. 

That being said, I also understand that, as I stated in my opening statement, that this world is much smaller, and there is vast 

opportunities for us to do some things together. I know on my trip 

to China, I was told many things previously what to expect. When 

I arrived in China, I was told that it was basically a closed society, 

and people wouldn’t talk to me, and all that. 

Before I went to China, I used to say there is no skyline like New 

York City. I am from New York. Then I went to Shanghai and Beijing, and I can no longer say there is no skyline like New York 

City. 

And one of the things that I also demanded to do on this particular trip was, as opposed to just go where individuals wanted me 

to go—and at this time it was the Clinton administration, in a time 

of PNTR—I, the condition which I went was that they would give 

me an interpreter and a car, and let me freely travel wherever I 

wanted to go. Because many people told me beforehand that if I 

went there, the Chinese people would shy away from me. They 

wouldn’t want to talk. 

So I got into this car, and I just told the driver, instructed him 

to stop. I saw a bus stop with a whole lot of people there. So I am 

going to check this theory out to see whether the people would engage me, or whether they would run from me in fear. So I stopped, 

and I went out, and through the interpreter, I began to talk. 

And the more I talked, the more people came around wanting to 

talk, to discuss how they were living in China, what their hopes 

and their aspirations were. You know, what they felt about Americans doing business in China. 

And what I found was that the Chinese people basically want the 

same thing that American people want: They want to be able to 

live a good quality life, raise their children, make sure that they 

are educated, have great healthcare. They want basically the same 

thing. 

And so that, to me, says that that possibility of having this relationship among the people of our two countries is great. 

The question then comes, and what I have huge concerns about 

is: How can we do certain things collectively together? Now, I 

know, for example, that—and I think you indicated that China is 
30

beginning to invest a lot in Africa and Latin America. And I think 

you indicated in your testimony, in reading it, that one of the questions that you thought that China could coordinate or should coordinate some of their A programs with other donors in a better 

fashion, so that there could be more focus. 

So one of my questions is—I am going to just try to put them 

out, and you can just answer them—are we helping China to do 

this? Are we helping them to figure out partnerships with other donors as it pertains to humanitarian efforts in Africa, in Latin 

America? Are we working collectively in that way? 

And then in that same regard, can you explain ways in which 

China can, in a very productive manner, use its relations with the 

investment in Africa and Latin America for beneficial use? 

So I want to know, and those are two questions. And lastly, my 

question would be again, because the one concern I do have with 

China and some other places is human rights. And I am wondering 

if the State Department would be concerned at all about China’s 

trade and investments policies, particularly in Africa and Latin 

America, insofar as China’s involvement, their involvement may 

have in the United States’ efforts to support human rights in those 

regions, given that we look at some of the human rights problems 

that are also in China. 

Mr. FALEOMAVAEGA. If I could interrupt my good friend from 

New York. While Dr. Christensen is running through his keen 

mind about the good questions that my good friend from New York 

has raised, I would like to give the opportunity to my good friend, 

another senior member of our committee, the gentleman from Indiana, Congressman Burton, for his statements. He has to leave in 

a very short while, if that is all right with you. 

Mr. MEEKS. Quite all right. 

Mr. FALEOMAVAEGA. Congressman Burton. 

Mr. BURTON. Congressman Meeks is always so eloquent with his 

questioning, and I hate to interrupt you. But right now, if we have 

committees, we have four subcommittees, what do I have? What is 

going on? [Laughter.] 

I just came from one. I have a couple of questions. And you may 

have covered these in your opening remarks, and I apologize for my 

tardiness, but it was necessary. 

China has not properly valued their currency. We have a huge 

trade deficit with them. They are a very important trading partner. 

But I would like to know how we should change our policy in order 

to deal with that. We can’t continue to have this erosion of trade 

with them indefinitely. And we have trade deficits with other countries, but China is really one of the big ones. 

The other thing is I am very concerned about Taiwan. Taiwan 

has been a good friend, and ever since the Taiwan Relations Act 

there has been a lot of saber-rattling. What are we doing to make 

sure that there is not conflict over there in the South China Sea, 

and that our friends in Taiwan are not endangered. 

Those are my two questions. And I thank you very much, Mr. 

Meeks and Mr. Chairman, for letting me go. 

Mr. MEEKS. Quite all right. 
31

Mr. CHRISTENSEN. Thank you very much. Mr. Chairman, would 

you like me to answer those questions first? Thank you, Representative Burton, for the excellent questions. 

Mr. FALEOMAVAEGA. You probably covered portions of the questions that Mr. Meeks——

Mr. CHRISTENSEN. I will come back and I will certainly——

Mr. FALEOMAVAEGA. No, what I mean is, there were portions of 

it dealt with. 

Mr. CHRISTENSEN. Yes. The excellent questions overlap a bit, and 

I will try to address them in reverse order. 

We do engage the Chinese very actively on the currency issue. 

We have been discussing that in my initial comments and in some 

of the question and answer that we had subsequently. 

And we engage them on that issue in a range of dialogues, including the Strategic Economic Dialogue. And our basic message to 

the Chinese is that it is in China’s own interests, its long-term financial interests, to increase the pace with which it moves toward 

that free floating currency, to increase the flexibility in its currency. That it is harmful to certain United States interests that the 

currency is not as flexible as it could be, but we also point out that 

it is harmful to China’s own economy, moving forward, to have 

some of the systems in place that are required to maintain a currency that is not as flexible as it should be. 

So what we are trying to do is work with those Chinese who already agree with this proposition, and to convince others that this 

is the case. We have seen a 7% revaluation of the Chinese currency 

since 2005, and we believe that that is a healthy trend, but it is 

not nearly fast enough. And Secretary Paulson has engaged on that 

issue. 

In terms of market access, fortunately the news is not all bad. 

We do have a huge trade deficit, and we try to deal with those imbalances, both in terms of subsidies, the currency issue, as you 

raised before, intellectual property rights protection—and we addressed some of those in our earlier conversations this afternoon. 

But there is some good news. And that is that since China has 

joined the World Trade Organization, our trade with China has, 

our export trade to China has increased rapidly, five times faster 

than our trade to the world at large. And in 2006 we had a 32% 

increase in our exports to China, with an 18% increase in our imports. So there are some positive pieces of news in there, and we 

believe that our engagement with China has produced some results 

for our manufacturers as well that are positive. 

But we do take these issues extremely seriously. We do engage 

on them in a broad range of dialogues as an administration, and 

within the State Department, as well, and we at State participate 

in the Strategic Economic Dialogue. I have had the privilege of participating along with the lead at the State Department on the dialogue, Assistant Secretary Dan Sullivan. That was a terrific experience for me, and I think it is a very constructive engagement that 

we have with them, and we think it could lead in a very positive 

direction, moving forward. 

On the Taiwan issue, I will say to you what I have said to many 

others. Taiwan has no better friend than the United States, has no 

better friend than the Bush administration. And we pay very care-
32

ful attention to Taiwan’s security needs. We take extremely seriously, as I had said earlier this afternoon, the large-scale military 

buildup across the Taiwan Strait from Taiwan. And we work to fulfill our commitments under the Taiwan Relations Act by offering 

military items of a defensive nature to Taiwan, and also by maintaining our own capabilities in the region. 

So that is clearly the case. One of the difficulties that we have 

run into is that President Bush offered an arms package to Taiwan 

in April 2001, and for political reasons on the island, Taiwan has 

not procured some of the key items in that defense package. And 

we work with, in our unofficial relations with Taiwan, we work 

with various elites on the island, and we try to convince them that 

they should not play political football with Taiwan’s security; that 

this is a core interest of the United States, and that we let the Taiwan public know that, that we take that extremely seriously. 

We let the Taiwan voters, who have the ability to express their 

opinions to their leaders, know that the United States position is 

that they should take this extremely seriously, they should procure 

the systems that the President has offered to them, and they 

should come up with a long-term plan for their security, that is a 

bit removed from the political to and fro on the island. 

So we take that extremely seriously. And we also take seriously 

President Chen’s commitment to President Bush in his two inaugural speeches, which we believe are stabilizing commitments on 

his part not to move in the direction of unilateral changes to the 

status quo, in terms of Taiwan’s status. And we believe that that 

is a sign of his leadership. And we believe that the situation across 

the Taiwan Strait has been stable because the President and the 

Bush administration at large has been very firm and very consistent in stating our full One-China policy, which calls for peaceful 

resolution across the Taiwan Strait, says that we do not support 

Taiwan independence; that we oppose unilateral changes to the 

status quo; and we expect the two sides to resolve their differences 

in a peaceful manner. 

So we take Taiwan’s interests and Taiwan’s security extremely 

seriously. We will continue to do so. And as I said in my opening 

comments, we believe that that robust and firm and very clear public commitment has maintained stability in the cross-strait relationship, at a time when there are lots of challenges, including that 

very large-scale military buildup across from Taiwan. 

So thank you very much. 

Okay, Representative Meeks, you asked extremely good questions. 

Mr. BURTON. And mine weren’t? [Laughter.] 

Mr. CHRISTENSEN. Oh, no, no, sir. I thought I prefaced my comments thank you for the excellent comments. If I didn’t, no, yours 

were excellent, yours were excellent. 

Representative Meeks has asked questions that cover a broad 

range of issues, and I will address them in the order that they were 

presented to me, which reflect that the common interests of China 

and the United States are very real. And I am glad you had that 

on-the-ground experience dealing with Chinese citizens, who do 

have the same aspirations that we do. 
33

I have spent a lot of time in China. I speak the language. I have 

had lots of conversations with Chinese citizens from all different 

backgrounds. And it is striking that they do share the same aspirations that we do. And we seek a positive future for them. That is 

in our interest; it is in their interest; it is the right thing to do, 

and we engage China in that spirit on economics and politics and 

elsewhere. 

When we engage the Chinese Government on political issues, 

like human rights in China—and I will get to the broader international issues—like human rights in China, like democratization 

in China, when we engage on those issues we try to convince the 

Chinese that progress is in China’s own interest. We are not asking 

you to do something for us; we are not trying to destabilize you; 

we are not trying to hurt you. We believe it is in your own interest 

to give those people you met on the streets of China a voice in their 

own government, a more direct voice in their own government, 

more say in how things proceed in their own country. Because they 

do have rational, productive goals that would be good for their own 

country. 

We want them more engaged in their own political system, and 

we believe that would be good for China as it moves into its desired 

status as a great power and respected power around the world. Because all of the other leading powers around the world have gone 

through these democratization processes. 

So when we engage even on issues where we have the biggest 

differences with the Chinese leadership, on issues like human 

rights, on democratization, we do it in that spirit. ‘‘We see this as 

something that is not just good for us, not just good for the international community and in line with international norms, but it is 

good for you. It will stabilize your own nation. It will make your 

own nation stronger, not weaker. It will make your own nation 

more respected, not less respected, if you adopt these measures.’’

On economics it is clearly a case that we have lots of common 

interests. And you referred before to the fact that the Chinese leadership in the reform period has pulled hundreds of millions of their 

citizens out of abject poverty. And when I say abject poverty, I 

mean global standards of $1.00 a day. This is a very impressive 

achievement, and we in the Bush administration recognize that. 

This isn’t all about asking them to do X, Y, and Z, and not recognizing that they haven’t had achievements in the past. This is a 

very real achievement, and it is something that deserves our respect, and we take it extremely seriously. 

We do have a lot more people who need to be brought out of poverty. And we believe that introducing markets and reforms and 

continuing the reform process, not taking steps back in the form of 

nationalism and other things that would protect those markets, 

will continue to produce the jobs for those other impoverished people. So we feel very strongly about that. 

Mr. MEEKS. Like we do. We have got to bring some more people 

out of poverty in the United States, also. 

Mr. CHRISTENSEN. I think all around the world we need to bring 

people out of poverty. It is a terrible condition to live in. 

And I think that you asked an excellent question about China’s 

engagement in Africa and Latin America, and the impact of Chi-
34

na’s investment in aid programs and loan programs to African nations and Latin American nations. 

I will just say as a backdrop, and it has been a theme today, and 

I don’t want to beat a dead horse, but we don’t view China’s investment assistance programs or aid to these areas as a zero-sum 

game. We believe that the development of Africa is a very good 

thing; development of Latin America is a very good thing. If China 

wants to bring capital to the show, that is a terrific thing. We want 

to see that happen. 

What we do ask of China, and what we think we could have had 

better coordination on, is coordinating our assistance programs, coordinating loan programs, and coordinating investment programs, 

so that China is more in line with efforts by the international community, including or especially international organizations like the 

World Bank, who are doing more than just throwing money at the 

problem, but who are trying to create better governance, more 

transparency within the African economies and polities, so that 

their own people will have a brighter future moving forward. 

These are very, very thoughtfully constructed programs designed 

to bring the best from the investment that goes in. And there is 

some concern that sometimes the Chinese money goes in without 

these conditions, and not in coordination with these international 

efforts. And we don’t think it is intentional, we don’t know, but we 

think that it may undercut some of the efforts that are being made. 

And then there are investments in areas where there are real 

abuses, such as Zimbabwe, the Sudan, et cetera. And as I said earlier, we really need China to use the very real leverage that it has 

in Sudan to get the government in Khartoum to accept the robust 

African Union/United Nations hybrid force under U.N. command, 

into that country, consistent with the agreements that Bashir’s 

government has already accepted. And we think this is of vital importance, and we are working hard with the Chinese to try to convince them to use that influence in an effective manner to get this 

done. 

There has been some positive movement from the Chinese Government on this score in recent months, but we think the Chinese 

can do more to get this done. 

And in terms of engagement, we engage the Chinese extremely 

robustly on these issues. And the Senior Dialogue, which I mentioned in my opening statement, which is run by Deputy Secretary 

Negroponte, has as one of its broad themes that we are trying to 

move beyond just the bilateral relationship in our discussions with 

China, and toward cooperation in handling problems of shared interest around the world. So we have regional sub-dialogues. 

And Assistant Foreign Minister Zhai Jun, and Assistant Secretary of State Jendayi Frazer had two sets of dialogues about Africa policy of the United States and China. Most recently, earlier this 

month they had a sub-dialogue here in Washington, and they addressed these very issues. And we think that is a very constructive 

product of the Senior Dialogue that was created during this administration. 

On human rights, I think I have addressed those. We do worry 

about human rights around the world, about human rights violations around the world. And we do push China when it engages Af-
35

rica or Latin America to take those concerns extremely seriously; 

to push for good governance. 

I will just say on a broad philosophical level, I do believe that 

at least in the terms of good governance, if not democratization, 

China will have increasing incentives to push for good governance 

in these areas as they bring more capital investment into those 

areas. Once you have a multi-billion-dollar contract with a government, you suddenly start to be concerned about whether that government honors its contracts, and whether there is some transparency in the legal system. 

So I am hopeful that China, as in the other things we engage 

China on, will realize that it is in its own interests to push for good 

governance in these areas for its own sake, in addition to being for 

the benefit of the many people who live in those regions. 

Thank you again for your excellent and wise questions. If I could 

just say one thing. One thing I disagreed with you on. I grew up 

in the New York area, and there is still no skyline like New York 

City. 

Mr. FALEOMAVAEGA. Let me just follow up on the questions Mr. 

Meeks had raised earlier. 

I think recently the Premier of China hosted 40 of Africa’s top 

leaders all went to China; hosted them in the most official capacity, 

for which our country has never done that. 

But the fact is that there is a human element here why China 

does this. It appears to me in the years that I have served in this 

committee, we seem to pay more attention to the industrialized 

countries than countries who are of lower economic standing, countries that really have no contribution to our own economic interests. 

And so China comes out with a very human-like presentation in 

looking at countries like in Africa. They have human rights problems, like all other countries. We can point to a lot of democracies 

that have human rights problems, as well. 

But my point I wanted to take is that we have never done this 

in all the years that I have served as a member of this committee, 

where we have, as a gesture of good will, if you will, of inviting the 

top 40 leaders of these African countries—went to China, was 

hosted first class. And there was no interest of trade. 

And I don’t think in the history of our country we have ever done 

that to these African countries. Let us face it: Africa is one of the 

low economic continents that it seems to me that the industrialized 

countries really have never paid serious attention about in providing any real economic assistance, real programs that really 

could be helpful. 

I realize that we contribute about 25% to 30% of the assets in 

the IMF, the World Bank, the Asian Development Bank. But when 

it gets to the bureaucratic maze, I never seem to really feel as if 

the funds intended from those regional lending institutions really 

go out to meet the needs of those poverty-stricken countries that 

never qualify, I suppose because we have these standards that we 

expect for them to come up to our level. When how can they come 

up to our level when they don’t have the means to—our Millennium Account situation is a concrete example of that. 
36

So I just want to express that concern, that we need to put a 

human face sometimes on the policies that we enunciate, not only 

with other regions of the world, but with other countries, on a bilateral basis. My basic criticism of our policy toward the Pacific Region, it is only with Australia and New Zealand, and the heck with 

the other countries, who are only incidental to our policy. 

What happens? President Chirac hosted the Pacific Island nations in Paris. The Premier of China hosted the Pacific Island leaders in Fiji. The Prime Minister of Japan hosted these Pacific Island 

leaders in Tokyo. 

My point is that they put a human face on how they deal with 

other countries. And I am sad to say—and correct me if I am wrong 

in my observation—we seem to stress more if you are not up with 

the big boys, we don’t want to talk to you. And I am really concerned, because these poverty-stricken countries are not given the 

kind of assistance that I think they deserve and we should. 

Now, we keep saying all these bad things about Sudan. And of 

course, there is a crisis there in Darfur. And we have been talking 

and talking and talking, it is all talk. But what can we do? I mean, 

in terms of the OAS, an ability to do this, the United Nations 

doesn’t seem to have the capability. 

So now we are pointing the finger at China, saying do something 

about it, because China has a very substantial trade with that 

country. Here we are pointing the finger at China with Iran. And 

correct me if I am wrong, the biggest trading partners that Iran 

has are those European countries. And nothing hardly, our media 

here has hardly said anything about that. And I am talking about 

real serious trade. 

So we are pointing the finger at China because of their involvement with Iran. The Russians, the only reason for a refusal of giving this nuclear stuff to Iran is because they couldn’t pay their 

bills, if that is really the real reason. And then these European 

countries have substantial trade with Iran, and we are not saying 

anything about that. Can you comment on that? 

Mr. CHRISTENSEN. Okay. Well, we have moved very far from my 

area of, my purview. 

Mr. FALEOMAVAEGA. Well, we are talking about China, Mr. 

Christensen. 

Mr. CHRISTENSEN. Yes, that is true. I mean, it is a humbling experience. As you know, I come out of academia. I have been on this 

job since last July. It is a great privilege and honor to serve in this 

position. 

But working on Chinese foreign policy issues does take you 

around the world in a hurry, and you do end up dealing with issues 

like Iran and Darfur. 

Mr. FALEOMAVAEGA. Mr. Secretary, and I want to apologize. We 

have been battering you all afternoon with questions left and right. 

Mr. CHRISTENSEN. No, it is a pleasure. 

Mr. FALEOMAVAEGA. But we really are honored having you here, 

and your expertise in this country that I feel, as you said, should 

not be treated as an adversary, but as a partner in solving some 

of the most serious problems that we face now in the world. 

Mr. CHRISTENSEN. It is a pleasure to be here today, and I certainly don’t feel like I have been abused in any way. 
37

So I do think that working on China foreign policy issues does 

make you travel, intellectually and otherwise, in a serious way. 

And I don’t want to speak too much about our broad strategy toward the world, but I would note that it is my impression—and we 

can get you the statistics, and we can check it—but my impression 

that the Bush administration has increased aid to countries in Africa above and beyond anything that has been done before, and by 

a very significant percentage. Starting in the first term of the Bush 

administration, this issue has been treated with great seriousness. 

Do we need to do more as an international community in Africa? 

Absolutely. And I think that that is something that Secretary of 

State Rice takes extremely seriously, and it is taken very seriously 

by the President himself. 

On issues that are a little bit closer to my area of coverage in 

the State Department, the Pacific Islands, you are obviously much 

more expert on these issues than I am, and I would not pretend 

to——

Mr. FALEOMAVAEGA. I still eat my coconuts, under a coconut tree, 

believe it or not. 

Mr. CHRISTENSEN. But I do think, and I know from my own office, I serve in the Bureau of East Asian and Pacific Affairs. And 

I know that my boss, Ambassador Hill, takes the Pacific Islands 

very seriously. He traveled there extensively. It is not just about 

Australia and New Zealand at all. 

And we are hosting this spring an organization called the PICL, 

which is the Pacific Island Council of Leaders. They will come to 

the United States in very much the fashion that you laid out in describing, in a congratulatory fashion, the Chinese effort——

Mr. FALEOMAVAEGA. You know what I told them? Don’t come if 

they don’t have a chance to meet with President Bush. 

Mr. CHRISTENSEN. That is above my pay grade, sir. [Laughter.] 

Such decisions are above my pay grade. But I do think it is constructive that we are doing that. 

But we are doing something else that I think touches on both of 

your comments, and that is we are having a donors conference for 

countries that give investment and assistance to the Pacific Island 

nations. And they are going to come to Washington just before that 

council. And they are going to engage in issues about how best to 

use the resources that are being put into the region to guarantee 

good governance, et cetera. 

And I do think that programs like the Millennium Challenge Account are good programs, because the idea behind them is that you 

don’t just put money into the problem, you try to use that money 

in a way that will create better governance. Because at the end of 

the day, it is the better governance and the better policies in those 

places that will produce the real wealth, moving forward. 

And you provide opportunities with the capital, but it is really 

going to require those places to maintain transparency, create good 

markets, and remain open to the international marketplace to 

move forward in their economic futures. 

I think it is very constructive to engage with these countries. The 

Millennium Challenge Account asks those countries to write their 

own loan proposals. You know, tell us what you want to do with 

it, and how you are going to use it best. That gives them voice in 
38

the process. And that is something that as far as I know has been 

missing from a lot of assistance programs in the past. 

So I think these are constructive programs. I think the Bush administration at large takes the less-developed areas of the world 

extremely seriously. And I can say with great authority in my own 

bureau, that we do take the Pacific Islands seriously. We worry 

greatly about developments in Fiji and elsewhere. And I hear about 

them every day, although my portfolio is China, Taiwan, and Mongolia. 

Mr. FALEOMAVAEGA. Well, Mr. Secretary, I have a million more 

questions that I wanted to ask you. 

Mr. CHRISTENSEN. I would be happy to meet with you again. 

Mr. FALEOMAVAEGA. Because of the constraints on time, I thank 

you again. Also my good friend from New York, our vice chairman 

of the subcommittee. Thank you so much for coming. I will look forward to another round. 

Mr. CHRISTENSEN. Thank you, sir. 

Mr. FALEOMAVAEGA. Thank you. 

[Whereupon, at 3:50 p.m., the subcommittee was adjourned.]

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