Congressional Research Service, "China-U.S. Relations: Current Issues and Implications for U.S. Policy", December 9, 2008

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Summary
U.S.-China relations were remarkably smooth for much of the George W. Bush Administration, raising speculation about how relations will fare after the transition to the Obama Administration. The State Department in 2005 unveiled what it said was a new framework for the relationship—with the United States willing to work cooperatively with China while encouraging Beijing to
become a “responsible stakeholder” in the global system. U.S. Treasury Secretary Henry Paulson in December 2006 established a U.S.-China Strategic Economic Dialogue, the most senior regular dialogue yet held with China.

With total U.S.-China trade in 2007 at $387 billion, China is now the second-largest U.S. trading partner. China also plays an important potential role in efforts to resolve the current global financial crisis, with China’s central bank a major purchaser of U.S. Treasuries and other U.S. debt. China is the second largest holder of U.S. securities and the largest holder of U.S. Treasuries used to finance the federal budget deficit. Other U.S. policymakers have advocated tougher stances on issues involving China. They are concerned about the impact of the PRC’s strong economic growth and a more assertive PRC diplomacy in the international arena; procedures to assure the quality of Chinese pharmaceuticals, food, and other imports into the United States; repeated PRC inabilities to protect U.S. intellectual property rights, and trade practices and policies in China that contribute to a strong U.S. trade deficit with China ($256 billion in 2007).

Democratic Taiwan, over which China claims sovereignty, remains the most sensitive bilateral issue and the one many observers fear could lead to Sino-U.S. conflict. U.S. relations with Taiwan also have been plagued by what some U.S. officials see as that government’s minimal defense spending and the independence-leaning aspirations of some in Taiwan that raise problems for U.S.-China relations and, according to U.S. officials, for regional stability. The political status of Tibet re-emerged as an issue on March 11, 2008 (the anniversary of a large-scale anti-Chinese uprising in 1959), when monks in Lhasa launched a protest against PRC rule. The protests, at times resulting in violent clashes with police, spread to several other cities in Tibet and beyond. Beijing’s assertive response added to a drive urging a boycott of the Summer Olympic Games in Beijing in August 2008.

Other concerns about China appear driven by security calculations, where U.S. officials question the motivations behind China’s expanding military budget. One congressionally mandated DOD report concluded Beijing is greatly understating its military expenditures and is developing anti-satellite (ASAT) systems—a claim that gained more credence when the PRC used a ballistic missile to destroy one of its own orbiting satellites in January 2007.

This report will be updated regularly as events warrant and will track legislative initiatives involving China. For actions and issues in U.S.-China relations considered during the 109th Congress, see CRS Report RL32804, China-U.S. Relations in the 109th Congress, by Kerry Dumbaugh, China-U.S. Relations in the 109th Congress, by Kerry Dumbaugh.

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