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Last Updated: Friday, 5 December, 2003, 11:24 GMT
Taiwan tensions cloud China US visit

By Tim Luard
BBC News Online

China's Prime Minister has begun a visit to the United States at a time when differences over two distinct issues - Taiwan and trade - are souring the generally upbeat mood of what is arguably the world's most important diplomatic relationship.

Beijing says its ties with the US are at an all-time high, but adds that relations are currently threatened by an "ambiguous" American policy towards Taiwan.

Washington, for its part, accuses China of following trade policies which are depriving Americans of jobs.

A McDonalds restaurant in Beijing
In 20 years' time the US economy may be eclipsed by China's
Wen Jiabao is the first senior Chinese leader to visit Washington since a transfer of power within the ruling Communist Party a year ago.

At home he is seen as caring and capable. Analysts expect him to make a similarly good impression on this, his biggest trip abroad to date.

Confident China

"The momentum is on Beijing's side," says Wenran Jiang, professor of political science at the University of Alberta.

He said that a series of foreign policy initiatives by the new leadership had given an economically buoyant China the diplomatic edge over the US, which is sometimes seen - at least in the Asia Pacific region - as a bullying superpower obsessed by its war on terrorism.

"On the Korean nuclear crisis, Beijing plays a leading role while Washington has to rely on China's support in every step," he said.

The Chinese Premier will speak on many topics in a hectic schedule of engagements during his four days in the United States, but Taiwan is top of his concerns.

Technocrat with common touch
Risked visiting students in Tiananmen Square in 1989
Appointed Premier 2003

Although Washington and Taipei have no official ties, Taiwan's president Chen Shui-bian received an unusually warm reception during a recent transit visit to the US.

If Beijing was annoyed at that, it is furious at Mr Chen's subsequent moves to legitimise the holding of referendums, believing this to be a first step towards the island's declaring independence.

"The Taiwan issue is very hard to manage and I am afraid it will be out of control one day," says Professor Xiong Zhiyong, a Beijing-based specialist on Sino-US ties.

He warned of the risk of war, which could quickly suck in the US also, since it is Taiwan's chief military backer..

The Chinese premier will ask his American hosts to make clear their policy on the status of Taiwan and to reduce their arms sales, he says.

Washington is aware that China is the only potential rival to US hegemony in the world
Wenran Jiang, University of Alberta
But the view among many analysts in China is that not only George Bush but many of his high officials are pro-Taiwan, and are likely to give their visitor little more than a formal restatement of US support for the "One China" policy and the status quo.

Although Mr Wen is part of the core leadership group on policy towards Taiwan, he may be constrained by the fact that it is not he but President Hu Jintao who is in overall charge. Indeed, some say the ultimate decision-maker on this single crucial topic remains former president Jiang Zemin.

US trade fury

As the man who runs the economy, however, Mr Wen will feel on stronger ground when he comes to defend China's trade and currency policies.

Chinese exports to the US exceed imports by nearly six to one, creating what is by far America's largest single trade deficit.

Many US legislators, manufacturers and labour groups blame China for rising US unemployment. Washington recently announced quotas on Chinese textile goods and anti-dumping tariffs on Chinese televisions, prompting threatened counter-measures from Beijing.

Chinese textile factory
China is still smarting from a US decision to impose quotas

The US government has also argued that China keeps its currency at an artificially low exchange rate, unfairly making its imports cheaper. But it has now toned down its demands that China move to a market-based exchange rate, recognising that American consumers depend on China's low-cost factories to keep prices stable at home.

"The furore over the Chinese currency lacks persuasive power," said Robert Kapp, President of the US-China Business Council.

"You can get a controversy going over almost anything. But it's hard to sustain it for long even in an election year if the economics aren't there," Mr Kapp said.

The skirmishing over trade is in part a natural result of the phenomenal growth of China's economy. Similar rows took place between the US and Japan in the 1980s, and trade friction was not allowed to impair the overall relationship.

To address US concerns, Mr Wen's message will be that China is working hard to make the deficit disappear and that it is already America's fastest-growing export market. He may even offer further measures to balance trade and a widening of the Chinese currency trading band.

To improve the mood ahead of the visit, China agreed to buy billions of dollars worth of US aircraft, cars and agricultural goods.

It also announced the early release of three dissidents.

Friend or foe

Mr Wen will be helped by the fact that Congress, where China's most vocal critics can be found, has already gone into adjournment for the rest of the year.

And he can take comfort from the knowledge that, for now at least, China is more of a friend to the US than an enemy, having proved a useful supporter in the war on terrorism.

Americans increasingly realise that China has many good points as well as bad, while the US government understands the extent to which the two countries are now "joined at the hip", Mr Kapp said.

But China's ambitions are far from satisfied, Wenran Jiang said.

"While Washington needs Beijing's help on North Korea and Iraq and praises current Sino-American relations as the best in history, it is aware that China is the only potential rival to US hegemony in the world," he said.

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