China Taps a Key Ally in US: Business

When China's leader Jiang Zemin rings the opening bell at the New York Stock Exchange on Friday, unleashing a flurry on the trading floor, he'll also be advertising one of the more successful new tactics of Chinese diplomacy: competitive bidding.

For as Mr. Jiang urges President Clinton to lift sanctions imposed after the 1989 Tiananmen Square crackdown and start "a new stage" in US-China relations, he is fully aware that his closest allies are big American companies vying against other foreign firms for sales in China's growing market.

"China wants the remaining Tiananmen sanctions removed," says a senior US Embassy official in Beijing. "A number of American business interests are also pushing for the removal of sanctions," he adds.

Jiang is keenly aware of how politically potent China's leverage with American firms can be. In May 1994, after an unprecedented barrage of Chinese buying missions, billions of dollars worth of contracts, and heavy lobbying by US companies, Mr. Clinton agreed to drop any link between China's human rights violations and the granting of US most-favored-nation (MFN) trading status.

The wholesale policy reversal by Clinton, who as a presidential candidate referred to China's leaders as the "butchers of Beijing," marked an equally thorough diplomatic victory for Jiang: two years later, the Communist Party chief whom Clinton had cold-shouldered was invited for his current, red-carpet visit to the United States.

Today, emboldened by success, Jiang is again counting on US corporate backing as he pushes for bigger economic concessions from Washington. Specifically, Beijing is pressing the United States to:

* Grant China permanent MFN status, effectively ending the annual review process that has been accompanied each year by strong criticism of Chinese human rights abuses.

* Demand less stringent standards for China's accession to the World Trade Organization (WTO), allowing it more time to reduce tariffs and open its markets fully to foreign competition.

* End the 1989 US sanctions that freeze the activities of the US Export-Import Bank and Overseas Private Investment Corporation in China.

* Lift restrictions on the sale of US nuclear power equipment and technology to China.

To sweeten the atmosphere, Jiang only days ago dispatched a large buying mission to the US, led by Chinese vice trade minister Sun Zhenyu. Its shopping list included car parts, chemical fertilizers, grains, and planes. During his visit, Jiang is expected to announce a plan to purchase 30 Boeing jets worth an estimated $2 billion.

Jiang also hopes to shore up corporate support for China's position in meetings with scores of US executives in New York, Los Angeles, and other cities. He will visit firms including IBM, AT&T, Lucent Technologies, and Hughes Satellite. On Friday night, a key lobbying group for executives who do business with China, the US-China Business Council, will host a dinner for Jiang at New York's Waldorf-Astoria Hotel.

Lifting economic sanctions against Beijing would help alleviate the mounting US trade deficit with China, which topped $40 billion last year and is likely this year to surpass the US deficit with Japan, according to US Commerce Department figures.

"US firms can't compete on some of the biggest projects. They are losing billions in contracts," says Nicholas Lardy, an expert on China's economy at The Brookings Institution, a Washington think tank

China has so far "frozen out" US firms from the Yangtze River dam project, which has generated contracts for billions of dollars worth of equipment from other industrialized countries, says Dr. Lardy. In the nuclear energy field, US firms sat on the sidelines as France, Canada, and Russia won lucrative contracts worth some $12 billion, he says.

US business lobbyists argue that expanded trade ties with Beijing are necessary not only to advance the interests of US companies but also to promote long-term progress in China toward a market economy and greater social and political freedom.

"If Beijing perceives that the Clinton administration is disinterested in pushing forward on an affirmative China policy, including granting China permanent Most Favored Nation (MFN) status in conjunction with its accession to the WTO, then China's willingness to undertake painful but essential economic reforms may erode," warns Kimberly Silver of the US-China Business Council in a recent article.

Yet critics counter that even if the US lifts sanctions on doing business with China, it is unlikely to lead to substantial progress in human rights.

China, with 1.2 billion consumers and the fastest growing economy in the world, is using a divide-and-conquer strategy to play the world's economic powers against each other for a share in the Chinese market, they say. Japan, the first nation to restore full ties with Beijing after the 1989 Tiananmen Square protests, triggered a race among Western rivals to grab a slice of China's need for technology and investment.

Such intense competition has led not only the United States, but also other countries, to put corporate interests ahead of opposition to China's human rights abuses.

Earlier this year, for example, France agreed to drop its longstanding sponsorship of a United Nations resolution in Geneva criticizing China's treatment of dissidents. Beijing rewarded it with a multibillion-dollar contract for Airbus aircraft.

"There is no doubt of a direct link between France's abandonment of its human rights stance and the aircraft deal," says an official at Boeing, the American firm that is the top global rival to Airbus.

Similarly, since Washington delinked trade and human rights, dissidents in China complain that Chinese security forces have stepped up their repression.

"The human rights situation in China has deteriorated sharply," says Wang Lingyun, the mother of prominent dissident Wang Dan in Beijing. Mr. Wang, a student protest leader at Tiananmen, was jailed after Clinton excluded human rights from the MFN debate and was later sentenced to 11 years in prison.