The Impact of Bilateral Economic Interdependence on U.S.-China Relations

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From the perspective of international relations theory, liberalists argue that there are three reasons to explain why economic interdependence among countries will facilitate stability and peace among countries. First, states’ primary goals are to promote economic prosperity and maintain international peace, which can be achieved through economic exchange and interdependence. Second, the costs of wars will increase due to bilateral economic interdependence. Third, with greater interdependence of global financial, trade, and other economic relations, most states will be harmed by any major international conflicts, and thus, will oppose this kind of conflicts.1

The liberalist argument provides a very important foundation for the U.S. in developing economic strategies toward China. The United States seeks to fully integrate China into the global economic and trading system. The U.S. argues that China’s participation in the global economy will increase China’s stake in the stability and prosperity of East Asia. As a result, Chinese foreign policy will become more moderate and cooperative.2 To evaluate the hypothesis of the U.S. strategy toward China, this paper analyzes to what degree economic interdependence between China and the U.S. increases China’s stake in the stability and prosperity of East Asia, and thus moderates China’s U.S. policy during bilateral conflicts.


States: The U.S. bombing of the Chinese embassy in Belgrade in May, 1999, and the reconnaissance plane incident in April, 2001. These two U.S.-China conflicts involved issues of sovereignty, and stirred severe initial reaction from the Chinese government. Therefore, they are very good incidents to explore how bilateral economic interdependence influences China’s U.S. policy in the situation of severe bilateral conflicts.


According to U.S. customs statistics, in 2002, China exported $125.2 billion, or 38.5 percent of total Chinese exports, to the United States (including those transshipped through Hong Kong), making the United States China’s largest export market. The two-way trade between China and the U.S. has grown from $33 billion in 1992 to $147.3 billion in 2002. The U.S. trade deficit with China was $103.1 billion in 2002, representing the largest U.S. bilateral trade deficit.

In addition, the United States is an important source of foreign direct investment (FDI) for China. American direct investment in China covers a wide range of manufacturing sectors, several large hotel projects, restaurant chains, and petrochemicals. According to Chinese figures, in 2001, the U.S. cumulatively supplied $4.4 billion, or 9.5 percent of total realized FDI in China. That year, the United States was the third largest investor in China, next to Hong Kong and Macau, and the Virgin Islands. By June 2002, the cumulative realized American FDI totaled $36.9 billion, divided among 35,374 projects.

Furthermore, the Chinese government (through sovereign bond offerings) and Chinese state-owned and other enterprises have raised significant funds in overseas capital markets in recent years. According to Morgan Stanley Dean Witter and the Wall Street Journal, Chinese


firms raised approximately $41 billion through initial public offerings (IPOs) and placements in international equity markets from 1993 through 2000, $21 billion in 2000 alone. According to the estimate of the U.S.-China Security Review Commission, Chinese entities have raised more than $14 billion through IPOs in the U.S. capital markets from 1999-2001. Chinese issuers have raised an estimated $20 billion from 1992-2001 from international bond offerings denominated in U.S. dollars.3

Chinese leaders are fully aware of bilateral (asymmetrical) economic interdependence with the United States. According to Hong Kong’s Ching Pao, Chinese President Jiang Zemin warned in an internal meeting in early 2000 that the Chinese government should closely watch changes in the world situation and initiate responsive measures, noting that China has integrated itself into the world economic system. In particular, he pointed out three significant factors of uncertainty, which would significantly influence the Chinese economy: U.S. economic development, fluctuations of international oil prices, and potential risks in the international capital market.4

President Jiang’s concerns have been echoed by other Chinese senior officials, as well as by the media. For instance, a commentary article in the Renmin Ribao (People’s Daily), on February 22, 2001, discussed the impact of a recession in the United States on the Asian economies. It concluded that “a U.S. economic slowdown indeed has a certain impact on Asia, and cannot be taken lightly.”5 Two months later, Shi Guangsheng, minister of Foreign Trade and Economic Cooperation, explicitly said that Beijing was “deeply concerned about the possible impact on China’s economy resulting from the slowdown of the U.S. economy.”6

China’s concerns have been realized. In 2001, according to the U.S. customs statistics, China’s exports to the U.S. increased by only 2.3 percent. Consequently, China’s total


exports increased by only 6.8 percent during that year, and China’s economic growth rate in 2001 was 0.7 percent lower than that in 2000. In comparison, in 2002, China’s exports to the U.S. sharply increased by 22.4 percent, and thus, China’s total exports increased by 21.8 percent. This contributed to China’s outstanding economic performance of a growth rate of 8 percent in 2002.

The following two case studies will examplify to what extent China moderates its stance with the United States, during situations of conflict, in order to preserve its economic interests of U.S.-China economic interdependence.


The North Atlantic Treaty Organization (NATO) began bombing targets in the Federal Republic of Yugoslavia, without UN authorization on March 24, 1999. Beijing feared that a resurgent United States, placing humanitarian intervention above the traditional concept of state sovereignty, planned to use a non-UN mechanism as its preferred tool. Furthermore, facing domestic opposition, Chinese Premier Zhu Rongji traveled to Washington to secure China’s accession to the World Trade Organization (WTO) in early April. However, the United States rejected the offer, and thus, gravely undermined the position of Chinese leaders who wanted to compromise with the United States. These two events together provoked strong anti-American sentiments among China’s elites and the Chinese public, at large.7

On May 8 (Beijing time), five bombs from an American plane slammed into the Chinese embassy in Belgrade, killing three and wounding more than twenty others. Immediately, NATO explained that the military command mistakenly believed that the Chinese embassy was a headquarters for a Yugoslav arms agency. Nevertheless, the Chinese government


issued a statement, expressing its utmost indignation and strong condemnation, and lodged its strongest protest against the United States.

On May 8, both the American Ambassador to China, James Sasser, and U.S. Secretary of State Madeleine Albright apologized to the Chinese government for the incident and conveyed sincere regret about the loss of life in the bombing. On May 9, U.S. President Bill Clinton sent a letter to Chinese President Jiang Zemin, saying, “I express my apologies and sincere condolences for the pain and casualties.” However, Chinese media did not report the repeated apologies made by the U.S until May 10. On May 10, President Clinton apologized again to the Chinese leaders and to the people. On the same day, Secretary Albright again expressed her profound sorrow over NATO’s bombing, stating that NATO would provide China with a full explanation.

Despite NATO’s previous explanation of mistaken bombing, on May 9, up to 100,000 demonstrators besieged the U.S. embassy in the biggest protests seen in Beijing since the 1989 pro-democracy movement. Tens of thousands of protestors marched past the U.S. and British embassies, throwing stones, burning the U.S. flag and effigies of President Clinton, and shouting slogans, like “Down with U.S. imperialism.” In addition, according to China’s official media, more than 100,000 people protested in other major Chinese cities, including Xian, Hangzhou, Guangzhou, Shanghai, Chengdu, Shenyang, and Guilin. Demonstrators set fire to the U.S. consulate in Chengdu and all consulate personnel were evacuated.8

During the demonstrations, the Chinese government not only helped transport demonstrators, but the police seemed indifferent to the damage that was being inflicted upon U.S. property. The Chinese explanation was that by allowing a “controlled” reaction, a bigger explosion was averted.9 Beijing understood full well, as Joseph Fewsmith and Stanley Rosen


argue, that “students are going to take to the streets in any event and that if they did not throw stones at the American embassy they would throw them at Zhongnanhai (the leadership compound).”10 If students and others had not been permitted to vent their feelings against the United States, they no doubt would have found release through criticism of the Chinese government.

On May 10, Chinese Foreign Minister Tang Jiaxuan raised four formal demands regarding NATO’s bombing of the Chinese embassy in Belgrade: First, to make an open and official apology to the Chinese government, the Chinese people and relatives of the Chinese victims; second, to carry out a complete and thorough investigation of the incident; third, to promptly make public the detailed results of the investigation; and fourth, to severely punish those who were responsible for the attack. Furthermore, the Chinese government decided to postpone the high-level military contact between China and the United States; postpone its consultations with the U.S. in the fields of proliferation prevention, arms control and international security; and suspend its dialogue with the U.S. in the sphere of human rights.

However, two-days of serious anti-American protests in China brought a severe backlash on the Chinese economy. On May 10, the A share index of the Shanghai Stock Exchange declined by 4.5 percent and the B share index by 7.3 percent; the A share index of the Shenzhen Stock Exchange declined by 5.6 percent and the B share index by 6.8 percent. Most investors worried that the situation might deteriorate and seriously jeopardize U.S.-China relations. After allowing the Chinese people to vent their frustration with the United States and presenting China’s official position, the Chinese government tried to control the damage and maintain its focus on economic development.


investors that China would protect foreigners and their assets. In his televised speech (Chinese first high-level official reaction) on May 9, Chinese Vice President Hu Jintao said, “The Chinese government firmly supports and protects all the protests that tally with the law…. [However,] we must guard against any overreactions, watch out for people who may take advantage of the opportunity to disrupt the normal social order, and take firm actions to safeguard social stability…. To fully demonstrate the fine, civilized traditions of the Chinese nation, we will…protect foreign diplomatic establishments and their personnel in China, foreign nationals in China, and foreign personnel who are in China for economic, trade, educational and cultural activities.”11 Within three or four days, Chinese officials secretly instructed campuses to discourage students from staging further protests. In May 2000, Beijing, again, issued a ban on protests to mark the anniversary of the Belgrade bombing.12

In addition, Chinese officials sought to reassure U.S. businesspeople in China that their operations were safe and that economic reform policies would continue. For instance, Shanghai Mayor Xu Kuangdi traveled to General Motors’s $1.5 billion plant, while a vice mayor met with several representatives of leading American banks. “Shanghai will continue to welcome foreigners to make investment in this city,” said Xia Zhongguan, a senior official at the Shanghai Foreign Investment Commission. “Politics should be separated from business and trade. The bombing is one thing; foreign investment is another.”13

Second, Beijing tried to divert the people’s focus back to economic development. On May 11, President Jiang Zemin said, “[The demonstrations against the United States have] demonstrated the enthusiasm, will, and power of the great patriotism of the Chinese people. The whole country is now determined to study and work harder, so as to develop the national economy continuously, enhance national strength, and fight back with concrete deeds against the barbaric act of U.S.-led NATO.”14 On May 13, he emphasized again, “China will


unswervingly take economic construction as its central task.” In addition, he asserted that China “will continue to unswervingly adhere to the policy of reform and opening up, which is the only way to invigorate the country.”15 On June 9, addressing to the National Party School Work Conference, he asked party cadres “must unswervingly focus our energies on continuing with economic construction,” despite the U.S. bombing of the Chinese embassy.16

On May 18, the Renmin Ribao urged the Chinese people to put aside the NATO bombing of the Chinese embassy in Yugoslavia and make efforts to improve the investment environment.17 On May 25, a Renmin Ribao editorial repeated President Jiang Zemin’s call to the whole country to focus on economic development. The paper said that taking economic development as the central task all the time was the key to the resolution of all problems China faced. The editorial went on to say, “We must focus on economic development, while handling both domestic and international issues.”18

In less than two weeks, the Chinese government essentially put aside the NATO bombing incident and moderated its stance toward the United States, despite its rhetorical excesses. Thereafter, China gradually normalized bilateral contacts with the United States and repeatedly emphasized the importance of the U.S.-China relationship. Nevertheless, the Chinese government tried to avoid criticism of being too weak on the sovereign issues and U.S.-China relations. Therefore, the Chinese government continued to express its strong dissatisfaction about the U.S. position on the bombing incident. However, the later complaints did not become a meaningful obstacle of the normalization of U.S.-China relations.

On May 14, a week after the NATO bombing of the Chinese embassy in Belgrade, President Clinton expressed his sincere regrets and condolences directly to President Jiang in


a telephone call concerning the tragic accident. One month later, U.S. Undersecretary of State Thomas R. Pickering met with Chinese officials in Beijing to offer the U.S. government’s official explanation of how it mistakenly bombed the Chinese embassy in Belgrade.

Nevertheless, Minister Tang Jiaxuan criticized that the U.S. explanation of the NATO bombing on the Chinese embassy in Belgrade was “unconvincing” and therefore the Chinese government and its people could not accept the conclusion that the “bombing was a mistake.”19 A commentary of the Renmin Ribao asked the U.S. side to “provide a convincing explanation of causes leading to the incident, make sufficient and effective compensation for all losses, and punish those responsible.” Despite its criticism, the commentary pointed out, “China attaches importance to the development of Sino-U.S. ties, which is in line with fundamental interests of the peoples of the two countries and beneficial to the world peace, stability and development.”20

On July 30, China and the United States reached an agreement on the compensation for the casualties. The United States paid $4.5 million to the Chinese government. On September 11, President Jiang met President Clinton on the margins of the Asia-Pacific Economic Cooperation summit in Auckland, New Zealand, and mentioned the Kosovo bombing only once.21 On November 18, U.S. Deputy Assistant Defense Secretary Kurt Campbell visited Beijing in an effort to resume high-level exchanges between the two militaries.22 On December 16, the U.S. and China agreed to a compensation deal for NATO’s bombing. The U.S. agreed to pay China $28 million for the destruction of the embassy in Belgrade, while China would pay $2.87 million to U.S. missions during the ensuing Chinese protests.

The resumption of WTO negotiations between the U.S. and China is another example of Chinese pragmatism. After the bombing incident, the Chinese government implicitly


suspended the bilateral negotiation with the United States on China’s entry into the WTO. On May 28, President Jiang Zemin explained that China remained “consistent in its attitude toward WTO, but the present atmosphere is inappropriate for the issue.”23 On June 15, Minister Shi Guangsheng further explained that a proper atmosphere for negotiations with the U.S. was that the United States gave a satisfactory explanation of its bombing of the Chinese embassy in Belgrade.24

Despite China’s persistent dissatisfaction with the U.S. explanation of the bombing incident, the U.S. and China resumed bilateral talks on the WTO on September 9. On November 15, about half a year from the incident, the U.S. and China signed a milestone agreement, allowing China entry into the WTO. Ironically, even after signing the WTO agreement, the Chinese government continued its demand that the U.S. offer an “acceptable explanation” to the Chinese government and its people for the bombing.

Throughout the second half of 1999, Beijing never accepted the U.S. explanation, continuing to demand that the U.S. conduct a “thorough and comprehensive” investigation, provide an “acceptable explanation” to the Chinese government and the people for the bombing, and “severely punish the perpetrators.” In early April 2000, the U.S. Central Intelligence Agency (CIA) dismissed one officer and punished six others for their roles in identifying and approving the target in Belgrade. Chinese spokesman criticized the CIA’s dismissal of a midlevel officer blamed for the attack as inadequate, reiterating China’s demands that the Clinton administration “punish those responsible.” In response, the U.S. explicitly declared the matter closed.25

On January 19, 2001, the U.S. government paid a sum of $28 million to the Chinese government for the property loss caused by the U.S. bombing. From the U.S. perspective, the


incident has completely come to an end; in contrast, from the Chinese point of view, the incident was never finished. A Chinese spokesman said, “We call on the U.S. side to conduct a comprehensive and thorough investigation into the bombing, severely punish the perpetrators, and give a satisfactory account of the incident to the Chinese people.”26

Regardless of these different views on the incident, it was only a symbolic issue for China, and would hardly impede the normalization of the U.S.-China relations. Obviously, the Chinese government moderated its stance on this issue, in order to preserve the U.S.-China relations. However, another incident involving a sovereignty dispute followed two months later and again spurred a standoff between these two countries.


On April 1, 2001, China held captive 24 U.S. military personnel and a U.S. Navy reconnaissance plane EP-3, which made an emergency landing on Hainan Island after an airborne collision with a Chinese fighter jet. This triggered a severe standoff between the United States and China. On the next day, U.S. President George W. Bush demanded “the prompt and safe return of the crew and the return of the aircraft without further damaging or tampering.” He warned that China’s continued silence about when the fliers would be returned could harm relations between the two countries.27

However, on April 3, the Chinese government directly rejected the U.S. demand. Instead, the Chinese government made solemn representations to the U.S. government. It strongly demanded that the U.S. government explain to the Chinese government and its people on the U.S. aircraft’s actions of ramming into the Chinese plane and violating China’s sovereignty and territorial airspace, and take earnest and effective measures to prevent similar


incidents from occurring. Concretely speaking, the Chinese government demanded the U.S. government apologize to China, bear all the responsibility, and stop reconnaissance flights in airspace off China’s coastal areas.28

In explanation of Chinese policy on this accident on April 4, Minister Tang Jiaxuan emphasized that the Chinese side had, all along, taken a calm, restrained, and responsible attitude in handling the incident. He stated that Beijing attached importance to Sino-U.S. relations and hoped to see a proper solution to the incident as soon as possible. In addition, he criticized that the U.S. had adopted an opposite attitude, without considering the overall situation of Sino-U.S. relations.29 Throughout the incident, Beijing repeatedly emphasized that China had consistently attached importance to developing Sino-U.S. relations.30

On April 4, U.S. Secretary of State Colin L. Powell struck a conciliatory note toward China. “We regret that the Chinese plane did not get down safely, and we regret the loss of life of that Chinese pilot,” Secretary Powell said. “But now we need to move on.” In his letter for Chinese Vice Premier Qian Qichen, Secretary Powell stressed the importance of the crew’s release, repeated the expression of regret, and suggested some ways to resolved the dispute through a series of discussions.

However, Chinese Ambassador to the United States Yang Jiechi said on CNN, “Our side has said very clearly, that the U.S. side should shoulder all the responsibility and should apologize to the Chinese side.” President Jiang Zemin also reiterated a demand that the U.S. apologize. Meanwhile, Minister Tang Jiaxuan berated U.S. Ambassador to China Joseph W. Prueher for what he called American arrogance by making groundless accusations against China. Nevertheless, he stated that China wanted to resolve the dispute “appropriately as soon as possible,” while protecting its “sovereignty and dignity.”31


China might want to resolve the dispute because many congressional critics of China said the continued detention of the plane’s crew could endanger the renewal of normal trade status for China.32 In addition, some of ranking U.S. officials threatened China to link the incident with other issues involving China-U.S. relations.33 The president of the United States Chamber of Commerce issued a warning to China, “We want the Chinese government to understand that failure to resolve this matter in the immediate future could and would likely damage the current and potential economic exchange between the companies in our two nations.”34

On April 5, President Bush repeated an expression of U.S. regret, urging China to free the U.S. crew without further delay. “I regret that a Chinese pilot is missing, and I regret one of their airplanes is lost,” he said. “Our message to the Chinese is we should not let this incident destabilize relations. Our relationship with China is very important. But they need to realize that it’s time for our people to be home.”35

Despite the U.S. regret, the majority of the Chinese people wanted a U.S. apology. According to a poll, conducted by the Social Survey Institute of China on the collision of Chinese and U.S. warplane, 98 percent of respondents believed that the incident was deliberately created by the United States, and was a blatant act of provocation against China’s sovereignty; while 89 percent of them believed that the U.S. side should and must apologize to China and indemnify Chinese losses.36

On April 7, a letter from Vice Premier Qian Qichen to Secretary Powell stated that U.S. expressions of regret were not enough to end the stalemate. However, on the next day, U.S. Vice President Richard B. Cheney and Secretary Powell again rejected China’s demands that


the U.S. apologize for the collision, warning that Beijing’s delays in returning the Navy plane’s 24 crew members risked long-term damage to relations between the two nations.37

In turn, on April 10, Beijing bluntly rejected U.S. statements of regret. “We are extremely unsatisfied by statements made thus far by the United States,” Chinese Foreign Ministry Spokesman Zhu Bangzao said. “The United States should apologize,” he added. “If not, it is going to make it more difficult to find a solution to this very serious incident.”38

On the same day, President Bush began to take a tougher tone, demanding the speedy release of the spy plane’s crew. “Every day that goes by increases the potential that our relations with China could be damaged,” President Bush warned. White House Spokesman Ari Fleischer further implied that Washington might end support for Beijing’s long-sought membership of the World Trade Organization.39

On April 11, after ten days of demanding the United States offer an official apology and admit full responsibility for the incident, China accepted a letter written by Ambassador Prueher to Minister Tang Jiaxuan, negotiated in English only, and agreed to release the 24 American crew members. In that letter, the United States told the Chinese people and the family of the lost Chinese pilot that it was “very sorry,” and also said that it was “very sorry” that the crippled American aircraft had landed in China without permission. Notwithstanding, the United States did not accept responsibility that China had demanded.

Hoping to head off a possible backlash from the Chinese public, Chinese officials presented the deal as a victory for Chinese dignity. The Xinhua She (New China News Agency) translated “very sorry” to “shen biao qianyi” in Chinese. This literally meant to deeply express regrets or an apology, which can imply some culpability, as well as regret.


However, a Chinese translation that was released by the U.S. embassy used the Chinese words “feichang wanxi,” which linguists described as an expression of great sympathy, but not an apology. Furthermore, the Xinhua She reported that, in a letter of expressing regrets (zhi qian xin) to the Chinese government, the U.S. government formally expressed regrets (zhi qian) to the Chinese government and the people. As a result, it claimed that the initial results had been achieved in the Chinese government’s struggle against U.S. hegemonism.40

Moreover, China twisted the language of a U.S. letter of regret into a fully-fledged apology. “The United States finally apologizes,” screamed a front page headline in the popular Beijing Morning Post. The People’s Liberation Army Daily added, “The U.S. apology to the Chinese people is only right.”41 An editorial in the Renmin Ribao on April 12 said, “Our government and people have…. compelled the United States to change its rude and unreasonable hard line attitute and apologize to the Chinese people.”42 In meeting with Communist Party organizations and media editors, Chinese leaders said that the United States had agreed to “a form of apology,” without providing the exact language. Beijing clearly hoped to emphasize how much the United States had backed down.43

Over the previous eleven days, China had insisted that the United States apologize for the collision, for the EP-3’s “violation of Chinese airspace” as it made an emergency landing on Hainan Island without formal approval from the Chinese authorities, and for the loss of the Chinese pilot. While interpreting U.S. expressions of sorrow over the landing and the pilot’s loss as an apology, the Chinese government chose not to notice that Washington did not accept responsibility or apologize for the collision itself. Shen Dingli, an expert on U.S.-China relations at Fudan University in Shanghai elaborated, “So if Chinese can’t read the English text, they’ll think it’s great.”44


On April 13, two days after the crew’s release, U.S. Defense Secretary Donald H. Rumsfeld accused the Chinese government of providing a misleading account of the collision and vowed to continue surveillance flights off the coast of China.45 Regarding this comment, Chinese Foreign Ministry Spokeswoman Zhang Qiyue responded, “This is not conducive to the development of Sino-U.S. relations, nor to the coming negotiations.” Zhang stressed that the Chinese side has been handling the issue with calmness and restraint, taking the overall situation of Sino-U.S. relations into consideration.46

Lu Shumin, a senior official of the Chinese Foreign Ministry, pointed out that after the incident, the Chinese side, taking into consideration the general interests of the China-U.S. relations, has handled the incident in a sober manner and with restraint. He added that China has always dedicated itself to developing healthy and stable relations between the two countries. Furthermore, he said, the Chinese side did not want to see any further harm to Sino-U.S. relations due to the suspension of the issue.47

President Jiang Zemin elaborated, “We have always attached importance to Sino-U.S. relations and have been stressing the need to regard and handle bilateral relations from a strategic height. We do not want confrontations. However, on issues involving national sovereignty, territorial integrity, and national dignity, we absolutely will not make any compromise either.” Nevertheless, he continued to say, “The people of all ethnic groups throughout the country must convert patriotic passion into an enormous strength for building a strong country, strive to push forward reform, opening up, and modernization undertakings….”48 A commentary article on April 12 in the Renmin Ribao also stated, “We must…gather up our strong patriotic fervor into all the work of promoting reform, opening up, and socialist modernization.”49 That is, in spite of no compromise on sovereignty issues, Beijing considered promoting economic development, with maintaining stable U.S.-China


relations, as the most important task.

Despite arousing rhetoric in official media, the Chinese government strictly prohibited protests against the United States on the streets and campuses of China. The Chinese government worried that demonstrations might go out of control and jeopardize social stability and economic development. To prevent the public’s intense reaction from their dissatisfaction over the authorities’ handling of the matter, the Chinese Communists have issued an order to strictly prohibit anyone from holding demonstrations against the release of the U.S. crew.50

For the first time since the collision on April 1, on May 7, 2001, the United States resumed reconnaissance flights off the coast of China. Despite China’s initial demand that the U.S. stop reconnaissance flights in this area, an U.S. official said, “There was no reaction from the Chinese.”51 On the next day, President Jiang Zemin clearly explained the Chinese position, “A peaceful environment is indispensable for national, regional and even global development. Without peace or political stability, there would be no economic progress to speak of.”52 Three weeks later, a commentary written by Gu Ping on the Renmin Ribao further elucidated that despite bilateral conflicts over the issues of the bombing, Taiwan, and Tibet, China and the United States had common interests in economic development and should cooperate with each other instead of creating a confrontation.53

Obviously, the Chinese government attached significant importance to U.S.-China relations. During the incident, the Chinese government repeatedly stressed the importance of U.S.-China relations and thus “handled the incident in a sober manner and with restraint.” This is not just propaganda! The Chinese government repeatedly demanded that the U.S. government apologize to China, bear all the responsibility, and stop reconnaissance flights in


airspace off China’s coastal areas. Furthermore, the Chinese said they “absolutely will not make any compromise” on issues involving national sovereignty, territorial integrity, and national dignity. However, in the end, the Chinese government released the American crew by accepting a letter in which the U.S. only went as far as saying “very sorry” twice, not an official apology by Chinese standards. Moreover, the U.S. never accepted responsibility that China had demanded and even resumed reconnaissance flights off the coast of China in less than one month after the crew’s release in mid-April 2001. Notwithstanding, Beijing did not adopt more assertive measures against Washington.


U.S.-China economic interdependence has significantly changed Beijing’s perception of national interests, and thus, has shaped U.S.-China relations. A commentary in the Renmin

Ribao in May 2001 pointed out, “The fast-developing Sino-U.S. economic cooperation and

trade has become the main stabilizing factor and driving force in bilateral relations.”54 An international relations scholar in Beijing expounded, “Some criticized Beijing was too weak in dealing with the U.S. and Japan. But those critics did not see a historical change. China is heavily interdependent with the U.S. and West. The interdependence has significantly constrained Chinese foreign relations. China can not comprehensively antagonize the West.”55

At a joint meeting with members of the Chinese People’s Political Consultative Conference on March 6, 2001, Vice Premier Qian Qichen said that it was impossible to change the U.S. basic standpoint on the Taiwan and human rights issues, but China and the United States had common economic interests. He emphasized that China should bring the contradictions between China and the United States “under control and not have an outburst.


We should reason things out and, if we fail, we should put aside minor differences so as to seek common ground [economic interests].”56

An international relations senior scholar in Beijing stressed, “Sino-U.S. relations reflect the importance of economic development to China. China makes every effort to maintain stable Sino-U.S. relations. It is impossible for China to face off with the United States. The Sino-U.S. relationship is not an issue of face, but of economic development.”57 An American studies senior scholar in Beijing elaborated, “The Sino-U.S. economic relationship is very important for China. Trade accounts for 40 percent of China’s GDP, and 40 percent of China’s trade goes to the United States. As a result, China must maintain a good relationship with the United States. The importance of the U.S. to China is much greater than China’s importance to the United States. If Sino-U.S. relations worsen, it will bring severe damage to China.”58

In the two case studies, Beijing tried to minimize the impact of surging nationalism and public overreaction on its overall economic development and U.S.-China relations. In the case of the embassy bombing, Beijing only allowed “controlled” demonstrations and protests for two days, and then strictly prohibited any follow-up demonstrations. Afterward, Beijing tried to control the damage by reassuring the foreign investors and diverting the people’s focus back to economic development. Moreover, Beijing pragmatically and gradually normalized relations with the United States, despite its tough gesture of rejecting U.S. explanation of the bombing incident and demanding the U.S. severely punish the perpetrators.

In the case of the reconnaissance plane incident, the U.S. government obviously did not meet China’s three demands: apologizing, taking responsibility, and stopping reconnaissance


flights in airspace off China’s coastal areas. However, China strictly prohibited protests against the United States for fear of damaging its economic development. Furthermore, China frequently publicly expressed that China took a calm, restrained, and responsible attitude in handling the incident. In order to minimize a possible backlash from the Chinese public, Beijing twisted the language of a U.S. letter of regret into a fully-fledged apology, and thus, declared it a victory for Chinese dignity.

Regarding the sharp contrast between Beijing’s rhetoric assertiveness and actual prudence, a Taiwan studies senior scholar in Beijing frankly stated, “The most important priority for China is economics. This is a prevailing consensus among the public and elite. Beijing should have acted stronger against the United States, Japan, and Taiwan, but Beijing had economic interests in mind.”59 Since Beijing was not willing to sternly respond to Washington because of economic interest concerns, Beijing had to at least rhetorically assure the Chinese people of its firm position, and then prudently minimize the impact of the incidents on U.S.-China relations. In the reconnaissance plane incident, because Washington did not meet any of three initial demands Beijing raised, Beijing finally twisted the language and declared a moral victory in order to bolster its domestic position, as well as to normalize U.S.-China relations.

Many other Chinese scholars had the same perspective. For instance, an American studies senior scholar in Beijing emphasized, “Regarding the issue of the U.S. bombing of the Chinese embassy and the airplane collision, China does not want conflict. All China wants is to develop its economy!”60 Four international relations senior scholars in Beijing and an international relations senior scholar in Shanghai all agreed that economic interest is the essential consideration for China to deal with the issues of the U.S. bombing of both the Chinese embassy and the airplane collision.61


An U.S. senior official explained, “Since the mid-1990s, Taiwanese President Lee Teng-hui’s visit to the States, the U.S. mistaken bombing incident of Chinese embassy in Belgrade, and the collision incident between an U.S. reconnaissance plane and a Chinese fighter jet, all stirred strong reaction from Chinese officials and scholars. Nevertheless, with the prerequisite of maintaining U.S.-China economic interests, President Jiang Zemin finally intervened and emphasized that China had to do its best to maintain friendly relations with the United States. Beijing clearly recognized that Chinese economy heavily depended on U.S. economy. Sometimes, Washington reminded Beijing of this fact.”62 [Please edit this paragraph]

Looking into the future, Chinese U.S. policy would continue to be moderate and cooperative, in order to preserve the interests of bilateral economic interdependence. In the 16th National Congress of the Chinese Communist Party held in November 2002, Chinese leaders announced that, for the next twenty years, China would continue to focus on economic development. Beijing believes that a peaceful and stable international environment, particularly a stable U.S.-China relationship, is essential to China’s economic development. As a result, it is a consensus within China that Beijing will continue adopting cooperative attitudes and policies toward the United States in the future.63


1 Dale C. Copeland, “Economic Interdependence and War,” in Michael E. Brown, Owen R. Cote, Jr., Sean M. Lynn-Jones, and Steven E. Miller, Theories of War and Peace (Cambridge, Massachusetts: The MIT Press, 1998), pp. 467-468. Mark W. Zacher and Richard A. Matthew, “Liberal International Theory: Common Threats, Divergent Strainds,” in Charles W. Kegley, Jr. (ed.), Controversies in International Relations Theory: Realism and the Neoliberal

Challenge (New York: St. Martin’s Press, 1995), pp. 107-150, 281-294. Timothy Dunne,

“Liberalism,” in John Baylis and Steve Smith (eds.), The Globalization of World Politics: An

Introduction to International Relations (New York: Oxford University Press, 1997), pp.

147-163. Richard Rosecrance, “War, Trade and Interdependence,” in James N. Rosenau and Hylke Tromp (eds.), Interdependence and Conflict in World Politics (Brookfield, Vermont: Gower, 1989), pp. 48-57. Marc A. Genest, Conflict and Cooperation: Evolving Theories of

International Relations (Orlando, FL.: Harcourt Brace & Company, 1996), pp. 132-142. David

Held, Anthony G. McGrew, David Goldblatt, and Jonathan Perraton, Global Transformations:

Politics, Economics and Culture (Stanford, CA.: Stanford University Press, 1999), pp. 99-103,


2 “Background Note: China,” U.S. Department of State, March 2003, Former U.S. President Bill Clinton has explicitly suggested that integration of China into the global trading regime will help constrain China’s external behavior, encourage its cooperation with the West, promote radical economic reform, and even facilitate future political opening.

3 “Chapter 6 – China’s Presence in U.S. Capital Markets,” Report to Congress of the

U.S.-China’s Review Commission, U.S.-China Commission, July 2002,

4 Zhang-rong Kang, “Jiang Zemin: Mainland Economy Faces Three Big Factors of Uncertainties,” Gongshang Shibao [Commerce Times], February 11, 2001.

5 Hengjun Lu, “U.S. Impact on Asia Is Weakening All the Time” (in Chinese), Beijing Renmin

Ribao (Internet version), February 22, 2001, in FBIS-CHI-2001-0222.

6 John Pomfret, “U.S. Economy Worries China,” Washington Post, March 23, 2001, p. A22. 7 At a high-level Chinese internal meeting shortly after the Belgrade bombing, a participant

even openly described Zhu Rongji as a traitor. David M. Lampton, Same Bed, Different

Dreams: Managing U.S.-China Relations, 1989-2000 (Berkeley: University of California

Press, 2001), pp. 57-59. James Miles, “Chinese Nationalism, US Policy and Asian Security,”

Survival, vol. 42, no. 4 (Winter 2000-01), p. 55.

8 “AFP Views Nationwide Fury in China Over NATO Bombing,” Hong Kong AFP, May 9, 1999, in FBIS-CHI-1999-0509.


10 Joseph Fewsmith and Stanley Rosen, “The Domestic Context of Chinese Foreign Policy: Does ‘Public Opinion’ Matter?,” in David M. Lampton (ed.), The Making of Chinese Foreign and

Security Policy in the Era of Reform (Stanford, CA: Stanford University Press, 2001), p. 173.

11 “Chinese Vice-President Hu: Broadcast to Nation on NATO Strike – Domestic Report” (in Chinese), Xinhua News Agency Domestic Service, May 9, 1999, in BBC Worldwide Monitoring, May 9, 1999.

12 Miles, “Chinese Nationalism, US Policy and Asian Security,” pp. 55-56.

13 Seth Faison, “Business in China: Longer-Term Worries,” New York Times, May 20, 1999, p. C10.

14 “Jiang Zemin Meets Chernomyrdin on NATO Bombing,” Beijing Xinhua, May 11, 1999, in FBIS-CHI-1999-0511.

15 “Jiang on Foreign, Internal Policy,” Beijing Xinhua, May 13, 1999, in FBIS-CHI-1999-0513. 16 “PRC: Jiang Zemin Speech on Party School Work, Cadres Training,” Beijing Xinhua

Domestic Service in Chinese, July 16, 2000, FBIS-CHI-2000-0716.

17 “AFP: People’s Daily Urges People to ‘Put Aside’ Bombing,” Hong Kong AFP, May 18, 1999, in FBIS-CHI-1999-0518.

18 “Unswervingly Adhere to Taking Economic Development as the Central Task” (in Chinese),

Renmin Ribao [People’s Daily] (Overseas edition), May 25, 1999, p. 1.

19 “Tang Jiaxuan Say Pickering Explanation ‘Unconvincing’,” Beijing Xinhua, June 17, 1999, FBIS-CHI-1999-0617.

20 “People’s Daily: U.S. Urged to ‘Untie Knot’,” Beijing Xinhua, June 17, 1999, FBIS-CHI-1999-0617.

21 US Assistant Secretary of State for East Asian and Pacific Affairs, Stanley Roth, said the Clinton-Jiang meeting “went a long way toward putting the bombing behind us.” Stanley O. Roth, “A Strategy for the Future: U.S.-China Relations and China’s WTO Accession,” speech before the Woodrow Wilson Center, Washington, D.C., May 9, 2000.

22 By July 2000, top-level military contacts between the U.S. and China were restored, despite the announcement in April of fresh U.S. weapon sales to Taiwan.

23 “WTO Entry Will Mean Compromise, But Not ‘A Big Present’ for the U.S., Says China’s Chief Trade Negotiator,” ChinaOnline, May 28, 1999.

24 “China – Efforts Meet International Norms States Seeks to Expand Exports,” China Daily, June 16, 1999.

25 Robert J. Saiget, “U.S. Official to Test Water for High-level Military Ties with China,” Agence France Presse, November 18, 1999. “U.S. Explanation on Embassy Bombing ‘Unconvincing’,” BBC Summary of World Broadcasts, December 18, 1999, FE/D3721/G. “PRC FM Spokesman Wants U.S. ‘Thorough Investigation’ of Embassy Bombing in FRY,”


Beijing Xinhua Domestic Service in Chinese, January 20, 2001.

26 “PRC FM Spokesman Wants U.S. ‘Thorough Investigation’ of Embassy Bombing in FRY,” Beijing Xinhua Domestic Service in Chinese, January 20, 2001.

27 David E. Sanger, “Bush Is Demanding a ‘Prompt’ Return of Plane and Crew,” New York

Times, April 3, 2001, p. A1.

28 “More on Foreign Ministry Spokesman on Mid-Air Aircraft Collision,” Beijing Xinhua Domestic Service in Chinese, April 3, 2001, FBIS-CHI-2001-0403. “Xinhua ‘Wrap-Up’: Jiang Zemin on U.S., China Air Collision Incident,” Beijing Xinhua, April 3, 2001, FBIS-CHI-2001-0403.

29 “Tang Jianxuan Summons U.S. Ambassador to Make Representations on Plane Incident,” Beijing Xinhua Domestic Service in Chinese, April 4, 2001, FBIS-CHI-2001-0404.

30 Jing Chen, “FM Spokesman Stresses Developing Sino-U.S. Relations,” Beijing Zhongguo Xinwen She in Chinese, April 11, 2001, FBIS-CHI-2001-0411.

31 Steven Mufson and Mike Allen, “U.S. Vocies Regrets Over Chinese Pilot,” Washington Post, April 5, 2001, p. A1.

32 Steven Mufson and Vernon Loeb, “U.S. Warns of Damaged Relations with China,”

Washington Post, April 9, 2001, p. A1.

33 “China, U.S. Hold Talks on Plane Collision,” Beijing Xinhua, April 19, 2001, FBIS-CHI-2001-0419.

34 Jane Perlez and David E. Sanger, “Bush Aides Saying Some Hope Is Seen to End Standoff,”

New York Times, April 6, 2001, p. A1.

35 Philip P. Pan and John Pomfret, “U.S. Words of Regret Ease China Tension,” Washington

Post, April 6, 2001, p. A1.

36 Kai-lei Peng, “HK WWP: PRC Poll Shows Over 90% of Respondent Want U.S. Apology,” Hong Kong Wen Wei Po in Chinese, April 8, 2001, FBIS-CHI-2001-0409.

37 Steven Mufson and Vernon Loeb, “U.S. Warns of Damaged Relations with China,”

Washington Post, April 9, 2001, p. A1.

38 Cind Sui, “AFP: PRC FM Spokesman: U.S. Should Apologize, China Victim of Collision Incident,” Hong Kong AFP, April 10, 2001, FBIS-CHI-2001-0410.

39 Cind Sui, “AFP: PRC FM Spokesman: U.S. Should Apologize, China Victim of Collision Incident,” Hong Kong AFP, April 10, 2001, FBIS-CHI-2001-0410.

40 Xinhua reporters, “ ‘Struggle Against Hegemonism’ Hailed by Chinese People,” April 11, 2001, Beijing Xinhua Domestic Service in Chinese, FBIS-CHI-2001-0411.

41 Robert J. Saiget, “AFP: PRC ‘Claims’ Victory in Spy Plane Row, Twisting ‘Regret’ Into ‘Apology’,” Hong Kong AFP, April 12, 2001, FBIS-CHI-2001-0412.


Kong AFP, April 11, 2001, FBIS-CHI-2001-0411.

43 Erik Eckholm, “Chinese Claim a Moral Victory, Describing a Much Bigger Battle,” New York

Times, April 12, 2001, p. A1.

44 John Pomfret, “Resolving Crisis Was a Matter of Interpretation,” Washington Post, April 12, 2001, p. A1.

45 Edward Walsh and William Claiborne, “U.S. Faults China on Crash Account,” Washington

Post, April 14, 2001, p. A1.

46 “PRC FM Spokeswoman Criticizes U.S.’ ‘Irresponsible’ Remarks,” Beijing Xinhua, April 14, 2001, FBIS-CHI-0414.

47 “China, U.S. Hold Talks on Plane Collision,” Beijing Xinhua, April 19, 2001, FBIS-CHI-2001-0419.

48 Wenjie Wang, Li Ma, and Yuwen Luo, “Jiang Zemin Meets Wang Wei’s Family,” Beijing Domestic Service in Chinese, April 20, 2001, FBIS-CHI-2001-0420.

49 A Renmin Ribao commentator, “Translate Patriotic Fervor into Strength to Make the Country Strong,” Beijing Xinhua Domestic Service, April 11, 2001, in FBIS-CHI-2001-0411.

50 “PRC Reportedly Bans Public Demonstrations Against Release of U.S. Crew,” Hong Kong Ming Pao in Chinese, April 12, 2001, FBIS-CHI-2001-0412. Erik Eckholm, “Chinese Claim a Moral Victory, Describing a Much Bigger Battle,” New York Times, April 12, 2001, p. A1. 51 Thom Shanker, “U.S. resumes Its Spy Flights Close to China,” New York Times, May 8, 2001,

p. A1.

52 Jiang Zemin, “Text of Speech by Jiang Zemin at Opening Banquet for the Fortune' Global Forum, 2001, in Hong Kong” (in Chinese), Beijing Xinhua Domestic Service, May 8, 2001, in FBIS-CHI-2001-0508.

53 Gu Ping, “If Friendship Both Benefit; If Friendship Breaks Both Suffer,” Renmin Ribao, May 31, 2001, p. 3.

54 Gu Ping, “If Friendship Both Benefit; If Friendship Breaks Both Suffer,” Renmin Ribao, May 31, 2001, p. 3.

55 An international relations scholar in Beijing, interview with author, July 19, 2001.

56 “Qian Qichen Speaks at Meeting with Hong Kong, Macao, CPPCC Members” (in Chinese), Hong Kong Ta Kung Pao, March 7, 2001, in FBIS-CHI-2001-0307.

57 An international relations senior scholar in Beijing, interview with author, July 17, 2001. 58 An American studies senior scholar in Beijing, interview with author, August 10, 2001. 59 A Taiwan studies senior scholar in Beijing, interview with author, July 29, 2001. 60 An American studies senior scholar in Beijing, interview with author, July 10, 2001.

61 An international relations senior scholar in Beijing, interview with author, August 2, 2001. An American studies senior scholar in Beijing, interview with China, July 12, 2001. An


international relations senior scholar in Beijing, interview with author, July 19, 2001. An American studies senior scholar in Shanghai, interview with author, July 4, 2001. A Taiwan studies senior scholar in Beijing, interview with author, July 13, 2001.

62 An U.S. senior official, interview with author, April 4, 2002.

63 Four international relations senior scholars in Beijing, interview with author, November 2002. Five international relations senior scholars in Shanghai, interview with author, November 2002.