OFFICIAL NAME:
People's Republic of China

Geography
Total area: 9,596,960 sq. km. (about 3.7 million sq. mi.).
Cities: Capital--Beijing. Other major cities--Shanghai, Tianjin, Shenyang, Wuhan, Guangzhou, Chongqing, Harbin, Chengdu.
Terrain: Plains, deltas, and hills in east; mountains, high plateaus, deserts in west.
Climate: Tropical in south to subarctic in north.

People
Nationality: Noun and adjective--Chinese (singular and plural).
Population (2003 est.): 1.3 billion.
Population growth rate (2003 est.): 0.6%.
Health (2003 est.): Infant mortality rate--25.26/1,000. Life expectancy--72.22 years (overall); 70.33 years for males, 74.28 years for females.
Ethnic groups: Han Chinese--91.9%; Zhuang, Manchu, Hui, Miao, Uygur, Yi, Mongolian, Tibetan, Buyi, Korean, and other nationalities--8.1%.
Religions: Officially atheist; Taoism, Buddhism, Islam, Christianity.
Language: Mandarin (Putonghua), plus many local dialects.
Education: Years compulsory--9. Literacy--86%.
Work force (2001 est., 711 million): Agriculture and forestry--50%; industry and commerce--23%; other--27%.

Government
Type: Communist party-led state.
Constitution: December 4, 1982.
Independence:
Unification under the Qin (Ch'in) Dynasty 221 BC; Qing (Ch'ing or
Manchu) Dynasty replaced by a republic on February 12, 1912; People's
Republic established October 1, 1949.
Branches: Executive--president, vice president, State Council, premier. Legislative--unicameral National People's Congress. Judicial--Supreme People's Court.
Administrative
divisions: 23 provinces (the P.R.C. considers Taiwan to be its 23rd
province); 5 autonomous regions, including Tibet; 4 municipalities
directly under the State Council.
Political parties: Chinese Communist Party, 66.35 million members; 8 minor parties under communist supervision.
Suffrage: Universal at 18.

Economy
GDP (2003 est.): $1.4 trillion (exchange rate based).
Per capita GDP (2003 est.): $1,090 (exchange rate based).
GDP real growth rate (2003): 9.1%.
Natural
resources: Coal, iron ore, crude oil, mercury, tin, tungsten, antimony,
manganese, molybdenum, vanadium, magnetite, aluminum, lead, zinc,
uranium, hydropower potential (world's largest).
Agriculture: Products--Among
the world's largest producers of rice, potatoes, sorghum, peanuts, tea,
millet, barley; commercial crops include cotton, other fibers, and
oilseeds; produces variety of livestock products.
Industry: Types--iron, steel, coal, machinery, light industrial products, armaments, petroleum.
Trade (2003): Exports--$438.4 billion: mainly electrical machinery and equipment, power generation equipment, apparel, toys, footwear. Main partners--U.S., Hong Kong, Japan, EU, South Korea, Singapore. Imports--$412.8 billion: mainly electrical equipment, power generation equipment, petroleum products, chemicals, steel. Main partners--Japan, EU, Taiwan, South Korea, U.S., Hong Kong.

PEOPLE

Ethnic Groups
The
largest ethnic group is the Han Chinese, who constitute about 91.9% of
the total population. The remaining 8.1% are Zhuang (16 million),
Manchu (10 million), Hui (9 million), Miao (8 million), Uygur (7
million), Yi (7 million), Mongolian (5 million), Tibetan (5 million),
Buyi (3 million), Korean (2 million), and other ethnic minorities.

Language
There
are seven major Chinese dialects and many subdialects. Mandarin (or
Putonghua), the predominant dialect, is spoken by over 70% of the
population. It is taught in all schools and is the medium of
government. About two-thirds of the Han ethnic group are native
speakers of Mandarin; the rest, concentrated in southwest and southeast
China, speak one of the six other major Chinese dialects. Non-Chinese
languages spoken widely by ethnic minorities include Mongolian,
Tibetan, Uygur and other Turkic languages (in Xinjiang), and Korean (in
the northeast).

The Pinyin System of Romanization
On
January 1, 1979, the Chinese Government officially adopted the pinyin
system for spelling Chinese names and places in Roman letters. A system
of Romanization invented by the Chinese, pinyin has long been widely
used in China on street and commercial signs as well as in elementary
Chinese textbooks as an aid in learning Chinese characters. Variations
of pinyin also are used as the written forms of several minority
languages.

Pinyin has now replaced
other conventional spellings in China's English-language publications.
The U.S. Government also has adopted the pinyin system for all names
and places in China. For example, the capital of China is now spelled
"Beijing" rather than "Peking."

Religion
Religion
plays a significant part in the life of many Chinese. Buddhism is most
widely practiced, with an estimated 100 million adherents. Traditional
Taoism also is practiced. Official figures indicate there are 20
million Muslims, 5 million Catholics, and 15 million Protestants;
unofficial estimates are much higher.

While the Chinese constitution affirms
religious toleration, the Chinese Government places restrictions on
religious practice outside officially recognized organizations. Only
two Christian organizations--a Catholic church without official ties to
Rome and the "Three-Self-Patriotic" Protestant church--are sanctioned
by the Chinese Government. Unauthorized churches have sprung up in many
parts of the country and unofficial religious practice is flourishing.
In some regions authorities have tried to control activities of these
unregistered churches. In other regions, registered and unregistered
groups are treated similarly by authorities and congregations worship
in both types of churches. Most Chinese Catholic bishops are recognized
by the Pope, and official priests have Vatican approval to administer
all the sacraments.

Population Policy
With
a population officially just under 1.3 billion and an estimated growth
rate of about 0.6%, China is very concerned about its population growth
and has attempted with mixed results to implement a strict family
planning policy. The government's goal is one child per urban family,
and two children per rural family, with guidelines looser for ethnic
minorities with small populations. Enforcement varies widely, and
relies upon "social compensation fees" for extra children as a means of
keeping families small. Official government policy opposes forced
abortion or sterilization, but in some localities there are instances
of forced abortion.  The government's goal is to stabilize the
population in the first half of the 21st century, and current
projections are that the population will peak at around 1.6 billion by
2050.

HISTORY

Dynastic Period
China
is the oldest continuous major world civilization, with records dating
back about 3,500 years. Successive dynasties developed a system of
bureaucratic control that gave the agrarian-based Chinese an advantage
over neighboring nomadic and hill cultures. Chinese civilization was
further strengthened by the development of a Confucian state ideology
and a common written language that bridged the gaps among the country's
many local languages and dialects. Whenever China was conquered by
nomadic tribes, as it was by the Mongols in the 13th century, the
conquerors sooner or later adopted the ways of the "higher" Chinese
civilization and staffed the bureaucracy with Chinese.

The last dynasty was
established in 1644, when the Manchus overthrew the native Ming dynasty
and established the Qing (Ch'ing) dynasty with Beijing as its capital.
At great expense in blood and treasure, the Manchus over the next half
century gained control of many border areas, including Xinjiang,
Yunnan, Tibet, Mongolia, and Taiwan. The success of the early Qing
period was based on the combination of Manchu martial prowess and
traditional Chinese bureaucratic skills.

During the 19th century,
Qing control weakened, and prosperity diminished. China suffered
massive social strife, economic stagnation, explosive population
growth, and Western penetration and influence. The Taiping and Nian
rebellions, along with a Russian-supported Muslim separatist movement
in Xinjiang, drained Chinese resources and almost toppled the dynasty.
Britain's desire to continue its illegal opium trade with China
collided with imperial edicts prohibiting the addictive drug, and the
First Opium War erupted in 1840. China lost the war; subsequently,
Britain and other Western powers, including the United States, forcibly
occupied "concessions" and gained special commercial privileges. Hong
Kong was ceded to Britain in 1842 under the Treaty of Nanking, and in
1898, when the Opium Wars finally ended, Britain executed a 99-year
lease of the New Territories, significantly expanding the size of the
Hong Kong colony.

As time went on, the
Western powers, wielding superior military technology, gained more
economic and political privileges. Reformist Chinese officials argued
for the adoption of Western technology to strengthen the dynasty and
counter Western advances, but the Qing court played down both the
Western threat and the benefits of Western technology.

Early 20th Century China
Frustrated
by the Qing court's resistance to reform, young officials, military
officers, and students--inspired by the revolutionary ideas of Sun
Yat-sen–began to advocate the overthrow of the Qing dynasty and
creation of a republic. A revolutionary military uprising on October
10, 1911, led to the abdication of the last Qing monarch. As part of a
compromise to overthrow the dynasty without a civil war, the
revolutionaries and reformers allowed high Qing officials to retain
prominent positions in the new republic. One of these figures, Gen.
Yuan Shikai, was chosen as the republic's first president. Before his
death in 1916, Yuan unsuccessfully attempted to name himself emperor.
His death left the republican government all but shattered, ushering in
the era of the "warlords" during which China was ruled and ravaged by
shifting coalitions of competing provincial military leaders.

In the 1920s, Sun Yat-sen
established a revolutionary base in south China and set out to unite
the fragmented nation. With Soviet assistance, he organized the
Kuomintang (KMT or "Chinese Nationalist People's Party"), and entered
into an alliance with the fledgling Chinese Communist Party (CCP).
After Sun's death in 1925, one of his protégés, Chiang Kai-shek, seized
control of the KMT and succeeded in bringing most of south and central
China under its rule. In 1927, Chiang turned on the CCP and executed
many of its leaders. The remnants fled into the mountains of eastern
China. In 1934, driven out of their mountain bases, the CCP's forces
embarked on a "Long March" across some of China's most desolate terrain
to the northwestern province of Shaanxi, where they established a
guerrilla base at Yan'an.

During the "Long March,"
the communists reorganized under a new leader, Mao Zedong (Mao
Tse-tung). The bitter struggle between the KMT and the CCP continued
openly or clandestinely through the 14-year long Japanese invasion
(1931-45), even though the two parties nominally formed a united front
to oppose the Japanese invaders in 1937. The war between the two
parties resumed after the Japanese defeat in 1945. By 1949, the CCP
occupied most of the country.

Chiang Kai-shek fled with
the remnants of his KMT government and military forces to Taiwan, where
he proclaimed Taipei to be China's "provisional capital" and vowed to
reconquer the Chinese mainland. The KMT authorities on Taiwan still
call themselves the "Republic of China."

The People's Republic of China
In
Beijing, on October 1, 1949, Mao Zedong proclaimed the founding of the
People's Republic of China (P.R.C.). The new government assumed control
of a people exhausted by two generations of war and social conflict,
and an economy ravaged by high inflation and disrupted transportation
links. A new political and economic order modeled on the Soviet example
was quickly installed.

In the early 1950s, China
undertook a massive economic and social reconstruction program. The new
leaders gained popular support by curbing inflation, restoring the
economy, and rebuilding many war-damaged industrial plants. The CCP's
authority reached into almost every aspect of Chinese life. Party
control was assured by large, politically loyal security and military
forces; a government apparatus responsive to party direction; and the
placement of party members into leadership positions in labor, women's,
and other mass organizations.

The "Great Leap Forward" and the Sino-Soviet Split
In
1958, Mao broke with the Soviet model and announced a new economic
program, the "Great Leap Forward," aimed at rapidly raising industrial
and agricultural production. Giant cooperatives (communes) were formed,
and "backyard factories" dotted the Chinese landscape. The results were
disastrous. Normal market mechanisms were disrupted, agricultural
production fell behind, and China's people exhausted themselves
producing what turned out to be shoddy, unsalable goods. Within a year,
starvation appeared even in fertile agricultural areas. From 1960 to
1961, the combination of poor planning during the Great Leap Forward
and bad weather resulted in one of the deadliest famines in human
history.

The already strained
Sino-Soviet relationship deteriorated sharply in 1959, when the Soviets
started to restrict the flow of scientific and technological
information to China. The dispute escalated, and the Soviets withdrew
all of their personnel from China in August 1960. In 1960, the Soviets
and the Chinese began to have disputes openly in international forums.

The Cultural Revolution
In
the early 1960s, State President Liu Shaoqi and his protégé, Party
General Secretary Deng Xiaoping, took over direction of the party and
adopted pragmatic economic policies at odds with Mao's revolutionary
vision. Dissatisfied with China's new direction and his own reduced
authority, Party Chairman Mao launched a massive political attack on
Liu, Deng, and other pragmatists in the spring of 1966. The new
movement, the "Great Proletarian Cultural Revolution," was
unprecedented in communist history. For the first time, a section of
the Chinese communist leadership sought to rally popular opposition
against another leadership group. China was set on a course of
political and social anarchy that lasted the better part of a decade.

In the early stages of the
Cultural Revolution, Mao and his "closest comrade in arms," National
Defense Minister Lin Biao, charged Liu, Deng, and other top party
leaders with dragging China back toward capitalism. Radical youth
organizations, called Red Guards, attacked party and state
organizations at all levels, seeking out leaders who would not bend to
the radical wind. In reaction to this turmoil, some local People's
Liberation Army (PLA) commanders and other officials maneuvered to
outwardly back Mao and the radicals while actually taking steps to rein
in local radical activity.

Gradually, Red Guard and
other radical activity subsided, and the Chinese political situation
stabilized along complex factional lines. The leadership conflict came
to a head in September 1971, when Party Vice Chairman and Defense
Minister Lin Biao reportedly tried to stage a coup against Mao; Lin
Biao allegedly later died in a plane crash in Mongolia.

In the aftermath of the Lin
Biao incident, many officials criticized and dismissed during 1966-69
were reinstated. Chief among these was Deng Xiaoping, who reemerged in
1973 and was confirmed in 1975 in the concurrent posts of Politburo
Standing Committee member, PLA Chief of Staff, and Vice Premier.

The ideological struggle
between more pragmatic, veteran party officials and the radicals
re-emerged with a vengeance in late 1975. Mao's wife, Jiang Qing, and
three close Cultural Revolution associates (later dubbed the "Gang of
Four") launched a media campaign against Deng. In January 1976, Premier
Zhou Enlai, a popular political figure, died of cancer. On April 5,
Beijing citizens staged a spontaneous demonstration in Tiananmen Square
in Zhou's memory, with strong political overtones of support for Deng.
The authorities forcibly suppressed the demonstration. Deng was blamed
for the disorder and stripped of all official positions, although he
retained his party membership.

The Post-Mao Era
Mao's
death in September 1976 removed a towering figure from Chinese politics
and set off a scramble for succession. Former Minister of Public
Security Hua Guofeng was quickly confirmed as Party Chairman and
Premier. A month after Mao's death, Hua, backed by the PLA, arrested
Jiang Qing and other members of the "Gang of Four." After extensive
deliberations, the Chinese Communist Party leadership reinstated Deng
Xiaoping to all of his previous posts at the 11th Party Congress in
August 1977. Deng then led the effort to place government control in
the hands of veteran party officials opposed to the radical excesses of
the previous two decades.

The new, pragmatic
leadership emphasized economic development and renounced mass political
movements. At the pivotal December 1978 Third Plenum (of the 11th Party
Congress Central Committee), the leadership adopted economic reform
policies aimed at expanding rural income and incentives, encouraging
experiments in enterprise autonomy, reducing central planning, and
attracting foreign direct investment into China. The plenum also
decided to accelerate the pace of legal reform, culminating in the
passage of several new legal codes by the National People's Congress in
June 1979.

After 1979, the Chinese
leadership moved toward more pragmatic positions in almost all fields.
The party encouraged artists, writers, and journalists to adopt more
critical approaches, although open attacks on party authority were not
permitted. In late 1980, Mao's Cultural Revolution was officially
proclaimed a catastrophe. Hua Guofeng, a protégé of Mao, was replaced
as premier in 1980 by reformist Sichuan party chief Zhao Ziyang and as
party General Secretary in 1981 by the even more reformist Communist
Youth League chairman Hu Yaobang.

Reform policies brought
great improvements in the standard of living, especially for urban
workers and for farmers who took advantage of opportunities to
diversify crops and establish village industries. Literature and the
arts blossomed, and Chinese intellectuals established extensive links
with scholars in other countries.

At the same time, however,
political dissent as well as social problems such as inflation, urban
migration, and prostitution emerged. Although students and
intellectuals urged greater reforms, some party elders increasingly
questioned the pace and the ultimate goals of the reform program. In
December 1986, student demonstrators, taking advantage of the loosening
political atmosphere, staged protests against the slow pace of reform,
confirming party elders' fear that the current reform program was
leading to social instability. Hu Yaobang, a protégé of Deng and a
leading advocate of reform, was blamed for the protests and forced to
resign as CCP General Secretary in January 1987. Premier Zhao Ziyang
was made General Secretary and Li Peng, former Vice Premier and
Minister of Electric Power and Water Conservancy, was made Premier.

1989 Student Movement and Tiananmen Square
After
Zhao became the party General Secretary, the economic and political
reforms he had championed came under increasing attack. His proposal in
May 1988 to accelerate price reform led to widespread popular
complaints about rampant inflation and gave opponents of rapid reform
the opening to call for greater centralization of economic controls and
stricter prohibitions against Western influence. This precipitated a
political debate, which grew more heated through the winter of 1988-89.

The death of Hu Yaobang on
April 15, 1989, coupled with growing economic hardship caused by high
inflation, provided the backdrop for a large-scale protest movement by
students, intellectuals, and other parts of a disaffected urban
population. University students and other citizens camped out in
Beijing's Tiananmen Square to mourn Hu's death and to protest against
those who would slow reform. Their protests, which grew despite
government efforts to contain them, called for an end to official
corruption and for defense of freedoms guaranteed by the Chinese
constitution. Protests also spread to many other cities, including
Shanghai, Chengdu, and Guangzhou.

Martial law was declared on
May 20, 1989. Late on June 3 and early on the morning of June 4,
military units were brought into Beijing. They used armed force to
clear demonstrators from the streets. There are no official estimates
of deaths in Beijing, but most observers believe that casualties
numbered in the hundreds.

After June 4, while foreign
governments expressed horror at the brutal suppression of the
demonstrators, the central government eliminated remaining sources of
organized opposition, detained large numbers of protesters, and
required political reeducation not only for students but also for large
numbers of party cadre and government officials.

Following the resurgence of
conservatives in the aftermath of June 4, economic reform slowed until
given new impetus by Deng Xiaoping's dramatic visit to southern China
in early 1992. Deng's renewed push for a market-oriented economy
received official sanction at the 14th Party Congress later in the year
as a number of younger, reform-minded leaders began their rise to top
positions. Deng and his supporters argued that managing the economy in
a way that increased living standards should be China's primary policy
objective, even if "capitalist" measures were adopted. Subsequent to
the visit, the Communist Party Politburo publicly issued an endorsement
of Deng's policies of economic openness. Though not completely
eschewing political reform, China has consistently placed overwhelming
priority on the opening of its economy.

Third Generation of Leaders
Deng's
health deteriorated in the years prior to his death in 1997. During
that time, President Jiang Zemin and other members of his generation
gradually assumed control of the day-to-day functions of government.
This "third generation" leadership governed collectively with President
Jiang at the center.

In March 1998, Jiang was
re-elected President during the 9th National People's Congress. Premier
Li Peng was constitutionally required to step down from that post. He
was elected to the chairmanship of the National People's Congress. Zhu
Rongji was selected to replace Li as Premier.

Fourth Generation of Leaders
In
November 2002, the 16th Communist Party Congress elected Hu Jintao, who
in 1992 was designated by Deng Xiaoping as the "core" of the fourth
generation leaders, the new General Secretary. A new Politburo and
Politburo Standing Committee was also elected in November.

In March 2003, General
Secretary Hu Jintao was elected President at the 10th National People's
Congress. Jiang Zemin retained the chairmanship of the Central Military
Commission. At the Fourth Party Plenum in September 2004, Jiang
Zemin retired from the Central Military Commission, passing the
Chairmanship and control of the People's Liberation Army to President
Hu Jintao.

China is firmly committed
to economic reform and opening to the outside world. The Chinese
leadership has identified reform of state industries and the
establishment of a social safety network as government priorities.
Government strategies for achieving these goals include large-scale
privatization of unprofitable state-owned enterprises and development
of a pension system for workers. The leadership has also downsized the
government bureaucracy.

The Next 5 Years
The
next 5 years represent a critical period in China's existence. To
investors and firms, especially following China’s accession to the
World Trade Organization (WTO) in 2001, China represents a vast market
that has yet to be fully tapped and a low-cost base for export-oriented
production. Educationally, China is forging ahead as partnerships and
exchanges with foreign universities have helped create new research
opportunities for its students. The new leadership is also committed to
generating greater economic development in the interior and providing
more services to those who do not live in China’s coastal areas.
However, there is still much that needs to change in China. Human
rights issues remain a concern among members of the world community, as
does continuing proliferation of weapons of mass destruction
(WMD)-related materials and technology.

GOVERNMENT

Chinese Communist Party
The
66.35 million member CCP, authoritarian in structure and ideology,
continues to dominate government. Nevertheless, China's population,
geographical vastness, and social diversity frustrate attempts to rule
by fiat from Beijing. Central leaders must increasingly build consensus
for new policies among party members, local and regional leaders,
influential non-party members, and the population at large.

In periods of greater
openness, the influence of people and organizations outside the formal
party structure has tended to increase, particularly in the economic
realm. This phenomenon is most apparent today in the rapidly developing
coastal region. Nevertheless, in all important government, economic,
and cultural institutions in China, party committees work to see that
party and state policy guidance is followed and that non-party members
do not create autonomous organizations that could challenge party rule.
Party control is tightest in government offices and in urban economic,
industrial, and cultural settings; it is considerably looser in the
rural areas, where the majority of the people live.

Theoretically, the party's
highest body is the Party Congress, which is supposed to meet at least
once every 5 years. The primary organs of power in the Communist Party
include:

• The Politburo Standing Committee, which currently consists of nine members;
  
• The Politburo, consisting of 24 full members, including the members of the Politburo Standing Committee;
  
• The Secretariat, the principal administrative mechanism of the CCP, headed by the General Secretary;
  
• The Central Military Commission;
  
• The Discipline Inspection Commission, which is charged with rooting out corruption and malfeasance among party cadres.

State Structure
The
Chinese Government has always been subordinate to the Chinese Communist
Party (CCP); its role is to implement party policies. The primary
organs of state power are the National People's Congress (NPC), the
President (the head of state), and the State Council. Members of the
State Council include Premier Wen Jiabao (the head of government), a
variable number of vice premiers (now four), five state councilors
(protocol equivalents of vice premiers but with narrower portfolios),
and 22 ministers and four State Council commission directors.

Under the Chinese
constitution, the NPC is the highest organ of state power in China. It
meets annually for about 2 weeks to review and approve major new policy
directions, laws, the budget, and major personnel changes. These
initiatives are presented to the NPC for consideration by the State
Council after previous endorsement by the Communist Party's Central
Committee. Although the NPC generally approves State Council policy and
personnel recommendations, various NPC committees hold active debate in
closed sessions, and changes may be made to accommodate alternate
views.

When the NPC is not in session, its permanent organ, the Standing Committee, exercises state power.

Principal Government and Party Officials
President--Hu Jintao
Vice President--Zeng Qinghong
Premier, State Council--Wen Jiabao
NPC Chair--Wu Bangguo
Vice Premiers--Huang Ju, Wu Yi, Zeng Peiyan, Hui Liangyu
Politburo
Standing Committee--Hu Jintao (General Secretary), Wu Bangguo, Wen
Jiabao, Jia Qinglin, Zeng Qinghong, Huang Ju, Wu Guanzheng, Li
Changchun, Luo Gan
Full Politburo Members--Cao Gangchuan, Chen
Liangyu, Guo Boxiong, He Guoqiang, Hui Liangyu, Liu Qi, Liu Yunshan,
Wang Lequan, Wang Zhaoguo, Wu Yi, Yu Zhengsheng, Zeng Peiyan, Zhang
Dejiang, Zhang Lichang, Zhou Yongkang
Alternate Politburo Members--Wang Gang
Chairman, Central Military Commission--Hu Jintao

Foreign Minister--Li Zhaoxing
Minister of Commerce--Bo Xilai
Minister of Finance--Jin Renqing
Minister of Agriculture--Du Qinglin
Minister of Information Industry--Wang Xudong
Governor, People's Bank of China--Zhou Xiaochuan
Minister, State Development and Reform Commission--Ma Kai
Ambassador to U.S.--Yang Jiechi
Ambassador to UN--Wang Guangya

POLITICAL CONDITIONS

Legal System
The
government's efforts to promote rule of law are significant and
ongoing. After the Cultural Revolution, China's leaders aimed to
develop a legal system to restrain abuses of official authority and
revolutionary excesses. In 1982, the National People's Congress adopted
a new state constitution that emphasized the rule of law under which
even party leaders are theoretically held accountable.

Since 1979, when the drive
to establish a functioning legal system began, more than 300 laws and
regulations, most of them in the economic area, have been promulgated.
The use of mediation committees--informed groups of citizens who
resolve about 90% of China's civil disputes and some minor criminal
cases at no cost to the parties--is one innovative device. There are
more than 800,000 such committees in both rural and urban areas.

Legal reform became a
government priority in the 1990s. Legislation designed to modernize and
professionalize the nation's lawyers, judges, and prisons was enacted.
The 1994 Administrative Procedure Law allows citizens to sue officials
for abuse of authority or malfeasance. In addition, the criminal law
and the criminal procedures laws were amended to introduce significant
reforms. The criminal law amendments abolished the crime of
"counter-revolutionary" activity, although many persons are still
incarcerated for that crime. Criminal procedures reforms also
encouraged establishment of a more transparent, adversarial trial
process. The Chinese constitution and laws provide for fundamental
human rights, including due process, but these are often ignored in
practice.

Human Rights
The
State Department’s annual China human rights reports have noted China’s
well-documented abuses of human rights in violation of internationally
recognized norms, stemming both from the authorities’ intolerance of
dissent and the inadequacy of legal safeguards for basic freedoms.
Abuses reported have included arbitrary and lengthy incommunicado
detention, forced confessions, torture, and mistreatment of prisoners
as well as severe restrictions on freedom of speech, the press,
assembly, association, religion, privacy, and worker rights.

At the same time, China’s
economic growth and reform since 1978 has improved dramatically the
lives of hundreds of millions of Chinese, increased social mobility,
and expanded the scope of personal freedom. This has meant
substantially greater freedom of travel, employment opportunity,
educational and cultural pursuits, job and housing choices, and access
to information. In recent years, China has also passed new criminal and
civil laws that provide additional safeguards to citizens. Village
elections have been carried out in over 90% of China’s one million
villages.

ECONOMY

Economic Reforms
Since
1979, China has reformed and opened its economy. The Chinese leadership
has adopted a more pragmatic perspective on many political and
socioeconomic problems, and has reduced the role of ideology in
economic policy. China’s ongoing economic transformation has had a
profound impact not only on China but on the world. The market-oriented
reforms China has implemented over the past two decades have unleashed
individual initiative and entrepreneurship. The result has been the
largest reduction of poverty and one of the fastest increases in income
levels ever seen. China today is the sixth-largest economy in the
world. It accounted for about 4% of global gross domestic product (GDP)
in 2002.

In the 1980s, China tried
to combine central planning with market-oriented reforms to increase
productivity, living standards, and technological quality without
exacerbating inflation, unemployment, and budget deficits. China
pursued agricultural reforms, dismantling the commune system and
introducing a household-based system that provided peasants greater
decision-making in agricultural activities. The government also
encouraged nonagricultural activities such as village enterprises in
rural areas, and promoted more self-management for state-owned
enterprises, increased competition in the marketplace, and facilitated
direct contact between Chinese and foreign trading enterprises. China
also relied more upon foreign financing and imports.

During the 1980s, these
reforms led to average annual rates of growth of 10% in agricultural
and industrial output. Rural per capita real income doubled. China
became self-sufficient in grain production; rural industries accounted
for 23% of agricultural output, helping absorb surplus labor in the
countryside. The variety of light industrial and consumer goods
increased. Reforms began in the fiscal, financial, banking,
price-setting, and labor systems.

By the late 1980s, however,
the economy had become overheated with increasing rates of inflation.
At the end of 1988, in reaction to a surge of inflation caused by
accelerated price reforms, the leadership introduced an austerity
program.

China's economy regained
momentum in the early 1990s. During a visit to southern China in early
1992, China's paramount leader at the time, Deng Xiaoping, made a
series of political pronouncements designed to reinvigorate the process
of economic reform. The 14th Party Congress later in the year backed
Deng's renewed push for market reforms, stating that China's key task
in the 1990s was to create a "socialist market economy." The 10-year
development plan for the 1990s stressed continuity in the political
system with bolder reform of the economic system.

China’s economy grew at an average rate
of 10% per year during the period 1990-2001, the highest growth rate in
the world. China’s gross domestic product (GDP) grew 8% in 2002, and
even faster, 9.1%, in 2003, despite the setbacks of the severe acute
respiratory syndrome (SARS) outbreak and a sluggish world economy.
China’s total trade in 2003 surpassed $852 billion, making China the
world’s fourth-largest trading nation.

Nevertheless, serious
imbalances exist behind the spectacular trade performance, high
investment flows, and high GDP growth. High numbers of non-performing
loans weigh down the state-run banking system. Inefficient state-owned
enterprises (SOEs) are still a drag on growth, despite announced plans
to sell, merge, or close the vast majority of SOEs.

Social and economic
indicators have improved since reforms were launched, but rising
inequality is evident between the more highly developed coastal
provinces and the less developed, poorer inland regions. According to
the Asian Development Bank, about 10.5% of the urban population and
25.5% of the rural population would be classified as poor in 1999.

Following the Chinese
Communist Party’s Third Plenum, held in October 2003, Chinese
legislators unveiled several proposed amendments to the state
constitution. One of the most significant was a proposal to provide
protection for private property rights. Legislators also indicated
there would be a new emphasis on certain aspects of overall government
economic policy, including efforts to reduce unemployment (now in the
8-10% range in urban areas), to rebalance income distribution between
urban and rural regions, and to maintain economic growth while
protecting the environment and improving social equity. The National
People’s Congress approved the amendments when it met in March 2004.

Agriculture
Roughly
half of China's labor force is engaged in agriculture, even though only
10% of the land is suitable for cultivation. China is among the world's
largest producers of rice, potatoes, sorghum, millet, barley, peanuts,
tea, and pork. Major non-food crops include cotton, other fibers, and
oilseeds. Yields are high because of intensive cultivation, but China
hopes to further increase agricultural production through improved
plant stocks, fertilizers, and technology. Incomes for Chinese farmers
are stagnating, leading to an increasing wealth gap between the cities
and countryside. Government policies that continue to emphasize grain
self-sufficiency and the fact that farmers do not own--and cannot buy
or sell--the land they work have contributed to this situation. In
addition, inadequate port facilities and lack of warehousing and cold
storage facilities impede both domestic and international agricultural
trade.

Industry
Major
state industries are iron, steel, coal, machine building, light
industrial products, armaments, and textiles. These industries have
resisted significant management change. The 1999 industrial census
revealed that there were 7,930,000 industrial enterprises at the end of
1999 (including small-scale town and village enterprises); total
employment in state-owned industrial enterprises was approximately 24
million. High-tech industries are well positioned to take advantage of
opportunities created by accession to the WTO. Machinery and consumer
products have become China's main exports.

Energy
In
2003, China surpassed Japan to become the second-largest consumer of
primary energy, after the United States. China is also the
third-largest energy producer in the world, after the United States and
Russia. China’s electricity consumption is expected to grow by over 4%
a year through 2030, which will require more than $2 trillion in
electricity infrastructure investment to meet the demand. China expects
to add approximately 15,000 megawatts of generating capacity a year,
with 20% of that coming from foreign suppliers.

Coal makes up the bulk of
China’s energy consumption (64% in 2002), and China is the largest
producer and consumer of coal in the world. As China’s economy
continues to grow, China’s coal demand is projected to rise
significantly. Although coal’s share of China’s overall energy
consumption will fall, coal consumption will continue to rise in
absolute terms.

Due in large part to
environmental concerns, Beijing would like to shift China's current
energy mix toward greater reliance on oil, natural gas, renewable
energy, and nuclear power. China has abundant hydroelectric resources;
the Three Gorges Dam, for example, will have a total capacity of 18
gigawatts when fully on-line (projected for 2009). In addition, the
share of electricity generated by nuclear power is projected to grow
from 1% in 2000 to 5% in 2030. But while interest in renewable sources
of energy is growing, except for hydropower, their contribution to the
overall energy mix is unlikely to rise above 1%-2% in the near future.

Since 1993, China has been
a net importer of oil. Net imports are expected to rise to 3.5 million
barrels per day by 2010. China is interested in diversifying the
sources of its oil imports and has invested in oil fields around the
world, particularly in Central Asia. Beijing also plans to increase
China's natural gas production, which currently accounts for only 3% of
China’s total energy consumption. Analysts expect China’s consumption
of natural gas to more than double by 2010.

Environment
One
of the serious negative consequences of China's rapid industrial
development has been increased pollution and degradation of natural
resources. A 1998 World Health Organization report on air quality in
272 cities worldwide concluded that seven of the world's 10 most
polluted cities were in China. According to China's own evaluation,
two-thirds of the 338 cities for which air-quality data are available
are considered polluted--two-thirds of them moderately or severely so.
Respiratory and heart diseases related to air pollution are the leading
cause of death in China. Almost all of the nation's rivers are
considered polluted to some degree, and half of the population lacks
access to clean water. Ninety percent of urban water bodies are
severely polluted. Water scarcity also is an issue; for example, severe
water scarcity in Northern China is a serious threat to sustained
economic growth and has forced the government to begin implementing a
large-scale diversion of water from the Yangtze River to northern
cities, including Beijing and Tianjin. Acid rain falls on 30% of the
country. Various studies estimate pollution costs the Chinese economy
7-10% of GDP each year.

China's leaders are
increasingly paying attention to the country's severe environmental
problems. In March 1998, the State Environmental Protection
Administration (SEPA) was officially upgraded to a ministry-level
agency, reflecting the growing importance the Chinese Government places
on environmental protection. In recent years, China has strengthened
its environmental legislation and made some progress in stemming
environmental deterioration. In 1999, China invested more than 1% of
GDP in environmental protection, a proportion that will likely increase
in coming years. During the 10th Five-Year Plan, China plans to reduce
total emissions by 10%. Beijing in particular is investing heavily in
pollution control as part of its campaign to host a successful Olympiad
in 2008. Some cities have seen improvement in air quality in recent
years.

China is an active
participant in the climate change talks and other multilateral
environmental negotiations, taking environmental challenges seriously
but pushing for the developed world to help developing countries to a
greater extent. It is a signatory to the Basel Convention governing the
transport and disposal of hazardous waste and the Montreal Protocol for
the Protection of the Ozone Layer, as well as the Convention on
International Trade in Endangered Species and other major environmental
agreements.

The question of
environmental impacts associated with the Three Gorges Dam project has
generated controversy among environmentalists inside and outside China.
Critics claim that erosion and silting of the Yangtze River threaten
several endangered species, while Chinese officials say the dam will
help prevent devastating floods and generate clean hydroelectric power
that will enable the region to lower its dependence on coal, thus
lessening air pollution.

The United States and China
have been engaged in an active program of bilateral environmental
cooperation since the mid-1990s, with an emphasis on clean energy
technology and the design of effective environmental policy. While both
governments view this cooperation positively, China has often compared
the U.S. program, which lacks a foreign assistance component, with
those of Japan and several European Union (EU) countries that include
generous levels of aid.

Science and Technology
Science
and technology have always preoccupied Chinas leaders; indeed, China's
political leadership comes almost exclusively from technical
backgrounds and has a high regard for science. Deng called it "the
first productive force." Distortions in the economy and society created
by party rule have severely hurt Chinese science, according to some
Chinese science policy experts. The Chinese Academy of Sciences,
modeled on the Soviet system, puts much of China's greatest scientific
talent in a large, under-funded apparatus that remains largely isolated
from industry, although the reforms of the past decade have begun to
address this problem.

Chinese science strategists
see China's greatest opportunities in newly emerging fields such as
biotechnology and computers, where there is still a chance for China to
become a significant player. Most Chinese students who went abroad have
not returned, but they have built a dense network of trans-Pacific
contacts that will greatly facilitate U.S.-China scientific cooperation
in coming years. The United States is often held up as the standard of
modernity in China. Indeed, photos of the Space Shuttle often appear in
Chinese advertisements as a symbol of advanced technology. China's
small but growing space program, which put an astronaut into orbit in
October 2003, is a focus of national pride.

The U.S.-China Science and
Technology Agreement remains the framework for bilateral cooperation in
this field. A 5-year agreement to extend the Science and Technology
Agreement was signed in April 2001. There are currently over 30 active
protocols under the Agreement, covering cooperation in areas such as
marine conservation, renewable energy, and health. Japan and the
European Union also have high profile science and technology
cooperative relationships with China. Biennial Joint Commission
Meetings on Science and Technology bring together policymakers from
both sides to coordinate joint science and technology cooperation.
Executive Secretaries meetings are held each year to implement specific
cooperation programs.

Trade
China's
merchandise exports totaled $438.4 billion and imports totaled $412.8
billion in 2003. Its global trade surplus was down 16%, to $25.6
billion. China's primary trading partners include Japan, the EU, the
United States, South Korea, Hong Kong, and Taiwan. According to U.S.
statistics, China had a trade surplus with the U.S. of $124 billion in
2003.

China has taken important
steps to open its foreign trading system and integrate itself into the
world trading system. In November 1991, China joined the Asia-Pacific
Economic Cooperation (APEC) group, which promotes free trade and
cooperation in the economic, trade, investment, and technology spheres.
China served as APEC chair in 2001, and Shanghai hosted the annual APEC
leaders meeting in October of that year.

China formally joined the
WTO in December 2001. As part of this far-reaching trade liberalization
agreement, China agreed to lower tariffs and abolish market
impediments. Chinese and foreign businessmen, for example, gained the
right to import and export on their own, and to sell their products
without going through a government middleman. By 2005, average tariff
rates on key U.S. agricultural exports will drop from 31% to 14% and on
industrial products from 25% to 9%. The agreement also opens up new
opportunities for U.S. providers of services like banking, insurance,
and telecommunications. China has made significant progress
implementing its WTO commitments, but serious concerns remain,
particularly in the realm of intellectual property rights protection.

Export growth continues to
be a major component supporting China's rapid economic growth. To
increase exports, China has pursued policies such as fostering the
rapid development of foreign-invested factories, which assemble
imported components into consumer goods for export, and liberalizing
trading rights.

The United States is one of
China's primary suppliers of power generating equipment, aircraft and
parts, computers and industrial machinery, raw materials, and chemical
and agricultural products. However, U.S. exporters continue to have
concerns about fair market access due to strict testing and standards
requirements for some imported products. In addition, a lack of
transparency in the regulatory process makes it difficult for
businesses to plan for changes in the domestic market structure.

Foreign Investment
China’s
investment climate has changed dramatically in 24 years of reform. In
the early 1980s, China restricted foreign investments to
export-oriented operations and required foreign investors to form
joint-venture partnerships with Chinese firms. Foreign direct
investment (FDI) grew quickly during the 1980s, but stalled in late
1989 in the aftermath of Tiananmen. In response, the government
introduced legislation and regulations designed to encourage foreigners
to invest in high-priority sectors and regions. Since the early 1990s,
China has allowed foreign investors to manufacture and sell a wide
range of goods on the domestic market, and authorized the establishment
of wholly foreign-owned enterprises, now the preferred form of FDI.
However, the Chinese government’s emphasis on guiding FDI into
manufacturing has led to market saturation in some industries, while
leaving China’s services sectors underdeveloped. China is now one of
the leading recipients of FDI in the world, receiving over $53 billion
in 2003, for a cumulative total of $501 billion.

As part of China’s
accession to the World Trade Organization in 2001, China undertook to
eliminate certain trade-related investment measures and to open up
specified sectors that had previously been closed to foreign
investment. New laws, regulations, and administrative measures to
implement these commitments are being issued. Major remaining barriers
to foreign investment include opaque and inconsistently enforced laws
and regulations and the lack of a rules-based legal infrastructure.

Opening to the outside
remains central to China's development. Foreign-invested enterprises
produce about half of China's exports, and China continues to attract
large investment inflows. Foreign exchange reserves totaled over $403
billion in 2003.

FOREIGN RELATIONS
Since
its establishment, the People's Republic has worked vigorously to win
international support for its position that it is the sole legitimate
government of all China, including Hong Kong, Macau, and Taiwan. In the
early 1970s, Beijing was recognized diplomatically by most world
powers. Beijing assumed the China seat in the United Nations in 1971
and became increasingly active in multilateral organizations. Japan
established diplomatic relations with China in 1972, and the U.S. did
so in 1979. The number of countries that have established diplomatic
relations with Beijing has risen to 156, while 28 have diplomatic
relations with Taiwan.

After the founding of the
P.R.C., China's foreign policy initially focused on solidarity with the
Soviet Union and other communist countries. In 1950, China sent the
People's Liberation Army into North Korea as "volunteers" to help North
Korea halt the UN offensive that was approaching the Yalu River. After
the conclusion of the Korean conflict, China sought to balance its
identification as a member of the Soviet bloc by establishing friendly
relations with Pakistan and other Third World countries, particularly
in Southeast Asia.

In the 1960s, Beijing
competed with Moscow for political influence among communist parties
and in the developing world generally. Following the 1968 Soviet
invasion of Czechoslovakia and clashes in 1969 on the Sino-Soviet
border, Chinese competition with the Soviet Union increasingly
reflected concern over China's own strategic position.

In late 1978, the Chinese
also became concerned over Vietnam's efforts to establish open control
over Laos and Cambodia. In response to the Soviet-backed Vietnamese
invasion of Cambodia, China fought a brief border war with Vietnam
(February-March 1979) with the stated purpose of "teaching Vietnam a
lesson."

Chinese anxiety about
Soviet strategic advances was heightened following the Soviet Union's
December 1979 invasion of Afghanistan. Sharp differences between China
and the Soviet Union persisted over Soviet support for Vietnam's
continued occupation of Cambodia, the Soviet invasion of Afghanistan,
and Soviet troops along the Sino-Soviet border and in Mongolia--the
so-called "three obstacles" to improved Sino-Soviet relations.

In the 1970s and 1980s
China sought to create a secure regional and global environment for
itself and to foster good relations with countries that could aid its
economic development. To this end, China looked to the West for
assistance with its modernization drive and for help in countering
Soviet expansionism, which it characterized as the greatest threat to
its national security and to world peace.

China maintained its
consistent opposition to "superpower hegemonism," focusing almost
exclusively on the expansionist actions of the Soviet Union and Soviet
proxies such as Vietnam and Cuba, but it also placed growing emphasis
on a foreign policy independent of both the U.S. and the Soviet Union.
While improving ties with the West, China continued to follow closely
economic and other positions of the Third World nonaligned movement,
although China was not a formal member.

In the immediate aftermath
of Tiananmen crackdown in June 1989, many countries reduced their
diplomatic contacts with China as well as their economic assistance
programs. In response, China worked vigorously to expand its relations
with foreign countries, and by late 1990, had reestablished normal
relations with almost all nations. Following the collapse of the Soviet
Union in late 1991, China also opened diplomatic relations with the
republics of the former Soviet Union.

In recent years, Chinese
leaders have been regular travelers to all parts of the globe, and
China has sought a higher profile in the UN through its permanent seat
on the United Nations Security Council and other multilateral
organizations. Closer to home, China has made efforts to reduce
tensions in Asia; it has contributed to stability on the Korean
Peninsula, cultivated a more cooperative relationship with members of
the Association of Southeast Asian Nations (Brunei, Burma, Indonesia,
Laos, Malaysia, Philippines, Singapore, Thailand, Vietnam), and
participated in the ASEAN Regional Forum. China has improved ties with
Russia. President Putin and President Jiang signed a Treaty of
Friendship and Cooperation in July 2001. The two also joined with the
Central Asian nations of Kazakhstan, Kyrgyzstan, Tajikistan, and
Uzbekistan to establish the Shanghai Cooperation Organization (SCO) in
June 2001. The SCO is designed to promote regional stability and
cooperate to combat terrorism in the region. China has a number of
border and maritime disputes, including with Vietnam in the Gulf of
Tonkin, with a number of countries in the South China Sea, as well as
with Japan and India. Beijing has resolved many of its border and
maritime disputes, notably including a November 1997 agreement
with Russia that resolved almost all outstanding border issues and a
2000 agreement with Vietnam to resolve some differences over their
maritime border, though disagreements remain over islands in the South
China Sea. Working with India, China has also stepped up efforts to
define a line of control on the Sino-Indian border.

DEFENSE
Establishment
of a professional military force equipped with modern weapons and
doctrine was the last of the "Four Modernizations" announced by Zhou
Enlai and supported by Deng Xiaoping. In keeping with Deng's mandate to
reform, the People's Liberation Army (PLA), which includes the
strategic nuclear forces, army, navy, and air force, has demobilized
millions of men and women since 1978 and introduced modern methods in
such areas as recruitment and manpower, strategy, and education and
training.

Following the June 1989
Tiananmen crackdown, ideological correctness was temporarily revived as
the dominant theme in Chinese military affairs. Reform and
modernization appear to have since resumed their position as the PLA's
priority objectives, although the armed forces' political loyalty to
the CCP remains a leading concern.

The Chinese military is
trying to transform itself from a land-based power, centered on a vast
ground force, to a smaller, mobile, high-tech military capable of
mounting defensive operations beyond its coastal borders.

China's power-projection
capability is limited but has grown over recent years. China has
acquired some advanced weapons systems, including Sovremmeny
destroyers, SU-27 and SU-30 aircraft, and Kilo-class diesel submarines
from Russia. However, the mainstay of the air force continues to be the
1960s-vintage F-7, and naval forces still consist primarily of
1960s-era technology.

Nuclear Weapons and Arms Control Policy
Nuclear Weapons.  In
1955, Mao Zedong's Chinese Communist Party decided to proceed with a
nuclear weapons program; it was developed with Soviet assistance until
1960. After its first nuclear test in October 1964, Beijing deployed a
modest but potent ballistic missile force, including land- and
sea-based intermediate-range and intercontinental ballistic missiles.

China became a major
international arms exporter during the 1980s. Beijing joined the Middle
East arms control talks, which began in July 1991 to establish global
guidelines for conventional arms transfers, but announced in September
1992 that it would no longer participate because of the U.S. decision
to sell F-16A/B aircraft to Taiwan.

China was the first state
to pledge "no first use" of nuclear weapons. It joined the
International Atomic Energy Agency (IAEA) in 1984 and pledged to
abstain from further atmospheric testing of nuclear weapons in 1986.
China acceded to the nuclear Non-Proliferation Treaty (NPT) in 1992 and
supported its indefinite and unconditional extension in 1995. In 1996,
it signed the Comprehensive Test Ban Treaty (CTBT) and agreed to seek
an international ban on the production of fissile nuclear weapons
material. To date, China has not ratified the CTBT.

In 1996, China committed
not to provide assistance to unsafeguarded nuclear facilities. China
attended the May 1997 meeting of the NPT Exporters (Zangger) Committee
as an observer and became a full member in October 1997. The Zangger
Committee is a group that meets to list items that should be subject to
IAEA inspections if exported by countries that have, as China has,
signed the Non-Proliferation Treaty. In September 1997, China issued
detailed nuclear export control regulations. China began implementing
regulations establishing controls over nuclear-related dual-use items
in 1998. China also has decided not to engage in new nuclear
cooperation with Iran (even under safeguards), and will complete
existing cooperation, which is not of proliferation concern, within a
relatively short period. In May 2004, with the support of the
United States, China became a member of the Nuclear Suppliers Group.

Based on significant,
tangible progress with China on nuclear nonproliferation, President
Clinton in 1998 took steps to bring into force the 1985 U.S.-China
Agreement on Peaceful Nuclear Cooperation.