[Pages S6937-S6940]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

U.S.-CHINA SECURITY REVIEW COMMISSION ANNUAL REPORT

Mr. BYRD. Mr. President, the U.S.-China Security Review Commission on
Monday released its first annual report, as directed by the Congress in
its authorizing statute, P.L. 106-398, October 30, 2000. It is a broad-
ranging analysis, with major recommendations for consideration. I will
ask unanimous consent that the Executive Summary be printed in the
Record at the conclusion of my remarks.
The report is extensive, thorough, and disturbing in many respects.
It paints a detailed portrait of a China determined to: acquire a vast
array of high technology; broaden and deepen its industrial base;
expand its research and development capabilities; and attract
substantial amounts of American and other foreign investment. China is
on the move. But, it is worthwhile to note that China pays for much of
its progress through a highly imbalanced trade relationship with the
U.S. Last year the U.S. trade deficit with China exceeded $80 billion
U.S. dollars.
One could simply say that the Chinese are intent on entering the
modern era, and on building a strong nation state, financed by
aggressively exporting goods to the U.S. But, Mr. President, there are
some very troubling aspects of the U.S./Chinese relationship.
The Commission found that U.S. policy toward China has been and is
alarmingly fragmented. It lacks consistency and depth. U.S. policy
toward China has often been driven solely by commercial interests,
specific human rights issues, or by a particular military crisis,
rather than by a comprehensive examination of all the issues which
impact upon this relationship. Furthermore, over the last 30 years U.S.
policy toward China has been dominated by strong Executive branch
personalities and compulsive secrecy. There seems to be little
sustainable consensus on the long-term national interests of the U.S.
vis a vis China.
The Report makes numerous recommendations designed to elicit a more
comprehensive understanding of China by U.S. policy makers and by the
general public. These include rebuilding the Library of Congress' China
collection, new language and area studies programs, new efforts at open
source collection by the intelligence community, and an upgrading of
the Federal Broadcast Information Service. The fact is that we as a
nation know far too little about China, and we need a better level of
effort in this regard.
There is new information and analysis in the Commission's report
regarding Chinese access to U.S. capital markets, and a renewed call
for more effective consultations and consensus-building between the
President and Congress on Taiwan policy. The report also recommends new
tools which should be employed to encourage the Chinese to comply with
their commitments--in proliferation practices, prison labor agreements,
intellectual property agreements enforcement, and most importantly,
with their far-reaching obligations under the WTO.
The report calls for increased scrutiny of corporate activities in
China, and a new corporate reporting system to reveal what investment,
R&D and technology is being sent to China. Transparency, disclosure and
corporate accountability should be required of U.S. firms' operations
in China, and are certainly of much interest to American shareholders
and investors.
I am pleased that the Report is a strong bipartisan effort, a broad
consensus of nearly all the Commissioners, who approved it by a vote of
11-1. It is both an educational report and an action document. Each
chapter highlights findings and makes recommendations for action which
flow from those findings. The executive summery gives the key 21
recommendations, but additional valuable proposals are found at the end
of each chapter.
Some of the Report's key findings about the U.S.-China relationship
include:
The U.S.-China bilateral relationship is poorly coordinated and lacks
a sustainable consensus among elected officials in Congress and the
Executive branch;

[[Page S6938]]

China's leaders see the United States as a declining power with
important military vulnerabilities that can be exploited;
There are serious differences in perceptions each country holds of
the other and a potential for misunderstandings that are compounded by
the lack of bilateral institutions for confidence-building and crisis-
management;
There is plausible evidence that the burgeoning trade deficit with
China will worsen despite China's entry into the World Trade
Organization (WTO);
The U.S. may be developing a reliance on Chinese imports that could
in time undermine the U.S. defense industrial base;
The U.S. lacks adequate institutional mechanisms to monitor national
security concerns involving Chinese and other foreign entities seeking
to raise capital in the U.S. debt and equity markets;
China provides technology and components for weapons of mass
destruction and their delivery systems to terrorist sponsoring states,
presenting an increasing threat to U.S. security interests, in the
Middle East and Asia in particular.
Radical changes in China's economic fortunes have been fueled by U.S.
investors and multinational firms, and have come with severe sacrifices
in the form of lost American manufacturing jobs.
Mr. President, there is much to recommend in this Report, and many
recommendations which may be of interest to my colleagues.
I congratulate the Chairman and all of the commissioners who authored
this fine report, as well as the staff members of the Commission who
worked tirelessly on this important endeavor.
Mr. President, I ask unanimous consent that the executive summary be
printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:

Executive Summary

Relations between the United States and China during the
last half-century have not always been smooth. The two
countries have sharply contrasting worldviews, competing geo-
strategic interests, and opposing political systems. More
recently, bilateral ties have centered on rapidly growing
economic interactions that have muted political differences.
For the moment, these relations have not softened China's
egregious behavior on human rights nor changed its strategic
perceptions that the U.S. is its principal obstacle to
growing regional influence. No one can reliably predict
whether relations between the U.S. and China will remain
contentious or grow into a cooperative relationship molded by
either converging ideologies or respect for ideological
differences, compatible regional interests, and a mutually
beneficial economic relationship.
However the relationship develops, it will have a profound
impact on the course of the twenty-first century. The
policies pursued today by both China and the United States
will affect future relations. The Congress created the U.S.-
China Security Review Commission to assess ``the national
security implications and impact of the bilateral trade and
economic relationship between the United States and the
People's Republic of China'' and to report its conclusions
annually to the Congress. It specifically directed the
Commission to focus on our deepening economic, trade, and
financial linkages with China. The Congress wanted the
Commission to evaluate whether our economic policies with
China harm or help United States national security and, based
on that assessment, to make recommendations in those areas
that will improve our nation's interests.
National security has come to include military, economic
and political relationships. At any time, one of these
concerns may dominate. They interact with one another and
affect our overall security and well-being. Neglect of any
one element will diminish our overall security as a nation.
The United States must be attentive to the strength and
readiness of our military forces, the health of our economy,
and the vibrancy of our political relationships.
The Congress also asked the Commission to include in its
Report ``a full analysis, along with conclusions and
recommendations for legislative and administrative actions.''
This is the Commission's first Report. In keeping with the
Congressional mandate, this Report provides a comprehensive
analysis of the Commission's year-long review of U.S.-China
relations, the principal findings that emerged from that
investigation, and the recommendations or measures the
Commission believes should be implemented to help safeguard
our national security in the years ahead. This initial Report
provides a baseline against which to measure and assess year-
to-year changes in the relationship.

Main Themes

Our relationship with China is one of the most important
bilateral relationships for our nation. If if is not handled
properly, it can cause significant economic and security
problems for our country. China is emerging as a global
economic and military power, and the United States has
played, and continues to play a major role in China's
development.
China's foreign trade has skyrocketed over the past twenty
years (from approximately $20 billion in the late 1970s to
$475 billion in 2000). Our trade deficit with China has grown
at a sharp rate, from $11.5 billion in 1990 to $85 billion in
2000. Foreign investment--with America a leading investor--
grew apace. This trade and investment has helped to
strengthen China both economically and militarily.
America's policy of economic engagement with China rests on
a belief that the transition to a free market economy and the
development of the rule of law in China's business sector
would likely lead to more political and social openness and
even democracy. This belief, along with the desire to expand
American commercial interests, drove U.S. support for China's
entry into the World Trade Organization (WTO). Many also
believe that a more prosperous China will be a more peaceful
country, especially if it is fully integrated into the
Pacific and world economies.
But these are hypotheses, and many leading experts are
convinced that certain aspects of our policy of engagement
have been a mistake. They argue that the PRC faces enormous
economic and social problems, that its leaders are
intractably antidemocratic, that they are hostile to the U.S.
and its prominent role in Asia, and that we are strengthening
a country that could challenge us economically, politically
and military.
The Commission does not believe that anyone can confidently
forecast the future of China and the U.S.-China relationship,
and contends that while we may work and hope for the best,
our policymakers should prepare for all contingencies.
Over the past twenty years, China has created a more
market-based economy and allowed more social and economic
freedom. Chinese participation in international security and
economic regimes has grown. On the other hand, China has made
little progress toward granting its citizens political and
religious freedom, and protecting human and labor rights. In
fact, the government has notably increased its repression of
some religious practices, including its brutal campaign
against the Alum Gong.
Chinese leaders have repeatedly stressed to their Communist
Party support and the Chinese people that they have no desire
to repeat in China the political and economic collapse that
took place in the former Soviet Union. They seek to maintain
and strengthen the Communist Party's political and social
control while permitting freer economic activity. They
consistently limit the freedom of the Chinese people to
obtain and exchange information, practice their religious
faith, to publicly express their convictions, and to join
freely organized labor unions. Chinese leaders frequently use
nationalistic themes to rally support for their actions,
including crack downs on dissenters.
China is thus embarked on a highly questionable effort--to
open its economy but not its political system--the outcome of
which will influence the destinies of many countries,
including our own. If the economy fails, or if the Chinese
people demand full freedom instead of merely a taste of it,
then the leaders will have to choose between reasserting
central control and granting greater political and social
freedom, with a consequent weakening of their own authority.
On the other hand, if China becomes rich but not free, the
United States may face a wealthy, powerful nation that could
be hostile toward our democratic values, to us, and in direct
competition with us for influence in Asia and beyond.
American policymakers must take these scenarios seriously,
and to that end the Commission has established benchmarks
against which to measure future change. There are important
areas in which Chinese policy runs directly counter to U.S.
national security interests, such as not controlling exports
that contribute to the proliferation of weapons of mass
destruction, its close relations with terrorist-sponsoring
states like Iran, Iraq, Syria, Libya, Sudan and North
Korea, its expanding long-range missile forces, its
threatening policies toward Taiwan, and its pursuit of
both asymmetric warfare capabilities and modern military
technology that could menace American military forces.
China's leaders view the United States as a partner of
convenience, useful for its capital technology, know-how and
market. They often describe the United States as China's
long-term competitor for regional and global military and
economic influence. Much rhetoric and a considerable volume
of official writings support this hypothesis. The recent
empirical study of Chinese newspapers' coverage of the U.S.,
conducted by University of Maryland scholars for the
Commission, found a divided perspective: articles in these
newspapers, which we believe generally represent the views of
the leadership, are consistently positive on trade and
investment matters and applaud Sino-U.S. cooperation in these
areas. In contrast, their coverage of U.S. foreign policy is
largely negative and frequently depicts the U.S., as
hegemonic and unilateralist.

[[Page S6939]]

In time we will learn whether China is to become a
responsible world power or an aggressive, wealthy
dictatorship, and whether the Communist Party maintains its
monopoly of political power or shares it with the Chinese
people. We will also learn whether the Chinese economy
flourishes or stumbles and collapses under the burden of
state-owned industries, a weak banking system, enormous debt,
wide-scale corruption, social dislocation, and the new
challenges of international competition brought about by its
WTO entry.
Current U.S. policies and laws fail to adequately monitor
the transfers of economic resources and security-related
technologies to China, considering the substantial
uncertainties and challenges to U.S. national interests in
this relationship. This Report attempts to begin to address
these uncertainties, trends, and challenges in a systematic
manner. It proceeds on the premise that far more prudence
must be displayed and far better understanding developed on
the part of the Congress on the full extent of this
relationship and its impact on U.S. interests. In addition,
too little attention has been devoted to the adverse impact
of recent Chinese economic strength on our Asian allies and
friends. The Commission believes the U.S. must develop a
better understanding of the vulnerabilities and needs of our
Asian allies and friends, and must carefully construct
policies to protect and nurture those relationships.

summary of recommendations

The Commission has identified its key findings and
recommendations with each chapter in this Report. The
Commission developed more than forty recommendations that are
listed with each of the ten chapters. We have prepared a
separate classified report providing additional details and
recommendations. Here, we highlight and summarize those
recommendations we believe are the highest priority and which
we recommend for immediate action. A more extended analysis
is contained in each of the Report's ten chapters.

conflicting national perspectives

The United States Government is poorly organized to manage
our increasingly complex relationship with China. We are not
adequately informed about developments within China and about
their leaders' perceptions of the U.S., and we dedicate
insufficient resources to understand China. Because Chinese
strategic thinking and analysis of military planning differ
markedly from our own, our incomplete understanding enhances
the possibilities for miscalculation, misunderstanding,
and potential conflict.
Recommendation 1: The U.S. Government should expand its
collection, translation and analysis of open source Chinese-
language materials, and make them available to the larger
community. Despite two studies advocating an improved
collection of Chinese materials at the Library of Congress,
its collection is nearly unusable and shameful. Congress
should provide funds to implement recommendations already
submitted by the two previous studies. In addition, the
Commission recommends increased funding for Chinese language
training and area studies programs, similar to the program in
the National Defense Education Act of 1958, and incentives
for post-secondary graduates to participate in government
services. The relevant executive branch agencies should
report annually to the Congress on steps taken to rectify
this situation.
Recommendation 2: The U.S. should develop a comprehensive
inventory of official government-to-government and U.S.
Government-funded programs with China. The President should
designate an executive branch agency to coordinate the
compilation of a database of all such cooperative programs.
The database should include a full description of each
program, its achievements to date, and the benefits to the
U.S. and should be prepared annually in both classified and
unclassified forms. The Commission further recommends that
the executive branch prepare a biannual report, beginning in
2004, on the cooperative Science and Technology (S&T)
programs with China patterned on the report submitted to
Congress in May 2002 at the request of Senator Robert C.
Byrd. The President should establish a working group to set
standards for S&T transfers, monitor the programs, and
coordinate with the intelligence agencies.
Recommendation 3: The Commission recommends that Congress
encourage the Department of Defense to renew efforts to
develop military-to-military confidence building measures
(CBMs) within the context of a strategic dialogue with China
and based strictly on the principles of reciprocity,
transparency, consistency, and mutual benefit.

Managing U.S.-China Economic Relations (Trade and Investment)

The United States has played a major role in China's rise
as an economic power. We are China's largest export market
and a key investor in its economy. Fueled by China's
virtually inexhaustible supply of low-cost labor and large
inflows of foreign direct investment (FDI), the U.S. trade
deficit with China has grown at a furious pace--from $11.5
billion in 1990 to $85 billion in 2000. The U.S. trade
deficit with China is not only our largest deficit in
absolute terms but also the most unbalanced trading
relationship the U.S. maintains. U.S. trade with China is
only 5 percent of total U.S. trade with the world but our
trade deficit with China is 19 percent of the total U.S.
trade deficit. U.S. exports to China are only 2 percent of
total U.S. exports to the world, while we import over 40
percent of China's exports.
Foreign direct investment has helped China leapfrog forward
both economically and technologically. These developments
have provided China with large dollar reserves, advanced
technologies, and greater R&D capacity, each of which has
helped make China an important world manufacturing center and
a growing center of R&D, which are contributing to its
military-industrial modernization. U.S. companies have
difficulty competing with Chinese based companies, in
large part, because the cost of labor in China is
depressed through low wages and denial of worker rights.
Essentially, Chinese workers do not have the ability to
negotiate their wages. Attracted in part by the low wages
in China, a growing number of U.S. manufacturers are now
operating in China, many of whom are utilizing China as an
``export platform'' to compete in U.S. and global markets.
China's large trade surplus with the United States, the
inflow of U.S. private investment into China, and China's
access to U.S. capital markets each contributes, directly or
indirectly, to China's economic growth and military
modernization.
Recommendation 4: The Commission recommends the creation of
a federally mandated corporate reporting system that would
gather appropriate data to provide a more comprehensive
understanding of the U.S. trade and investment relationship
with China. The reporting system should include reports from
U.S. companies doing business in China on their initial
investment, any transfers of technology, offset or R&D
cooperation associated with any investment, and the impact on
job relocation and production capacity from the United States
or U.S. firms overseas resulting from any investment in
China.
Recommendation 5: The Commission recommends that the U.S.
make full and active use of various trade tools including
special safeguards provisions in the WTO to gain full
compliance by China with its World Trade Organization (WTO)
accession agreement.

China's WTO Membership: Conflicting Goals

The U.S. and China hold differing goals for China's
membership in the WTO. (The Chinese saying for this situation
is: ``same bed, different dreams''). China's leadership
sought WTO membership to further the nation's economic reform
and growth through export production and the accumulation of
foreign investment, capital, and technology in order to
become a world power. U.S. support for China's WTO membership
was intended to enhance market access for U.S. goods and
services, and also to promote internal economic, political
and civil reforms, including a more open society.
China has instituted legal reforms to supervise foreign
direct investment (FDI), financial markets and private
businesses in order to stimulate trade and investment and
fulfill the country's WTO commitments. The development of a
commercial rule of law in China faces numerous obstacles,
including the lack of an independent judiciary and trained
judges, local protectionism, and widespread corruption.
Despite some advances in commercial legal reforms, China
remains grossly deficient in granting its citizens civil and
political freedoms, and makes widespread use of prison labor.
Recommendation 6: The Commission recommends that Congress
renew the Super 301 provision of U.S. trade law and request
the Administration to identify and report on other tools that
would be most effective in opening China's market to U.S.
exports if China fails to comply with its WTO commitments. In
examining these tools, priority should be given to those
industry sectors where China expects rapid economic growth in
exports to the U.S. market.
Recommendation 7: Congress should authorize and appropriate
additional funds to strengthen the Commerce Department's
support for commercial rule of la reform in China, including
intellectual property rights and WTO implementation
assistance, and to strengthen the Department of State's
promotion of capacity-building programs in the rule of
law, administrative reform, judicial reform and related
areas.
Recommendation 8: The U.S. should improve enforcement
against imports of Chinese goods made from prison labor by
shifting the burden of proof to U.S. importers and by more
stringent requirements relating to visits to Chines
facilities suspected of producing and exporting prison-made
goods to the United States. (Note: The Commission made
recommendations to Congress on this issue in a May 2002
letter).
Recommendation 9: The Commission recommends that Congress
request the annual Trade Promotion Coordination Committee
(TPCC) report prepared by the Department of Commerce include
an assessment of China's progress in compliance with its WTO
commitments, recommendations on initiatives to facilitate
compliance, and a survey of market access attained by key
U.S. industry sectors in China, including agriculture. The
report should include comparisons of U.S. market access in
those key industry sectors with those gained by the European
union and Japan.
Recommendation 10: The Commission recommends that Congress
urge the U.S. Trade Representative (USTR) to request WTO
consultations on China's noncompliance with its obligations
under the Trade-related Aspects

[[Page S6940]]

of Intellectual Property Rights (TRIPS) Agreement,
particularly its inadequate enforcement, to deter China's
counterfeiting and piracy of motion pictures and other video
products. If China fails to respond, Congress should
encourage the USTR to request a WTO dispute settlement panel
be convened on the matter.
Recommendation 11: Congress mandated the Commission to
evaluate and make recommendations on invoking Article XXI of
the General Agreement on Tariffs and Trade (GATT), relating
to security exceptions from GATT obligations. The Commission
believes that the steel industry is a possible candidate for
using Article XXI. If the Administration's current safeguard
measures prove ineffective, the Commission recommends that
Congress consider using Article XXI to ensure the survival of
the U.S. steel industry.

accessing u.s. capital markets

Chinese firms raising capital or trading their securities
in U.S. markets have almost exclusively been large state-
owned enterprises, some of which have ties to China's
military and intelligence services. There is a growing
concern that some of these firms may be assisting in the
proliferation of weapons of mass destruction of ballistic
missile delivery systems. The U.S. lacks adequate
institutional mechanisms to monitor national security
concerns raised by certain Chinese and other foreign entities
accessing the U.S. debt and equity markets. We also lack
sufficient disclosure requirements to inform the investing
public of the potential risks associated with investing in
such entities.
Recommendation 12: The Commission recommends that foreign
entities seeking to raise capital or trade their securities
in U.S. markets be required to disclose information to
investors regarding their business activities in countries
subject to U.S. economic sanctions.
Recommendation 13: The Commission recommends that the
Treasury Department, in coordination with other relevant
agencies, assess whether China or any other country
associated with the proliferation of weapons of mass
destruction or ballistic-missile delivery systems are
accessing U.S. capital markets and make this information
available to the Securities Exchange Commission (SEC). state
public pension plans, and U.S. investors. Entities sanctioned
by the Department of State for such activities should be
denied access to U.S. markets.

proliferation of weapons of mass destruction

China fails to control the export of dual-use items that
contribute to the proliferation of weapons of mass
destruction and their delivery systems. China is a leading
international source of missile-related technologies. Its
proliferation activities with terrorist-sponsoring and other
states, despite commitments to the U.S. to ease such
activities, present serious problems for U.S. national
security interests, particularly in the Middle East and Asia.
Recommendation 14: The Commission recommends that the
President be provided an extensive range of options to
penalize foreign countries for violating commitments or
agreements on proliferation involving weapons of mass
destruction and technologies and delivery systems relating to
them. All current statutes dealing with proliferation should
be amended to include a separate authorization for the
President to implement economic and other sanctions against
offending countries, including quantitative and qualitative
export and import restrictions, restricting access to U.S.
capital markets, controlling technology transfers, and
limiting U.S. direct investment.
Recommendation 15: The United States should work with the
United Nations Security Council and other appropriate inter-
governmental organizations to formulate a framework for
effective multilateral action to counter proliferation of
weapons of mass destruction and their delivery systems.
Member states found in violation of the agreed framework
should be subject to international sanctions.
Recommendation 16: The United States should continue to
prohibit satellite launch cooperation with China until it
puts into place an effective export-control system consistent
with its November 2000 commitment to the U.S. to restrict
proliferation of weapons of mass destruction and associated
technologies to other countries and entities.

cross-strait and regional relations

Cross-strait relations are a major potential flashpoint in
U.S.-China relations. Economic and people-to-people
interactions between Taiwan and the Mainland have increased
dramatically in recent years, raising prospects that such
interactions could help ameliorate cross-strait political
tensions. At the same time, China is enhancing its capability
to carry out an attack across the Taiwan Strait with special
operations, air, navy and missile forces. It continues to
deploy short- and intermediate-range missiles opposite Taiwan
and although the threat of an immediate attack appears to be
low, this buildup appears designed to forestall pro-
independence political movements in Taiwan and help bring
about an eventual end to the Island's continued separate
status.
China's economic integration with its neighbors in East
Asia raises the prospects of an Asian economic area dominated
or significantly influenced by China. The U.S. has an
interest in China's integration in Asia if it gives all
parties a stake in avoiding hostilities. Nonetheless, U.S.
influence in the area could wane to a degree, particularly on
economic and trade matters.
Recommendation 17: The Commission recommends that the
Department of Defense continue its substantive military
dialogue with Taiwan and conduct exchanges on issues ranging
from threat analysis, doctrine, and force planning.
Recommendation 18: The Commission recommends making
permanent those provisions in the fiscal years 2001 and 2002
Foreign Operations Appropriations Acts providing for
executive branch briefings to the Congress on regular
discussions between the administration and the government on
Taiwan pertaining to U.S. arms sales to Taiwan.
Recommendation 19: The Commission believes that the
Congress should encourage the Administration to initiate
consultations with other Asian countries to assess and make
recommendations on the impact of the ``hollowing out''
phenomenon with respect to China on regional economies and on
U.S. economic relations with the region.

china's military economy

China's official defense spending has expanded by more than
one-third in the past two years. The Commission estimates
that China's official defense budget represents about one-
third of its actual spending level. Its ability to increase
defense spending in the face of competing priorities is
supported by its rapid economic growth. China has the largest
standing army in the world and ranks second in actual
aggregate spending. The military's role in China's economy
has been reduced in recent years, but the military derives
extensive financial and technological benefits from the
growth and modernization of the domestic economy, which is
designed to serve it.
Recommendation 20: The Commission recommends that the
Secretary of Defense prepare a biannual report on critical
elements of the U.S. defense industrial base that are
becoming dependent on Chinese imports or Chinese-owned
companies. The Department of Defense should also update its
acquisition guidelines and develop information from defense
contractors on any dependency for critical parts of essential
U.S. weapons systems.

technology transfers and military acquisitions

China has a well-established policy and program to acquire
advanced technologies for its industrial development,
military capabilities and intelligence services. Over the
next ten years, China intends to acquire an industrial
capability to build advanced conventional and strategic
weapons systems. Current U.S. policies do not adequately
consider the impact of the transfers of commercial and
security-related technologies to China.
Recommendation 21: The Commission recommends that the
Department of Defense and the FBI jointly assess China's
targeting of sensitive U.S. weapons-related technologies, the
means employed to gain access to these technologies and the
steps that have been and should be taken to deny access and
acquisition. This assessment should include an annual report
on Chinese companies and Chinese PLA-affiliated companies
operating in the United States. Such reports are mandated by
statute but have never been provided to Congress.
The Commission cannot forecast with certainty the future
course of U.S.-China relations. Nor can we predict with any
confidence how China and Chinese society will develop in the
next ten to twenty years. We do know that China now ranks
among our most important and most troubling bilateral
relationships and believe that China's importance to the
United States will increase in the years ahead. As its
economy and military grow and its influence expands, China's
actions will carry increased importance for the American
people and for our national interests.
For this reason, the Commission believes that there is a
pressing need to fully understand the increasingly complex
economic, political and military challenges posed by China's
drive toward modernity. To gain such comprehension will
require the allocation of more resources and the elevation of
China in our foreign and national security priorities. The
Commission hopes that U.S.-China relations will develop in a
positive direction but we must urge that this outcome, though
preferred, may not happen. The U.S. must, therefore, be
prepared for all possible contingencies.

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