The U.S. and China This Week
Week of July 11, 2003
The U.S. and China This Week
Domestic: Victory Gives Impetus to Pro-democracy Parties in
Hong Kong's chief executive, Tung Chee-hwa postponed his efforts
to pass controversial security legislation known as Article 23 following the
defection from his cabinet of Liberal Party chairman James Tien. Mr. Tien
said his party could not support Tung's demands for immediate consideration
of the bill. Tien referred to the July 1 popular demonstrations against the
legislation in explaining his actions, stating: "We have to take into
consideration that there were close to half a million people who protested
peacefully." The Liberal Party's defection, along with the defection
of other political independents, gave Hong Kong's pro-democracy parties the
votes necessary to force postponement of the bill regardless of Tung's wishes.
The defeated chief executive said that he would shift his focus to the economy,
but gave every indication that he intends to take up the bill later, under
more favorable conditions.
Many observers point out that this is the second time in only
a few months that the Chinese government has been forced to backpedal in response
to public pressure-the first time was when Beijing acknowledged it underestimated
the seriousness of the SARS epidemic. There is every indication that Beijing
takes this matter seriously. Beijing has dispatched dozens of mainland officials
to Hong Kong for consultations with opinion leaders since last week's demonstrations,
and will likely continue to monitor the situation in Hong Kong very closely.
Analysts say Beijing is wary that giving into the demands of Hong Kong citizens,
or allowing Tung to do so, too often, could spark more demonstrations on the
Meanwhile, encouraged by their initial success at forcing the
postponement of Article 23, tens of thousands of demonstrators encircled the
Legislative Council on Thursday, July 9 to demand Tung's resignation and to
reassert their call for direct elections. Organizers reported a turnout of
50,000 participants, which although significant, constituted a mere fraction
of last week's turnout. More moderate voices are calling for Tung to reshuffle
his unpopular ministers.
International: ROK President Visits China
Republic of Korea President Roh Moo-hyun met with Chinese
leaders in Beijing this week for discussions on a wide array of regional
and international issues. Officials from the ROK's relevant finance and
economic departments and a delegation of businessmen from over 30 major
companies accompanied Roh to China, indicating the emphasis placed on the
two countries' deepening economic relationship in the talks. Since normalization
of relations in 1992, the volume of trade between the two countries has
increased from US$5 billion to US$44 billion. Roh expressed his opinion
that China's rapid economic growth, far from being a threat, constitutes
an opportunity for regional prosperity and cooperation. Roh said the two
sides should intensify their economic cooperation, and that "the ROK
and China should become a regional economic community."
Also high on the agenda was an exchange of views regarding
the DPRK's nuclear program, a current focal point of the international community.
Chinese president Hu Jintao and visiting ROK president Roh Moo-hyun took
the opportunity to jointly reiterate their commitment to maintaining a nuclear-free
Korean Peninsula through peaceful means. Both sides also agreed to work
for an early resumption of direct talks aimed at resolving the nuclear issue.
Progress on the matter has been stalled since largely ceremonial three-way
talks took place between Pyongyang, Beijing, and Washington in April, at
which time little headway was made in the talks, save for all three countries
agreeing that further talks would be useful.
Roh's visit to China follows in the wake of visits to the
United stated and Japan, and precedes his upcoming visit to Russia. Roh
is expected to finalize his country's foreign policy agenda after visiting
all four countries.
U.S.-China Relations: On-Going Debate Over Outsourcing
High-tech R&D to China
In June, Senator Joe Lieberman's office weighed in on what
is becoming an increasingly front-page-worthy issue: the national security
implications of outsourcing high-tech R&D to the PRC. The white paper
his office published, entitled National Security Aspects of the Global
Migration of the U.S. Semiconductor Industry, explains that "East
Asian countries are leveraging market forces through their national trade
and industrial policies to drive a migration of semiconductor manufacturing
to that region, particularly China." The implication is that China
is leveraging access to its market to obtain sensitive high-tech know-how
so it can improve its defense capability vis-à-vis the United States.
The paper also asserts that "relying on integrated circuits fabricated
outside the U.S. is not an acceptable national security option."
For major IT firms the debate centers much less on matters
of national security and more on matters of national prosperity. From
their perspective, whoever wins the Chinese market wins the world. This
is why throughout the 1990's U.S. companies were willing to accept the
risks involved in entering into joint ventures with Chinese partners in
exchange for market access. They had no choice, as the joint venture requirement
was codified in Chinese law. So imperative was it to gain market access,
multinationals were willing to expose themselves to the rampant corruption,
overstaffing, management headaches, and other risks inherent in Chinese
business culture. They were even willing to accept technology transfer
requirements, i.e. less control over their intellectual property.
Today, this debate is taking on new life following China's
accession to the WTO. Under WTO rules and regulations, China must discontinue
requiring technology transfer as a prerequisite for market access. Under
the new system, multinationals can opt to set up wholly foreign owned
enterprises that will allow them to covet their intellectual property
and minimize their investment risks while still gaining market share.
By implication, China's ability to leverage market share for dual-use
technological know-how will be reduced.
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views expressed herein are those of the writers and editors
do not reflect the views of USCPF itself.
Last Updated: 5 December 2001