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[Senate Hearing 110-763]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 110-763
 
       UNITED STATES-CHINA RELATIONS IN THE ERA OF GLOBALIZATION

=======================================================================

                                HEARING

                               BEFORE THE

                     COMMITTEE ON FOREIGN RELATIONS
                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 15, 2008

                               __________

       Printed for the use of the Committee on Foreign Relations

  Available via the World Wide Web: http://www.gpoaccess.gov/congress/
                               index.html

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                     COMMITTEE ON FOREIGN RELATIONS

                JOSEPH R. BIDEN, Jr., Delaware, Chairman
CHRISTOPHER J. DODD, Connecticut     RICHARD G. LUGAR, Indiana
JOHN F. KERRY, Massachusetts         CHUCK HAGEL, Nebraska
RUSSELL D. FEINGOLD, Wisconsin       NORM COLEMAN, Minnesota
BARBARA BOXER, California            BOB CORKER, Tennessee
BILL NELSON, Florida                 GEORGE V. VOINOVICH, Ohio
BARACK OBAMA, Illinois               LISA MURKOWSKI, Alaska
ROBERT MENENDEZ, New Jersey          JIM DeMINT, South Carolina
BENJAMIN L. CARDIN, Maryland         JOHNNY ISAKSON, Georgia
ROBERT P. CASEY, Jr., Pennsylvania   DAVID VITTER, Louisiana
JIM WEBB, Virginia                   JOHN BARRASSO, Wyoming
                   Antony J. Blinken, Staff Director
            Kenneth A. Myers, Jr., Republican Staff Director

                                  (ii)

  
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                            C O N T E N T S

                              ----------                              
                                                                   Page

Biden, Hon. Joseph R., Jr., U.S. Senator from Delaware, opening 
  statement......................................................     1
Campbell, Dr. Kurt, chief executive officer, the Center for a New 
  American Security, Washington, DC..............................    37
    Prepared statement...........................................    41
Haass, Hon. Richard, president, Council on Foreign Relations, New 
  York, NY.......................................................    30
    Prepared statement...........................................    34
Harding, Dr. Harry, University Professor of International 
  Affairs, The Elliott School of International Affairs, George 
  Washington University, Washington, DC..........................    48
    Prepared statement...........................................    51
Lugar, Hon. Richard G., U.S. Senator from Indiana, opening 
  statement......................................................     4
Negroponte, Hon. John D., Deputy Secretary, Department of State, 
  Washington, DC.................................................     6
    Prepared statement...........................................     8
    Responses to questions submitted for the record by Senator 
      Richard Lugar..............................................    66
    Responses to questions submitted for the record by Senator 
      Barbara Boxer..............................................    67

                                 (iii)

  

       UNITED STATES-CHINA RELATIONS IN THE ERA OF GLOBALIZATION

                              ----------                              

                         THURSDAY, MAY 15, 2008

                                       U.S. Senate,
                            Committee on Foreign Relations,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 2:07 p.m., in 
room SD-419, Dirksen Senate Office Building, Hon. Joseph R. 
Biden, Jr. (chairman of the committee) presiding.
    Present: Senators Biden, Kerry, Nelson, Cardin, Lugar, 
Voinovich, Murkowski, and Isakson.

        OPENING STATEMENT OF HON. JOSEPH R. BIDEN, JR.,
                   U.S. SENATOR FROM DELAWARE

    The Chairman. The hearing will please come to order.
    Mr. Secretary, welcome.
    Let me, at the outset of this hearing--I want to express my 
condolences, as I'm sure every American does, to the people of 
China, who are working to recover from what is a God-awful, 
devastating earthquake. I keep thinking of this in terms of the 
tragedy that we went through in Katrina. And, my gosh, I mean, 
it's just--what's happening in China, and, for that matter, in 
Myanmar and in Burma, is just--it's just staggering. And at 
least 20,000 people were reported to have been killed by the 
quake that struck western China on Monday, and authorities fear 
the toll could climb higher, as many of the missing are feared 
dead, buried beneath those collapsed buildings. And our hearts 
go out to the Chinese people. And I know--and I hope they know 
that, as the President and the administration and the Congress 
has said, we stand ready to help in any way we can.
    Senators Boxer and Murkowski have drafted a resolution 
expressing the sympathy of the American people for China during 
this tragedy, and I--I'm sure, with every member of the 
committee--join them in expressing what I'm sure are going to 
be a unanimous view on the floor of the United States Senate.
    Good afternoon, Mr. Secretary. Today the Foreign Relations 
Committee convenes the first in what will be a series of 
hearings on China. Further hearings will focus on economic 
relationships, on energy and environment, on China's growing 
soft power in Asia, Africa, and Latin America, and on China's 
internal political and economic challenges.
    And just last week the Congressional Research Service 
released a comprehensive study commissioned by us, on the 
Foreign Relations Committee, that takes stock of China's soft 
power and its implications for U.S. interests and those of our 
friends and allies. The study, which is available on our Web 
site, highlights both the challenges and opportunities of 
China's reemergence as a great power.
    Let me begin by saying I welcome all the witnesses today, 
but especially the Deputy Secretary of State, John Negroponte, 
who is no stranger to this committee, a leader of the 
administration's senior dialogue with China.
    There's a view in Washington that the United States and 
China--a view held by some--that the United States and China 
are fated to confrontation. In this view, the great struggle of 
our time will be between liberal democracies like the United 
States and autocracies like China and Russia. Some liken this 
struggle to the great ideological battles of the cold war, and 
they often suggest that cold-war remedies are needed to 
challenge--to meet the challenges of the 21st century.
    But, I believe this view is mistaken. There is a more 
powerful reality, in my view, that trumps this pessimistic 
world view. For all of China's emerging power and all of 
America's great strength, neither of us can solve the problems 
we both confront without the other. From the spread of weapons 
to the scarcity of resources, from the threats to our planet to 
the dislocations in our economies, we have shared interests, 
and, on most fundamental issues--even as we disagree on other 
matters, on shared issues we have a profound common interest.
    China and the United States may well be destined for 
competition, which I believe they are, but nothing dictates 
that we are headed for confrontation, and everything argues 
that it's in America's national interest to forge an 
affirmative agenda with China. But, how do we get there? How do 
we make the most of the opportunities that are inherent in 
China's rise, while addressing the challenges that accompany 
China's reemergence as a global power?
    The place to start is with--in my view, with intense, 
sustained, high-level engagement between the United States and 
China across every issue area. Through engagement over the past 
30 years, we've built a common interest and managed problem 
areas before they've developed into crises. Engagement with 
China has been a successful approach, encouraging fundamental 
change in the world's most populous nation. But, engagement 
alone is not enough. We must complete the process of 
integrating China into the international system, and push it to 
adopt laws and policies consistent with international norms.
    Two areas, two key areas, merit special attention, in my 
view: Energy and the environment. China's drive for energy is 
churning global markets and expanding their presence in Africa 
and elsewhere, and China is now the single largest source of 
greenhouse gases, having overtaken the United States for that 
dubious distinction.
    Working with our European and Asian friends and our allies 
to convince China to address energy security and environmental 
challenges should be among the very top foreign policy 
priorities of the next administration. Our approach to China 
emphasizes integration, but we must be prepared to take China 
as--we must be prepared if China takes an unexpected radical 
turn and strives to undermine our vital interests and those of 
our allies. We not only need to reinvigorate our existing 
alliances, but we also need to think about how China should be 
involved. The six-party talks in North Korea demonstrate the 
benefit of an inclusive approach to security challenges in East 
Asia.
    But, what kind of power is China? Where is it heading? 
China is so big and diverse that most anything I could say 
about it is true--would be true. China is rich; China is very 
poor. China is strong; China is very weak. It's confident--
witness the Olympics; and insecure, as evidenced by the 
response to the Tibetan unrest.
    Over the past 30 years, we've witnessed an incredible 
transformation in China, starting with an almost 10-percent 
annual economic growth lifting 400 million people out of 
poverty. In 1978, China had 300,000 registered private 
businesses; today it has 30 million private companies. China 
today has 106 billionaires, ranks third in the world in gross 
domestic product after the United States and Japan, and is 
sitting on more than 1.5 trillion in hard currency reserves.
    Last year, for the first time since the end of World War 
II, China contributed more to global economic growth than did 
the United States. So, today it's accurate to call China a rich 
country. Or is it? Because China is also a very poor country. 
For all its impressive growth, China still ranks only 100th in 
the world in per capita income, about the same as Mali. China 
still has about 400 million people living on about $2 a day. 
China faces enormous challenges--an aging population, a 
degraded environment, a growing social unrest fueled by income 
inequities and endemic corruption, just to name a few.
    And the security picture is mixed, as well. China's 
spending in defense has grown rapidly. It now spends somewhere 
between $50-$100 billion on defense, and it's working hard to 
acquire systems and capability it needs, in its view, to defend 
its global interests. But, that's still only 15 percent of what 
we spend on defense. China's force-projection capabilities 
remain quite modest. It has a few dozen strategic nuclear 
weapons, to our thousands. And China struggles to attract and 
retain highly educated soldiers it needs to fight a high-tech 
war under modern conditions.
    The limits of China's military power were evident during 
the Asia tsunami of December 2004, when it was the United 
States, in partnership with Japan and Australia, who rallied 
first and were able to sustain relief efforts thousands of 
miles from our shore, in China's backyard. And I could say the 
same about what's going on right now in China, in dealing with 
the earthquake.
    So, the picture is mixed. China is, arguably, the worst--
the world's first poor great power, a leading and economic and 
military power, but also a nation confronting enormous 
challenges.
    It presents, in my view, a unique challenge to U.S. 
policymakers, and we need to resist trying to plug China neatly 
into some cold-war paradigm or a 19th-century world view of 
great power rivalry.
    To advise us on how we get this vital relationship right--
and I don't think anyone knows for certain--I know I don't--how 
to build on the opportunities and deal with the challenges, the 
committee has called on four very able individuals. We'll first 
hear from Deputy Secretary of State John Negroponte. The 
committee will then hear from Dr. Richard Haass, president of 
the Council on Foreign Relations, and Dr. Kurt Campbell, CEO of 
The Center for New American Security, and Dr. Harry Harding, a 
former dean of the Elliott School of International Affairs at 
G.W., and one of America's leading scholars on China.
    So, I welcome you all. I look forward to this testimony. 
And I'll end where I began. This will be one of only a series 
of hearings, the opening hearing, which will be more general in 
its focus than others will be. And we'll have numerous 
hearings, both at a full committee and subcommittee levels, 
dealing with specific aspects of China's emergence.
    So, I yield now to my colleague, Chairman Lugar.

 OPENING STATEMENT OF HON. RICHARD G. LUGAR, U.S. SENATOR FROM 
                            INDIANA

    Senator Lugar. Well, Mr. Chairman, I thank you for calling 
this hearing.
    I welcome back to the committee Secretary Negroponte.
    Today, as we consider policy toward China, we send our very 
special thoughts and prayers, as you have mentioned, to the 
people affected by the devastating earthquake, and we note with 
sympathy and with high regard the responses of the Chinese 
Government to meet the needs of the people.
    The United States must come to grips with the incredibly 
complex set of problems, choices, and opportunities that China 
represents. Clearly, we have sharp differences with the Beijing 
government on many issues, including human rights, 
democratization, religious freedom, the protection of 
intellectual property rights, Chinese currency policy, the 
safety of Chinese consumer products, the militarization of 
space, the status of Tibet, matters related to Taiwan, and 
other issues. Though progress has been made in some areas, most 
of these issues are unlikely to be resolved in the short run.
    In recent years, United States-China ties have advanced on 
several fronts, including military-to-military relations and 
cooperation on antiterror initiatives. Beijing has an integral 
role hosting the six-party talks intended to eliminate North 
Korea's nuclear weapons program. And this has been a valuable 
venue for extended dialogue between our diplomats and Northeast 
Asian counterparts on other items, as well.
    Recently, China and Taiwan are interacting on relevant 
issues in more measured tones. Among other positive steps, I 
encourage China's acceptance of Taiwan's participating as an 
observer in the upcoming World Health Assembly of the World 
Health Organization.
    Economically, U.S. exports to China rose by nearly 240 
percent from 2001 to 2007, significantly more than exports to 
any of our other top 10 trading partners. Yet, we are mindful 
that the annual U.S. trade deficit with China has risen to 
approximately $256 billion. Many U.S. officials have insisted 
that China's currency was undervalued in comparison to the 
United States dollar, making Chinese exports to the United 
States cheaper, and, consequently, United States exports to 
China more expensive.
    Congressional Research Service reports that, ``China is the 
second largest foreign holder of U.S. Treasury securities, at 
$487 billion, and, while China's purchases enable the United 
States Government to finance the budget deficit, helping to 
keep interest rates low in our country, some have raised 
concerns that China could destabilize the U.S. economy if it 
decided to suddenly attempt to sell off its debt holdings.''
    Also, there is concern that China's establishment of a 
multibillion sovereign fund may be used to acquire foreign 
companies, energy companies among them. Beyond your bilateral 
relationship with China, we must recognize that China's 
economic emergence is a crucial consideration in finding 
solutions to global energy, climate, and food.
    Unfortunately, the United States debate on contentious 
issues between our two countries is often oversimplified, 
parsed out in sound bites, omitting realities of the broader 
trade and economic interaction. China's rapid economic growth 
and industrialization are obliterating old ways of thinking 
about the global economy. We celebrate the rise of hundreds of 
millions of people out of poverty; yet, our policies have not 
yet fully comprehended the consequences of that many people 
eating more meat or driving more cars. China's economic growth 
depends upon having adequate supplies of energy, and this will 
lead to increasing scarcity of global energy sources and 
surging greenhouse gas emissions in the absence of massive 
deployment of new technologies, such as clean coal, carbon 
capture and storage, industrial efficiency, alternative fuels, 
and advanced technology vehicles.
    Consider that in 2007 alone, demand for power generation in 
China expanded by a phenomenal 16 percent. This figure followed 
a 14-percent increase in demand for power in 2006. The Chinese 
coal plants that came online in 2006 alone added a net 80 
gigawatts of electric generation to the Chinese system, and 
this amount was roughly equal to the entire electrical capacity 
of Great Britain. Vehicle sales in China increased by more than 
25 percent in 2006 as China passed Japan to become the second 
largest vehicle market in the world, behind the United States. 
The 7.2 million vehicles sold in China in 2006 were four and a 
half times as many as were sold just 9 years earlier.
    The resulting demand for transportation fuels has focused 
the Chinese Government on an aggressive global search for 
reliable oil supplies. Technological breakthrough that expand 
energy supplies for billions of people worldwide will be 
necessary for sustained economic growth. If concerns over 
climate change are factored into policies, the challenge 
becomes even greater, because serious efforts to limit carbon 
could constrain energy options, particularly the use of coal. 
In the absence of China's participation in revolutionary 
changes in energy policy, we will be risking multiple hazards 
for the world that could constrain living standards and leave 
us highly vulnerable to economic and political disasters with 
an almost existential impact.
    I look forward to our discussion today, as the chairman has 
pointed out, at the beginning of a number of constructive 
hearings on China. As--and I asked, and congratulate Chairman 
Biden that he has asked, Secretary Paulson to testify, and we 
are hopeful that the Secretary will come forward in exploring 
the strategic economic dialogue with China as a part of this 
series.
    I thank the chairman.
    The Chairman. Thank you very much.
    Thanks for your patience, Mr. Secretary. Welcome, again, 
and the floor is yours.

    STATEMENT OF HON. JOHN D. NEGROPONTE, DEPUTY SECRETARY, 
              DEPARTMENT OF STATE, WASHINGTON, DC

    Ambassador Negroponte. Thank you very much, Mr. Chairman, 
Senator Lugar, members of the committee. Thank you for the 
opportunity to speak with you today about United States policy 
toward China.
    Today's hearing comes at an opportune moment, since I have 
just returned from a 2-day visit to Beijing. While there, I met 
with senior Chinese Government leaders to discuss issues of 
bilateral and international concern. One of the 
administration's major foreign policy objectives is to engage 
with an increasingly influential China to affect choices that 
Chinese leaders make in ways that serves global stability and 
United States interests.
    China is a permanent member of the U.N. Security Council. 
It possesses one of the world's largest and most dynamic 
economies. It is a nuclear power. And it is the seat of a great 
civilization. United States-China cooperation is in our mutual 
interest.
    Before addressing three important dimensions of United 
States-China cooperation, I want to express condolences, on 
behalf of our Government, to the Chinese people for the tragic 
loss of life from Monday's earthquake in Sichuan province. We 
have transferred $500,000 to the International Federation of 
the Red Cross and are exploring ways to make additional 
assistance available to China through public-private 
partnerships and other means. Our interest in the immediate 
welfare of the Chinese people at such a moment is emblematic of 
our broader commitment to strategic dialogue and cooperation 
with China as a nation.
    Today, I'd like to focus on three vital dimensions of our 
relations with China: Maintaining peace and stability in Asia; 
motivating China's positive contributions to global stability; 
and encouraging China's greater respect for human rights and 
freedom of expression.
    With respect to peace and stability in Asia, we welcome the 
fact that China has repeatedly reassured its neighbors that its 
rise is peaceful and will benefit the entire region. This 
facilitates our efforts to urge China to exercise leadership in 
addressing regional problems, particularly with regard to the 
Korean Peninsula and Burma and in pursuing dialogue with 
Taiwan. We work closely with China on our shared six-party goal 
of the complete and verifiable denuclearization of the Korean 
Peninsula. China's leadership as chair and host of the six-
party talks has been essential to the progress we have made so 
far.
    We also think the eventual establishment of a framework for 
peace and security in Northeast Asia would be advantageous for 
the region as a whole. Such a framework would complement our 
enduring alliances in Asia. China must, of course, play an 
important role in any such undertaking.
    Burma is a separate regional challenge. The situation in 
Burma is unstable and unsustainable. We welcome the fact that 
China has pressed the Burmese regime to cooperate with the 
international community in providing humanitarian assistance in 
the wake of Cyclone Nargis. China has also urged meaningful 
dialogue between the Burmese regime and the democratic 
opposition and ethnic minority groups. We want to work with 
China more to persuade the Burmese regime to move away from its 
political repression and disastrous economic mismanagement.
    Regarding Taiwan, we are encouraged by news of the initial 
meeting between President Hu Jintao and Taiwan's Vice-
President-elect, Vincent Siew. We remain concerned, however, 
about the PRC's continued military buildup, and have urged the 
mainland's leaders to show more flexibility in their approach 
to cross-strait relations. We do not support Taiwan 
independence. We want cross-strait differences to be resolved 
peacefully and according to the wishes of the people on both 
sides of the strait. Nobody should question our resolve in 
insisting on such a peaceful process.
    As China becomes more integrated in international economic 
and political institutions, its ability to contribute to global 
stability, the second theme I'd like to address, is growing. 
Beijing's traditional principle of noninterference is giving 
way to diplomatic interventions that highlight China's stated 
ambition: To be seen as a responsible major power.
    We have welcomed China's support for a number of U.S. 
initiatives in the United Nations Security Council. These have 
included sanctions resolutions against North Korea and Iran, 
and a hybrid peacekeeping mission for Darfur. China's support 
for these positions would have been hard to imagine several 
years ago. At the same time, we continue to encourage China to 
take into consideration the full impact of its diplomatic and 
trade policies, particularly in areas of instability and civil 
unrest, like Sudan.
    I would like to conclude by speaking about the Chinese 
Government's respect for human rights and freedom of 
expression. Our position is clear, grounded in our national 
values and national experience. We believe the expansion of 
individual freedoms and greater political liberalization is not 
only the right and just path, it is also the best way for China 
to achieve long-term stability. This is especially true as 
China pursues national modernization that will inevitably be 
accompanied by unpredictable social changes.
    We, therefore, welcome the recent meeting between Chinese 
officials and representatives of the Dalai Lama. Such dialogue 
is the best hope to address longstanding grievances and promote 
prosperity in Tibetan areas. And we have urged China to use the 
Olympics as an opportunity to show greater openness and 
tolerance, and to increase access to information and expand 
press freedoms. China will earn the international respect it 
seeks by guaranteeing all of its citizens' internationally 
recognized rights.
    Mr. Chairman, our approach to building cooperation with 
China and influencing the choices its leaders make about its 
role in the world is, as you said earlier, a long-term 
proposition. China is an emerging great power with enormous 
potential to enhance prospects for peace, stability, 
prosperity, and human freedom in Asia and around the world. In 
recent years, we have made some progress in our relations with 
China, and I would say that the trend lines are positive. But, 
respect, perseverance, and patience will be permanent 
requirements for both sides as we seek to endow our bilateral 
relationship with greater solidity, depth, and capacity for 
constructive cooperation.
    Thank you, again, for inviting me to testify on this 
important topic, and I would welcome your comments and 
questions.
    Thank you.
    [The prepared statement of Ambassador Negroponte follows:]

    Prepared Statement of Hon. John D Negroponte, Deputy Secretary, 
                  Department of State, Washington, DC

    Mr. Chairman, Senator Lugar, and members of the committee, thank 
you for the opportunity to address U.S. policy toward China.
    I just returned from a 2-day visit to Beijing, where I met with 
senior Chinese Government leaders to discuss issues of bilateral and 
international concern. Both we in the administration and our Chinese 
interlocutors are keenly aware of the spotlight focused on China during 
these final 3 months before the Olympic Games commence in Beijing on 
August 8. We continue to express our support to the Chinese people for 
a successful Olympic Games. At the same time, we emphasize to Chinese 
leaders the importance of making progress on issues that matter to the 
American people.
    These issues span the subjects of global security, human rights, 
the environment and trade. In some areas we have been able to develop 
common approaches with the Chinese; in others we remain far apart. That 
there exist substantial policy differences should come as no surprise, 
given the two countries' very different demographic and economic 
conditions, histories, and political systems. Nonetheless, our constant 
objective is to engage with an increasingly influential China to shape 
the current and future choices that Chinese leaders make in ways that 
serve global stability and U.S. interests. China is, after all, a 
permanent member of the U.N. Security Council. It possesses one of the 
world's largest and most dynamic economies. It is a nuclear power, and 
it is the seat of a great civilization. United States-China strategic 
cooperation is in our mutual interest.
    I would like to address three dimensions of our engagement with 
China that are central to our relationship: Maintaining peace and 
stability in Asia; motivating China's positive contributions to global 
stability, and encouraging China's greater respect for human rights and 
freedom of expression.
    I will not speak about trade, energy, and the environment, other 
than to say that they are key topics of our government's engagement 
with the Chinese and that such engagement has produced positive 
results.
    We have discussions with China in over 50 dialogues at all levels. 
We believe that this extensive consultative framework will help us 
ensure progress in our cooperation with China in the years ahead.
                      peace and stability in asia
    A major priority in our engagement with China is the maintenance of 
peace and stability in Asia. The United States is a Pacific power, and 
the stability and economic dynamism of Asia has been essential to the 
health and growth of our economy over the past 20 years.
    While China grows as a regional power, its leaders are at pains to 
reassure its neighbors that its rise is a peaceful one and that a 
prosperous China will benefit the entire region. Beijing also 
acknowledges the benefits of the U.S. presence and recognizes that a 
diminished U.S. profile would make its neighbors nervous. Our task is 
to challenge China to exercise real leadership in solving problems in 
the region. We encourage China to reach out to its neighbors in a 
peaceful and constructive way. At the same time, we remain deeply 
committed to our alliances and maintain an active U.S. security 
presence in Asia. A robust U.S. presence in Asia, undergirded by our 
strong alliances, has been a guarantor of the regional stability that 
has created the conditions for Asia's emergence as a major engine for 
global economic growth.
    In some areas, China is showing constructive leadership on 
difficult issues. The United States and China recognize that North 
Korea's pursuit of nuclear weapons would not benefit the long-term 
security interests of any party, including the citizens of North Korea. 
We continue to work closely with China on our shared six-party 
commitment to achieve the verifiable denuclearization of the Korean 
Peninsula in a peaceful manner. China's leadership as chair and host of 
the six-party talks has been essential to the progress we have made in 
drawing North Korea out from isolation and into constructive dialogue, 
and we rely on China's active engagement to continue this process. 
Beijing also joined us in imposing mandatory chapter VII sanctions 
against the DPRK in the U.N. Security Council. Our combined efforts 
benefit international security.
    It makes sense to discuss the issue of Taiwan within the context of 
peace and stability in Asia. With the inauguration of Ma Ying-jeou on 
May 20 we will have safely navigated a tense period in cross-Strait 
relations. Our ``one China'' policy, based firmly on the Three 
Communiques and the Taiwan Relations Act, continues to guide our 
approach to cross-Strait relations. We do not support Taiwan 
independence and we are opposed to unilateral attempts by either side 
to change the status quo. We want cross-Strait differences to be 
resolved peacefully and according to the wishes of the people on both 
sides of the Strait. Nobody should question our resolve in insisting on 
such a peaceful process.
    We will continue to sell Taiwan defensive arms to maintain the 
capacity to assist in Taiwan's defense if needed. As you know, this 
policy fulfills a legal obligation under the Taiwan Relations Act. It 
also supports our belief that a Taiwan confident and capable of 
protecting itself will offer the best prospects for a peaceful 
resolution of cross-Strait differences.
    We continue to express concern about the Mainland's ongoing 
military buildup on its side of the Strait. We view China's buildup as 
unnecessary and counterproductive. The anxiety it breeds on Taiwan 
encourages proindependence inclinations that the Mainland's missile 
deployment purports to deter. Mainland efforts to squeeze Taiwan's 
diplomatic space also are counterproductive. We do not advocate that 
Taiwan be allowed membership in international organizations when 
sovereignty is a requirement. But we should be able to find ways to 
allow Taiwan to participate meaningfully in the broad range of 
international activities. For example, Taiwan's participation in the 
World Health Organization would give it access to vital health 
information about quickly spreading infectious diseases. That is in 
everyone's interests.
    Taiwan's active democracy is an admirable achievement. As the 
President noted after Taiwan's Presidential election in March, we view 
Taiwan as a beacon of democracy to Asia and the world and are confident 
that the Presidential election in March--and the democratic process it 
represented--will help advance Taiwan as a prosperous, secure, and 
well-governed society. It now falls to Taiwan and Beijing to build the 
essential foundations for peace and stability by pursuing dialogue 
through all available means and refraining from unilateral steps that 
would alter the cross-Strait situation. In this context, we were 
encouraged by news of the initial meeting between President Hu Jintao 
and Taiwan's Vice-President-elect Vincent Siew at the Bo'ao Forum in 
China and other positive cross-Strait developments that have taken 
place since the March election.
    Another regional issue we work on with China is Burma. In the wake 
of Cyclone Nargis, we appreciate China's willingness to press the 
Burmese regime to cooperate with the international community's efforts 
to provide humanitarian assistance to the people of Burma. On a broader 
front, we are trying to persuade our Chinese interlocutors that the 
Burmese regime's political repression and disastrous economic 
mismanagement have created a situation that is unstable and 
unsustainable, and that continuing such misrule will only result in 
greater turmoil in the future. While we still have work to do on this 
subject, we note that the Chinese Government has publicly urged 
meaningful dialogue between the Burmese regime and the democratic 
opposition and ethnic minority groups in that country. Together, the 
United States and China have released two U.N. Security Council 
Presidential Statements on Burma, most recently on May 2.

                        ENGAGING A GLOBAL CHINA

    Over the past several years, we have explored issues with China 
that go beyond management of our bilateral or even regional relations. 
This is an innovation and represents important progress. In our 
discussions with the Chinese, we spend an increasing amount of time 
considering how to improve coordination of our activities toward third 
countries or regions of the world. The United States-China Senior 
Dialogue, which I lead on the U.S. side, has spawned a series of 
regional and functional subdialogues led by Assistant Secretaries to 
discuss trends and challenges in every region of the world--this 
includes talks in the critical areas of nonproliferation and 
counterterrorism.
    We are seeing results from such discussions. For example, China has 
supported a number of U.S. initiatives in the United Nations Security 
Council in recent years, including sanctions resolutions against North 
Korea and Iran. I highlighted our positive engagement with Beijing 
concerning Burma and North Korea above. Let me also discuss Sudan and 
Iran, two additional areas where we have seen some positive 
developments in China's position:

Sudan/Darfur
    China's early Darfur policies were aimed at insulating the Sudanese 
regime from international pressure. In a marked turnaround, China voted 
in support of U.N. Security Council Resolution (UNSCR) 1769 in July 
2007. The UNSCR authorized the deployment of UNAMID, the hybrid United 
Nations-African Union mission in Darfur, and committed over 300 
engineering troops to the mission. We credit this change in part to our 
senior- and working-level consultations with China's leaders and 
diplomats, in part to the attention paid to the issue by U.S. lawmakers 
and nongovernmental organizations, and in part to China's increasing 
sensitivity to the negative implications of close ties to problematic 
regimes. China's investments in Sudan's energy sector and military 
trade provide economic and military lifelines to the repressive regime 
in Khartoum, so we continue to highlight the need for the Chinese 
Government to exert pressure commensurate with its influence. 
Currently, we are urging the Chinese Government to augment its previous 
commitments by supplying transport equipment essential to a successful 
UNAMID mission.

Iran
    The Chinese Government says that it shares our strategic objective 
of preventing Iran from acquiring a nuclear weapons capability. After 
participating in lengthy discussions as a member of the P5+1 process, 
China voted in favor of U.N. Security Council Resolutions 1737, 1747, 
and 1803, applying sanctions on Iranian individuals and companies 
associated with its nuclear weapons and ballistic missile programs. 
Nonetheless, Chinese companies have expanded their trade and investment 
links with Iran, particularly in its oil and gas sector. We believe 
this expansion undermines international efforts to pressure Iran, and 
sends the wrong signal to the Iranian regime, especially at a time when 
other oil companies are heeding their governments' wishes to forgo new 
investments in Iran. We have told our Chinese interlocutors that 
China's expansion of trade relations with destabilizing a regime as 
Iran's is not in keeping with its aspirations to play the role of 
responsible global stakeholder. We also have made it clear that Chinese 
entities' continued sale of conventional weapons to Iran is 
unacceptable. China understands our position that Iran presents a grave 
international and regional security concern, and that our government 
reserves the right to apply all multilateral, bilateral, and unilateral 
measures at our disposal to ensure that our concerns are addressed. We 
reinforce this message at every opportunity.

   ENCOURAGING IMPROVEMENTS IN HUMAN RIGHTS AND FREEDOM OF EXPRESSION

    Let me turn now to another important dimension of our engagement 
with China--encouraging the Chinese Government's respect for human 
rights and freedom of expression. From our own history, we know that 
human rights and social stability are inseparable. A government that 
respects the rights of its people secures its own future and a strong 
future for the nation. In this spirit, we call attention to China's 
poor human rights record not only because the cause of individual 
freedom is noble and just in its own right, but also because we believe 
that expansion of individual freedoms and greater political 
liberalization will help China to achieve long-term stability to the 
benefit of the entire world. Stability allows China to continue as a 
global economic engine of growth; it also allows it to contribute to 
regional and global peace and security in the ways I have outlined 
above.
    In our talks with China, we point to concrete ways in which 
improvements on human rights, religious freedoms, and press freedoms 
will be a source of stability as China continues a national 
modernization that has been accompanied by wrenching social changes. If 
religious groups are allowed to operate more freely, they will be 
better able to provide material and spiritual assistance to those 
segments of the population left behind by China's explosive economic 
development. Similarly, a free press can be a valuable asset in the 
battle against official corruption. Furthermore, an enlightened and 
tolerant policy that promotes genuine expressions of cultural, ethnic, 
and religious identity by minorities could prevent the kind of unrest 
and violence that recently erupted in Tibetan areas of China.
    As I testified before the Subcommittee on Asian and Pacific Affairs 
last month, we recognize Tibet as part of the People's Republic of 
China, but we have very serious concerns about the recent events, human 
rights conditions, and limits on religious freedom there. As the 
President has reiterated on many occasions--most recently in his call 
to Chinese President Hu Jintao on Tuesday of this week--substantive 
talks between Chinese officials and the Dalai Lama and his envoys are 
the best hope to address longstanding grievances and promote stability 
and prosperity in these Tibetan areas. We were encouraged by the recent 
meeting between Chinese officials and representatives of the Dalai Lama 
and the subsequent news that a second meeting will take place soon. At 
the same time, we urge China to take a close look at longstanding 
policies in Tibetan areas that have created tensions because of their 
impact on Tibetan religion, culture, and livelihoods, to allow 
unfettered access to Tibet for diplomats and journalists, and to 
release protestors who expressed their views peacefully.
    Finally, as we examine China's domestic situation, it is worth 
analyzing Beijing's efforts to respond to some of the challenges that 
have arisen recently in connection with its role as host of the 2008 
Olympics. The Chinese Government has exerted substantial effort both to 
rally its population and the international community behind a 
successful Olympic Games. We have urged China to use the Olympics as an 
opportunity to show greater openness and tolerance, and to increase 
access to information and expand press freedom. Attempts to clamp down 
on those who seek to use the Olympics to air their legitimate 
grievances about certain aspects of China's policies will only serve to 
embolden China's critics. China will earn the respect and admiration it 
seeks as an emerging great power only by guaranteeing all of its 
citizens internationally recognized human rights.

                               CONCLUSION

    If one steps back and views our engagement with China as a moving 
picture, evolving over time, one will see that in the past few years 
China's policy postures toward governments in North Korea, Sudan, 
Burma, and Iran have evolved in a positive direction. Supporting 
sanctions against North Korea and Iran, public calls for domestic 
political progress in Burma, and the deployment of peacekeepers to the 
Darfur region of Sudan are major shifts in Chinese foreign policy that 
suggest Beijing is rethinking its hard and fast principal of 
``noninterference'' in the internal affairs of states friendly to 
China, and its argument that sanctions and pressure are not effective 
or appropriate tools in foreign policy. We recognize that there are 
many factors that have contributed to these outcomes, but we believe 
that our ongoing dialogues have played a significant role in bringing 
about these outcomes.
    Our approach to influencing China's choices through a strong U.S. 
military, economic, and political presence in Asia, combined with 
diplomatic engagement and dialogue, is a long-term proposition. It 
requires perseverance, patience, and firmness, but it seems clear to us 
that it has been successful and that there are no other readily 
available alternatives that would produce better results for the United 
States and the world.

    The Chairman. Thank you very much, Mr. Secretary.
    I'm going to be here for the duration, and I'm delighted to 
yield to the Senator from Maryland, because I know he has 
something a little bit later that he has to attend. So, I'd be 
delighted to----
    Senator Cardin. Well----
    The Chairman [continuing]. Yield to you.
    Senator Cardin. Thank you very much, Mr. Chairman. I 
appreciate that very much.
    Secretary Negroponte, it's always a pleasure to have you 
before our committee. As you know, I have the deep respect for 
your commitment to our country and to the relationships with 
other countries.
    I thank the chairman for his leadership, not only in this 
hearing, but the series of hearings that our committee will be 
holding on Chinese-American relations, which I think is 
critical to our country. In preparation for today's hearing I 
was challenged as to what questions to ask, because there are 
so many. There are so many issues out there. And I agree with 
you that we want to engage China. It's absolutely essential 
that we engage China, and that your thoughts that China will 
adhere to international norms through engagement has me 
somewhat concerned. And let me explain my reasonings.
    Several years ago, it was thought that engaging China 
through the WTO would be the best way to bring about economic 
reforms in that country and to establish a more positive 
relationship between the United States, China, and other 
trading partners. So, we normalize our relations with China and 
they enter the WTO. China today is certainly very far away from 
the type of level playing field that they should have as it 
relates to manipulation of currency; as it relates to 
intellectual property; as it relates to the safety of products 
that are imported into the United States; and I could continue 
to go through the long list.
    As I hear your testimony, talking about human rights 
problems in China, the list gets longer and longer. In my view, 
it's not getting better; it's getting worse. Yestereday, I met 
with some individuals in regards to Internet access, including 
what China has done in arresting people who tried to present 
information to the people of China and how reporters are 
treated. The human rights violations continue to grow and grow. 
Then you look at what the international community's attempting 
to do regarding responsible policies toward climate change. 
China's policies are certainly out of step with its plans to 
increase so many more coal-burning plants.
    My question to you is, Why should I be optimistic that 
constructive engagement will bring about the types of changes 
in human rights, economic and environmental issues? I could 
mention some of the security issues as well, when the record 
over the past 10 years would give us little hope that is the 
case.
    Ambassador Negroponte. Right. Thank you for your question, 
Senator. And I understand what underlies it, and I understand 
some of the concerns and frustrations that make this an open 
question in many people's minds.
    The first thing I think I'd say is, I did not make a 
particularly expansive claim with respect to our relationship. 
I said, we have made ``some progress'' in our relations with 
China, and then I added, ``I would say that the trend lines are 
positive.'' And I make that statement, I think, in all 
sincerity.
    And I think you have to ask yourself two questions. You 
have to look--we're talking, really, about a process, and we're 
looking--at any particular time, we've got a snapshot of the 
current situation, and there's no question that we confront 
many of the challenges that you describe. But then, one has to 
look back a number of years previously and see what things were 
like then, and then make some judgment as to whether we think 
the trends are changing, and I think there are a number of 
different areas where you can say there have been great 
improvements.
    Talk about the Chinese economy, I mean literally hundreds 
of millions of Chinese have been lifted out of poverty in 
recent years and have greater opportunities for self-
fulfillment and self-realization than they had, say, for 
example, when I was the Vice Consul in Hong Kong in 1960, or 
when I first went to China with Dr. Kissinger in 1972, when the 
prospects for individual citizens living in that country were 
very grim, indeed.
    I think the second question--or, answer I would give to you 
is that it's not only a matter of whether you--what you think 
of the situation inside of China; it's, How best can we 
influence it? And our conviction is--and I think it's the right 
judgment--is that the best way to influence China's behavior is 
to engage it, and to engage it at every level of our society 
and government, right from the President on down. And we think, 
through that process of engagement and dialogue--and we have 
multiple dialogues going on with the Government of China, 
including Secretary Paulson's strategic economic dialogue, 
which engaged China on a whole host of issues--and the more, I 
think, that we do that, I think, the more likely we are to get, 
over time, the kind of responses to the concerns that we 
express to--the kind of responses that we seek to the concerns 
that we express.
    Senator Cardin. I agree that the best course is 
constructive engagement. I have no other alternatives. I think 
that----
    Ambassador Negroponte. Right.
    Senator Cardin [continuing]. That we need to pursue that 
course. I don't challenge that.
    Let's just take the economic front for one moment. I know 
that we'll have Secretary Paulson before us, and this falls 
under his portfolio, not yours. But, when we look at engagement 
on the currency manipulation issue, I don't understand why this 
administration hasn't taken a tougher view within WTO on the 
manipulation of currency, which to me, is clearly actionable. 
We've been very slow to use the tools that we have available. 
Instead, we say we'll have constructive dialogue. Well, you can 
have constructive dialogue, but to try to get their attention, 
I think we should be using more aggressive tools.
    My concern, as we continue to talk about this, China 
continues to hold more and more U.S. currency. They hold, I 
believe, the largest amount of foreign currency of any country. 
They hold a huge portion of American currency, second largest 
country that holds American dollars. We are losing leverage 
rather than gaining leverage in our constructive engagement 
with China. It seems to me we'd be better off if we used more 
aggressive tools to get their attention.
    Ambassador Negroponte. Again, I mean, as far as a detailed 
reply, I think I'd defer to Secretary Paulson, but what I would 
say, on the currency issue--and I think people can differ as to 
whether the China response has been adequate--but, I would 
point out that, over the past year or so--I think it's since 
the summer of 2007--the renminbi, the Chinese currency, has 
appreciated by some 18 percent. So that has been in the 
direction that we would like to see it go. Whether you think 
that the upward revaluation of their currency by 18 percent is 
adequate or not is perhaps a matter of debate, but it is a 
change, and it's not an insignificant one.
    Senator Cardin. But, it still doesn't float. It still very 
much overvalues the dollar on exchange, still works against 
United States products in China and Chinese products in the 
United States.
    My point is it seems to me we would make better progress if 
we held China to international trade standards, as they agreed 
to do under the WTO.
    Ambassador Negroponte. The other point I would make in 
regard to that question is that our imports are now increasing 
at a very rapid rate to China--I mean, our exports--excuse me--
our exports have increased something on the order of 20 percent 
last year. They're now one of our largest tech-support markets. 
So, I see some very hopeful prospects as--for United States 
exporters in China.
    So, I think we may be seeing some change in this trend. 
While we may not be satisfied yet, I do think that the trend is 
in a positive direction, and it's more than just--these are 
more than just minor increments.
    Senator Cardin. Thank you, Mr. Chairman.
    The Chairman. Thank you.
    Senator Lugar.
    Senator Lugar. Well, thank you, Mr. Chairman.
    I want to continue along the line of Senator Cardin's 
questioning, just to think out loud about the implications of 
this trade we have with China. As you pointed out, Mr. 
Secretary, it increased rapidly last year, and I mentioned in 
my opening statement, by a rate of 240 percent from 2001 to 
2007, which was significantly greater than the exports to any 
of our other top 10 trading partners. So, this is an extremely 
important part of our exports.
    But, of course, even then, the deficit--in terms of our 
imports, the trade deficit with China was well over $200 
billion again, and one can say, ``Well, overall, our exports 
are $600 or $700 billion.'' As we then come into the second 
dimension, our domestic deficit, which, this year, is running 
in excess of $400 billion, the question is, Who loans us the 
money? And some of it we borrow among ourselves, but, as is now 
well known, we are selling bonds abroad, and securities, that 
make it possible for our interest rates to remain lower.
    I often get questions from constituents, ``How long can 
this go on?'' In other words, if you have a domestic deficit of 
this dimension, and borrowings from wherever, whether from our 
American capital pool, with a savings rate of zero and so 
forth, or from the Chinese, where they have a very magnificent 
savings rate, for a variety of reasons, what happens if the 
dollar begins to diminish even further with relationship to the 
euro, or others decide they want more of a portfolio with 
regard to the reserves in which they find safety, but, 
likewise, could also find, maybe, better yield?
    And you must have pondered over the years, as all of us 
have, because there seems to be nothing that's going to change, 
for the moment, any of these trends. Now, domestically, we 
could make a difference, in terms of our own deficit, but that 
is unlikely, even in most optimistic terms. People talk about 5 
years toward balance, some say more like 10. But, given wars 
and problems, supplementals that we're about to take up, and so 
forth, we're going to have a large domestic deficit in the 
foreign side. Perhaps, as you point out, our dollar, by 
diminishing in value, has made it easier to export, so we've 
had a little bit of a push there. But, still, a deficit of 
$600-billion-plus, how can this go along? Or, is this the way 
the world works? In other words, is this a situation in which, 
essentially, the Chinese loan us the money to buy the goods, 
understanding that if they didn't loan us the money and keep it 
here, that somehow their economic situation would be severely 
disrupted?
    Ambassador Negroponte. Well, you're taking me a little bit 
far from my customary areas of concentration, here, Senator, so 
this is going to be my opinion. But, I'd say, first of all, I 
think we have to keep matters a little bit in perspective here 
with regard to China's spectacular economic growth. It has been 
phenomenal, there's no question about it. I mean, 10 percent a 
year, year-in/year-out, is--and it looks like that's going to 
continue for the foreseeable future--is a very, very impressive 
record, indeed. But, even with, what, four times the population 
of the United States, they have only one-quarter of the 
national income. I mean, we are still a--we're a $13 trillion 
economy. China has $3.42 trillion nominal GBP.
    Senator Lugar. That's very important.
    Ambassador Negroponte. So, I think we have to keep a little 
sense of perspective here.
    Senator Lugar. Right.
    Ambassador Negroponte. Even with 1.6 trillion dollars' 
worth of reserves, which they have because of their phenomenal 
savings rate, that $1.6 trillion is about 15 percent of 1 
year's national product for the United States, so it's not--
it's not an enormous sum.
    I think what you're going to see happen--I heard 
complaints, in Tokyo and in Seoul, that there's a shortage of 
containers for westbound traffic across the Pacific, because 
exports have experienced--our exports have experienced a spike 
in recent months because of the low dollar and the growing 
economies in the East Asia region. So, I think you're going to 
see increased United States exports, perhaps some correction in 
these imbalances to which you refer, although, as you know, the 
imbalances won't necessarily be one-for-one.
    Senator Lugar. No.
    Ambassador Negroponte. Or country-for-country, they 
sometimes can be for a region, because, after all, China's--is 
supplanting manufacturers from other exporters to the United 
States, in some instances. They've picked up some of the 
Southeast Asian manufacturing capacity to export to us.
    The other point I'd make is that, one of these days, 
China's going to start spending more to attend to its own 
internal domestic needs, which I think is then going to 
discourage it from accumulating quite the currency surpluses 
that it's accumulating now. Hu Jintao says that his No. 1 goal 
is to create a harmonious society, and to create--he tells 
President Bush, whenever he meets him, ``My No. 1 priority is 
to create 25 million new jobs a year.'' Well, he's going to 
have to start attending--and they, the leadership of China--to 
the social and economic needs of their own people. So, I think 
that over time we can expect them to evolve to a little more 
balanced approach to their own economic development, not 
totally export-driven, but also internally motivated, as well.
    Senator Lugar. And presumably, that--the thought of the 
Chinese leadership is more likely to lead to China's peace with 
its neighbors if it is not sort of preoccupied, but has as its 
major focus this harmony within China and the growth of 
infrastructure.
    Ambassador Negroponte. Yes, sir.
    Senator Lugar. Thank you.
    The Chairman. Thank you very much.
    Mr. Secretary, I appreciate your reference to perspective 
here, because we tend to, all of us in this town and in the 
community, focus on what are, taken in isolation, some splendid 
numbers. Let me talk to you about China's soft power for a 
minute.
    There's been an awful lot of talk about what an advantage 
the Chinese Government has in their foreign assistance 
programs, their investment in other nations, because they don't 
get tied down with these pesky things like human rights and 
accountability, like we do or the World Bank or other 
international institutions. And you hear stated, ofttimes with 
alarm, of this significant--at least on the surface, 
significant investment that the Chinese Government, through its 
government-controlled institutions, are making in Africa, in 
Asia, in Latin America.
    And that's why I asked for a report to be written by the 
GAO--I mean, excuse me, the Congressional Research Service on 
the--of the Library of Congress. And the title of the report is 
``China's Foreign Policy and Soft Power in South America, Asia, 
and Africa.'' And when you go through this report, which is--
I'd--presumptuous of me--I'd recommend it to you. I think it's 
a fairly good report, and it's fairly thorough, on just this 
one issue of the soft power. The fact of the matter is that the 
raw numbers--first of all, we don't know for certain how much 
is actually being invested by the Chinese abroad, but that some 
of it is significantly overstated.
    ``While''--let me just read from one page--``While China's 
trade flows have increased dramatically both globally and 
within Latin America, Chinese foreign direct investment abroad, 
while increasing, has not been as significant. China's 
cumulative stock in foreign direct investment worldwide 
amounted to $73.3 billion at the end of 2006, just .58 percent 
of global foreign direct investment stock.'' And it goes on to 
say, ``Cumulative stock in Chinese foreign direct investment 
with Latin America and the Caribbean rose $4.6 billion in 2003, 
accounting for almost 14 percent of China's foreign direct 
investment stock worldwide, to $11.5 billion in 2005,'' et 
cetera. And then it goes on to point out that 96 percent of 
that investment is in the Cayman Islands and in the British 
Virgin Islands and in Bermuda, and that it is--and the three 
major nations, although major sources of foreign direct 
investment into China, showing the possible intention of the 
Chinese foreign direct investment into jurisdictions could be 
so-called ``roundtripping,'' whereby Chinese investors bring 
capital back to the country's foreign capital in order to take 
advantage of preferences given to foreign firms.
    Now, I realize that's pretty esoteric for anybody listening 
to this outside the room here, but what I'm trying to get at 
here is that--What is your assessment--not in any of that kind 
of detail--What is your assessment of the purpose, intention, 
and efficacy of what we've been reading a lot about the last 3 
or 4 years, about this significant apparent spike in Chinese 
foreign investment--we would call it--you know, average 
Americans refer to it as aid to other countries--with no 
strings attached, particularly Latin America? Is it real? Is it 
consequential? Is it competitive? What is its purpose? And is 
it consequential? Are they actually able to project power 
through this mechanism? Is it--how would you--how would you 
characterize it? How would you----
    Ambassador Negroponte. Well, it strikes me that it's the 
behavior of a country that is no longer totally contained 
within itself, in terms of its foreign policies, that it wants 
to play a role in the world. But, I don't know of anyplace in 
Latin America where, as a result of Chinese investment, that 
they somehow have gained a preponderance of influence or have 
created some kind of a beachhead, if you will, on the shores of 
Latin America. And my understanding is that the--as you 
suggested, Senator, these sums are not necessarily that large, 
although we don't have a complete handle on the amounts of 
foreign assistance that China is giving.
    That was one of the issues that I raised when I was in 
Beijing on Monday--I met with the Vice Minister of Commerce--
it's the Department in China that handles foreign aid for their 
government. And we are proposing to them that we have 
consultations on foreign assistance so that there would be more 
transparency between us as to what our foreign aid policies 
are, and practices, so that we can try, at least, to see if, in 
certain areas of the world, we can coordinate our assistance 
policies, in the sense of--if we're not giving assistance to a 
particular country because we don't want to encourage certain 
kinds of behavior, well, then, it causes us concern if they 
come right in behind us and give aid to that same country and, 
we feel, undercut the purposes of the United States or the 
international community.
    So, we'd like to start a dialogue with them on this matter.
    The Chairman. What I'm trying to get at is--and I realize 
this is a very, very broad and not very targeted question, but 
the debate that surrounds this issue is whether or not the 
purpose of this investment is designed to undercut American 
influence deliberately in--whether it's Africa or in South Asia 
or in Latin America. And there is a debate--if that is the 
purpose, the efficacy of their efforts thus far. And--but, 
maybe I should leave that to another moment.
    Let me----
    Ambassador Negroponte. If I could just add to one thing I 
said.
    The Chairman. Yes.
    Ambassador Negroponte. I mean, Western researchers estimate 
somewhere between--that their aid bill, their assistance 
levels, are somewhere between $1.5 and $2 billion annually. 
Now, we don't know for sure, but if that figure is correct, 
that level, spread out over the world, is not a particularly 
substantial amount.
    The Chairman. Yes. Because it's--well, anyway, I'll get 
back to that.
    Let me ask one more thing. One of the things that none of 
us have--I shouldn't say ``none of us''--I don't have any 
quarrel with the notion of engaging China, bringing them into, 
and holding them accountable to, international norms. One of 
the witnesses, who will soon testify, who I have great respect 
for, is--has a unique way, I think--at least, in--I don't want 
to hurt his reputation, but I think he captures and translates 
well, for average people, very complicated notions. And he says 
that our emphasis should be on shaping what China does, and not 
what China is. And it--there is a real distinction here, in 
that--and he says, ``A cooperative United States-China 
relationship will not just happen. There is no invisible hand 
at work in the world of geopolitics. Still, it's critical that 
it does come about.''
    And the point of my raising that is this. There are a 
number of things that we have engaged China on, and there are a 
number of successes and some failures. And the real--and 
maybe--you don't have to answer it now, we'll go back to it--
but, the real question for me is this: What do we do when this 
dialogue fails and China acts in ways that are contrary to U.S. 
interests and international norms? That's the place where we 
seem to get stymied. That's the place where we seem to say--do 
nothing more than raise a red flag and say, ``This is a 
violation of international norms.'' They're violating WTO. 
They're acting against our interests. But, there's never--to 
the extent that I've observed--never any consequence to it. And 
that's what you see, I think, Senator Cardin reacting to. 
That's what you see an awful lot of Americans reacting to. You 
know, we want them in the deal, but we don't seem to hold them 
accountable. Is it for fear of--well, I mean, how would you 
respond to that?
    Ambassador Negroponte. Here's how I'd respond to it. I'd go 
back to the one point I emphasized in my statement is that we 
have made some progress and the trend line is positive. And 
then I'd say, going to your question here, about shaping what 
they do, not what they are, look at the areas where we do 
really have an interest in what they do. The Korean Peninsula, 
for example, and the cooperation there, I think, has been very 
good and very excellent, and it's been from the top level on 
down in our two respective governments. So, I would list that 
as one of the important successes. We've worked more closely 
with them on the question of Iran in the Security Council. 
We've had quite a bit of cooperation in the Security Council. 
And, although not fully satisfactory, we've had some 
cooperation with them on the situation in Darfur. Just to give 
you three examples.
    There are areas where we think they should do more. 
Usually, I think, the kind of situations you're referring to 
have to do with human rights, for example, particularly, let's 
say, the situation in Tibet. And my answer to that question 
would be, I think one has to simply persist--patience and 
persistence--in pursuing the dialogue at all levels. And in 
Tibet, we've gotten some encouragement, I think, from the fact 
that they have held and now resumed, one round of talks with 
the representatives of the Dalai Lama.
    But, I think, to look at the other side, some kind of 
criticism or boycott the Olympics or something like that, I 
think--I don't think that that would achieve the desired 
purpose. I think it runs the risk of being counterproductive 
and could well put at risk other equities and other interests 
we have in our relationship with China, given the importance of 
the country and the breadth of dealings that we have with them.
    The Chairman. Well, I don't disagree with you. I think 
they're more symbolic than the more substantive things I'm 
talking about relating to currency exchange and a whole range 
of other----
    Ambassador Negroponte. Right.
    The Chairman [continuing]. Things that are--that would, in 
other nations, trigger responses on our part, that we do not 
trigger, or we seldom trigger.
    But, at any rate, I'm over my time, and I apologize to my 
colleagues.
    Governor.
    Senator Voinovich. Thank you, Mr. Chairman.
    One of the observations that many people make of our 
relationship with China is that, in spite of the fact that we 
have made some real progress internationally with China, 
particularly in the Security Council of the United Nations, 
because China is key to our interests there and on the issue of 
North Korea, that on some of the other things that we should be 
pressing it on, we've lightened up for fear that we might lose 
its support. And we're talking about the currency issue, 
intellectual property rights, human rights, and so forth.
    Perhaps we haven't lightened up on China in these areas as 
much as the public believes, but they do believe it. If you get 
on the telephone and talk with some people in the State of 
Ohio, they are livid about our relationship with China. They 
feel that China is walking all over us, that it is fixing its 
currency, that it's violating intellectual property rights, 
that its human rights record is very bad.
    The point I'm making is, Mr. Secretary, that if things are 
not what I perceive them to be, then we're doing a bad job of 
conveying to the American people the work that we, in fact, are 
accomplishing in some of these areas, or maybe we're just 
laying off publicly because we don't want to get the Chinese 
angry with us.
    Ambassador Negroponte. The first thing I'd want to say, 
Senator, is that some of these issues that you mentioned are 
questions of judgment, because--for example, Is an 18-percent 
year-on-year increase in our exports to China enough? We do 
have a trade imbalance, but it so happens that, at the moment, 
we're having--China is our fastest growing export market. So, 
that's--I consider that a positive indicator.
    Senator Voinovich. Right, but you and I both know that the 
reason for it is because our dollar is so weak, perhaps one 
reason is because half of our debt, or more, is owned by 
foreign countries, and people are getting a little bit leery 
about our financial ability. So, that's happening as a----
    Ambassador Negroponte. Right.
    Senator Voinovich [continuing]. Result of the dollar, more 
than anything else.
    Ambassador Negroponte. They also removed the currency peg 
in July 2005, and the renminbi--their currency--has appreciated 
18 percent. That may not be enough, to some people's liking, 
but, again, it's moving in the right direction.
    There are times when we do impose sanctions. We've imposed 
sanctions against Chinese trading companies because of 
nonproliferation activities, where some item, which should have 
been controlled--dual-use item--was exported to North Korea or 
some other market, where we didn't think it should have gone, 
and we've imposed sanctions. The Chinese don't like that. But, 
it's part of our dialogue with China. It isn't all just talk. 
We will take measures when we believe our interests call for 
them.
    Senator Voinovich. Well, I think some people describe our 
actions with respect to China as us waltzing, but, on occasion, 
you have to step on somebody's toes, and we're unwilling to do 
that.
    The other thing I'd like to say is that, for the last 
several years I have worked on intellectual property rights, 
and we finally, in the Commerce Department, have something 
called ``STOP!'' It's a coordinated effort to deal with 
intellectual property. And I am very, very upset with the 
administration that we're not getting the kind of support from 
it to get this legislation passed. This new effort is making 
some real difference--for example, we have been able to stops 
Chinese trading companies that we know are counterfeiting, and 
so forth. But, we're not getting the support from the 
administration, and I think that that's something that you 
folks ought to look into.
    These are the kinds of things that need to be done, that 
don't seem to be getting done, that are making a difference. So 
the public perception is that we're losing more than we're 
winning.
    And the last thing, Mr. Chairman, is the issue of soft 
power. There's no question that the Chinese are doing, in 
public diplomacy, a much better job than the United States of 
America. International polls, China ranks higher than we do 
almost anywhere in the world. China understands the importance 
of soft power or public diplomacy. We listened to testimony 
here a couple of weeks ago by Joe Nye and Dick Armitage about 
something called ``Smart Power,'' and I'd like to know, from 
your perspective in the State Department, what we are doing to 
increase our soft power and our public diplomacy. The one area 
in which it would make a tremendous amount of difference is 
greenhouse gases, of which the Chinese have basically said 
they're not going to participate. It seems to me that we ought, 
if we're interested in progress on something like that, to 
engage China to become a partner with us and take a leadership 
role, and not only deal with the problems of the environment, 
but also deal with something that would show the two of us 
working together on something that's very important.
    Ambassador Negroponte. Well, I think, on that point, 
Senator, that's an area that the administration does plan to do 
more with China. A working group has been created, in the 
context of Secretary Paulson's economic dialogue with China, to 
dialogue about economic, energy security, and environmental 
issues. We also have the Asia Pacific Partnership, which deals 
with China on that issue. And last, but perhaps most 
importantly, to your point about getting them engaged on 
greenhouse gases, they got a free pass, as you know, in the 
Kyoto Protocol--they and India and some of these other major 
emitting countries. The President has taken the view, and it's 
the strong position of the administration, that in any follow-
on arrangement in 2012 and beyond, vis-a-vis the Kyoto 
Protocol, that China and India and countries like that have got 
to be involved. They've got to take on obligations, as well, 
because, if you project out to the year 2050, if you don't get 
them involved in taking measures of some kind, their growth in 
emissions is going to cancel out or overtake any possible 
savings in such emissions that are made by the rest of the 
world. So, that is a high priority.
    Senator Voinovich. OK. Just one last thing--again, on soft 
power. The Chinese are being smart and responsible citizens, 
but what are we doing to counteract that with our soft power?
    Ambassador Negroponte. I didn't know about these. I'd have 
to go and look at the figures you're referring to, in terms of 
popularity or relative receptivity to China. But, I'd say that 
we essentially want to encourage China to play a constructive 
role in the world, and--so that, I think, if anything, we favor 
increased engagement by them, provided that it is done 
constructively. I don't think we have anything to fear, in 
terms of our ability to compete with China, in terms of how 
well received we are or how effective our programs are. The one 
part of the world that occurs to me in this regard, since 
they've made quite an effort, and so have we, would be in the 
continent of Africa. And my experience, based on my travels to 
Africa, is that the United States is extremely well received 
there, and there's nothing--this is not a zero-sum game, and 
there's nothing incompatible between them having some effective 
programs that make them an appreciated international player in 
the African Continent, and we doing the same.
    Senator Voinovich. Well, from what we've heard, one area 
that we have really neglected is the area of soft power, that 
we've been concentrating on hard power, and one of the reasons 
why we're not as successful as we should be is that we haven't 
paid enough attention to the soft power. It would be 
interesting to know what this administration is going to try to 
do, before it leaves, to do something about it.
    Thank you.
    The Chairman. Thank you very much.
    Senator Kerry.
    Senator Kerry. Thank you, Mr. Chairman.
    Let me begin by joining you in expressing our thoughts and 
condolences to the people of China for the tragedy that has 
engulfed them with this earthquake, the enormous losses that 
they've suffered. And we are certainly, I know, thinking about 
that, and, obviously, prepared to be helpful in ways that I 
think are needed.
    Mr. Secretary, in response to what you just said to Senator 
Voinovich, let me just say that, having been involved in this 
effort for some 20 years now with respect to climate change, 
beginning with the first hearings that Senator Gore and I held, 
back in 1987, and going through the Rio Conference to Kyoto and 
beyond, and most recently in Bali, I think it's fair to say the 
attitude of the Chinese has changed significantly. I can 
remember meetings where, you know, you'd stare at each other, 
and there was no real conversation. And now, their Environment 
Minister has been part of their delegation, they are very 
serious, they understand what's happening to their glaciers, to 
their agriculture. They are moving, in fact, to put stricter 
standards on automobiles in place than we have, faster than we 
are, and moving on energy intensity, greenhouse-building, and 
other things. I think it's fair to say that most of those who 
have been involved in this effort for a long time believe that 
the United States, which has stayed out of the talks, frankly, 
until recently, and been the biggest scofflaw with respect to 
the Kyoto Agreement, and, moreover, represents 25 percent of 
the world's greenhouse gases, and has yet to move as 
authoritatively as Europe, is going to have a hard time, sort 
of, leading on this, unless we, in fact, lead. And we have a 
chance to do that here. So, it's our hope the administration is 
going to embrace the targets that have been set out, which 
major corporations in America, ranging from Dow Chemical to 
DuPont to American Electric Power to Florida Power Light, 
Lehman Brothers, British Petroleum, host of entities, are now 
embracing.
    And half of our economy has been put under this, 
voluntarily. The RGGI Agreement in New England, the Midwest 
Agreement, and the California, plus four or five, Agreement, so 
that over half of the American economy has already moved, 
voluntarily, to place itself under mandatory reductions, and we 
have yet to see the administration lead on this. So, our hope 
is going to be that it will in the next days; and I am 
confident, as is Prime Minister Blair, who was here the other 
day--I met with him on it; he's working this issue diligently, 
and he is convinced that we have to lead first.
    So, my hope is that we'll do that, and I'm quite confident 
that, if we do, our market power and our GT---our WTO-compliant 
weapons will empower us to be able to leverage the behavior we 
want. I'm not going to ask you to comment on that up front, 
unless you want to incorporate it in a subsequent answer, but I 
would like to ask you a couple of questions.
    One, Prime Minister Kevin Rudd ended the United States-
Australia-Japan-India quadrilateral talks after their first 
meeting, in May, because of the fears, in Beijing, of a sort of 
encirclement strategy. And I wonder if you would comment on 
what role you think the United States ought to play with 
respect to democracies in that part of the world and the 
ability of democracies to act together without, sort of, being 
neutered, in a sense, by whatever those fears are. Is there a 
way to build a different security arrangement and a way to 
leverage different behavior?
    And tied to that is the other side of the coin that has 
seen China now--I think you've issued several demarches on this 
with respect to the weapons that have showed up in Iraq, 
Afghanistan, through China, as well as the multimillion-dollar 
oil and gas deals with Iran. So, you have Iranian weapons, you 
have the multimillion-dollar oil and gas deal, and yet, the 
sanctions issue has not moved forward.
    How do you balance these interests that I've just 
described, the, sort of, quadrilateral talks, democracy, and 
then, the other side, China's presence and the need to have 
them help leverage different behavior from Iran?
    Ambassador Negroponte. Well, first of all, we still do have 
some regional consultations amongst the democracies. I mean, 
Japan, Korea, the United States, for example, we have some 
dialogue at various levels. We, of course, I think, most 
importantly, have our alliances with Australia, with Japan, 
with Korea, and we make very clear that they are the 
cornerstone of our security involvement and our security 
presence in the East Asia Pacific region.
    Senator Kerry. But, why, then, do you think the 
quadrilateral talks stood out in such a way? If we have all 
those other relationships and they're a reality, why would the 
quadrilateral talks be this thorn?
    Ambassador Negroponte. Well, I haven't spoken to Prime 
Minister Rudd about the fact that he chose to disengage from 
those talks.
    Senator Kerry. Has the Secretary talked to him?
    Ambassador Negroponte. I just can't recall whether she has 
or not, but I----
    Senator Kerry. So, the talks ended, and it just didn't 
matter?
    Ambassador Negroponte. I--if I can submit a reply for the 
record----
    Senator Kerry. Sure. That's OK. That's fine.
    [The State Department supplied the written response that 
follows:]

    Assistant Secretary-level officials from the United States, Japan, 
Australia, and India met informally on the sidelines of ASEAN Regional 
Forum (ARF) Senior Officials Meeting in Manila in May 2007. Officials 
discussed issues of mutual cooperation such as post-Tsunami disaster 
relief and counterterrorism. At the time, none of the parties viewed 
that meeting as a formal new grouping or mechanism but rather an 
opportunity to have discussions on an informal basis. The decision to 
forgo pursuing a formal grouping was not the result of concerns that 
such talks could be perceived as aimed at ``encirclement'' of China. 
Rather the decision relates more fundamentally to our view that we are 
already engaged in a number of bilateral and multilateral groupings in 
Asia that achieve our democratic, economic, and security goals.
    The Trilateral Strategic Dialogue, in which we have participated 
since 2002, continues to be the premier venue for the United States and 
allies Australia and Japan to discuss issues of regional and 
international security concern. Secretary Rice will meet her 
counterparts for the next Trilateral Strategic Dialogue Ministerial in 
Japan in June.
    We recognize that United States relations with India are strong and 
growing, and we value India's partnership and respect its democratic 
tradition. The China-India relationship has been improving, 
particularly in the realm of economic and trade relations. We encourage 
this trend.

    Senator Kerry. Talk to me about the Iranian component of 
it.
    Ambassador Negroponte. I would like to mention something on 
the security front, which is that we are, nonetheless, when we 
visualized, in the six-party talks--we've talked about creating 
a Northeast Asia peace and security mechanism as one of the 
concepts that might flow from the six-party talks and from 
restoring peace on the Korean Peninsula, because of the absence 
of any all-embracing security mechanism for that part of the 
world. But, even as we move toward that, which we haven't done 
yet, but, as we get there, we're going to make clear that it's 
not at the expense of the alliances that we have in the region, 
which are all with democracies.
    On Iran and Iraq and the question of weapons reaching--
Chinese weapons reaching those countries, just the other day, 
Monday, when I was in Beijing, this was one of the issues I 
raised, the concern about Chinese weapons, or Chinese-designed 
weapons, showing up in some of these battle areas, be it Iraq 
or Afghanistan, and expressed our concern. And what my Chinese 
interlocutors have said is that they have scaled way back their 
sale of conventional weapons to Iran. They had had 
relationships previously where they exported these weapons, but 
they have dialed that back. And, as you know, they've 
cooperated with us in the Security Council on the three 
resolutions that have imposed sanctions on Iran for their 
enrichment activities.
    So, I'd say that there's been quite a bit of cooperation 
between us and them on----
    Senator Kerry. Was there any watering-down effort on the 
last sanction round?
    Ambassador Negroponte. It was a negotiation, and certainly 
if we had our druthers and could have gotten them to impose--by 
``them,'' I mean the entire international community--to impose 
more stringent sanctions, we would have welcomed that. But, 
this was a negotiated outcome, and so, I think you could say 
that it was less than the optimal.
    Senator Kerry. Thank you, Mr. Chairman.
    The Chairman. Thank you.
    Senator Murkowski.
    Senator Murkowski. Thank you, Mr. Chairman.
    And, Mr. Secretary, welcome.
    Ambassador Negroponte. Thank you.
    Senator Murkowski. I want to ask a couple of questions this 
afternoon about Taiwan. In reviewing your written remarks here, 
you state that, ``We'll continue to sell Taiwan defensive arms, 
to maintain the capacity to assist their defense, if needed.'' 
And I would like from you, this afternoon, just kind of a 
status report on where we are with regards to any arms sales to 
Taiwan.
    I had, back in October of last year, sent a letter to 
Stephen Hadley, over at NSA, inquiring as to where we were with 
the sale of F-16s to Taiwan. Since the time of that letter, 
we've made several different attempts to get a response, and 
have basically been told it's in the works, but, really, 
nothing more specific than that. So, can you give me some 
indication as to where we may be with--whether it's the F-16 or 
any of the other arms sales to Taiwan?
    Ambassador Negroponte. There was an offer, of several years 
ago, of various other types of equipment--now, not the F-16s--a 
package of arms that was offered to Taiwan. And for a number 
of--I think, 2 or 3 years, it was being debated in the Taiwan 
legislature. And they've just recently voted funding and voted 
to approve the purchase of that package.
    Senator Murkowski. Right.
    Ambassador Negroponte. So, that's the most recent step that 
was taken on that. And there hasn't been any subsequent step. 
As you know, we're in the middle of a political--or, they are 
in the middle of a political transition in Taiwan, so we'll 
have to await developments there.
    As far as the F-16 is concerned, there are no present plans 
to offer the F-16 to Taiwan, although that is a subject that 
has been under discussion over time.
    Senator Murkowski. So, is it fair to say that there is 
nothing, then, that is out on the table, in terms of specific 
military equipment or--you mentioned, you know, that the F-16 
is not out there at this point in time.
    Ambassador Negroponte. It's not----
    Senator Murkowski. Is there anything----
    Ambassador Negroponte. It's not on offer at this particular 
time. I can give you the details of the package that was 
offered and approved by the Taiwan legislature.
    Senator Murkowski. Well, it was my understanding that there 
were several different defense sales that were kind of moving 
through the process, and recognizing the politics in Taiwan, 
and the politics over here, as well, I was hoping to get a 
little bit better sense of where we were in that process. So, 
if you can provide us with----
    Ambassador Negroponte. I will. I will, indeed, do that.
    Senator Murkowski. Great.
    And then, one other comment that you have made in your 
statement, about Taiwan, mentioning finding ways to participate 
meaningfully with Taiwan for a broader range of international 
activities, and you state, for example, Taiwan's participation 
in the World Health Organization. I'm assuming that's 
reaffirming the United States policy toward Taiwan's WHO 
observer status. Are we doing anything more, other than making 
statements like this, to encourage involvement or participation 
in WHO? Where are we with that?
    Ambassador Negroponte. We would--well, just as you 
correctly state, I mean, our policy is to not support their 
membership in an organization which requires statehood, but we 
think they're--they should be allowed to participate as an 
observer, particularly in organizations like the WHO, where 
their participation in matters of public health is important, 
not only to them, but to the international community as a 
whole. So, we will continue to support their becoming observers 
in the WHO, although, up until now, we have met with resistance 
to that within the organization.
    Senator Murkowski. Thank you, Mr. Chairman. I don't have 
any further questions.
    Thank you, Secretary.
    The Chairman. Thank you very much.
    The Senator from Florida, Senator Nelson.
    Senator Bill Nelson. Thank you, Mr. Chairman.
    Mr. Secretary, the Chinese have not been particularly 
helpful in Darfur. So, what degree have you, the State 
Department, engaged senior leadership in China to try to help?
    Ambassador Negroponte. As we were saying earlier, Senator, 
that I represent the United States in our senior dialogue with 
China, which is where we discuss political issues with my 
counterpart, and it's one of the issues that is always on the 
agenda of our dialogue. We meet a couple of times a year, we 
discussed it earlier this week, when I was in Beijing.
    Senator Bill Nelson. Give us some examples of the issues 
that you're raising with them, with regard to Darfur.
    Ambassador Negroponte. Well, first of all, we raised the 
question--we encourage them to do what they're doing, which is 
to participate in the peacekeeping effort there. And, as you 
perhaps know, they've got, I think, more than 300 people from 
their People's Liberation Army in Darfur, working as engineers 
to help build facilities there. And I think they may be the 
first country from outside the African Continent to have forces 
in Darfur. So, that's a good thing.
    We've encouraged them to use their influence with Sudan--
with the Government of Sudan, since they do have some influence 
with the Government of Sudan, to comply with the Darfur Peace 
Agreement and with the Comprehensive Peace Agreement, and to 
allow better access for the humanitarian workers to Darfur.
    Senator Bill Nelson. Have they been successful?
    Ambassador Negroponte. I think they've played a role in 
conveying messages to the Government of Sudan and urging their 
compliance with the will of the international community. But, 
have they been completely successful? Obviously not, because 
we've not gotten as far with respect to the situation in Sudan 
as we would like.
    Senator Bill Nelson. Could they help more?
    Ambassador Negroponte. Could they help more? They certainly 
know how much we would like them to help.
    Senator Bill Nelson. Why don't you think they do? Since 
they are quite concerned about their image in the world now, 
with the Olympics coming up, and they certainly could exert a 
lot more influence in Darfur, why don't, you think, that they 
do it? Why do they hold back?
    Ambassador Negroponte. Well, Senator, they have put their 
own troops into Darfur. I don't know of any Western country 
that's done that.
    Senator Bill Nelson. But, they're pumping oil there, too.
    Ambassador Negroponte. That is true. They've invested in 
the Sudanese National Oil Company, but----
    Senator Bill Nelson. Well, let me ask you about that. Given 
the fact that they've made multiple energy deals with a whole 
bunch of African countries, where they exchange infrastructure 
projects for the oil futures, what, from our standpoint, can 
you tell us are our long-term security concerns on this 
consolidated influence in China--of China in Africa?
    Ambassador Negroponte. We were talking earlier, Senator, 
about the extent of their assistance programs, and we don't 
have a reliable estimate, but the--we have some estimates that 
it's something on the order of $1\1/2\-$2 billion a year, or 
something like that, for--worldwide. So, I think, compared to, 
let's say, the level of investment of the United States, if you 
take our PEPFAR program, our direct aid program, what we do for 
malaria, and our Millennium Challenge program, I think that the 
Chinese effort pales in comparison to the United States efforts 
in Africa. So, I guess I'm not overly concerned about it, 
although I do think it would be important--and we've proposed 
to China, that we have dialogue with them about their 
assistance programs, so that, for example, in a country where 
we're not giving assistance, and we have our reasons, and they 
are giving assistance, and we disagree with them doing that, we 
could at least--in our discussion, get on the table what the 
rationale of each of our respective positions are, and 
hopefully, maybe, move toward at better understanding and a 
convergence of our views.
    Senator Bill Nelson. Tell me--given the fact that they had 
a successful ASAT test, how has that changed your thinking at 
the State Department--I'm not asking you as the Defense 
Department--in your planning and strategy toward China?
    Ambassador Negroponte. I was Director of National 
Intelligence when that happened, Senator, and I guess the point 
that we all made at that time--well, first of all, we thought 
that it was wrong for them to have carried out this activity, 
and, second, to do it without any notice whatsoever, since it 
affects interests of a lot of other people; it was a mistake. 
But, I think it also drives home the importance of the 
transparency with respect to China's growing military power, 
and importance of dialogue. And I'm happy to tell you, or 
pleased to tell you, that I think the level of dialogue--
military dialogue--with China has improved somewhat in the last 
year or two, and there are much more discussions between our 
respective military and defense leaders than there was 
previously. And I think that's one of the things we want to see 
happen.
    Senator Bill Nelson. Have you seen any clue that they have 
expressed any kind of embarrassment due to the fact that they 
put tens of thousands of pieces of debris up at very high 
altitude, that it will be decades before it degrades back into 
the Earth's atmosphere, and therefore, threatens not only our 
space assets, but other nations', as well? Have you picked up 
any of that in your diplomatic circles?
    Ambassador Negroponte. I have picked up that this was not 
something that was carried out with extensive prior knowledge 
of the various agencies within the Chinese Government whose 
interests might have been affected by this shot.
    Senator Bill Nelson. Do you think that the published 
reports that we see, that they intend and are planning for 
putting a man on the moon by 2020, do you think--well, what do 
you hear about that in your circles?
    Ambassador Negroponte. I'm sorry, I don't know. I should 
know the answer to that question. I do know that our NASA 
director wants to have a dialogue with the Chinese authorities 
about that, and obviously that would be a subject of great 
interest to him.
    Senator Bill Nelson. And they don't want to talk to him----
    Ambassador Negroponte. I don't know.
    Senator Bill Nelson [continuing]. About that.
    Ambassador Negroponte. I honestly don't know the answer to 
that question.
    Senator Bill Nelson. They don't. And yet, it's clear that 
they're moving in that direction. And from a standpoint of 
United States diplomatic relations with them, and the balance 
of power, and holding the high ground, and so forth, that's 
something we've got to be concerned about.
    Thank you, Mr. Chairman.
    The Chairman. Thank you very much.
    Senator Isakson.
    Senator Isakson. Thank you, Mr. Chairman.
    With regard to both Senator Nelson and Senator Voinovich's 
comments about soft power in Africa, having been there a couple 
of times and observed where the Chinese are investing, it does 
appear to me their investments follow their economic interests. 
They're not necessarily humanitarian investments, but they 
invest where there are resources they want to import. Am I 
right?
    Ambassador Negroponte. Well, I would have said, with 
respect to the Sudan, I think that's right. I'm not sure I know 
the entire portfolio of China's investments in Africa. But, 
certainly that association has been made, yes.
    Senator Isakson. And is it probable that this may be the 
same reason for their involvement in Iran and in their interest 
again, in getting petroleum.
    Ambassador Negroponte. Right, although Iran doesn't really 
need foreign assistance because of their oil revenues.
    Senator Isakson. Well, I think you made a very good point 
and--it's a point I want to make--we don't do a very good job, 
as a country, of tooting our own horn. That's a Southern 
expression. I thought your example about the Millennium 
Challenge Corporation, and the example on PEPFAR, what the 
United States initiatives have accomplished in Africa, are 
really astounding. And even to the extent of AFRICOM, which 
people perceive as a military presence, but, in fact, from 
everything I've seen, about 75 to 80 percent of AFRICOM is 
humanitarian investment. Such humanitarian investment includes 
drilling wells, building bridges, and helping with 
infrastructure on the continent. So, we don't, sometimes, tell 
the story about how much we, as a country, really are doing, 
from a humanitarian standpoint and in the best interest of 
those people.
    I would also appreciate being copied with your 
correspondence that you send to Senator Murkowski with regard 
to the Taiwanese request on the F-16.
    Ambassador Negroponte. Right.
    Senator Isakson. I read, in your statement, a very clear 
statement about the concern of the continued buildup on their 
side of the strait, the mainland side of the strait, and I 
think that our Taiwan-China policy is clear, and I think the 
Taiwanese Defense Act, or what is it? Where we provide them 
with assistance to defend themselves.
    Ambassador Negroponte. Taiwan Relations Act.
    Senator Isakson. Relations, I guess. I am very supportive 
of that.
    You must have gone on the trip with Kissinger and President 
Nixon, the first trip to China. Is that the trip that you were 
referring to?
    Ambassador Negroponte. No; that was in February 1972. I 
went with Dr. Kissinger in June, 4 months later.
    Senator Isakson. So, it was a followup trip.
    Ambassador Negroponte. Yes.
    Senator Isakson. Going back to my memory, which gets worse 
and worse the older I get, but thinking back to 1972, it is 
pretty remarkable what that event did, in terms of opening 
China to the world and the world to China.
    Ambassador Negroponte. Absolutely. And when you think of 
the conditions that were evident at that time, everybody riding 
bicycles, and everybody wearing a very similar outfit, the sort 
of Mao tunics, and very low standard of living, and you think 
of what the development that--skyscrapers that you see in 
Shanghai and the developments you see in China today, hardly 
any room for the bicycles anymore, because they're crowded out 
by all the vehicle--the cars and the trucks. It's quite an 
amazing picture.
    Senator Isakson. Well, the reason I make the point is, 
there have been some questions raised about China and things 
they don't do, but it seems to me that when that door opened, 
the genie was let out of the bottle, and the Mao days were 
quick to fall behind. Now China is pretty much engaged all over 
the world. I think from a positive standpoint that we are to 
benefit in the long run. Because their people now have a window 
to the world, which they didn't prior to that time, and once 
people see democracy and see freedom and free enterprise, as 
you're able to do by the Internet, telecom, and now with the 
Olympics coming and the world coming to their door, it just 
continues to put pressure on them, on the human rights side. 
These pressures should bring about all the positive things we'd 
like to see take place in China. Are we seeing that kind of 
evidence?
    Ambassador Negroponte. I think that's right. And an example 
that--a point that was made the other day by Stapleton Roy, our 
former Ambassador to China, which I thought was very apt, was 
that if you look at some of the other countries in Asia, like 
Taiwan or South Korea--or Japan, even--that were authoritarian, 
at times in the past, economic growth in each of those cases, 
and development, brought along with it, eventually, a more 
democratic way of governance. And hopefully we can see that 
kind of development take time--take place over time in China, 
as well.
    Senator Isakson. One last question, back to the Taiwan 
issue and the World Health Organization. Had the earthquake 
that hit Sichuan Province in China hit Taiwan, World Health 
Organization participation and information would have been 
invaluable to the Taiwanese. And I will continue to support 
what you said you support, and that is to allow Taiwan 
participation in the World Health Organization. I think that is 
critical for us to do.
    Thank you very much, Mr. Chairman.
    Thank you, Secretary, for being here.
    Ambassador Negroponte. Thank you.
    The Chairman. Mr. Secretary, thank you. There are a whole 
lot of questions we all have--when we get a chance to talk with 
you, both before this committee, and you've always been 
available to each of us when we pick up the phone and call you, 
and--but, I want to emphasize that the--this is just a start, 
here. We'll, hopefully, have your colleague Secretary Paulson 
up here. We're going to have other administration witnesses, as 
well, who I think are agreed that they'll come and participate. 
We thank you for taking the time.
    I have--I will not--I will not trespass on your time, or 
the other witnesses, right now, but I'm going to submit two or 
three questions on developmental-aid issues----
    Ambassador Negroponte. Happy to----
    Senator Isakson [continuing]. That I'd like to--I'd like to 
ask you to follow up on, if you would.
    The Chairman. And, again, thank you very much for----
    Ambassador Negroponte. Thank you.
    The Chairman [continuing]. Your time.
    Ambassador Negroponte. I appreciate the opportunity.
    Thank you.
    The Chairman. Thank you, John.
    [Pause.]
    The Chairman. Our next panel is a very distinguished panel. 
And, again, we thank them so much for their taking the time. 
Dr. Richard Haass, president of the Council on Foreign 
Relations--and I'll put a much longer statement in about his 
significant accomplishments. Also, Dr. Kurt Campbell, chief 
executive officer of The Center of a New American Security, in 
Washington, DC, as well as Dr. Harry Harding, university 
professor of international affairs, the Elliott School of 
International Affairs, George Washington University, in 
Washington, DC.
    Gentlemen, it's truly a pleasure to have you here. I've 
read each of your statements. That's not to suggest you should 
shorten them, just--they're first-rate, they're right on point. 
And I really mean that, I'm not suggesting--because I think 
part of the purpose of this committee is to be sort of a--an 
educational sounding board and forum for those who listen. So, 
it's not merely just for us to hear what you have to say. So, I 
welcome you.
    Richard, thanks for coming back so soon. Why don't we begin 
with you, and then go to Dr. Campbell, and then go to Dr. 
Harding, and in the order in which we've been called.
    The floor is yours, Richard.

STATEMENT OF HON. RICHARD HAASS, PRESIDENT, COUNCIL ON FOREIGN 
                    RELATIONS, NEW YORK, NY

    Ambassador Haass. Well, thank you, Mr. Chairman, Senator 
Lugar, Senators. It's good to be back before this committee, in 
particular to testify on this subject. You've selected an 
important one.
    Let me also just say how pleased I am to be with these two 
gentlemen, who are two of this country's leading experts on 
Asia. And I'm also fortunate enough to count both of them as 
friends.
    I heard what you said, I will not read my statement.
    The Chairman. No, no, no, I didn't mean to suggest that. 
I--and I really didn't mean to suggest that.
    Ambassador Haass. OK.
    The Chairman. Please, go ahead and read your statement, 
because I think it's first-rate. I was just--I was just 
bragging that I read them. [Laughter.]
    And that was the only thing I was doing. But----
    Ambassador Haass. That's now in the record. [Laughter.]
    Let me just make clear that I'm speaking for myself here 
and not for the Council on Foreign Relations, although----
    The Chairman. No one's ever spoken for the Council----
    Ambassador Haass. Exactly.
    The Chairman [continuing]. Have they? I'm not----
    [Laughter.]
    Ambassador Haass [continuing]. It takes no institutional 
positions, and I expect a good chunk of its members will 
disagree with what I have to say here today.
    Let me say, at the outset, that I don't think it's an 
exaggeration to predict that the United States-China 
relationship will, more than any other, influence international 
relations in the 21st century. I also think, though, that the 
basic contours of the 21st century are now visible. Let me just 
give a little bit historical comparison here, if I might.
    The 20th century started out as a multipolar world 
dominated by a few. Then, after World War II, with the 
weakening of the European powers, and the special constraints 
placed on Germany and Japan, we ended up with a bipolar world 
dominated by the United States and the Soviet Union. Then, 
after the end of the cold war, we ended up with a world 
uniquely dominated by one country: The United States. Now, I 
would suggest it is a very different world, which I have termed 
``nonpolar.'' Essentially, it is a world characterized not by 
the concentration of power, but by its distribution, by its 
diffusion. We--the United States--will still remain first among 
unequals, but there will be many more independent actors, state 
and nonstate alike, possessing meaningful power, in one form or 
another.
    The signature challenges of this era will be those 
presented by globalization, such as the spread of nuclear 
materials and weapons and associated delivery systems, climate 
change, protectionism, pandemics, drugs, and terrorism.
    It is just worth stating for a moment that this represents 
a fundamental change from much of modern history, which, as you 
know better than anyone, was shaped by great power competition 
and often great power conflict. This is now a different world, 
and there is an opportunity, because the fact that great power 
competition and conflict is no longer the driving force of 
international relations means that the world has opened up the 
possibility of meaningful cooperation between and among the 
major powers of this era, including the United States and 
China.
    Now, what the United States and China choose to make of 
this opportunity to shape the world is a very different 
question. That is the one I want to talk about.
    There are a number of possible futures for the United 
States and China and for their relationship. Two stand out.
    The first would be in--the chairman alluded to it in his 
opening statement--a relationship marked mostly by competition, 
possibly even cold war, which, by the way, if it were to ever 
come about, would lead us to rename this period the ``inter-
cold-war era.'' Worse yet, it could be, conceivably, a 
relationship marked by conflict. At the other end of the 
spectrum, a far more optimistic alternative, would be a United 
States-Chinese relationship that I would call ``selective 
partnership,'' which is just that, a willingness and an ability 
to work together when interests coincide, such as recently we 
saw with North Korea.
    The obvious challenge for American foreign policy, but also 
Chinese foreign policy, is to steer the relationship toward the 
more cooperative end of the spectrum, and to manage areas of 
disagreement so that they do not spill over and preclude 
partnership and cooperation where they are otherwise possible.
    And, given your conversation here just now with Secretary 
Negroponte, I just want to highlight that it is in our interest 
to try to persuade China to see that it is increasingly in 
China's self-interest to work with us. I do not believe that is 
``pie in the sky.'' It falls within the realm of possibility. 
But, we also need to understand cooperation will, on occasion, 
or more than on occasion, prove impossible. We ought to be 
very, very careful before introducing ideas of linkage into the 
relationship. Just because we can't cooperate everywhere does 
not mean we want to eliminate the possibility to cooperate 
where we can.
    So, what is required? Let me begin with what is probably 
the most important functional recommendation, which is regular 
high-level consultations. And what I'd say here is, 
consultations are to foreign policy what location is to real 
estate. It is not everything, but it's a great deal. And the 
scope of such consultations should run the gamut from bilateral 
political and economic matters to regional and global issues.
    In general, consultations provide a setting to establish 
rules that would shape international relations, and then to go 
on to design institutions that would buttress those rules. As 
we heard just before, the United States and China have helped 
themselves by establishing consultative frameworks in the 
political and economic realms, and these should be continued at 
a high level, as well as at a medium level and a working level, 
by the next administration and held as frequently as is 
productive.
    Bilateral consultations, though, will not be enough. U.S. 
foreign policy should also be geared toward integrating China 
into regional and global efforts meant to structure the 21st 
century world. It would help to expand the G-8 to include China 
on a permanent basis.
    Second, devising a security architecture for Asia, possibly 
resembling the Organization for Security and Cooperation in 
Europe and what it has done for that part of the world, also 
deserves serious attention.
    A regional body for Asia along these lines, which would 
involve the United States and China, and not exclude either, 
could complement existing regional mechanisms, as well as 
United States alliances with Japan, Korea, and others.
    As a rule of thumb, China is more likely to support those 
regional and international arrangements it has had a hand in 
building than those it is simply being asked to support.
    Let me say one or two things about energy and the 
environment. There are many arguments for reducing, as I know 
this committee has heard from others, demand for oil. Here I'd 
list the impact on price, flows of dollars to producers, and 
climate change. The United States and China happen to share 
these interests, as well as a stake in the growth of supply and 
the stability of supplier countries. What the two countries 
also share is a stake in avoiding growing competition over 
access to energy supplies. Such competition could drive up 
price; or worse, it could bring about, in a worst-possible 
case, conflict. All this underscores the need for enhanced 
consultations in this area. I would single out three subjects: 
Climate change, technology development and sharing, and steps 
to promote stability in producing regions.
    One area I would not be so enthusiastic about----
    The Chairman. Excuse me, would you repeat those again? 
Climate change, you said----
    Ambassador Haass. Climate change, technology development 
and sharing--for example, in the clean-coal area----
    The Chairman. Yeah.
    Ambassador Haass [continuing]. And we should have a 
conversation with the Chinese about the stability of oil 
production areas and routes. They, like we, are increasingly 
dependent on imports. And they, like we, are dependent upon 
open sealanes. And it is--coming back to your previous 
conversation about Iran, one of the potential aspects----
    The Chairman. Yeah.
    Ambassador Haass [continuing]. Of that conversation has got 
to be what the consequences of a crisis over Iran and the use 
of force, vis-a-vis Iran, would mean for the price and 
availability of oil. China has a stake in not seeing that 
scenario come about, just like we do.
    Let me raise one question, though, about 
institutionalization, and that would be in the area of creating 
a league or cluster of democracies. There is the reality that 
the cooperation of nondemocratic states, such as China and 
Russia, is essential if global challenges are not to overwhelm 
us. And, on top of that, it's not obvious that the exclusion 
from such groupings of democracies of countries such as China 
would have the effect of encouraging the evolution of democracy 
and civil society in that country. So, if we are going to go 
ahead, nonetheless, to establish some kind of a league of 
democracies, I would simply suggest that the purpose of such a 
group be limited to democracy promotion, and it not become a 
forum where the full range of foreign policy matters is 
discussed, much less decided.
    Let me return, then, to something you mentioned, Mr. 
Chairman, in your comment, before, about what the principal 
focus of U.S. foreign policy ought to be toward China. You were 
kind enough to quote from something I said, so I will follow 
suit. The principal focus of U.S. foreign policy toward China 
should be China's foreign policy. And the reason is simple. 
Given all the challenges we face in this world, the United 
States does not have the luxury of making its focus what goes 
on inside China. Nor do we have the wisdom or ability to make 
China in our image. We do, though, have an interest in a stable 
and peaceful China that is willing and able to play a 
constructive role in the world. And let me be clear here, 
because it is easy to caricature what I just said. This is not 
an all-or-nothing call. There are things we can do that would 
influence what happens inside of China, such as promoting the 
spread of the rule of law, working with the Chinese to increase 
the transparency of all the government does. By doing those 
things, we would help bring about a more open China. But it is 
a matter of emphasis. And foreign policy has got to be a 
question of emphasis; it has got to be a question of priority, 
and it has got to be a question of tradeoffs. And the emphasis 
of United States foreign policy should be on shaping what China 
does, and not what China is.
    The United States also needs to be careful not to react to 
the so-called Chinese threat. China's economy is large, and 
growing rapidly, but it does so from a very low base, as 
Senator Lugar pointed out. Moreover, much of its wealth is 
necessarily absorbed by providing for its population, not for 
military investment or foreign policy undertakings. And even 
though it is modernizing its military, we've also got to keep 
that in perspective; it spends only roughly 15 percent or so of 
what we do on our military. And the bottom line is that China 
is not yet a military competitor, much less a military peer.
    Interestingly, I think Chinese leaders understand this, and 
they understand just how much their country requires decades of 
external stability so that they can continue to focus their 
energies and attention on economic growth and political 
evolution. China is an emerging country, but in no way is it a 
revolutionary threat to world order as we know it.
    Let me just end with one or two things that the Chinese 
also have to think about, because if this relationship is to 
prosper in every sense of the word, it is going to take both 
sides to manage it carefully and manage it well.
    We, alone, cannot bring about a successful United States-
Chinese relationship. What the Chinese do and say will count 
just as much. They will need, to begin with, to exercise 
restraint and patience on Taiwan. There can be no shortcuts, no 
use of force. We, at the same time, must meet our obligations 
to assist Taiwan with its defense. We can also help by 
discouraging statements and actions by Taiwan's leaders that 
would be viewed as provocative, or worse.
    Let me also discuss one last subject that doesn't get 
enough attention: China's relationship with its own 
nationalism. It is actually the one development within China 
that concerns me the most and, I believe, casts the greatest 
potential cloud over China's future and over our bilateral 
relationship.
    Nationalism could all too easily fill the void within 
China, all too easily fill the political and psychological void 
in that society. And this is dangerous, as history demonstrates 
that leaders who allow or stimulate excess nationalism can all 
too easily become trapped by it. This argues for allowing 
greater political and religious freedom in China so there are 
alternative sources of legitimacy and allegiance there. 
Ultimately, there needs to be more to life for the Chinese 
people than simply economic advance. But it is also true that 
this is something that the Chinese will largely have to do by, 
and largely for, themselves. We can and should make our views 
known, but mostly in private, and not as demands or as 
prerequisites for our willingness to work with China when it is 
in our own self-interest to do so.
    Last, China will need to assume a greater responsibility in 
world affairs. It cannot continue to hide behind its being a 
developing country. China is one of the world's great powers, 
and it needs to approach specific foreign policy matters, from 
Zimbabwe and Sudan, to proliferation and climate change, not 
just through the narrow prism of what is good for its economy; 
Chinese leaders also need to consider what is good for the 
world.
    In return, China can expect a greater role in setting the 
rules and building the institutions that will shape the world. 
In this vein, China's foreign policy analysts and leaders 
should reconsider their view of sovereignty. In the modern 
world, what happens within borders can affect others. 
Governments cannot be free to commit or allow genocide or 
harbor terrorists or proliferate weapons of mass destruction. 
With sovereignty comes obligations, as well as privileges.
    The United States can help by being sensitive to legitimate 
Chinese concerns, by consulting frequently, and by working to 
integrate China into regional and global institutions in a 
manner befitting a rising power. This is something we can and 
should do, not as a favor to China, but as our favor to 
ourselves in a era of history where Chinese cooperation is 
essential if globalization is to be managed.
    Thank you. And I look forward to any comments or questions 
you may have.
    [The prepared statement of Ambassador Haass follows:]

  Prepared Statement of Hon. Richard N. Haass, President, Council on 
                    Foreign Relations, New York, NY

    Thank you for this opportunity to testify on United States-China 
relations in the era of globalization. This is a critically important 
subject. It is no exaggeration to predict that the United States-China 
relationship will, more than any other, influence international 
relations in the 21st century.
    That said, the basic contours of the new century are already 
visible. Unlike the 20th century, which started out as a multipolar 
world dominated by a few, became, after World War II, a bipolar world 
dominated by two countries, and ended up mostly a unipolar reflection 
of American primacy, the 21st century is nonpolar. Ours is a world 
characterized not by the concentration of power but by its 
distribution. The United States is and will remain first among 
unequals, but there are and will be many more independent actors, state 
and nonstate alike, possessing meaningful power in one form or another 
than at any other time in modern history.
    But if the structure of today's world is clear, its character is 
not. A nonpolar world is already a reality, but it is not certain 
whether it turns out to be the sort of world where most people live in 
peace, enjoy prosperity, and experience freedom. Again, the trajectory 
of the United States-China relationship will help determine how this 
century unfolds.
    The signature challenges of this era will be posed by 
globalization. Globalization is the increasing volume, velocity, and 
importance of flows within and across borders of people, ideas, 
greenhouse gases, manufactured goods, dollars, euros, television and 
radio signals, drugs, guns, e-mails, viruses, and a good deal else. The 
challenges that result from globalization are many, and include the 
spread of nuclear materials and weapons and associated delivery 
systems, climate change, impediments to trade and capital movement, 
pandemics, drugs, and terrorism.
    The notion that challenges derived from globalization will dominate 
the century represents a considerable departure from much of modern 
history, which more than anything else was shaped by great power 
competition and conflict. But such competition and conflict between and 
among the great powers of this era--the United States, China, India, 
Russia, Japan, and Europe--is not and need not become the defining 
dynamic of this century. This is a tremendous development, as the 
United States is spared the cost and risk of engaging in such 
conflicts.
    It is as well an opportunity. The absence of automatic great power 
competition and conflict opens up considerable potential for 
cooperation among the major powers of the era, including between the 
United States and China. Ideally, this cooperation would be centered on 
those pressing global challenges that no single country can manage much 
less master on its own. What the United States and China choose to make 
of this opportunity to shape the world of the 21st century is a 
different question.
    There are a number of possible futures for the United States and 
China and the relationship between them. Two stand out. The first would 
be a United States-China relationship marked mostly by competition, 
cold war, or, worst of all, conflict. History suggests this is 
possible, if only because of the natural tendency for friction to arise 
between the prevailing power of the day and a rising power that could 
challenge its status. Concerns about this prospect exist in the United 
States given China's economic dynamism, its growing military strength, 
and aspects of Chinese policy, including its stance vis-a-vis Taiwan 
and its emphasis on securing access to energy and raw materials. Not 
surprisingly, concerns in China about U.S. intentions are no less 
intense, with many believing that U.S. foreign policy aims to thwart 
China's rise and deny China its rightful place in the world. Many also 
believe that the United States regularly and unjustly interferes with 
what many Chinese see as internal matters, including Taiwan, Tibet, and 
the nature of China's political system.
    A far more optimistic and positive alternative is a United States-
China relationship that could best be described as selective 
partnership. This would be fundamentally different from and 
considerably less than an alliance, something that involves a 
commitment to act together, normally on the most fundamental matters of 
defense and security. Rather, selective partnership is just that: A 
willingness and ability to work together when interests coincide. North 
Korea is a case in point. The United States and China have cooperated 
to a degree to manage, i.e., place a ceiling on, the nuclear problem. 
This is not the same as solving it. Nor is it to be taken as a 
precedent. Cooperation between the United States and China thus remains 
limited in frequency and scope; the relationship shares and will likely 
continue to share elements of both competition and cooperation. The 
obvious challenge for statecraft is to steer the relationship toward 
the cooperative end of the spectrum and to manage areas of disagreement 
so they do not spill over and preclude partnership and cooperation 
where otherwise possible. We need to work to bring about a bilateral 
relationship in which China increasingly sees it in its own interest to 
work with us--and where both countries eschew linkage on those 
occasions when cooperation proves impossible.
    A cooperative United States-China relationship will not just 
happen. There is no invisible hand at work in the world of geopolitics. 
Still, it is critical that it does come about. The stakes are great. 
Slowing the spread of nuclear materials; controlling climate change; 
managing pandemics; maintaining an open world economy: these and other 
challenges will be far less difficult to contend with if the United 
States and China work together. Indeed, it is next to impossible to 
imagine how these challenges could be met if China and the United 
States fail to cooperate or, worse yet, actually work to frustrate 
collective efforts.
    What then is required? There is no single or simple fix, but one 
place to start is with regular, high-level consultations. Consultations 
are to foreign policy what location is to real estate: Not everything, 
but a great deal. Consultations offer an opportunity for officials to 
share views on emerging and existing challenges and on what needs to be 
done about them. The scope of such exchanges should run the gamut, from 
bilateral political and economic matters to regional and global issues. 
When it comes to global concerns, consultations provide a setting to 
establish rules that would shape international relations and to design 
institutions for buttressing those rules. Consultations have the 
potential to be the creative exchanges that set the stage for 
successful negotiations. The United States and China have helped 
themselves by establishing consultative frameworks in the political and 
economic realms. These should be continued at a high level by the next 
administration and held as frequently as is productive.
    It also warrants mention that the time when bilateral economic ties 
could provide ballast and protection for the entire bilateral 
relationship is largely over. In part this is because economic ties 
themselves have become something of a source of friction given the 
large bilateral trade imbalance and China's managed exchange rate. The 
criticism this situation generates is overstated--the trade imbalance 
would remain high even if China allowed its currency to appreciate, and 
U.S. exports to China are growing rapidly--but the political friction 
in the United States is real all the same. This situation calls not 
simply for addressing (in the WTO and bilaterally) legitimate concerns 
about China's economic behavior, but for establishing rules and 
procedures that encourage the flow of Chinese investment into the 
United States.
    The likelihood of increased friction in the economic realm 
reinforces the importance of expanding United States-China diplomatic 
coordination. Bilateral consultations are not enough, however. U.S. 
foreign policy should also be geared toward integrating China into 
regional and global efforts meant to structure the 21st century world. 
It would help to expand the G-8 to include China on a permanent basis; 
better yet would be to transform the grouping into a G-10 (with India 
also added as a regular member) and then to involve medium powers 
(including such countries as South Africa, Brazil, South Korea, Mexico, 
Indonesia, and Australia) and other state and nonstate actors as 
relevant. Devising a security architecture for Asia, possibly 
resembling in some fashion what the Organization for Security and 
Cooperation in Europe (OSCE) has done for that region, also deserves 
serious attention. A regional body along these lines could complement 
existing regional mechanisms as well as U.S. alliances with Japan, the 
Republic of Korea, and others. Asian security arrangements that involve 
both the United States and China are called for if the region's 
dynamism is not to prove too much for local governments to manage. All 
things being equal, China is more likely to support those regional and 
international arrangements it has had a hand in building than those it 
simply is being asked to support.
    Energy and the environment merit separate mention. There are many 
arguments for reducing (or at least slowing the rate of increase in) 
demand for oil, including the impact on price, flows of dollars to 
producers, and climate change. The United States and China share these 
interests as well as a stake in the growth of supply and the stability 
of supplier countries. What the two countries also share is a stake in 
avoiding growing competition over access to energy supplies. This 
combination of overlapping and potentially competing interests 
underscores the need for enhanced consultations in this area, including 
on climate change, technology development and sharing, and steps to 
promote stability in producing regions.
    The United States should be wary of institutionalizing some sort of 
league or cluster of democracies. Apart from the difficult and awkward 
problem of determining which states qualify for membership, there is 
the reality that the cooperation of nondemocratic states, including 
China and Russia among others, is essential if global and other 
challenges are not to overwhelm us. It is also not obvious that 
exclusion from such a grouping would have the effect of encouraging 
democratic evolution in the countries that need it most. If such a 
group is nonetheless established, it should be limited to the purpose 
of encouraging reforms related to promoting democracy and not become a 
forum where other foreign policy matters are discussed and decided.
    The principal focus of U.S. foreign policy toward China should be 
China's foreign policy. This may be seem obvious, although it is 
anything but. One contending school of thought influencing American 
foreign policy would emphasize and seek to change what goes on inside 
countries, both as a moral end in itself and for pragmatic ends. This 
latter contention stems from the assumption that democratic countries 
are likely to behave better toward their neighbors than authoritarian 
regimes. But given all the challenges we face in a global world, the 
United States does not have the luxury of making its focus what goes on 
inside China. Nor do we have the wisdom or ability to make China in our 
image. We do, though, have an interest in a stable and peaceful China 
that is willing and able to play a constructive role in the world. It 
is not an all or nothing call--there are things we can do (such as 
spreading the rule of law and working with the Chinese to increase the 
transparency of what goes on inside the government) to help encourage 
the emergence of a more open China. But there is the matter of 
emphasis, and the emphasis of U.S. policy should be on shaping what 
China does, not what China is.
    The United States also needs to be careful not to overreact to the 
``Chinese threat.'' China's economy is large and growing rapidly, but 
it is doing so from a relatively low base. In addition, it is unlikely 
double-digit growth rates can be sustained. Moreover, China's enormous 
population is as much a burden as an asset. Much of its wealth will 
necessarily be absorbed by providing for its population, not for 
military investment or distant undertakings. Similarly, although China 
is modernizing its military, we should keep its military might in 
perspective. China spends roughly 15 percent of what the United States 
does on its military. China is not a global military competitor, much 
less a peer.
    Some in the United Sates tend to overstate China's strength; in my 
experience, few in China do. To the contrary, Chinese leaders 
understand well just how much their country requires decades of 
external stability so that they can continue to focus their attention 
on economic growth and political reform. China can ill afford external 
distractions that would absorb resources and jeopardize the environment 
that China requires for continued economic growth. China is an emerging 
country, but in no way is it a revolutionary threat to world order as 
we know it.
    But U.S. policy alone cannot determine the future trajectory of 
United States-China relations. What the Chinese do and say will count 
just as much. China will need to exercise restraint and patience. 
Taiwan is one such area. There can be no shortcuts, no use of force. 
History must play itself out. The United States must meet its 
obligations to assist Taiwan with its defense. At the same time, the 
United States can help here by discouraging statements and actions by 
Taiwan's leaders that would be viewed as provocative or worse. But 
leaders on the mainland must not overreact nor be pushed by domestic 
pressures to take actions that would prove destabilizing.
    China's leaders must also be careful of nationalism. Communism and 
socialism do not command public support as they once did. Materialism 
and consumerism cannot substitute. Political and religious freedoms are 
severely constrained. Nationalism can all too easily fill a void. This 
is dangerous, as history demonstrates that leaders who allow or 
stimulate excess nationalism can all too easily become trapped by it. 
This argues not simply for keeping nationalism in check, but for 
allowing greater political and religious freedom so there are 
alternative sources of legitimacy and allegiance in the society beyond 
that of economic advance. This is something that the Chinese will 
largely have to do by and for themselves. The United States can and 
should make its views known, but mostly in private and not as demands 
or as prerequisites for our willingness to work with China when it is 
in our own self-interest to do so.
    China will need, too, to assume a greater sense of responsibility 
in world affairs. China cannot hide behind its being a developing 
country. It is one of the world's great powers. China needs to approach 
specific foreign policy matters ranging from Zimbabwe and Sudan to 
proliferation and climate change not just through a narrow prism of 
what is good for its economy. It also needs to consider what is good 
for the world. In return, China can expect a greater role in setting 
the rules and building the institutions that will shape the world. In 
this vein, China's foreign policy analysts and its political leaders 
should reconsider their absolute view of sovereignty. In the modern 
world, what happens within borders can affect others. Governments 
cannot be free to commit or allow genocide or harbor terrorists or 
proliferate weapons of mass destruction. With sovereignty comes 
obligations as well as privileges.
    Again, the United States can help here, by being sensitive to 
legitimate Chinese concerns, by consulting frequently with Chinese 
leaders, and by integrating China into regional and global institutions 
in a manner befitting a rising power. This is something we do not as a 
favor to China, but as a favor to ourselves in an era of history where 
Chinese cooperation is essential if globalization is to be managed.

    The Chairman. Thank you very much.
    Doctor?

 STATEMENT OF DR. KURT CAMPBELL, CHIEF EXECUTIVE OFFICER, THE 
       CENTER FOR A NEW AMERICAN SECURITY, WASHINGTON, DC

    Dr. Campbell. Thank you very much, Chairman Biden, Senator 
Lugar, other Senators. Thank you for this opportunity.
    As you've suggested, we've sent in our full comments 
earlier today, and I'll try to just simply summarize. But, I'd 
like to, since I agree with almost everything that Richard has 
said and written, and the same thing with Harry, I think I'll 
focus more on American policy and what are some of the 
challenges that are likely for American policymakers to face 
when it comes to China's rise. And, in that respect, I'll just 
make five quick points.
    But, before I do, I also just want to comment and really 
suggest that we all appreciate working with your staffs. You've 
got excellent people who work on these and other issues, and we 
appreciate it, and we appreciate their hard work.
    Five quick points, Chairman Biden, if I can.
    I think, if you ask many people outside of the United 
States--and, indeed, historians, maybe, 10 or 15 years from 
now--what is the key feature of global politics, it might be a 
surprise. For most Americans, certainly those of us who work in 
Washington, we'd say, ``Well, look, it's the war on terror and 
Iraq. Clearly, that's the issue that we've got our eye on.'' I 
think a powerful argument could be made, if you go elsewhere, 
that they would say that the key feature in global politics 
over the last decade has been the arrival of China on the 
international scene as a great player and a great power. And I 
think that the essential components of that are obviously 
China's economic capabilities, its growing commercial might, 
its political muscle, its soft power, as we've discussed.
    But, I think, unfortunately, a critical ingredient in that 
arrival has been American preoccupation. If you ask many 
friends in Asia, they will tell you, ``Look, where the United 
States is right now.'' China's arrival has basically occurred 
during a period of somewhat of an American vacuum in which we 
have been missing among many of the most critical dialogues and 
discussions in Asia, and that's going to be--and, I must say, 
that, unfortunately, is a bipartisan preoccupation, and it's 
something that the next President, Democrat or Republican, is 
going to have to confront head on.
    I would also say that we--you focused--I love the report 
that you commissioned, Chairman Biden. My own hunch is that we 
have seen the high point in Chinese soft power, and it's going 
to be over the last couple of years. But, I think the real 
interesting questions, going forward, are just simple 
measurements about Chinese power, because what Chinese friends 
in the region and elsewhere are starting to appreciate is that, 
not only does China have soft power--and there are limitations 
to it, associated with Tibet and other issues--but, it's the 
combination of the two that they have wielded. I don't--you 
know, this concept of ``smart power,'' I'm not sure--I think 
that just means diplomacy, I think. But, the truth is that the 
Chinese have been quite effective at merging hard and soft 
power in a way that I think is a real challenge to the United 
States and other friends in the international system.
    So, this first issue, I think we just have to recognize 
that this is a dominant feature in global politics. As Richard 
and Harry point out, it's not going away, it's going to 
dominate global politics over the course of the next 50 years.
    Second, since everything--to get attention, if you focus on 
Asia, you've got to focus a little bit and link China or Asia 
to the Middle East, I'll do so now, and I'll talk about Iraq. I 
mention in my statement that I think American policymakers face 
something that I would refer to as the ``Siberian dilemma.'' 
Now, I, unfortunately, spent many years as a Sovietologist, not 
very good training for very much, but you learn a lot of great 
stories that are wonderful anecdotes that you could apply 
elsewhere.
    Russian fishermen who live in Siberia, who venture way out 
onto the ice, even in the coldest periods of the year--and 
because that ice has a very high content of salt, it's still 
thin very, very far out; so when these fishermen go out, they 
know that that's where the fish are the biggest, they drop 
their lines in; and, even on the worst days, sometimes they're 
out there in the middle of the lake; and if that ice breaks, 
they're, you know, plummeted into the water, and they face, 
immediately, the Siberian dilemma. If they remain in the water, 
call for help, they'll be dead of hyperthermia in about 10 
minutes; if they pull themselves out on the ice to attempt to 
climb away, they'll be dead in about 2 minutes, because the ice 
freezes on their body. And so, in typical Russian optimistic 
sense, that's the ``Siberian dilemma.''
    And I would suggest to you that American--it's really 
encouraging. It's a good feature for our discussion.
    The Chairman. I kinda like that. [Laughter.]
    Dr. Campbell. It's--we face a version, sort of a sand 
version of the Siberian dilemma, when it comes to Iraq. If we 
decide to stay in and slog it out for the next 10 or 15 years, 
spending troops and treasure, American capital, we will pay a 
price. And one of the regions who will pay the largest price--
and we should be under no illusions about that, we should just 
recognize it up front--is going to be in Asia.
    The Chairman. Yeah.
    Dr. Campbell. However, if we decide, very rapidly, to 
withdraw, pull our forces out, it's likely to be a mess, and 
we'll be able to replace pictures in 1975 of folks, you know, 
fleeing on helicopters, with new pictures of guys getting out 
of the Embassy with, you know, computers and stuff to other 
waiting helicopters, and the consequence there, of course, will 
be felt in the Middle East. And that's where we talk about it 
the most. But, the truth is, no region is more attentive to the 
concepts and, sort of, the dimensions of American power than 
Asia is. So, the Siberian dilemma, the challenges that we face 
in Iraq, will have deep consequences for Asia and China.
    Third point, quickly, Mr. Chairman, I want to talk about 
the components of a good American strategy, vis-a-vis China, or 
at least what are--some of the challenges are. And I want to 
make--one thing internally and one thing externally--and I'm 
going to just reflect on my own experience and something that I 
am struck by. I had either the good fortune or the challenge of 
working in the part of the Defense Department and in the Navy 
that thought more about, shall we say, hedging, vis-a-vis 
China. Others, like our very able witness before us, have 
worked more on the engaging side. I counted, and he, I think, 
used the word ``dialogue'' over 1,000 times. Dialogue is very 
important. It's also very important to think about hedging, as 
well.
    What I'm concerned by is that these two components, these 
two wings of our policy, even though we talk about it as a 
coherent whole, are not very well integrated.
    The Chairman. Yeah.
    Dr. Campbell. And I'm struck that, increasingly, you're 
able to send, sort of, mixed messages, unintended messages. And 
I will tell you that the people I interacted with primarily in 
China on the military side, the hard side, did not think and 
talk the way Secretary Negroponte did. Likewise, some of the 
people that I worked--in the Defense establishment in the 
United States in China also think about things very 
differently.
    One of our most important challenges, going ahead, is to 
try to integrate this in a more sophisticated way, because 
they're almost like two torpedoes on different paths, sort of 
heading in different directions, and they're not well linked 
together.
    The second point is one, I agree with you, Chairman, and--
--
    The Chairman. Are they linked in China?
    Dr. Campbell. Better than they are in the United States. 
But, that's just because they're a highly centralized 
government.
    I would also say that I agree with both Richard and you, 
Mr. Chairman, that one of the most important ingredients of a 
successful policy is to engage the leaders of Beijing 
intensively. But, the truth is, and one thing that's 
occasionally lost on American policymakers, is that good China 
policy isn't just going to China, it's working in the region, 
it's working with our allies in the region and reassuring them, 
engaging them deeply and profoundly, and that starts in Japan. 
We need to rebuild our relationship with South Korea. We've 
done a lot in Australia and Singapore and other countries.
    I will say the one area that I--as I listen to Secretary 
Negroponte, that I heard a little wobbliness, was our 
relationship--our security relationship should be with Taiwan. 
And I think that's important. I personally am--would be someone 
who would suggest that Taiwan will have the confidence to 
engage with Beijing. We want a peaceful process. But, they will 
only have that confidence if they know that we have their back. 
And so, I think it's important for us to send a signal and a 
message that we understand that they're living in a difficult 
neighborhood. That's the third point.
    Two last points.
    One, climate change. Everything, I think, that has been 
said today is very reassuring, in a recognition that climate 
change, in my view, is going to be the dominant--not 
environmental issue, the dominant national security issue--
national security issue over the course of the next 30 to 50 
years. But, the truth is, when Secretary Negroponte said 
``unless we get this done by 2050''--if we don't get this 
done--start seeing major changes in both United States and 
China policy in the next 10 years, it's game-over. If you look 
at the most reasonable, conservative predictions about what's 
going to happen to sea-level rises--let's say, maybe, a meter 
over 50 years--you have a billion people on the move. It's a 
global catastrophe of really historic proportions. And so, we 
don't have that time.
    And I will say that, generally speaking, we talk about the 
benefits and possibilities of United States-China collaboration 
and cooperation--one of the most tragic cooperations, however, 
that we've seen over the last 6 or 7 years has been that the 
United States and China have cooperated very aggressively at 
undermining the science of climate change and undermining, 
really, any international efforts. If you ask me, it's going to 
be a race about which ultimate inheritance is going to be most 
damaging from the Bush administration, and it's a race--it's a 
close race between Iraq and climate change. It's a big issue, 
and it's one that the next administration has to attack, right 
off the bat.
    Last, you alluded to this in your excellent comments at the 
outset, both of you, Mr. Chairman and Senator Lugar. The 
problem for China policy is that we, here in this room, and 
others, can agree about how nuanced and subtle a policy it's 
going to need to be, but the truth is, it's a very complicated 
sell to the American people. And it's--and the relationship 
with China is going to be unlike any big relationship we've had 
with a major power in our history. If you look at the Soviet 
Union, it was monochromatic, black and white, good/bad. The way 
that Richard and Harry describe it is much more sophisticated 
than I could, but it's much--it's monochromatic, we're going to 
be having areas where we're going to cooperate very closely, 
and we're going to have areas that we're going to compete.
    I actually think that we can manage that if it's simply the 
executive branch doing business, but we all understand that 
that's not how the U.S. Government works. We work in a very 
important collaboration with the legislative branch, but we 
also have to bring the American people along. And the thing 
that has struck me the most, of all the discussions that I've 
had with people outside of Washington, is not the debate about 
Iraq, but the debate about China. I hear many more concerns 
about China policy.
    I'll just end with a quick anecdote. I was fishing in 
Alaska last year with Joe Nye and others, and we were talking 
with some of our guides about China. And our guide was very 
angry, and he said, ``Look, the Chinese are trying to kill my 
dogs,'' and he was very worried, because the food that we had 
imported from China--obviously, dog food--has poisons laced in 
it. And we proceeded to have a discussion, and the level of 
knowledge and unhappiness across a broad range of issues really 
struck me.
    It's not just going to be cobbling together and basically 
developing a coherent, synthetic policy, it's going to be 
bringing the American people along that is the real challenge.
    Thank you very much for this opportunity, Mr. Chairman.
    [The prepared statement of Dr. Campbell follows:]

 Prepared Statement of Dr. Kurt Campbell, Chief Executive Officer, the 
           Center for a New American Security, Washington, DC

    Chairman Biden, Ranking Member Lugar, distinguished members of the 
committee, it is an honor to appear before you today to discuss the 
strategic challenges confronting the United States over the course of 
the next decade and beyond in the Asia-Pacific.
    A trip through Asia, even a relatively brief one, reveals some 
disquieting concerns over the current American position in the region. 
In these waning months of the Bush administration, with the country 
bogged down and preoccupied in Iraq, the United States faces an 
unpalatable choice posed by the ``Siberian dilemma'' in Iraq. Just what 
is the Siberian dilemma and how does it apply to the unforgiving urban 
battlefields of Iraq? And more to the point, what does this have to do 
with Asia?
    The fishermen of northernmost Russia go out onto the frozen lakes 
of Siberia in temperatures approaching 60 degrees below zero centigrade 
to fill their catch. They know from experience that the biggest fish 
congregate at the center of lakes where the ice is the thinnest. They 
slowly make their way out across the ice listening carefully for the 
telltale signs of cracking. If a fisherman is unlucky enough to fall 
through the ice into the freezing water, he is confronted immediately 
with what is known as the Siberian dilemma. If he pulls himself out of 
the water onto the ice, his body will freeze immediately in the 
atmosphere and the fisherman will die of shock. If, however, he chooses 
to take his chances in the water, the fisherman will inevitably perish 
of hypothermia. Such is the stark choice presented by the Siberian 
dilemma.
    With sand instead of ice, President Bush faces a kind of Siberian 
dilemma of his own making when it comes to his political and diplomatic 
efforts with regard to Iraq. We are now entering the most consequential 
phase of the unpopular war, and America's power and prestige (as well 
as President Bush's legacy) hang in the balance.
    Some of the President's closest advisers have told him to spend all 
his waking hours on selling an increasingly skeptical American populace 
on the necessity of continuing with the war--a war that many expect to 
end badly despite all the effort, attention, and sacrifices of those 
engaged in the conflict. Another set of advisers argue that the United 
States must begin to put Iraq in context and focus on other issues of 
importance, such as the drama playing out in Asia and in particular 
China's dramatic ascent. If we don't begin to engage more seriously on 
other critical global issues--these policy wonks claim--the United 
States risks not only a major setback not only in Iraq but on other 
consequential global playing fields spanning Asia, Africa, Latin 
America, and even Europe. However, through this course of action, the 
United States risks inadvertently sending the message that it is giving 
up on Iraq at a critical juncture.
    This set of very bad choices approximates a Siberian dilemma for 
America. To date, the administration has chosen fundamentally to stay 
in the sands of Iraq--and basically hope for the best elsewhere. This 
choice is highlighted by a lack of strategic clarity and engagement in 
Asia. For instance, it was commendable that the President managed to 
make it to the APEC leaders summit in Australia (after a detour to 
Iraq), but unfortunately he chose to depart a day before the meeting 
concluded and skipped the preceding ASEAN summit for heads of state. On 
the last day of the APEC summit, the chair reserved for the President 
of the United States was conspicuously empty as the powers of the Asia 
Pacific--China, India, Japan, and others--looked on. This is precisely 
where China has been most apt at filling America's void in the region--
by engaging in constant high-level meetings and shaping regional 
agendas.
    This absence is compounded by the nonattendance in recent years of 
United States officials, including the Secretary of State, at numerous 
other regionwide sessions like the ASEAN Regional Forum and the most 
recent round of the Australia-U.S. Ministerial Consultations. It used 
to be that the United States needed strong bilateral relationships 
before venturing into the territory of multilateral forums. 
Increasingly, however, the reverse is true. Active participation in the 
new multilateral structures of Asia is necessary and important for 
effective management of bilateral ties and impending security 
challenges in the region.
    While the Bush team has made significant progress in broadening and 
strengthening our bilateral alliances with Australia, Japan, and South 
Korea and tried gamely to develop strategic collaboration with India, 
the usefulness of these efforts has been challenged by a growing 
perception in Asia that America just does not understand the 
significance of China's rise and Asia's ascent.
    The epicenter of global power is no longer the Atlantic but the 
Pacific. China's ascent has arguably been one of the most rapid and 
consequential in history, in many ways rivaling or even surpassing the 
significance of America's rise in stature during the first two decades 
of the last century. Rarely in history has a rising power gained such 
prominence in the international system at least partially because of 
the actions of--and at the expense of--the dominant power, in this case 
the United States. The arrival of the Pacific century has hastened 
challenges to American influence and power in the greater Asia-Pacific.
    From India to Australia, Asia, more than any other part of the 
globe, is defined by opportunity: Democracy continues to spread beyond 
the traditional outposts of Japan and South Korea; the continent now 
accounts for almost 30 percent of global GDP; and the world's most 
wired and upwardly mobile populations are Asian. Asian visitors to the 
U.S. now often complain about the poor quality of American-wired 
networks when compared with the dramatic innovations of online and 
mobile communication in Asia.
    Home to more than half the world's population, Asia is the 
manufacturing and information technology ``engine of the world.'' 
Asians are shaping a world that is ever more integrated. New regional 
forums like the East Asia summit and the Boao Forum for Asia (an Asian 
Davos of sorts that brings together the political and economic elites 
of the region) are reshaping cooperation and fostering deeper ties. For 
instance, this year's Boao Forum enabled high-level contact between 
Taiwan's Vice President Vincent Siew and Chinese Premier Hu Jintao. 
Free trade agreements are rapidly integrating Asian economies. Amidst 
this integration, 21st century Asia is rich with innovation. The latest 
gadgets and most dynamic Internet communities exist in Asia, where 
customers expect cell phones to stream video and conduct financial 
transactions. Asia is also investing like never before. Asian countries 
lead the world with unprecedented infrastructure projects. With over $3 
trillion in foreign currency reserves, Asian nations and business are 
starting to shape global economic activity. Indian firms are purchasing 
industrial giants like Arcelor Steel, as well as iconic brands of its 
once colonial ruler like Jaguar and Range Rover. China, along with 
other Asian financial players, injected billions in capital to help 
steady American investment banks like Merrill Lynch as the subprime 
mortgage collapse unfolded. All the while, these nations are developing 
and industrializing at unprecedented rates. Asia now accounts for over 
40 percent of global consumption of steel and China is leading the pack 
by consuming almost half of global concrete.
    Yet Asia is not a theater of peace: Between 15 and 50 people die 
every day from causes tied to conflict, and suspicions rooted in 
rivalry and nationalism run deep. The continent exhibits every 
traditional and nontraditional challenge of our age: A cauldron of 
religious and ethnic tension; a source of terror and extremism; the 
driver of our insatiable appetite for energy; the place where the most 
people will suffer the adverse effects of global climate change; the 
primary source of nuclear proliferation; and the most likely arena for 
nuclear conflict. Importantly, resolution and management of these 
challenges will prove increasingly difficult--if not impossible--
without strong United States-Chinese cooperation.
    However, even Beijing remains uncertain about how best to manage 
the still-powerful independence movement in Taiwan. The issue presents 
an acute dilemma for China's leaders, whose individual and collective 
legitimacy could be undermined either by the ``loss'' of Taiwan or by 
the problems that would ensue from a military conflict over the island. 
Chinese authorities perceive a realization of its fears in U.S. efforts 
to promote a cooperative network of regional ballistic missile defense 
programs, which Beijing fears could lead to a de-facto United States-
Australia-Japan-ROK-Taiwan collective defense alliance. This is a 
strategic competition that the United States can only engage in 
effectively with an appropriate balance of renewing our soft-power 
efforts and rebalancing our military commitments to reassure our 
friends and allies and dissuade potential adversaries from taking 
provocative actions.

                          SOFT POWER AND TRADE

    In order for Chinese leaders to meet their goal of great power 
status, Beijing has embarked upon a global effort to expand its 
influence and credibility. China is attempting to cultivate its image 
and attractiveness--perhaps to counter America's monopoly on soft 
power--for example, by building over 100 Confucius Learning centers 
from South Korea to Kenya to Argentina. China is also buying other 
powers' allegiance away from Taiwan; building road, rail, and energy 
infrastructure through Central Asia; and securing exclusive rights to 
energy throughout Africa and South America--most observers agree that 
this pattern shows a loss of U.S. influence in the region to China.
    Even though China has always had a popular cultural following, that 
following is now achieving a global scale. For example, China received 
its first Nobel Prize in Literature--awarded to the controversial poet 
laureate, Gao Xingjian--in 2000; foreign students studying in Chinese 
universities trebled from 36,000 to over 110,000 over the past decade; 
and the rise to stardom of China's basketball super-star Yao Ming has 
resulted in China acquiring a sobriquet as basketball's ``final 
frontier.'' Beijing is systematically and sophisticatedly increasing 
global knowledge about Chinese culture, philosophy, and language. These 
examples have become a central part of China's soft power playbook and 
will be boosted by its hosting of the 2008 Summer Olympic Games.
    Many of China's gains in the Asia-Pacific are natural. After all, 
China is culturally, geographically, and historically the giant of the 
region. From Africa to South America, China is establishing strong 
bilateral relationships and funding development and economic assistance 
programs. China's ``no strings attached'' foreign assistance policy--
referred to as the Beijing consensus--is attractive to many developing 
nations. These nations view China's historical struggle with poverty 
and industrialization as both inspirational and an alternative model to 
the more cumbersome Western approach to development with its emphasis 
on democracy and market liberalization.
    Nowhere is China's presence more noticeable than in Southeast Asia, 
where the United States is often notably absent. Even though China's 
trade with ASEAN countries is less still than the U.S.-ASEAN trade 
relationship, prospects for China overtaking the U.S. are becoming more 
likely with the ASEAN-China Free Trade Agreement. In 2000, two-way 
ASEAN-U.S. trade totaled over $121 billion; the U.S. accounted for over 
16 percent of ASEAN's total trade, the largest single-partner 
component. That same year, $32 billion in trade with China only 
accounted for 4.3 percent of the region's total. By 2005, the most 
recent year for which ASEAN has published statistics, trade with the 
U.S. rose to nearly $154 billion, a proportion equal to that of the 
other top partner, Japan, at 12.6 percent. Meanwhile, in those same 5 
years, China more than tripled its trade with the region, to $113 
billion, a number that now represents 9.3 percent of ASEAN's total. 
(The EU runs a close third, ahead of China, in 2005: $140.5 billion and 
11.5 percent). To illustrate that this is indeed a long-term trend, it 
should be noted that while China's trade with ASEAN increased more than 
13-fold between 1993 and 2005, America's doubled: $8.9 billion to $1.13 
billion and $75.7 billion to $153 billion, respectively. At that rate 
of change, and absent unforeseen limits on China's capacity, parity 
between the U.S., Japan, the EU, and China is imminent, and China's 
assumption of the crown all but preordained.
    There are many success stories of China's effective public 
diplomacy through Southeast Asia. Perhaps most illustrative is 
Beijing's decision to foot the bill for the reconstruction of Dili East 
Timor's war-ravaged capital that was all but leveled by intense 
fighting between East Timorese and the Indonesian military. East Timor 
is both a natural resource-rich state and an ideal staging ground for 
China's intensive public diplomacy campaign, one that showcases its 
benevolent foreign policy. China sees East Timor as a strategic 
investment in its expanding sphere of influence, and a potential source 
of rights to untapped natural resources. PetroChina got the contract 
rights to conduct seismic tests to determine the volume of oil and 
natural gas in the Timor Gap, potentially valued at $30 billion USD. 
Australian troops and U.S. and United Nations diplomats may have 
guaranteed Timorese freedom, but China provided the inhabitants of the 
new Presidential palace and the Ministry of Foreign Affairs building 
with resort-like offices.
    All the while, China has been strategically securing mountains of 
American debt and treasury bills (T-bills). Recent reports indicate 
that China now owns over $388 billion USD in T-bills, almost 20 percent 
of the global total. China's financial stakes in the U.S. economy are 
disconcerting to many, but a major Chinese sell-off of
T-bills seems unlikely because of the negative consequences it would 
impose on China's economy and its image as a rational actor. 
Furthermore, not only do Chinese exports provide affordable products to 
the American consumer, their possession of foreign exchange reserves--
estimated at $1.6 trillion in March 2008--helps spur domestic economic 
growth in the U.S. and fund the U.S. Federal budget deficit. The wars 
in Iraq and Afghanistan are costing the American taxpayers hundreds of 
billions each year, and China continues to fund those war expenditures. 
Such dependency on Beijing is a double-edged sword that requires 
strategic reflection and possible adjustments to economic strategy.
    Even though China has made miraculous gains in the region over the 
last two decades, there are problems on the horizon that could 
challenge its ascent and image. Most pressingly, Beijing needs to 
responsibly manage tensions and violence in Tibet if it wants to ease 
concerns around the region. The international community continues to 
challenge Chinese officials to think of the long-term implications of 
its heavy-handed approach to dissent and free expression. In the months 
leading up to the Beijing Olympics nations will continue to pressure 
China on the Tibet issue, but these countries must also understand that 
if they continue to constantly needle China, the chances for a 
miscalculated decision with disproportionate consequences remains a 
major concern.

                         MILITARY MODERNIZATION

    Recent news reports of China building an undersea submarine base 
seem right out of a James Bond movie. China has been mysteriously 
building and modernizing its military forces--presumably to respond to 
a contingency in the cross-Straits, though regional powers such as 
India and Japan believe otherwise. Anxiety in the region is growing as 
China continues to invest billions advancing in its force projection 
capabilities.
    According to the Department of Defense's annual report on China's 
military, ``On March 4, 2007, Beijing announced a 17.8-percent increase 
in its military budget . . . a 19.47-percent increase from 2006.'' This 
figure continues an average annual increase of 15 percent during the 
past 5 years in China's military spending, one of the few sectors that 
outpaces the country's economic growth. Since the late 1990s, the 
Chinese Government has accelerated efforts to modernize and upgrade the 
People's Liberation Army (PLA). The lack of transparency regarding 
Chinese defense expenditures obscures matters, but most foreign 
analysts estimate that the PRC spent between $97 billion and $139 
billion on military-related spending in 2007 (up to three times the 
official Chinese budget figures of $45 billion, which excludes spending 
on military research and development, nuclear weapons, and major 
foreign-weapons imports). Despite China's significant military 
modernization, they have yet to publically articulate a ``grand 
strategy'' and continue to pursue nonconfrontational policies as laid 
out in Deng's ``24 Character Strategy.''
    Whatever the true number, U.S.-led military operations in Iraq and 
the former Yugoslavia clearly have inspired the Chinese Government to 
pursue improved capacities for power projection, precision strikes, and 
the other attributes associated with the latest so-called revolution in 
military affairs (RMA): For example, the PLA has emphasized developing 
rapid reaction forces capable of deploying beyond China's borders, and 
the PLA navy (PLA-N) has been acquiring longer range offensive and 
defense missile systems and a more effective submarine force (which is 
stealthier and more operationally efficient). Chinese strategists have 
also sought to develop an ``assassin's mace'' collection of niche 
weapons that the PLA can use to exploit asymmetrical vulnerabilities in 
adversary military defenses, such as America's growing dependence on 
complex information technology.
    Besides allowing the PRC to improve its traditionally weak 
indigenous defense industry, rapid economic growth has made China a 
prolific arms importer. Russia has been an especially eager seller. 
Recently acquired Russian weapons systems include advanced military 
aircraft (e.g., Su-27s and Su-30s) and naval systems such as 
Sovremenny-class missile destroyers equipped with SS-N-22 Sunburn 
antiship missiles, and improved Kilo-class diesel class attack 
submarines that would enhance a Chinese military campaign against 
Taiwan. According to a recent IISS report, China's Navy ``has evolved 
from a purely coastal-defense force into one with growing oceanic 
capabilities, This has enabled it to change the way it views itself, 
its future trajectory and its role in Chinese national security.'' The 
PLA-N force includes 74 principal combatants, 57 attack submarines, 55 
medium and heavy amphibious ships, and 49 coastal missile patrol craft. 
In addition, recent reports suggest that China is planning to develop a 
three-carrier battle group posture-a project that the PRC could start 
by decade's end. Moreover, PLA-N is advancing its ``over the horizon'' 
targeting capabilities with new radars, and developing a new SSBN (Jin-
class) which may soon enter service.
    China is also devoting more resources to manufacturing and 
deploying advanced indigenous weapons systems. The PLA has now fielded 
the indigenously produced DF-31 and DF-31A intercontinental ballistic 
missiles, which are especially important because their mobility makes 
them hard to destroy. China's Air Force modernization programs 
continue. China's indigenous J-10 system is now being followed up with 
a supposed fifth generation multirole J-12. These platforms will 
complement the existing 490 combat aircraft ``within unrefueled 
operational range of Taiwan,'' as well as the modernization of the FB-
7A fighter-bomber. China's space program has resulted in its acquiring 
new surveillance, communication, and navigation capabilities critical 
to coordinating military operations against Taiwan or other 
contingencies beyond Chinese territory. China's successful attempt to 
destroy an aging weather satellite in January 2007, followed by the 
launch of a lunar module in fall 2007, demonstrated a significant jump 
in China's antispace assets.
    Although China's military buildup appears to be primarily motivated 
by a potential Taiwan contingency, many of its recent acquisitions 
could facilitate the projection of military power into more distant 
threats of great importance to the United States, including Japan, 
India, Southeast Asia, and Australia. Some of the missile, air, and 
increasingly mobile ground forces directed at Taiwan could be deployed 
to multiple points on China's periphery. The soon-to-be-fielded 
conventional land-attack cruise missiles, which could be deployed on 
China's new Type 093 nuclear-powered submarines, will give China a 
limited but useful global power-projection capability. In addition, 
Russia is now marketing Tu-22 Backfire and Tu-95 Bear bombers to the 
PLA, which could enable it to conduct air strikes against distant 
targets in Southeast Asia and elsewhere. Many PLA navy commanders still 
desire the acquisition of an aircraft carrier fleet, a traditional 
symbol both of global power-projection capabilities and great-power 
status. The Chinese presence in Gwadar, Pakistan, located opposite the 
vital energy corridors of the Strait of Hormuz, also has a strategic 
dimension. For several years, China has been pursuing a ``string of 
pearls'' strategy to gain access to major ports from the Persian Gulf 
to Bangladesh, Cambodia, and the South China Sea. China's neighbors are 
wary. A career Japanese diplomat recently wrote, ``If China's military 
expansion remains nontransparent and continues at its current pace, 
states with interests in East Asia will, at some point, begin to 
perceive China as a security threat. Institutionalized trilateral 
security dialogue among Japan, the United States, and China would be 
one way to minimize such threat perceptions.'' American involvement is 
key to such efforts to build trust and reduce tension.
    None of these developments is surprising; great powers expect to 
have strong militaries, and the United States certainly appreciates the 
logic of this position. But great powers often seek to disrupt the 
status quo with such capabilities. Secretary of Defense Robert Gates 
has taken a conciliatory, though cautious, approach to Chinese military 
modernization. His visit to China, heralded as a success by many, 
broadened the scope of military-to-military cooperation and established 
a direct hotline between both nations should a crisis arise. Gates' 
remarks at the Forbidden City further emphasized the need to develop 
cooperative relations--a view that is consistent with America's 
strategic objectives in the region. Gates' visit and the consistent 
efforts of the United States Pacific Command to engage China could be 
the first step toward getting more than declarations of China's 
intention to be a good actor. The U.S. will need to convince PLA 
leaders that transparency, not uncertainty, will be key to avoiding 
miscalculation in the future, particularly as the seas grow more 
crowded with more capable naval forces.
    Unfortunately, the Chinese decision to deny harbor to the USS Kitty 
Hawk on Thanksgiving Day 2007, and its refusal to allow shelter to U.S. 
minesweepers in duress suggest to some that Beijing is beginning to 
behave provocatively. These incidents, added to the successful direct 
ascent antisatellite test in January, mass collection of U.S. Treasury 
bills and, relentless hacking of Pentagon and other U.S. computer 
systems, underscore a potentially adventurous Chinese military policy 
toward America. Individually, these events are perhaps inconsequential, 
but in sum, they indicate a pattern of change in China's behavior.

                            RECOMMENDATIONS

    The concurrent challenges of fighting the war on terror and 
learning how to live with a rising China will require starkly different 
government efforts and capacities. Either one on its own would be 
daunting, and taken together, may prove overwhelming. The violent 
struggle with Islamic jihadists is now an inescapable feature of 
American foreign policy, while relations with China involve a complex 
mix of cooperation and competition but are not necessarily destined to 
degenerate into open hostility. American policymakers must better 
understand the risks associated with a myopic foreign policy focus and 
better balance commitments from South America to the Middle East to 
Asia.
    Perhaps it will be prudent for American strategists to consider how 
best to balance and shape these simultaneous challenges. For instance, 
Chinese cooperation in the global war on terrorism should be a main 
feature of American diplomatic strategy with Beijing, given that the 
PRC has as much to lose from the jihadists' success as the United 
States. Southeast Asia is likely to be a major battleground for hearts 
and minds between moderate Muslims and radical Islamic instigators, and 
China has a major stake in seeing the former prevail.
    Moreover, policymakers must articulate a realistic and pragmatic 
China policy. Concerns ranging from consumer safety to worries about 
significant economic downturn have give trade skeptics in Congress the 
necessary ammunition to hold up critical free trade agreements and 
elevated concerns in Beijing. China's secretive military modernization 
program and assertive provocations, such as its antisatellite test in 
2007, have raised tremendous concern amongst conservative foreign 
policymakers. America's strategic engagement with China will have to 
balance between trade skeptics and conservative voices that prefer 
containment and hedging over collaboration and concord.
    Conducting an effective China policy will involve more than just 
interacting with Beijing. America must commit to engaging in bilateral 
dialogue and cooperation on trade-related issues while encouraging 
Beijing to make the necessary adjustments in its export standards, 
intellectual property rights law--including revaluation of the Yuan. 
More importantly, Beijing and Washington need to develop stronger 
military-to-military contacts. Secretary Gates' forward-looking 
decision to create a hotline between the two countries has been 
heralded across the Asia-Pacific for reducing risks associated with 
miscalculation.
    In order for China to be compelled to act as a ``responsible 
stakeholder'' it will prove increasingly important for policymakers to 
devise a strategy that is capable of ensuring the maintenance of 
American power and influence in the Asia-Pacific for the foreseeable 
future. It must be embedded within an overall policy toward Asia that 
uses ties with key allies to act as a force multiplier for U.S. 
interests throughout the region. Such a strategy should include the 
following elements:
(1) Reassert American strategic presence
    Clarity from a new administration should come immediately, with 
strong statements that emphasize Asia's permanent importance to the 
United States. The next President should focus on the global challenges 
and prospects for cooperation in the Asia-Pacific and communicate a 
vision of a region that is as integral to U.S. well-being as Europe is. 
A clarifying reference to America's position on Taiwan must complement 
an articulation of America's desire to expand bilateral ties with 
mainland China. This is particularly important in the Asia-Pacific 
where strategic competition may prove more likely in the coming years 
as both the ``Middle Kingdom'' and India reemerge as global powers.
(2) Maintain strong bilateral ties
    A regional plan is only as strong as the bilateral relations 
underpinning it. While it is true that bilateral alliances will 
increasingly prove less capable of dealing with myriad challenges in 
the region, they will prove indispensible to managing traditional 
security challenges. The United States must continue to build strong 
bilateral relations with Australia, India, Japan, South Korea, 
Indonesia, and Taiwan. In particular, Japan will remain the foundation 
for America's presence in the Asia-Pacific and our cooperation must 
deepen beyond the successes of the Bush administration.
(3) Showing up: Get in the game and engage more actively in regional 
        and multilateral forums
    The next National Security Council and Secretaries of State and 
Defense must not only recognize the importance of attending high-level 
meetings in Asia, but must actively schedule meetings and summits that 
will further American strategic interests. The State Department must 
enunciate an interagency attendance policy for meetings in the Asia-
Pacific, and ensure that an Assistant Secretary or higher is present at 
every meeting. To alleviate the potential strains of such a policy, we 
recommend a reorganization of the authority of the Under Secretary of 
State for Political Affairs. The U.S. must also encourage trilateral 
talks at the ministerial level; dialogue between the U.S., China, and 
Japan, or between the U.S., Japan, and ROK could prove particularly 
productive.
(4) Reexamine military engagement
    The United States must maintain a forward deployed military 
presence in the region that is both reassuring to friends and a 
reminder to China that we remain the ultimate guarantor of regional 
peace and stability. Military presence is essential for credibly 
backstopping American alliances and other security commitments in the 
region. More positively, we should make clear our eagerness to work 
with all Asian countries, including China, in pursuit of common 
security objectives such as countering terrorism, piracy, and WMD 
proliferation. Joint peacekeeping operations involving China, Japan, 
South Korea, and other countries could also provide opportunities for 
expanded security dialogue among the participants.
(5) Broadening the agenda
    Focusing on traditional security concerns alone may limit the 
United States ability to pursue a broad spectrum of interests in Asia. 
The primary focus for Asian nations is not security but economics. 
Meanwhile, the challenges of global climate change and energy 
competition will become more and more prevalent over time. The complex 
intersection of all these issues will require cooperative international 
solutions. In particular, America must continue to pursue the 
establishment of a bilateral United States-China framework for energy 
conservation and cooperation.

                               CONCLUSION

    Much of the American approach to foreign policy in the cold-war era 
was characterized by a degree of bipartisanship. In Senator 
Vandenburg's immortal words, bitter divisions often stopped ``at the 
water's edge.'' Bipartisanship has been conspicuously absent in current 
debates and this internal divisiveness hampers our effectiveness in the 
formulation and execution of American foreign policy. Given the 
magnitude of what lies ahead, a concerted effort to rediscover some 
common ground in American politics (at least when it comes to foreign 
policy) may indeed be one of the most important ingredients for a 
successful foreign policy balancing act.
    China's rise to a sustained great power status in the global arena 
is not preordained, nor is it necessary that the United States and 
China will find themselves at loggerheads over Taiwan, increasing trade 
frictions, regional rivalry in Asia, or human rights matters. The 
United States and China are currently working together surprisingly 
well on a wide array of issues. However, so long as China's intentions 
and growing capabilities remain unclear, the United States and other 
nations in the region will remain wary.
    The next President, Democrat or Republican, will face tremendous 
challenges in the Asia-Pacific that will increasingly involve China. 
Establishing a foundation and framework for cooperation will prove 
critical to ensure stability and security in the region.
    I once again would like to thank you for the opportunity to testify 
before this distinguished panel.

    The Chairman. You make me feel very good that I dropped out 
of the race. [Laughter.]
    Dr. Harding.

    STATEMENT OF DR. HARRY HARDING, UNIVERSITY PROFESSOR OF 
  INTERNATIONAL AFFAIRS, THE ELLIOTT SCHOOL OF INTERNATIONAL 
     AFFAIRS, GEORGE WASHINGTON UNIVERSITY, WASHINGTON, DC

    Dr. Harding. Thank you, Mr. Chairman and Senators. It's a 
great honor to be with you this afternoon.
    So many interesting things have been said that I'd love to 
comment on, but let me first summarize my statement for you.
    The Chairman. Thank you.
    Dr. Harding. As you know, I was asked to testify about the 
prospects that China will become a so-called ``responsible 
stakeholder'' in the international system. And, as you also 
know, that objective was put forward by then-Deputy Secretary 
of State Bob Zoellick, one of John Negroponte's predecessors, 
in a speech that he delivered in New York back in September 
2005. And, as I look at American policy toward China, I think 
that concept has joined some others as the central elements of 
American policy toward China: Our policy of engagement--that 
is, engaging China in a robust dialogue on bilateral issues; 
hedging against the risks inherent in China's uncertain future; 
and promoting a peaceful evolution of the relationship across 
the Taiwan Strait. So, it's not all of United States policy 
toward China, but it's become a very important part of it.
    I see this concept as an extension and an updating of the 
earlier concept of integrating China into the international 
order. That policy, in turn, was based on the assumption that 
our objectives with regard to China could be better served, and 
the predictability of China's international and domestic 
conduct could be increased, if China were brought into the full 
range of international regimes and organizations for which it 
was qualified, as well as extensively integrated into the 
global economy. There are a lot of examples of this policy, but 
probably the most obvious involves the long, difficult, but 
ultimately successful negotiations over China's membership in 
the World Trade Organization.
    Now, with the support and encouragement of the United 
States, China's now become a member of virtually all the 
international regimes for which it's qualified. And, therefore, 
the process of integration is basically over--not entirely, but 
it's largely completed. And so, the issue, as Bob Zoellick 
rightly suggested, is no longer securing China's membership, 
but encouraging it to be something more, what he called a 
``responsible stakeholder.'' This means not only honoring the 
rules and norms of the system, but also enforcing them when 
others violate them, and assisting those who wish to join the 
system but who lack the capacity to do so. It means, in other 
words, not simply passive membership, but active participation. 
It means accepting the burdens and responsibilities of being a 
major power with a stake in international peace and stability, 
rather than simply being a free rider on the efforts of others.
    Now, China has reacted to the concept of responsible 
stakeholding with some ambivalence. On the one hand, it 
appreciates that the United States is thereby seeking a 
positive relationship with China. The concept suggests that we 
can accept, and even welcome, the rise in Chinese power and 
Beijing's growing role in the world. It certainly is seen by 
the Chinese as preferable to the Bush administration's earlier 
idea that China would be a strategic competitor of the United 
States, as was expressed during the campaign of 2000 and in the 
early months of 2001.
    However, Beijing also perceives, largely correctly, that 
America's more accommodative posture, as expressed in this 
concept, is conditional. China will be expected to honor 
international norms and respect international organizations 
that it did not create and that it may sometimes question. And 
even more worrying from Beijing's perspective is the prospect 
that the United States is reserving the right to be the judge 
as to whether Chinese behavior on particular issues is 
sufficiently responsible or not.
    Now, my written statement discusses Beijing's willingness 
to comply with and enforce some of the most important norms 
that lie at the heart of that community. I won't go into the 
details here. As you know if you've read the statement, I deal 
with four such norms and regimes: Self-determination, 
development assistance, human rights and human security, and 
nonproliferation. Let me summarize my analysis in the following 
conclusions, and then turn to some of the recommendations for 
U.S. policy.
    My conclusions represent, as is so often the case with 
China, a very complex and very mixed picture. There is always a 
``but'' or ``on the other hand'' somewhere in the conclusions.
    First, China has come increasingly to accept a wide range 
of international norms and institutions, including some that it 
vigorously rejected during the Maoist era. These include the 
norms restricting the proliferation of weapons of mass 
destruction, and some of the norms governing human rights and 
human security. But, China still defines some of these norms 
differently than does the United States, including those 
governing human rights and official development assistance, and 
it continues to resist still others, particularly the right of 
self-determination and the norms governing trade and arms other 
than weapons of mass destruction.
    Second, China believes that the enforcement of norms should 
be constrained by a continuing commitment to the countervailing 
principle of national sovereignty. That's the point that 
Richard made a few minutes ago. Thus, for example, it believes 
that violations of human rights are a legitimate concern for 
the international community only if one or more of three 
conditions are met: When the violations are extraordinarily 
serious, as in the case of apartheid or genocide or severe 
internal conflict; when the violations of human rights have 
effects that spill across borders and thus threaten 
international peace and stability; or when the government of 
the state in question requests or accepts international action. 
Otherwise, it regards public criticism of a country's human 
rights record, let alone sanctions to punish human rights 
abuses, as unwarranted intervention in the country's internal 
affairs.
    Third, Beijing is generally slow to impose sanctions on 
offenders. It prefers first to try what it calls a more 
``cooperative'' approach, that is, diplomatic dialogue with 
positive incentives provided alongside the prospect of 
sanctions. It regards sanctions as a last resort, and when 
sanctions are ultimately necessary, it tends to favor modest 
and voluntary ones over stringent mandatory ones, and economic 
sanctions over military intervention. That's why China always 
seems slow to act, from the American perspective.
    And then, finally, in practice, China does what other 
countries do. It often has other interests, particularly 
commercial or security ties to the governments accused of 
violating international norms, that may sometimes lead it to 
try to block or moderate the imposition of international 
sanctions.
    Given this mixed record, how can the United States persuade 
Beijing to be even more responsible than it is now? In my 
judgment, China is more likely to act responsibly under the 
following circumstances.
    No. 1, when it sees that the norms in question are truly 
universal, obtaining support from the vast majority of states 
in both the developed and the developing world. This explains 
China's acceptance of some of the international norms governing 
human rights and nonproliferation. It did so when it realized 
these were not just the preferences of the United States and 
not just the preferences of the West or developed countries, 
but, indeed, the preferences of the majority of nations in the 
world.
    Second, and perhaps most important, when China understands 
that international behavior in accordance with these norms 
would be in keeping with its own interests, and that behavior 
that violates those norms would pose a potential threat to 
China's own objectives. This is perhaps an even more important 
reason why China now supports the nuclear nonproliferation 
regime.
    Third, when China sees that the international organizations 
that enforce the norms are widely regarded as effective and 
legitimate, even if they do not always endorse China's 
preferences. This explains Beijing's increasing willingness to 
take security issues to the U.N. Security Council and to take 
trade issues to the WTO.
    Fourth, when Beijing knows that it will be isolated from 
countries whose opinions matter if it obstructs the enforcement 
of the norms. This is the lesson to be drawn from the 
embarrassment that China recently suffered when it tried to 
transport conventional arms to Zimbabwe and found its ship 
turned away from nation after nation in Southern Africa.
    And finally, when China sees that other major powers, 
including the United States, also abide by the norms that they 
expect China to honor.
    In addition, one last point, which I think one of my 
colleagues has already made. As new norms are written--norms 
are an evolving thing in international affairs, they aren't 
carved in stone forever--as new norms are written to meet new 
challenges, or when outmoded ones are revised to meet new 
circumstances, if Beijing is to be regarded as a responsible 
stakeholder in the international system, it should be invited 
to participate in the norm-drafting process, not as a decider, 
and not with a veto, but as a participant. If a major power 
like China is to be discouraged from being a rulebreaker, or 
even simply a nation that tolerates, passively, rulebreaking by 
others, then it should be treated as a rulemaker, and not 
simply as a ruletaker.
    Thank you very much.
    [The prepared statement of Dr. Harding follows:]

   Prepared Statement of Dr. Harry Harding, University Professor of 
International Affairs, the Elliott School of International Affairs, the 
              George Washington University, Washington, DC

    I've been asked to testify today about the prospects that China 
will become a ``responsible stakeholder'' in the international system--
the objective of American policy defined by then-Deputy Secretary of 
State Robert Zoellick in a speech he delivered to the National 
Committee on United States-China relations in New York in September 
2005. Along with our policies of engaging China in regular and robust 
negotiations on bilateral issues, hedging against the risks inherent in 
China's uncertain future, and promoting a peaceful evolution of the 
relationship across the Taiwan Strait, encouraging China to become a 
``responsible stakeholder'' in international affairs has become one of 
the central elements in present American policy toward China.
              the concept of ``responsible stakeholding''
    Our goal of seeing China become a ``responsible stakeholder'' in 
the international system is an extension and updating of the Clinton 
administration's earlier policy of integrating China into the 
international order. The policy of integration reflected the assumption 
that our objectives with regard to China could be better served, and 
the predictability of China's international and domestic conduct 
increased, if China were brought into the full range of international 
regimes for which it was qualified, as well as extensively integrated 
into the global economy. The most obvious example of this policy was 
the long, difficult, but ultimately successful negotiations over 
China's membership in the World Trade Organization. But there are other 
examples as well: Securing Chinese endorsement of the norms that govern 
nonproliferation and human rights, supporting China's membership in 
regional economic and security organizations, and even the decision to 
endorse Beijing's bid to host this year's Summer Olympic Games.
    But now, China has become a member of virtually all international 
organizations, excepting primarily only those that require members to 
be developed economies (the OECD, the International Energy Agency, and 
the G-7), plus a few nonproliferation regimes (the Missile Technology 
Control Regime; the Wassenaar Agreement, governing conventional arms 
and dual-use technologies; and the Australia Group, governing 
technologies that produce chemical and biological weapons). And, as the 
levels of trade and capital flows to and from China so amply 
demonstrates, China has certainly become a major participant in the 
global economy. The process of China's formal integration into the 
international system has been largely completed.
    The issue now, as Zoellick rightly suggested, is no longer securing 
China's membership in the international system, but encouraging it to 
become a ``responsible stakeholder.'' By this is meant not only 
honoring the rules and norms of the system, but also enforcing the 
norms when others violate them, and assisting those who wish to join 
the system but lack the capacity to do so. It involves active 
participation, not simply passive membership. It entails accepting the 
burdens and responsibilities of being a major power with a stake in 
international peace and stability, rather than being a free rider on 
the efforts of others.
    China has reacted to the concept of ``responsible stakeholding'' 
with some ambivalence. On the one hand, Beijing appreciates that, in 
calling on it to become a ``responsible stakeholder,'' the U.S. is 
seeking a positive relationship with China. The concept suggests that 
the U.S. can accept--and even welcome--the rise of Chinese power and 
Beijing's growing role in the world if it acts responsibly. The Bush 
administration's view of China as a prospective stakeholder in the 
international system as expressed in 2005 is certainly preferable to 
its view of China as a strategic competitor of the United States as 
expressed during the early months of the administration's first term in 
2001.
    However, Beijing also perceives, largely correctly, that America's 
more accommodative posture is conditional. China will be expected to 
honor international norms and respect international organizations that 
it did not create and that it may sometimes question. And, even more 
worrying from Beijing's perspective, is the prospect that the United 
States is reserving the right to be the judge of whether or not Chinese 
behavior on particular issues is sufficiently ``responsible.''

              CHINA'S CONDUCT AS A RESPONSIBLE STAKEHOLDER

    In the short space of time available to me here, I cannot offer a 
comprehensive issue-by-issue or region-by-region assessment of the 
extent to which China is acting as a ``responsible stakeholder'' in the 
international community. What I can do is to discuss Beijing's 
willingness to comply with and enforce four sets of norms that lie at 
the heart of that community. I will not discuss China's compliance with 
its obligations to the World Trade Organization, since I understand 
that will be covered in a separate hearing. Rather, I will deal with 
four other norms and regimes:

   Self-determination
   Development assistance
   Human rights and human security
   Nonproliferation

    Together, these norms cover most of the specific issues about which 
the U.S. is concerned, from Taiwan to Iran and from North Korea to 
Sudan. I will discuss the norms in the order in which China is willing 
to accept, uphold, and enforce them, from less acceptance to more.
Self-determination
    Of the four sets of norms under consideration here, the norm of 
self-determination, most recently invoked by those who support the 
independence of Kosovo from Serbia--is the most worrying to China. 
Ironically, the norm was a key element in Chinese foreign policy in the 
1950s, 1960s, and 1970s, when Beijing could apply it to support 
independence for Western colonies in Asia, Africa, and Latin America. 
But today, when there are few colonies left, the concept is primarily 
applied to parts of states that--often for reasons of ethnicity or 
identity--want independence or greater autonomy from the national 
government that exercises sovereignty over them. Beijing is now intent 
on ensuring that such the principle is not applied to Taiwan, Tibet, or 
other parts of what it regards as Chinese territory. What was once 
praised as a principle when it justified the desire of a people to 
assert independence from colonial rule is now denounced when it can be 
invoked to justify ``splittism'' against a legitimately constituted 
nation-state.
    This is not to say that China's opposition to self-determination is 
absolute. Beijing has accepted the independence of Timor-Leste (East 
Timor) from Indonesia, as well as the independence of the former Soviet 
Republics from Russia. It may even tolerate the independence of Kosovo 
from Serbia, particularly if Kosovo refrains from recognizing Taiwan or 
supporting Taiwanese independence.
    But China would prefer that self-determination be applied only when 
it has obtained the consent (even if nominal) of the national 
government in question. If Indonesia was willing to permit the 
independence of East Timor, China will not object. But since China will 
not permit the independence of Taiwan or Tibet, the rest of the 
international community has the right to apply the principle of self-
determination in those cases.
Development aid
    In recent years, China has markedly increased its official 
development assistance (ODA) to the Third World, with a particular 
focus on providing that aid as part of a package that also includes 
Chinese direct investments in projects to extract energy and other 
natural resources, and often in the transportation infrastructure that 
can facilitate the export of those resources to China.
    China has tried to differentiate its aid from that provided by 
Western countries and the major international financial institutions 
(particularly the World Bank and the IMF) by claiming that its ODA is 
unconditional--that it does not require that the recipient governments 
meet certain standards of performance in order to receive the aid. 
Strictly speaking, of course, it is inaccurate to describe China's aid 
as unconditional. As just noted, much Chinese ODA is tied to commercial 
projects, even if not conditioned on standards of good governance. 
Still, Beijing presents its aid policy as avoiding any temptation to 
interfere in the recipient country's internal affairs.
    But is this policy sustainable? Already, it is clear that China 
runs a significant international risk by providing large amounts of aid 
to rogue regimes. As the case of China's attempt to ship small arms to 
Zimbabwe illustrates, this risk comes not just from the U.S. and other 
Western powers, but from other developing countries in the region as 
well. In addition, Beijing may also run reputational risks at home, if 
its citizens begin to perceive that their national treasure is being 
misused by corrupt governments because of the absence of conditions on 
its use, or that foreign investment in unstable states encounters 
unanticipated and unacceptable costs and risks.
    Already, there are signs that Beijing may be willing to discuss 
minimal performance standards for ODA--as well as the concept of 
corporate social responsibility (CSR) as applied to the activities of 
Chinese companies operating or investing abroad. This provides some 
hope that China will see the advantages of becoming more responsible on 
the issue of development aid.
Human rights
    China's position on international human rights has evolved 
dramatically over the last 30 years. It has come to accept the idea 
that there are universally accepted human rights--a departure from the 
Maoist position that the West's definition of ``human rights'' embodied 
``capitalist'' or ``bourgeois'' concepts that could not be applied to 
China, to other socialist states, or even to developing countries. It 
has even begun to accept the proposition that this universal definition 
of human rights includes political and civil rights as well as economic 
and social rights, even though it has not yet ratified the 
international convention governing the former.
    Despite Beijing's growing acceptance of the concept of universal 
human rights, however, there remain significant gaps between its 
position and that of the United States. China continues to insist that 
human rights, although universal, are not absolute. Their promotion 
must be weighed, Beijing says, against other considerations, 
particularly political stability and economic development. It also 
argues that political and civil rights can only be implemented 
gradually, at higher levels of economic development and greater degrees 
of political stability. There is also the strong possibility that China 
is trying to develop a new model of politics that it will call 
``democratic,'' but that will not include the elements of pluralism, 
contestation, and direct elections that the U.S. regards as essential 
parts of the definition of democracy.
    Even more important for our purposes is Beijing's ambivalent 
attitude toward international enforcement of human rights in countries 
where they are being violated. China's present position is that 
international action through economic sanctions or humanitarian 
intervention is acceptable under only three conditions:

   When the violations of human rights are extraordinarily 
        serious, as in the case of apartheid, genocide, or severe 
        internal conflict;
   When the violations of human rights have effects that spill 
        across borders and thus threaten international peace and 
        stability; or
   When the government of the state in question requests or 
        accepts international action.

    More recently, China has been increasingly willing to subject 
lesser human rights to international criticism or diplomatic 
representations, as when it urged the Burmese Government to promote the 
``normalization'' of political life or encouraged the North Korean 
Government to engage in economic reform and opening. But, again because 
of concern about its own domestic situation, China is not willing to 
accept the imposition of sanctions, let alone military intervention, in 
these lesser cases. Unless one of the three conditions listed above is 
met, China regards economic sanctions or humanitarian intervention as 
an unacceptable violation of the sovereignty of the country in 
question.
Proliferation
    China has increasingly accepted the international norms governing 
the proliferation of weapons of mass destruction (WMD), largely because 
Beijing has come to understand that China's own interests might well be 
threatened by such proliferation. It remains, however, less supportive 
of norms that govern the proliferation of other weapons systems, 
including missile technology and conventional arms. And its domestic 
enforcement of the norms it has accepted, such as those governing the 
export of precursors for chemical and biological weapons, has not 
always been adequate.
    The main issue, however, is China's attitude toward the enforcement 
of nonproliferation norms when they are being violated by other states, 
particularly those such as North Korea and Iran that are seeking to 
develop nuclear weapons. In general, China has insisted that all 
states--even those that the U.S. regards as rogue states--have the 
right to undertake civilian nuclear programs, if they are subjected to 
the requisite international safeguards. When violations are suspected, 
Beijing is relatively slow to accept the need for sanctions, preferring 
to try what it calls a more ``cooperative'' approach--i.e., diplomatic 
dialogue, with positive incentives provided alongside the prospect of 
sanctions. It regards sanctions as a last resort--and, when sanctions 
are ultimately necessary, it tends to favor modest and voluntary 
sanctions over stringent and mandatory ones, and economic sanctions 
over military intervention. Of course, China also prefers that 
decisions to impose sanctions to be made by the United Nations, or at 
least a regional body with universal membership, rather than 
unilaterally by a single nation (particularly the United States), or 
even by a group of nations that it regards as unrepresentative.
Generalizations
    What do these four sets of international norms tell us about the 
probability that China will become a more ``responsible stakeholder'' 
in the present international system, as envisioned by current American 
policy? Let me conclude with the following generalizations:

   China has come increasingly to accept a wide range of 
        international norms and institutions, indulging some that it 
        vigorously rejected during the Maoist era.
   But it still defines some of these norms differently than 
        does the U.S., including those governing human rights and 
        official development assistance, and continues to resist still 
        others, particularly the right of self-determination and the 
        norms governing trade in arms other than weapons of mass 
        destruction.
   China believes that the enforcement of norms should be 
        constrained by a continuing commitment to the countervailing 
        principle of national sovereignty.
   And, in practice, China often has other interests--
        particularly commercial or security ties to the governments 
        accused of violating international norms--that lead it to try 
        to block or moderate the imposition of international sanctions.
   In so doing, Beijing can invoke its general preference for 
        diplomatic initiatives over sanctions and for milder sanctions 
        over harsher ones.
  conclusion: when does china engage in ``responsible stakeholding''?
    How, then can the U.S. persuade Beijing to be more responsible than 
it is now? China is more likely to act responsibly under the following 
circumstances:

   Beijing sees that the norms in question are truly universal, 
        obtaining support from the vast majority of states in both the 
        developed and developing worlds. This explains China's 
        acceptance of some of the international norms governing human 
        rights and nonproliferation.
   China understands that international behavior in accordance 
        with the norms would be in keeping with its own interests, and 
        that behavior that violates those norms would pose a potential 
        threat to China's own objectives. This is perhaps the major 
        reason why China now supports the nuclear nonproliferation 
        regime.
   China sees that the international organizations that enforce 
        the norms are widely regarded effective and legitimate. This 
        explains China's increasing willingness to take security issues 
        to the United Nations Security Council and trade issues to the 
        WTO.
   Beijing knows that it will be isolated from countries whose 
        opinions matter if it obstructs the enforcement of the norms. 
        This is the lesson to be drawn from the embarrassment China 
        recently suffered when it tried to transport conventional arms 
        to Zimbabwe.
   China sees that other major powers, including the United 
        States, also abide by the norms that they expect China to 
        honor.

    In addition, as new norms are written, or as outmoded ones are 
revised, if Beijing is to be regarded as a ``responsible stakeholder'' 
in the international system, it should be invited to participate in the 
norm drafting process. If a major power like China is to be discouraged 
from being a rule breaker or even simply a nation that tolerates rule 
breaking by others, then it should be treated as a rulemaker, and not 
simply as a ruletaker.

    The Chairman. Thank you very much, gentlemen, for very good 
testimony.
    Let me begin with you, Dr. Harding. Your--the five 
conclusions you reached--actually, it's six, the additional 
norm--the one that says ``China understands international 
behavior in accordance with the norms would be in keeping with 
its own interests,'' isn't that the underlying rationale why we 
assume they're not--why--to make them a stakeholder, not a 
responsible stakeholder, just a stakeholder? In other words, as 
their economy grows, the free flow of oil becomes an important 
thing to them, so, where they may not have cooperated 10 years 
ago in keeping the Strait of Hormuz open or the Persian Gulf 
flowing, we--they may very well be engaged in being willing to 
do that now. Whereas, 15 years ago, the idea of dealing with 
terrorist activity anywhere else in the world would not be 
something they would be inclined to do, the fact that they have 
their own internal problems, they may very well find it in 
their interest to do it.
    So, is their emergence as an economy that increasingly and 
steadily increases the standard of living for their people, 
does that, in and of itself, bring along some promise, not of 
lack of competition with us economically, but in accepting some 
of the norms heretofore unwilling--that were prescribed and 
written before they got to be a player in writing the norms?
    Dr. Harding. I think that's an excellent question. I think 
that the key word is, indeed, ``promise.'' There is a promise, 
there is a hope, there is even a----
    The Chairman. Yeah.
    Dr. Harding [continuing]. Probability. And I think that is 
exactly the assumption, that China----
    The Chairman. But, is it an assumption you operate on as 
you----
    Dr. Harding. It's an assumption that I operate on, that 
China does have a stake in the smooth operation of the 
international system, it has a stake in peace, and it has a 
stake in economic prosperity, precisely because it benefits 
from these things. And I think that China increasingly accepts 
that and understands it.
    However, there is still a gap that they have to overcome. 
And let me simply identify two that I think are relevant here.
    The Chairman. Please.
    Dr. Harding. One is that they do have it in their mind that 
these norms and institutions were written or created at a time 
when they were weak, or at a time when they were excluded from 
the international community, or at a time when they excluded 
themselves, as during the Maoist era. And therefore, there is a 
bit of a ``not invented here'' syndrome, and they have to be 
persuaded that these norms are in the interest of all, 
including those who did not write the rules----
    The Chairman. Right.
    Dr. Harding [continuing]. As well as in the interest of 
those who wrote them. That's one----
    The Chairman. I think that's a very----
    Dr. Harding. A second point is that the Chinese are, I 
think, just beginning to understand the risks that they face as 
a stakeholder. They concentrate almost obsessively on some, and 
they tend to ignore others. They have been absolutely obsessed 
with the idea that one day a President of the United States 
might pick up the phone, as they see it, and call ExxonMobil 
and say, ``We're having some problems with China. Cut off their 
oil.'' And that leaves----
    The Chairman. They don't know ExxonMobil like we know----
    Dr. Harding. I know. Their----
    The Chairman [continuing]. ExxonMobil.
    Dr. Harding [continuing]. Their concern with that risk 
gives them this idea that, if only they could have equity 
stakes----
    The Chairman. If only that were true.
    Dr. Harding [continuing]. In oil production in places like 
Sudan or in Iran, that they would avoid risk.
    The Chairman. Yeah.
    Dr. Harding. Well, by acquiring such equity stakes they may 
reduce some risks, but they greatly increase others. And I 
think that they are also unaware of the risks of giving 
unconditional aid in Africa. It's a issue that you've been 
interested in. So, I think that they are still in the learning 
process of understanding the risks and threats to the stakes 
that they have in the international system.
    The Chairman. One of the things I'm grappling with in 
trying to get a sense of what the equation here is--if you 
assume that the status quo, in terms of the political system 
within China were to be sustained and remain for the next 5, 
10, 15 years, then it is easier to predict--nothing's easy--
it's easier to predict, for example, the likelihood of 
acceptance of certain norms based upon the view of self-
interest and whether they were ready. But, one of the things 
that seems to be--I hope, at least--is likely to fluctuate, as 
well, to change, is the status quo internally. Whether we, in 
fact, impact on it or not, I mean, it's going to--it is likely 
to change. And one of the things that I think the next--
presumptuous of me to--one of the things I wonder about--in the 
calculations--because some of this is going to have to be 
fairly farsighted policy that we're going to engage in here--I 
mean, we're going to try to begin to implement in a new 
Democrat or Republican administration--is that--what are the 
odds that the substantial changes you talked about, Richard, 
how the world has changed, like you've heard me quote Yeats all 
the time--it's changed utterly; a terrible beauty's been born 
here--this is a different--and the change has not stopped; I 
mean, this is in motion--that, although I start off with the 
proposition--I'll further damage his reputation--of Dr. Haass, 
which is that I'm more concerned about changing their behavior 
than changing their system. But, as their system changes, if it 
changes, that obviously will have impact on their behavior. 
What that will be, I don't know.
    So, I realize this is a fairly--it's hard to articulate it, 
in terms of a question--but what do we look at, in terms of the 
outside events, whether they're a consequence of just 
inevitable change or change that we've helped shape, on the 
makeup of the political system in Beijing--2, 5, 10, 12 years 
from now? Do you look down the road--for example, I look down 
the road, and I don't see a Saudi royal family, 20 years from 
now, having the same kind of authority and power it has in 
Saudi now. As the tides of history move, I just don't see that. 
I mean, just for me, just Joe Biden.
    What do you guys, who really know this--what do you look 
at, what do you anticipate are the likely scenarios based upon 
assuming a relative stability, continued economic growth, 
expansion of their economy, expansion of their standard of 
living, on the domestic imperatives within China? Not what 
policy we should engage in, but--am I making any sense, what 
I'm trying to get at here? So, how do you guys, when you think 
about this, factor that in? What we heard today from you--is it 
basically predicated on ``no substantial change in the status 
quo'' internally within the Chinese political apparatus and 
system?
    Anyway, if you can take a shot at it, I'd----
    Dr. Harding. First--yeah.
    The Chairman [continuing]. Appreciate it. I realize it's 
awfully broad.
    Dr. Harding. Right. Well, I think the safest prediction 
about anything is, the status quo is not going to continue for, 
you know, 5, 10, 15 years. I see three trends that I would 
think are very highly likely in China. And there's some good 
news, and there's some bad news.
    I think the first one has already been alluded to Secretary 
Negroponte, and that is that the Chinese leadership know that 
their development has to become more sustainable in many, many 
different ways. It has to be more environmentally sustainable, 
it has to be more economically sustainable, it has to be more 
politically sustainable. And I think, in that sense, we're 
going to see some progressive changes in China's domestic 
policy. They'll be slow, they'll be gradual, but I think that 
we will see, for example, a lower savings rate. That will be 
translated into a lower trade deficit. We'll probably see 
somewhat slower growth. So, I think that we'll see a different 
Chinese economy in 5, 10, or 15 years than we do today.
    Second--and I've already touched on this--I don't think 
we're going to see democracy in this period of time, but I 
think we are going to see some political reforms that are going 
to open the system up to greater input from inside the party, 
from government legislatures, even from ordinary citizens. It 
won't be pluralistic, it won't be competitive, in terms of a 
multiparty system, but I think that it will be somewhat more 
responsive to a very wide range of interests, some of which 
will be compatible with the interests of the United States, and 
some will not.
    And that leads to my third trend, and that is that 
alongside foreign policy nationalism--I think we're going to 
see increasing economic nationalism----
    The Chairman. Right.
    Dr. Harding [continuing]. In China. We're going to see 
ambitious Chinese entrepreneurs and managers saying, ``We want 
to be national champions for China, we want to be world-class 
companies, and we want the support of our government in helping 
us compete abroad and in restricting the market share of 
foreign firms inside China.'' And that, of course, is going to 
pose all kinds of problems for the United States.
    Now, that's if things go relatively smoothly.
    The Chairman. Right.
    Dr. Harding. Obviously, we could have a major political or 
economic crisis that leads to a significant retrogression in 
Chinese policy, at home and abroad.
    The Chairman. Well, I want to follow up on this in a second 
round, with your permission, but I just would say that there 
are two factors here that I don't know how to calculate, but 
I--I'm of the view that they are going to play a major role.
    I think--not just economic nationalism, but I think 
nationalism is likely to be an increasing driver, in terms of 
domestic Chinese politics, and that will impact, I think, on 
their foreign policy, as well. But, that's another question.
    The second one is, I know this will sound like--classically 
trite, but the Internet. I think it's going to have a gigantic 
impact. I don't know what it will be. But, the idea of the 
ability to continue to stifle access to information and control 
of information is just beyond the capacity. There is 
inevitability. Now, what is wrought by the change, I don't 
know, but I'd love to, at another time, to explore that with 
you a little bit. I don't want to make it more or less than it 
is. But, it really is such a different world, and I don't know 
how the present regime, or some successor that is recognizable 
as a successor regime/regimes, are going to be able to deal 
with this dilemma, which--but, at any rate, that's----
    Richard, you wanted to make a comment?
    Ambassador Haass. Globalization is no more of a choice for 
China than it is for us. It's a reality for them.
    The Chairman. Yeah.
    Ambassador Haass. And it's one of the things that will 
change the environment in which they're operating. And what 
that means, to put it bluntly, is that Orwell was wrong. Most 
of the technological changes are decentralizing.
    The Chairman. Yeah.
    Ambassador Haass. And that makes it hard for nation-states, 
and in some ways it makes it a more complicated task, for 
highly centralized nation-states----
    The Chairman. Yeah.
    Ambassador Haass [continuing]. To continue doing business 
as they've always done it.
    The Chairman. Highly centralized states with over a billion 
people.
    Ambassador Haass. Right. So, one of the dilemmas for China 
is going to have to be, How do they manage to be efficient and 
effective in a global world with all the things they can't 
control with the desire to still maintain an awful lot of 
control, which is obviously the raison d'etre of a Communist 
Party. The word ``dilemma'' is overused, but that's actually a 
dilemma.
    Can I say two things on nationalism, very quickly?
    The reason I mentioned it in my statement is that I'm 
worried that the political and intellectual--not ``vacuum,'' 
that's too strong--but thinness of Chinese political life is 
dangerous, and it's one of the reasons that we actually do have 
a long-term interest in encouraging civil society, encouraging 
greater religious freedom. We want this to become, in that 
sense, a richer society. We don't want nationalism to be the 
only thing that gets young people out of their chairs. That is 
the biggest reason to promote internal change--but, again, to 
do it gradually, carefully, smart, and from the sidelines.
    Second of all, we need to be careful not to do gratuitous 
things that inflame nationalism, and that's where things like 
the Olympics debate come in. We've really got to ask ourselves, 
``What might be the benefits of some symbolic action?'' 
against, ``What might be the deep and long-term and abiding 
social reaction or consequences?'' And if we're right, here in 
this conversation, when we assume that nationalism has the 
potential to take hold there. Already, you see in Chinese chat 
rooms a real sense that China is being denied its rightful 
place. It reminds me a little bit to use a bad historical 
parallel, of imperial Germany, where it felt it was being 
denied its place in the sun, and that obviously fed nationalist 
ambitions there. I don't think we want to go down that path, it 
doesn't mean that we are supine and simply let them do what 
they want to do.
    The Chairman. Yeah.
    Ambassador Haass. But, we have to be mindful--coming back 
to something Kurt said, we don't want to make it more difficult 
for them to manage their domestic politics. It was interesting, 
if you remember, several years ago, in the aftermath of the 
airplane incident. At the beginning of that incident, the 
government didn't mind some of the nationalist reaction. My own 
reading of it was, very quickly they got scared. Very quickly, 
they saw the intensity of it. And I think it taught them a 
powerful lesson, that they had to be careful about whipping 
nationalism up, because it might, in some ways, control them, 
rather than vice versa.
    We have a stake in helping them manage their domestic 
politics so they do not feel compelled to embark on more 
nationalist foreign policies in order to sustain their own 
domestic status.
    The Chairman. I've gone way over my time. Do you want to 
add----
    Dr. Campbell. Yes, just very quick----
    The Chairman. Do you mind?
    Dr. Campbell. Mr. Chairman, just three points.
    The first, on your question about how to think about China 
in the future, the most important dimension of this, I think, 
gets back to your citing of Richard, ``What is China going to 
do?'' as opposed to ``what it is.'' I think the most 
interesting thing about China's foreign policy is, despite some 
of these misgivings about the institutions that were 
essentially created at the end of the 1940s, and then revived 
in the 1970s, is that, secretly, China wants to join all of 
them. They may gripe and say, ``Well, look, I'm not so sure 
about that.'' If we came to them and said, ``We'd like you to 
join the G-8, we'd like you to join these institutions,'' they 
would get over those things very quickly. I believe that 
fundamentally--Harry may not--but I think the truth is that 
they are, in their hearts, joiners.
    What I am concerned by is that, no matter what happens, 
whether China becomes more nationalistic, more powerful, over 
the course of that period of the next 10 or 15 years, I think 
they're going to be less interested in joining and more 
interested in creating institutions of their own. So, we have, 
I think, an interesting period that really apt, smart 
statecraft can take advantage of that. First point.
    Second point. You know, the truth is that we talk--we've 
talked constantly, this dialogue about us engaging and managing 
China. We should be well aware that they're also managing and 
engaging us; in fact, I would say, frankly, in many respects, 
more effectively. And they know something about us that we 
don't know very much about, and that is that we will not go 
quietly. So, they do everything possible not to make any really 
rapid movements. The thing that was most alarming to them about 
the antisatellite shot was that it happened in the first place, 
because their message to us is that, ``You go ahead, you do 
this important work in Iraq and Afghanistan, and then, in 20 
years, you come back and we'll talk about things.'' They--and 
so, when they talked about ``peaceful''--they talked, 
initially, about ``peaceful rise.'' It was a great concept. But 
then the Chinese leadership realized that we were focusing on 
the second word, not the first one. And so, that was quickly 
changed to ``peaceful development.'' They don't want us to 
start worrying about the fact that they're--you know, we're--
some footsteps back there. And they understand that about us. 
And we should appreciate that.
    The last point, I'm less optimistic about China's knowledge 
about the threat of nationalism. If I had to say anything about 
the Internet, is that--it is that it is a--the best analogy is 
the Three Gorges Dam. The Three Gorges Dam did not block the 
river, it diverted it. And I think what they have done quite 
effectively with the Internet is, not blocked everything, but 
they have diverted many things, and much of that diversion has 
been into the areas of, really, some of the coarsest 
nationalism imaginable, and they have not blocked that. And so, 
if anything, I think they've chosen between two evils, between 
just trying desperately to block everything, which they know 
that they'd fail at, and, instead, practice a much more 
sophisticated--and, say, the allowable areas of critique are of 
the kind of nationalist sort that, frankly, are as worrisome to 
some of our friends in Asia as it is to us.
    The Chairman. Yeah.
    I'm sorry, Dick. I've--we've gone, oh, 11 minutes over my 
time. I apologize.
    It's all their fault. [Laughter.]
    Senator Lugar. Thank you, Mr. Chairman.
    I want to raise, with all three of you, these predicaments 
that I have, not only listening today, but just generally. 
Essentially, I've just heard, today, and in other circles with 
people who shall remain nameless, a discussion of a polar bear 
and whether the Secretary of the Interior should have declared 
it as an endangered species. Now, it gets to climate change, 
ice floes, ice melting very rapidly, with the people involved 
pointing how wrongheaded the Secretary is to do such a thing; 
that, indeed, there is some ice melting, but then it comes back 
again, and that the polar bear is not threatened, all things 
considered.
    It's a manifestation of the fact that, although there is 
discussion in informed circles in our country of climate change 
and so-called scientific evidence and so forth, the fact is 
that in our public dialogue, even as public officials, quite 
apart from work with our constituents, this is hardly a 
majority viewpoint, and the degree of skepticism is profound.
    Now, even among people who believe that there is something 
to this, they are not inclined to change the size of their cars 
or the consumption of energy or other things of this variety. 
In fact, most of our time is spent indicating whether or not 
oil companies are gouging or whether ExxonMobil should be 
censured, and so forth, which, you know, is interesting, but 
probably rather irrelevant to this.
    Now, this is our predicament. On the Chinese side, here is 
a country described as one really on the march, in terms of 
ordinary people finally having a chance to buy cars, millions 
of people moving in from the countryside, who, perhaps for the 
first time, have a heated shelter. And so it is not surprising 
that there'd be a 16-percent increase in energy use in a single 
year.
    Now, Secretary Negroponte sort of assured us that this is a 
very small economy compared to ours, maybe a fourth or a third 
as large, so, in fact, if there is 10 percent real growth, this 
is on top of that kind of a base. Of course, on top of our 
base, we're not growing more than 1 percent, or we hope that 
we're not in a negative quantity in this particular year. And 
so, there are some who, in their papers, will say, in a few 
decades, China, who already may be the second largest economy, 
will, in fact, be the largest. Maybe so, maybe not.
    My point is that the dialogue in China about climate change 
probably is not of the order that we heard today, that if water 
rises a meter, that a billion people are displaced. That would 
be very serious. Now, maybe they're not people in China, maybe 
someplace else. You know, hypothetically, we can think about 
that, too. We don't expect that'll happen in the United States. 
In other words, the thing that I'm concerned about is that, for 
the moment, it would appear to me that both publics, and the 
United States and in China, are concerned with ordinary affairs 
of their lives. They're trying to get better housing, better 
transportation, better utilization of their personal resources.
    Now, maybe if the Chinese Government remains more 
authoritarian, it has the ability to say to its people, ``That 
may be all well and good, but this is where we're headed. We're 
going to curtail this or that, or change the effects, and so 
forth.'' On the other hand, as some of you have suggested, 
maybe they become a little more democratic, or at least, in 
fact, people have more effective decisionmaking on their own, 
which we would applaud, because we believe in respective 
individual choices.
    But, as in our democracy, taking the climate change issue 
again, this is going to be, quite a debate, with even more 
people involved than would be involved here. And I just don't 
see a gelling in these two countries of the type of leadership 
that probably is going to be required, so that you move down 
the trail. It's not quite so bad as the Siberian dilemma that 
you suggested, Dr. Campbell, immediately for us with regard to 
Iraq, but, there may be some potentially catastrophic 
situations unless things are interrupted in the process. For 
example, if the United States and China do not come to similar 
views, along with Russia, with regard to Iran, and for some 
reason military action occurs and there's disruption of the 
straits, and China's deprived of energy, we are deprived of 
energy. Europe is deprived of energy, and the whole thing goes 
haywire because, in the international community, we could not 
manage, that would change things, but not for the better. Here 
in the United States, I'm not sure where our democratic 
dialogue goes then, quite apart from what happens in China.
    Now, offer some scenario, if you can, as to why things 
might turn out better.
    The Chairman. Please. [Laughter.]
    Senator Lugar. Richard.
    Ambassador Haass. The short answer is, you may be right, in 
which case, very quickly, the climate change debate would stop 
focusing on mitigation and would focus on either adaptation or 
geoengineering. And we may get to that point, where whatever we 
do is too little, too late, the effects start to kick in, by 
which point, even if we changed our ways, again, it would not 
be soon enough to avert what was already, if you will, in the 
pipeline. We may get to that point.
    And there's a whole body of political thinking that thinks 
we will get to that point, simply because open societies have 
trouble responding in anticipation of consequences. And I'm 
sure you have people all the time who sit up here and talk to 
you about the tests for leadership and all that. I do think, 
though, both in this country and China, the debates have 
changed markedly in the last couple of years. You see it, I 
assume, every time you go home. All the candidates this time 
are talking very differently about climate change than they 
were several years back. One is seeing things at the state 
level, at the regional level, at the corporate level. One also 
sees in the world of venture capital a lot going on. There are 
some grounds, if you will, for optimism on what can be done.
    One is seeing some parallels in China. The debate in China 
about climate change today has moved considerably. And one 
doesn't just get automatic comments that, ``We're a developing 
country, we're immune''--in part because the Chinese are 
beginning to see the effects of climate change on their own 
economy and their own society, and they are understanding that 
this is something that will challenge their economic future, 
which obviously challenges their political future.
    Senator Lugar. What are those effects?
    Ambassador Haass. You are seeing problems with health, with 
land degradation, with desertification, and so forth, so you're 
beginning to see protests. The Chinese understand that they 
have a problem here, and it's not just a question of what's 
going on ``out there.'' Climate change, like all forms of 
globalization, is not a choice. It is beginning to happen.
    For the United States and China, two areas become 
paramount, and they're actually both areas of potential 
cooperation. One is clean-coal technology. If China is going to 
go ahead and continue to build roughly two coal-powered plants 
a week, that will overwhelm whatever progress they or others 
could possibly introduce in this realm. Clean-coal technology 
is not yet there, for us or for them. That is obviously an area 
where, actually, there is a place, I would think, for a larger 
public role, because the investment levels are so high. Engine 
technology, if China continues to proliferate the number of 
cars, is an area for some potential cooperation.
    There are also things the United States and China could do 
collectively in the world. A big chunk of the climate change 
problem, a significant piece of it, is deforestation, 
destruction of forests, burning of forests. This ought to be an 
area that could be separated from the rest of the climate 
change debate. We don't need to wait for ``Son of Kyoto'' to do 
this. And this ought to be an area where the United States and 
China could cooperate. We could create an international fund to 
discourage deforestation and to encourage other forms of 
agricultural development. There are things the United States 
and China can and should do in this area, which actually would 
make a difference. And again, it is one of the reasons that, in 
all the dialogues, this is probably the one issue that we want 
to put on the front burner.
    Senator Lugar. Well, unfortunately, my time is up.
    The Chairman. No, no; keep going.
    Senator Lugar. Essentially, is this the sort of thing in 
which the new President of the United States and the leadership 
of China might decide, on a bilateral situation? Maybe we 
flatter each other, that the two of us can tackle this--but, 
still, there is such a presumption that if the United States 
and China do not somehow get the coal thing under 
consideration, just as a starter, that school's out with regard 
to CO2, that there's enough of it--of the two of us. So, even 
though Europeans may be engaged in this, and very sensitive to 
this, they might be delighted if, somehow or other, 
enlightenment has come, and there is some degree of 
cooperation. This doesn't omit all the other discussions you 
might have with China, but it might be we could say, ``This is 
such an existential problem--for us, for the world, for 
everybody else--that let's leap into this, the two of us,'' and 
this might be, conceivably, a way that melts down some of the 
other difficulties.
    Ambassador Haass. There is actually an interesting parallel 
from the trade world. We are trying to negotiate a Doha Round 
agreement. It's obviously stalled. In the meantime, though, 
we're trying to do other things in trade--bilateral, FTAs, 
regional agreements. So, while we're trying to negotiate a 
post-Kyoto comprehensive agreement that deals with everything 
and involves everyone, we've got to do other things. So, 
whether it's bilateral agreements dealing with certain specific 
challenges, like deforestation, or maybe having an agreement of 
just the major emitters of greenhouse gases, we may need to 
disaggregate the problem and realize progress where we can, 
because if we make it all-or-nothing, that, to me, is too big 
of a role of other dice for the planet. So, I am increasingly 
interested in ways of essentially deconstructing the climate 
change challenge. There are specific things the United States 
and China, possibly with Japan, Europe, and India, conceivably, 
where you bring together the major emitters because the top 10 
or 15 emitters are going to determine the future. And the other 
150 countries around the world, or what have you, while 
important, are not going to, ultimately, determine whether we 
are successful in meeting this challenge. So, there is both a 
strong case, and there's precedent, for groups of countries 
like the United States and China, either alone or with others, 
to try to tackle parts of this problem.
    Senator Lugar. This has subgroups. Maybe our negotiations 
can make headway if we discuss coal, if we discuss oil, because 
they're searching for it everyplace on Earth, as we are--but, 
maybe, at the same time, we discuss food.
    The Chairman. Right.
    Senator Lugar. At this point, the Chinese have been 
relatively self-sufficient, but now we get rumors that, due to 
the better-eating aspects of China and India, there's a desire 
for some new croplands in Africa. Even Abu Dhabi is trying to 
get farmland in Pakistan. But, I'm just trying to brainstorm 
out loud, guided by you today, as to the sort of an agenda with 
which we have a new relationship that would be very surprising 
to the Chinese, to us, to lots of people.
    Dr. Campbell. Can I--I know you all have busy lives and 
need to--we need to adjourn, here in a moment, but I will say 
that, from my sense, Senator Lugar, I worked, over the last 2 
years, in a dialogue between national security experts and 
people who are scientists in the climate change arena. I've 
never worked on anything that was more worrisome. I think the 
jury is in. I do not believe there is any substantial debate 
about climate change. There are about four or five outliers, 
all very well financed and supported by the petro community.
    I think the reality is, it's going to be worse than we 
realize. I think there are a number of myths that permeate the 
American political system about it; one, that there will be 
just gradual changes--climate will change dramatically, perhaps 
at points in the future, that will have major impacts on 
agriculture, on fishing, on sea level, on everything associated 
with the stability of our planet; that the United States is 
somehow immune from this. We have very long shorelines. Large 
parts of the United States are at sea level. So, I actually 
think that you've got to be careful--you know, if you talk like 
this, people kind of tend to move their chairs away from you--
--
    [Laughter.]
    Dr. Campbell [continuing]. Because you sound a little bit 
crazy. But, I actually really believe in it, fundamentally, and 
I think it has to be, actually, at the very top of the agenda 
of the United States and China. And, myself, I will do 
everything possible to make sure that that's the case.
    Senator Lugar. I would encourage you, in that respect, 
Doctor, to publish, in various ways you can, some of this 
insight that you have gained, because I would say that there is 
a general idea about all this, but there's not a whole lot of 
confidence.
    Dr. Campbell. We'll get you some stuff to your office 
tomorrow.
    Senator Lugar. That would be very helpful, just as a 
starter, maybe, for the two of us.
    The Chairman. Well, I--look, gentlemen, I--you know, this 
is one of the cases I'm going to make a statement that's going 
to be totally counterintuitive here in Washington--I think the 
American people are way ahead of their leaders. I really think 
you're going to see such a rapid change in attitude here--I 
think it's going to be exponential, this change. Maybe it's 
just--to be in this business, you have to be an optimist, and 
maybe that's just a--occupational requirement. But, I really--I 
just sense, as a plain, old politician hanging around for 35 
years, there's pace on the ball here. This is a very different 
place.
    Now, are we anywhere near being able to do--I mean, I think 
this is a place where the public's going to push us. We are 
all--I don't include my colleague, and I hope not me--but an 
awful lot of skittish people up here because of the major 
interests, as you point out. There are some significant 
outliers, but there's also significant--like, for example, 
clean-coal technology; the environmental community is pushing 
hard against clean-coal technology, because they believe, 
basically, it's a dirty product, period, but they deny the 
reality there's 300 years of dirty coal sitting in China. And 
they're not going to use it? I mean, you know--you know, 
they're building roughly two plants a week. I mean--so, it's 
not merely coming from, you know, the recalcitrant folks. It's 
coming from progressive folks who want only, the silver bullet, 
the answer immediately.
    But, my point is, I'm a helluva lot more optimistic than I 
was a year ago, not because of anything we've done here, 
clearly not because of anything the administration's even 
thought about, but because of what I sense out there, whether 
it's on Wall Street and capital markets or whether or not it's 
literally the woman who helps me with my mom who lives with me. 
It is, you know, gone through the permafrost. I mean, people 
are figuring this out.
    But, having said that--and we've kept you a long time--I 
find the three of you have, really, a unique ability, beyond--
and I mean this sincerely, I'm not being a wiseguy--a unique 
talent, beyond your substantive knowledge. You explain 
complicated notions as well or better than any three experts 
that I have encountered. And part of this is translation, here. 
Part of this is translating to our colleagues--who are very 
smart folks; I'm not suggesting otherwise--but, who don't have 
time to concentrate on all of this.
    And I'm going to ask you something--I probably should do it 
off the record--but, in addition to being available to the 
committee to answer--I have five or six questions. I don't want 
to make a lot of work.
    I want to talk to you, Dr. Campbell, about the whole idea 
of security architecture for the region and the willingness of 
China to embrace it or reject it--the whole notion--and one of 
the candidates running is talking about a League of 
Democracies, but he's not talking about it the way you're 
talking about it, as I understand it.
    Richard, I want to talk about, to overstate it, Can we stop 
them from killing our dogs and still have a relationship? I 
mean, I don't find them mutually exclusive. I know it sounds a 
trite way to say it, but, you're right, that's how it affects 
public attitudes here. I don't find them mutually exclusive--
the ability to be able to walk and chew gum at the same time. I 
mean, they've got to mature and grow up, and we've got to, as 
well.
    But, at any rate--so, there's a bunch of areas I'd like to 
discuss with you. I'd like you to consider the possibility--and 
it may not be possible to get all three of you together at one 
time, but it would be a great idea if you could, for--if the 
chairman is willing--just to get a number of our colleagues 
together in an informal setting, in one of our offices, in my 
office, and just come in, and we'll get you an agenda ahead of 
time of the things that we'd like to have you talk about, and 
literally sit there, over a long lunch, and begin to have a 
discussion about some of these things, because, again, your 
greatest ability is your ability to take these complicated 
notions and, not dumb them down, but to put them in context.
    I think you all underestimate just how good you are at 
being able to do that. And I think there's nothing more 
important--now, I think the American people are pretty damn 
smart, and I'm not being a solicitous politician; I genuinely 
mean that. I wouldn't have stayed in this, this long, if I 
didn't. But, they've got to have it translated for them. They 
have day jobs. And there's a lot of folks in day jobs up here 
who don't spend all their time doing this. And so, would you 
all be--if we can work something out----
    Dr. Campbell. Actually, we're extremely busy and----
    [Laughter.]
    Dr. Campbell [continuing]. But we'll try to figure it out.
    The Chairman. All right. OK. All right.
    Well, thank you very, very much. And, as I said, I have 
some questions I'm going to submit, with your permission.
    The Chairman. Thank you for your time and for your input.
    We're adjourned.
    [Whereupon, at 4:58 p.m., the hearing was adjourned.]
                              ----------                              

              Additional Material Submitted for the Record

  Responses of Deputy Secretary of State John Negroponte to Questions 
           Submitted for the Record by Senator Richard Lugar

    Question. Some have expressed concern about Chinese foreign 
assistance to developing countries because it does not carry similar 
policy conditions and accountability mechanisms tied to foreign aid 
from the multilateral development banks and other donors. How is the 
administration engaging with the Chinese to harmonize aid mechanisms? 
What is the administration encouraging the Chinese to do specifically?

    Answer. The U.S. Government believes that engaging the Chinese 
Government in a dialogue on foreign assistance is a high priority. 
Accordingly, and since the Ministry of Commerce is responsible for 
managing China's foreign assistance program, the Director of Foreign 
Assistance and USAID Administrator Henrietta Fore, in an April 7 
meeting with Chinese Vice Minister of Commerce Yi, proposed a high-
level foreign assistance dialogue. I followed up on this proposal in my 
May 12 meeting with Chinese Vice Minister of Commerce Fu. The Chinese 
Government has stated its support for such a dialogue, which both sides 
hope would be launched this fall. We will be following up with the 
Chinese Government to schedule an initial round at a mutually 
convenient time.
    In addition, under the auspices of the United States-China 
Strategic Economic Dialogue, the Treasury Department is engaged in 
discussions with China on debt sustainability and on lending by 
multilateral development banks.
    Our goal for the high-level dialogue is to obtain Chinese 
understanding and acceptance of the importance of adhering to 
international best practices in its foreign aid and lending programs, 
especially in the area of assistance transparency. We will also discuss 
how we can work together to implement the Paris Declaration on Aid 
Effectiveness, signed by both countries in March 2005, which aims to 
increase the efficiency and accountability of aid in line with sound 
development principles determined jointly by donors and recipients. The 
objective of the Treasury Department's dialogue is to encourage China 
to factor debt sustainability issues into its decisions on loans to 
developing countries.

    Question. Given that China is the largest borrower from the World 
Bank, what is the World Bank doing to encourage responsible lending and 
granting from the Chinese Government?

    Answer. It is my understanding that the first pillar of the World 
Bank's 2006-2010 Country Partnership Strategy (CPS) for China focuses 
on integrating China into the world economy. Noting China's increasing 
role as a significant provider of Official Development Assistance 
(ODA), the CPS highlights the importance of China joining international 
ODA structures, such as the Organization of Economic Cooperation and 
Development (OECD)'s Development Assistance Committee and other donor 
coordination regimes.
    The Bank has also begun a dialogue with China as part of its 
efforts to coordinate OECD Export Credit Agencies and emerging market 
bilateral creditors in connection with its Debt Sustainability 
Framework and Non-Concessional Borrowing Policy (NCBP). (The Debt 
Sustainability Framework seeks to identify and mitigate potential risks 
of debt distress among borrower countries, while the NCBP seeks to 
improve creditor coordination and introduce borrower disincentives for 
unwarranted nonconcessional borrowing.)
    On May 21, 2007, the Bank signed a Memorandum of Understanding 
(MOU) with China's Export-Import (Exim) Bank that calls on both sides 
to improve information-sharing, facilitate participation in donor 
coordination mechanisms and frameworks, identify projects for 
cofinancing, collaborate on ensuring sustainable development financing 
through appropriate levels of concessionality, and identify, minimize 
and mitigate adverse environmental and social consequences of 
development initiatives.

    Question. Chinese companies are playing a growing role in 
extractive industries (such as oil, gas, minerals, and timber) in 
developing countries. Do Chinese companies operate differently than 
companies from other countries? If so, how?
    a. Are Chinese companies held to similar antibribery standards that 
U.S. companies are held to through the Foreign Corrupt Practices Act?

    Answer. Overseas investments by Chinese firms in extractive 
industries are a response to China's rapid economic growth. Like their 
OECD counterparts, Chinese companies are profit-maximizing corporations 
whose actions are guided primarily by commercial considerations. 
However, Chinese companies are bound by fewer national legal 
restrictions than companies from OECD countries and are not yet party 
to international agreements on overseas business practices. Many of the 
Chinese companies engaged in pursuing contracts for extractive products 
are state-owned or state-operated companies, meaning that the companies 
receive political support from the Chinese Government for their 
overseas activities, including tied development aid, and business 
decisions may take into account some political goals as well as purely 
commercial factors.
    a. There is no legislation in China that is the equivalent of our 
Foreign Corrupt Practices Act (FCPA). In recognition of China's 
importance in global commerce and the need to level the playing field 
by addressing the issue of foreign bribery, the U.S. and partners at 
the OECD are hopeful that China will sign the OECD's Convention on 
Combating Bribery of Foreign Public Officials in International Business 
Transactions, which requires legislation making the payment of bribes a 
criminal offense and eliminating tax breaks for bribing foreign 
officials. The desire to address the problem of bribery and corruption 
is one of the reasons why the OECD has called for Enhanced Engagement 
with countries like China, with the aim of having these countries adopt 
common standards on the way to eventual OECD membership.

    Question. How is the administration engaging with the Chinese 
Government on issues around extractive industry transparency? At what 
level and through what agencies is the engagement? Is the 
administration encouraging the Chinese Government to support the 
Extractive Industry Transparency Initiative (EITI)? If so, how?

    Answer. Senior Department of State officials have, on a number of 
occasions, encouraged interlocutors within both China's Foreign 
Ministry and the National Commission for Development and Reform (NDRC) 
to consider China's participation in EITI as a ``supporting country.'' 
This is the same status that the U.S. holds in EITI. Such support by 
China would reflect China's growing weight and influence as an 
important investor in the extractive sectors of many developing 
countries.

    Question. A number of countries are supporting a U.N. General 
Assembly draft resolution in favor of EITI--A/62/L.41. Some have 
suggested that a U.N. resolution encouraging EITI will help pave the 
way for Chinese and Indian support for the initiative. Given the 
administration's support for EITI, does the administration expect to 
support this resolution? Why or why not?

    Answer. The pursuit of transparency is a high-profile foreign 
policy objective which cuts across numerous USG departments and 
organizations. State participates in international and bilateral 
efforts such as EITI to encourage resource-rich developing countries, 
as well as countries that invest in them (including China and India), 
to implement transparency throughout the extractive industries value 
chain. Resource revenue transparency contributes to effective use of 
public resources by enabling oversight. It is encouraging to see that 
other countries, including those who have proposed and sponsored the 
current UNGA draft resolution in favor of EITI (A/62/L.41), agree and 
are willing to encourage increased participation in the initiative. 
Although the U.S. does not anticipate formally cosponsoring the 
resolution, we have no objections to the current wording, and expect 
that the administration will support it.
                                 ______
                                 

  Responses of Deputy Secretary of State John Negroponte to Questions 
                   Submitted by Senator Barbara Boxer

    Question. On April 23, you appeared before the Senate Foreign 
Relations Subcommittee on East Asian and Pacific Affairs to discuss the 
crisis in Tibet. During that hearing, we discussed the possibility of 
working together on an ``action plan'' for Tibet.
    On Friday, May 9, I sent a letter to President Bush with Senator 
Biden, Senator Kerry, and Senator Snowe, which outlined a number of 
specific actions that we believe the President should take, including 
visiting Tibet when he travels to the Olympic Games later this summer.
    I have put together a slightly more detailed action plan below. Can 
you please respond to your progress made to date on each item?

   A. Moving Lhasa to the top of the list of cities in China 
        for the next United States consulate, accompanied by a 
        statement linking the opening of any further Chinese consulates 
        in the United States to Chinese consent on the Lhasa post;
   B. Calling for the release of those people detained for 
        peaceful, nonviolent expression of opinion;
   C. Demanding that China's Government allow access by 
        journalists to all areas of China and meet its commitments to 
        the International Olympic Committee;
   D. Coordinating efforts with European governments and United 
        Nations agencies on getting access for foreign media, 
        independent monitors, and diplomats to monitor the humanitarian 
        situation in and around monasteries, and of Tibetans in 
        general;
   E. Insisting that Chinese authorities follow international 
        standards of due process during the trials of those arrested 
        since March 10, and allow for independent monitoring of such 
        trials;
   F. Requesting that the Chinese Government provide a list of 
        those persons detained since March 10 and the charges against 
        them;
   G. Insisting that the Chinese Government end contentious 
        policies, such as ``patriotic education'' campaigns, that 
        restrict Tibetans' ability to freely practice their religion;
   H. Amending the fiscal year 2009 budget request to ensure 
        that funding for Tibetan language broadcasts on Radio Free Asia 
        and Voice of America is commensurate with the increased hours 
        of service;
   I. Ensuring that Radio Free Asia and Voice of America be 
        included in the President's press pool for Olympics;
   J. Assuring that Tibet will be a topic of substantive 
        discussion at the next meeting of the United States-China 
        Strategic Economic Dialogue; and
   K. Assuring that the administration will seek results and 
        real progress on human rights conditions, including those 
        inside Tibet, during the upcoming United States-China bilateral 
        human rights dialogue.

    Answer. Like you, we remain concerned about the March unrest in 
Tibet and the longstanding grievances of China's Tibetan communities. 
Thank you for the valuable suggestions in your Tibet action plan. We 
look forward to working with you and other Members of Congress as we 
press China to pursue substantive dialogue with the Dalai Lama and his 
representatives to address policies that impact the Tibetan people's 
way of life.
    I am pleased to provide a status report on each of the items you 
raise in your action plan:

    A. Lhasa Consulate: As you know, we cover events in the Tibet 
Autonomous Region (TAR) and Tibetan areas of Sichuan and Yunnan 
provinces out of our Consulate General in Chengdu, in Sichuan province, 
where our team includes Tibetan-speaking staff. The Tibetan areas of 
Qinghai and Gansu provinces are covered under Embassy Beijing's 
consular district. However, we agree that the United States needs to be 
more widely represented in China, including in the TAR. As we discussed 
during my testimony, in April we officially expressed interest in 
opening U.S. consulates in Lhasa and a number of other cities in China. 
To date, the Chinese have not responded to our expression of interest. 
We have followed up on this request: I raised the issue with Foreign 
Minister Yang when I was in China on May 12, indicating that the 
request for a consulate in Lhasa was at the top of our list of 
priorities; and, we sent a diplomatic note to China on May 15, placing 
priority on opening a post in Lhasa. We will continue to work on this 
with the Chinese.
    B. Prisoner Releases: We have repeatedly called on China to release 
those detained for peaceful, nonviolent expression of opinion. 
President Bush and Secretary Rice have spoken to their Chinese 
counterparts, Ambassador Randt at our Embassy in Beijing has raised the 
issue repeatedly with high-level officials in the Chinese Government, 
and we have raised it here in Washington. We call on the Chinese 
authorities to ensure that all individuals detained during the recent 
unrest are afforded internationally recognized protections of due 
process and transparent legal procedures. Assistant Secretary for 
Democracy Human Rights and Labor David Kramer will be raising this 
issue during our upcoming bilateral human rights dialogue with China.
    C. Journalist Access: We call on China to allow domestic and 
international journalists unfettered access to all areas of recent 
unrest. I discussed access for journalists personally with Chinese 
Ambassador Zhou soon after violence broke out in Tibet, and we have 
repeated this request at all levels of the government. As you have 
noted, China's 2007 temporary regulations granting increased freedom to 
foreign journalists in advance of the 2008 Olympic Games were a 
positive step, but we share your concerns about the failure to apply 
these standards fully in all Tibetan areas, particularly in light of 
recent events. We will continue to press Chinese officials to fully 
implement the regulations, make them permanent, and extend similar 
benefits to Chinese journalists.
    D. Coordination With European Governments and the U.N.: We have 
been coordinating closely with European Governments and other friends 
and allies on our approach to events in Tibet. We and the EU made 
statements at the U.N. Human Rights Council urging all sides to refrain 
from violence and pursue substantive dialogue, and calling for 
transparency and access. We discussed the situation in Tibet with EU 
officials and others at a human rights forum in Brussels in April, and 
we will remain in touch with our friends in the international community 
as we press for progress on these issues. We, together with the EU and 
others, continue to press the Chinese for access to Tibet for U.N. 
observers including the U.N. High Commissioner on Human Rights and 
others.
    E. Due Process for Trials: We agree that we must continue to press 
China to ensure that all legal and administrative proceedings against 
persons alleged to have participated in violent acts during the recent 
protests throughout Tibetan areas of China are conducted in a manner 
that is both transparent and consistent with Chinese law and 
international human rights norms. We have asked for unfettered access 
to the TAR and other Tibetan areas of China for diplomats so that, 
among other things, they may observe judicial proceedings against 
Tibetans charged in connection with recent events in Tibetan areas. 
This is another issue Assistant Secretary for Democracy Human Rights 
and Labor David Kramer will raise during our upcoming bilateral human 
rights dialogue with China.
    F. List of Detainees: Officers from our Embassy and our Consulate 
General in Chengdu have repeatedly pressed Chinese officials at all 
levels for information regarding detainees, including individual cases. 
To date, we have not received a satisfactory response to our requests, 
although the Chinese Government has recently provided information on 
some cases. Assistant Secretary for Democracy Human Rights and Labor 
Kramer will again request this information during our upcoming 
bilateral human rights dialogue with China.
    G. Amending Contentious Policies: In the Secretary's first public 
statement on the March protests and on other occasions, we have urged 
the Chinese Government to address policies in Tibetan areas that have 
created tensions due to their impact on important facets of Tibetan 
life. The Tibetans have asked for increased autonomy to govern their 
own affairs within Tibetan areas, particularly on issues such as 
education, language, religious practices, and other matters important 
to the protection of Tibet's unique cultural heritage. We continue to 
impress upon the Chinese leaders that a new approach on these policies 
in Tibet is in China's own interest and will serve not only to improve 
the lives of the Tibetan people, but also to reduce tensions and 
increase stability in the long term.
    H. Broadcasting: We recognize the important role that U.S.-
supported Tibetan language radio broadcasts played in providing 
information both inside Tibet and to the rest of the world as events 
unfolded in March and April. Radio Free Asia was often first to break 
stories of protests, even after China imposed a media blackout 
throughout the affected areas. The Broadcasting Board of Governors 
(BBG)'s current broadcast schedule to Tibet has actually increased by 
30 percent since March 2008. In light of recent events in Tibet, the 
BBG increased combined Voice of America and Radio Free Asia Tibet 
broadcasting from 86 to 112 hours per week. This ability to ``surge'' 
broadcasting displays the agency's ability to reevaluate its broadcast 
requirements when events warrant. The agency will continue to monitor 
the situation in Tibet to ensure that the most effective and 
appropriate levels of broadcasts are reaching the region.
    I. Olympics Press Pool: Voice of America is a part of the 
President's radio pool, whose members accompany the President on a 
rotating basis. No official announcement has been made about the makeup 
of a pool going to the Olympic Games. Regardless, VOA will benefit from 
the reports of other pool members if they are not among the group that 
travels with the President. In addition, VOA will have six or seven 
journalists accredited to the Games, who will provide detailed coverage 
of the events. Radio Free Asia also has several reporters accredited to 
the Games. Two RFA broadcasters are accredited with the International 
Olympic Committee. One is a Mandarin service broadcaster. The other is 
with the Tibetan service. RFA is not part of the Presidential pool.
    J. Strategic Economic Dialogue: We will continue to raise our 
concerns about Tibet in our bilateral forums with China. Secretary 
Paulson expressed his concerns about the situation in Tibet during his 
SED preparatory trip to China in early April. I discussed Tibet most 
recently with my interlocutors, including Vice President Xi Jinping, in 
Beijing on May 12, stressing our desire for progress through dialogue 
between Beijing and the Dalai Lama and his representatives. It has also 
been a subject of my Senior Dialogue discussions with my Chinese 
counterpart, Dai Bingguo. Secretary Rice has spoken with her 
counterparts frequently about Tibet as well. While the focus of the 
upcoming Strategic Economic Dialogue is our bilateral economic agenda, 
our delegation will be prepared to discuss Tibet with their Chinese 
counterparts outside of the formal, plenary sessions.
    K. Human Rights Dialogue: Secretary Rice and her Chinese 
counterparts agreed in February to resume our long-stalled bilateral 
human rights dialogue. We view these talks as a valuable opportunity to 
press for progress on China's human rights record, including in Tibet. 
We have made clear to the Chinese, both publicly and privately, that we 
expect the dialogue to lead to real progress.

    Question. In your opening statement, you write that you 
``appreciate China's willingness to press the Burmese regime to 
cooperate with the international community's efforts to provide 
humanitarian assistance to the people of Burma.''
    Have these overtures by the Chinese Government had any effect 
whatsoever?
    Because the Burmese generals have refused to allow international 
aid workers to enter the country, the suggestion has been raised that 
the international community should intervene in a humanitarian way 
without the explicit approval of the junta.
    Have you discussed this option with Chinese officials?

    Answer. The Burmese regime is slowly increasing access to Burma for 
international aid workers, including doctors from neighboring 
countries. However, according to recent United Nations assessments, 
over half of those severely affected by Cyclone Nargis still have not 
received any assistance.
    There is no question that the Burmese regime needs to increase 
access to affected areas for international relief teams and accept 
outside logistical resources to expand and accelerate the humanitarian 
assistance operation. Our Embassy in Rangoon has been in direct contact 
with Burmese officials about this, and governments and NGOs from around 
the world have all sent similar messages.
    Given China's unique access to the Burmese regime, we have been 
urging our Chinese interlocutors to use their influence to convince the 
regime to expand access for international relief efforts. We believe 
that Chinese intercession with the Burmese military was helpful in 
persuading the Burmese regime to allow in the first relief supplies 
from the U.S. Military's Pacific Command that reached Rangoon after 
transportation assets were diverted from military exercises in 
Southeast Asia.
    China has reacted negatively to any suggestion of nonconsensual 
humanitarian intervention in Burma, including during recent discussions 
of this idea by France at the United Nations.

    Question. On May 14, my office was contacted by a mother from 
California who has been unable to contact her son who was traveling 
with two classmates near Chengdu, China, when the earthquake struck.
    I have been told that the U.S. consulate in Chengdu is working hard 
to locate the three Californian students and that additional U.S. 
personnel arrived from Beijing to help in the search efforts.
    Will you look into this case for me to ensure that everything is 
being done to find these missing Californian students?

    Answer. Consulate General Chengdu, working closely with the Chinese 
and the students' parents, located the three California college 
students in Maoxian. They are uninjured and have food, water, and 
shelter. We will continue to monitor their condition until they are 
safely out of the affected area. To date, U.S. consular officers have 
successfully accounted for over 275 American citizens since the 
earthquake struck on May 12.

                                  
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