World’s most populous country and third-largest country in size, with increasing importance for U.S. trade and investment since the 1880s.
Formal U.S.-China economic relations began with the 1844 Treaty of Wangxia, which granted most-favored-nation trading status to the United States. American economic interests rapidly expanded in China during the late nineteenth century, when the United States emerged as a major world power and its influence grew in the Pacific, By acquiring the Philippines in the Spanish-American War of 1898, the United States founded a stronghold for American trade in Asia and gained convenient proximity for American commercial gains in China. But given the exclusive spheres of influence that other Western powers and Japan had carved out based on the unequal treaties with the Qing government since 1840, the United States faced the danger of being cut off from the China trade. To protect American interests without risking conflict, U.S. Secretary of State John Hay, in 1899 and 1900, respectively, delivered diplomatic notes to the major powers (England, Germany, Russia, France, Japan, and Italy) that possessed spheres of influence in China. He demanded equal and fair chances for all nations that wanted to compete in the China market and asked the major powers for their commitment to Chinese sovereignty and territorial integrity. These notes established an “open door” as the international policy pursued by the United States toward China until 1949, and they were important for U.S. relations with other imperial powers in East Asia until World War II. When the Communist Party of China (CPC) defeated the Nationalist Chinese forces and took power in China’s mainland in 1949, economic contact between mainland China (the People’s Republic of China) and the United States was suspended, not to be renewed until 1978.
After the fall of mainland China to communist forces under Mao Zedong, the United States formally recognized Taiwan as the legitimate government of China under Chiang Kai-Shek, the leader of the Nationalist Chinese forces. Although Richard Nixon visited the People’s Republic of China in 1972 after the U.S. government initiated a policy of detente toward communist countries, the United States continued to recognize Taiwan as the legitimate government of China until 1979. In 1979 the United States transferred recognition to the government of the People’s Republic of China.
Chinese-American economic relations developed rapidly in the 1980s when the new CPC leadership under Deng Xiaoping pursued pragmatic modernization for China and initiated continuous economic reforms in the name of building “socialism” with Chinese characteristics. Through economic decentralization and by opening up to foreign investments, China has improved its productivity and its people’s living standard and has made its national strength more comprehensive.
Vital to China’s economic growth are exports to the United States and American investment in Chinese technology. Since 1980 the United States has become a foremost market for Chinese exports, and China has generated increasing trade surplus—more than $103 billion in 2002. Meanwhile, American investment in China has been growing rapidly. In 1997 alone, Americans had investments in 22,240 Chinese projects the total contractual value of which was worth $35.17 billion. Despite the trend toward greater economic intercourse with China, the United States has long been protesting China’s unfair trade practices (high tariffs and market closings to certain American industries) and piracy of intellectual property rights (especially in U.S. movies, computer software, and compact discs). Contention on these issues led the United States to threaten tariff retaliation against China in 1992. To avoid a trade war, the two countries negotiated and signed the 1992 Intellectual Property Protection Memorandum. In 1995, China promised to lower certain tariff barriers and open markets to several American products in exchange for American support of China’s entry into the World Trade Organization (WTO). In 2000, the U.S. Congress voted to give China permanent most-favored-nation status.
