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US and the growing China trade -- it's not just peanuts

A peanut farmer from Georgia was the first President to offer China the formal handshake of diplomatic relations. Now China is cementing the friendship by shipping America a suddenly scarce commodity -- peanuts.

Last year, the United States bought no nuts from China. This year, because of the withered domestic peanut crop, America imported $158.4 million worth of Chinese oilseeds, nuts, and kernels through June, according to the Department of Commerce.

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Increased trade has continued to be a key part of China's bootstrap modernization effort. Though all industrial countries have benefited, the US is gaining the most ground, says a just-released study of China's modernization strategy vis-a-vis the US. And the advantages go beyond keeping cupboards stocked with extra-chunk peanut butter to spread with jelly at lunch.

"Economic ties, on a daily basis, have served to strengthen relations between the two countries," says Lynn Feintech, head of political analysis at Bank of America and author of the Overseas Development Council report. "They have helped people in the US and China become more familiar with each other."

It is no surprise that buying and selling bring countries closer together. But China, since the days of clipper ships and delicate export porcelain, has had an ambivalent attitude toward trade.

In February 1978, however, Premier Hua Guofeng whisked the wrapping off a plan for extensive economic development, aimed at making China an industrial power by the year 2000. For the first time, the People's Republic would take on direct foreign debt. The plan called for rapid expansion of foreign business.

Since then, the plan's priorities have been rearranged several times. Heavy industry has been deemphasized. Agriculture and light industry, such as textiles, have gained importance. But trade expansion has stayed near the top of the list.

"This whole policy has more staying power" than those of previous economic plans, Mr. Feintech says.

Between 1978 and 1981, China's foreign trade grew at an average of 38 percent a year -- nearly four times the rate of 1949-78.

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The US isn't China's leading trade partner. Japan is first, followed by South Korea. But America is No. 3, with business increasing fast. In 1977, US exports to China were $171 million. By 1980, they were $3.8 billion. During those same years American imports from the People's Republic jumped from $203 million to $1.1 billion.

When China decided to make agriculture its No. 1 priority, America was the No. 1 winner. Food sales "dominate US exports to China and are likely to continue to do so in the first half of this decade," the report says.

During the first six months of this year China bought $575 million worth of US wheat, an almost fourfold increase over the same period last year.

China also imports substantial amounts of American cotton and yarn. Textiles are an important export for China, since cloth manufacture is a capital-light, labor-intensive industry that earns China most of its hard foreign cash.

But the flow of textile exports is easily disrupted by tariffs and trade limits. Under the soon-to-be-renegotiated Multifiber Arrangement (MFA), annual growth of textile exports to industrial countries is limited to 6 percent. Though China hasn't signed the MFA, it is party to similar treaties with the US and the European Community.

"It will be important for China to diversify its light industrial base in the latter part of this decade," says the report, "as its textile exports are always politically vulnerable."

Though not exactly an Asian member of OPEC, China is also a petroleum exporter. US purchases of China's oil reached significant levels for the first time in 1979. But they are unlikely to increase anytime soon, the report says, as "the People's Republic has already informed its major oil customer, Japan, that it will fall short of its export commitments to that country in 1981."

China, like all countries of vast expanse, is also rich in crucial minerals. Export of scarce metals such as titanium, vanadium, and tantalum could become increasingly important.

"China is believed to have substantial reserves of these lightweight, heat-resistant metals, all of which are in short supply in the United States," the report says.

But trade expansion is still limited by what might deli cately be described as "differences in business practices." In China, business negotiations are lengthy, subtle, and delicate, like dancing a minute. Chinese bureaucrats often do not have authority to make decisions on their own, and contract language is sometimes vague by American standards.

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