Your Excellency the Governor, the Rector, distinguished Fellow Honorees, Ladies and Gentlemen. It is a great honor for me to receive this degree in the company of such distinguished men, and also in a location that is so symbolic for many of the challenges of our age. We meet on Chinese soil under Portuguese administration. I come here from Hong Kong in the process of reversion to China. We are adjoining a great country with an elemental rhythm of its own and a long and extraordinary history. In this area, there will be tested the vitality of the concept of one country and two systems, which will be of the profoundest significance for the evolution of other difficult problems.

I have visited China now on many occasions since my first secret trip and for somebody whose education was in America, and whose formative experience was in America, it is always a humbling experience. It is always astonishing to me to reflect that the 11 dynasties in Chinese history, have each of them lasted several centuries longer than the entire history of the United States, and therefore the time frame within which China considers problems, is inevitably different from that of the United States. It is claimed that somebody once asked Chairman Mao what he thought of the French Revolution, he allegedly replied, "It is too early to tell." That is not a comment that could ever have been made by a non-Chinese. And when I travel through China, and visit the various provinces, most provinces that I have visited have a larger population than the largest European country. Those two factors, the size of the population, and the perspective of history, create necessities of adjusting perspectives for both sides.

The first time I visited China, in my very first conversation with Premier

Zhou Enlai, I referred to the fact that China was a mystery, and he said to me, "Has it ever occurred to you that it is not a mystery to the Chinese?" And that was a very profound remark. So when people refer to individual achievement in strengthening relations between China and the United States, friendly as these remarks are, and appreciated as they are, one must also keep in mind, that in the end, relations between societies must reflect underlying necessities and underlying perspectives that merge. The United States and China, as was expressed in the Shanghai Communique, have an interest that is common in preventing what was called hegemony in Asia, and for that matter, elsewhere. There is a necessity to permit all the nations to develop by their own views, in the light of their own traditions, without foreign pressures and without foreign interference.

In the past generation, we have witnessed one of those extraordinary cycles in history in which the nations of Asia have suddenly emerged in many respects as the most dynamic of all the nations in the world. The rate of economic advance and the rate of political consolidation has been greater in Asia than anywhere else in the world; and for my own country, while I cannot say Europe has become less important, it is clearly true that Asia has become more important, and more important because of its specific gravity.

In those years since I first visited China, we have seen extraordinary changes, indeed in both countries. In China, when I first visited, the Cultural Revolution was still in progress. Economic development was still in a rather rudimentary phase. Since then we have seen the extraordinary effort at economic and social reform that has transformed the physical appearance of China

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and its structure. It is important to keep in mind that the task of governing a billion people is unprecedented in human history. It would be astonishing, no matter what the political system, if that could go forward evenly, and if one could avoid experiments of trial and error. Secondly, the process of modernization involves for China, peculiar philosophical, historical and psychological complexities.

Throughout its long and great history, China has always been distinct from the rest of the world. China has always been a cultural unity all to itself. In the nineteenth century, when, as was said by a previous speaker, the Europeans kicked open the doors of China, China made a decision quite different from Japan. Japan decided to modernize, cost what it may, even if it would lose, in the process, its identity. As it turned out, Japan did not lose its identity, and modernized for some, perhaps too successfully. China decided that it would remain what it was; that it would not risk its culture; and that it would manipulate the foreigners without imitating them, a role, incidentally, China performed with extraordinary skill. It is only in the last 20 years that China has decided to modernize, a decision quite contrary to Chinese history. Whatever model is followed, the process of modernization will make China more like other nations than it has ever been in history, not identical. It involves inevitably an openness to other countries that is also quite uncharacteristic of Chinese history. I stress this because that is independent of the teachings of Marx and of the Communist system. This problem would exist whatever system attempted to modernize in China. Now in addition, China is, of course, a socialist country, and it is seeking to modernize as a socialist country. It has had the extraordinary courage to recognize that some of the

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more dogmatic versions of socialism as practised in other socialist countries
produce stagnation.

In our period every country faces the problem of how to establish a relationship between planning and initiative. In countries in which central planning dominates everything, the result is inertia, stagnation, the inability to determine human needs, and a collusion between governmental bureaucrats and the managerial groups that prevent true innovation. In countries that have no planning at all, there is the difficulty that the immediate requirements of the market may not satisfy the long-range needs of the society. For example, of the United States today, with respect to energy policy, there are low prices for energy, therefore there is very little exploration. Exploration has been reduced by some 80%. There is an increased consumption of oil and there is, therefore, an increased importation of oil. And yet, every study of the subject makes clear that every year we are consuming more oil than we are finding, so with mathematical certainty, a point will be reached where there is once again a shortage; once again, prices will go up; and yet the market alone does not provide an answer to this question. I mention these examples today because every society must strike a balance between the need for planning and the need for initiative. The difficulty in many socialist societies has been that the planning may set objectives, but does not provide the mechanism to achieve them. The difficulty in some market economies has been the difficulty of dealing with the long-range future in the face of immediate incentives.

Inevitably when a country of a billion people with a social system that has been recognized as being too rigid, and a tradition that has been characterized

by isolation, takes the tremendous step of moving towards modernization and
towards openness, there will be trial and error. It is unavoidable that some
things will prove not to be as effective as was originally thought. It is, there-
fore, important for those who observe from the outside, to look at the trend and
not only at individual occurrences. It seems to me that the trend is towards
modernization; that the commitment to openness will be continued; that adjustments
will take place from time to time. But a people that has come through the
millenia, overcoming all vicissitudes, and has achieved the longest uninterrupted
history of any people on earth, I am convinced, will master its immediate
challenges; and those on the outside should be patient, and not close the books
every week. So I personally am very hopeful about the trends inside China.
This is a matter of some significance to territories as Macau and Hong Kong
that will have to live within one country having two systems.

As far as international relations are concerned, the relations between China
and the United States have had also their unprecedented aspects. Americans
have a tendency to judge international relations on the basis of legal criteria,
and very often, when there is a discussion of what the United States should
do in specific situations, it is analysed in terms of what legal commitments
we have, implying that the first thing an American president should do in a crisis
is to ask for his lawyer, to see what the documents say. In fact, for most
countries, through most of history, their actions have been based on their per-
ception of their national security, their national interest, and the relation of
that to the world interest. China presents, in this respect, a very particular
challenge to the United States. We have no legal obligations to each other.
The Shanghai Communique, to which the Rector referred, and which in fact

was concluded this week 15 years ago, is unprecedented in one respect: most
diplomatic documents, in fact all documents with which I am familiar, state only
what the parties agree upon, and as a result, they are drafted in a language
that often permits each party to interpret it in line with its preconceptions;
the Shanghai Communique is the only diplomatic document with which I am familiar,
in which both sides state their disagreements in sections devoted to the Chinese
point of view and to the American point of view, and so that those sections
in which the common point of view is expressed, gain additional power and
could be put with particular clarity. It is no accident that this document
has survived all the changes in both countries, that four American administrations
have maintained it, and that the Secretary of State of an administration, whose
affection for China at the beginning, was not unlimited, has now visited Beijing
on a very successful trip, re-affirming the constant element. The constant element
is, as I have already said, that the United States and China want an international
order in which each nation can achieve its aspirations without foreign pressure.
The United States has an interest in the territorial integrity and absence of
foreign intervention in China, not because we have signed a legal document to
that effect, but because of the weight and importance that China represents.
There are many parts of the world in which the United States and China have
different views, especially in many parts of the Third World. That requires
both sides to show some restraint in the extent to which they push their dis-
agreements. But fundamentally, what we want, and what China, I believe, wants,
is a world in which nations can achieve their goals by their own efforts, and
in which each nation can pursue its own model for economic development and
political progress.

I would like to say two or three words about American relations with another great country in this area, namely Japan. Japan chose a different course in the nineteenth century from China. Japan is a society more similar to one large family, of great cultural homogeneity, and of extraordinary social cohesion-ness. It chose for a while the role of militarism, and then in the post-war period, has thrown its extraordinary energies and discipline in the direction of economic development. In the process it has achieved an economic power which has led to strains in the relationship with most other industrial nations, and indeed, with several developing nations. The attempt has been made to negotiate some restraints on an item-by-item basis. It is a matter of some great consequence for the other nations of Asia because when we read of American protectionism, most of it is triggered by the experience with Japan. The problems with other Asian nations would be relatively easily soluble. I have said in Japan, (so I say nothing here that I have not said there), that the present method of negotiating item-by-item will lead to endless tension and will also involve other Asian nations, whose own impact on the balance of payments is much less serious. It is important to have a global negotiation in two respects. First, there is the amount of deficit in its balance of trade that the United States can accept. If we negotiate item-by-item there will never be an end to it. If we could agree on a global figure, then it is up to the Japanese Government and Industry to apportion themselves how they are going to achieve this figure, either by reducing exports or increasing imports. The second respect is that one of the greatest problems in the world today is the inability of many developing countries to grow because of the debt burden that they have assumed. In many respects, these developing countries may have been irresponsible in borrowing so much money, and the banks may have been greedy

in lending so much money, but that is not now the issue. The issue is that
you cannot have hundreds of millions of people condemned to austerity, in which
as a result of these interest payments, developing countries become exporters
of capital when they _must_ become importers of capital. It is therefore imperative
that the industrialized nations combine to find a way of separating the problem
of old debt from the problem of the new needs, and in this respect, Japan
could make a very large contribution, in my view, a much larger contribution
than by entering the field of military security. These are some of the problems
in the relations between my country and two of the great nations of Asia.

History never moves in a smooth line, and it is important to distinguish
the surface phenomena from the fundamental trends. China is embarked on a
historic experiment. It deserves our sympathy and our support. Where we
are, there on the coast, will also test the variety of political forms that are
conceivable; and in the long-term, the attitude of my country towards China,
and the ability to relate what occurs here to Japan, will determine crucially
what is happening, the future of an area that at this moment, has the momentum
of history behind it. When one views history, one finds the extraordinary
phenomenon, that every great achievement was an idea before it became reality,
and that the capacity to dream of distant goals may be the distinguishing
feature of humanity in the Pacific today. Great nations have set themselves
extraordinary goals, and the future of a humane, progressive and developing
policy and world order, depends on whether they can achieve their aspirations.

Thank you very much.