Bush's China Policy Gets Japanese Nudge

SINCE the June 1989 crackdown on pro-democracy demonstrators in Tiananmen Square, President Bush has been under fire from critics who feel he has been too soft on China's human rights abuses, while business advocates have cautioned him not to block United States-Chinese commercial interests. The pressure increased this week when Japanese Prime Minister Toshiki Kaifu announced at the Economic Summit in Houston his plan for economic assistance to Beijing. While withholding support, Mr. Bush indicated that he would not oppose Japan's intention to activate $5.4 billion in development credits for the Chinese.

``I think it's premature for countries to go back into China with loans, says Winston Lord, US ambassador to China from 1985 until November last year. The country has reversed much of the progress it has made over the past decade, he says, and it is back to central planning. ``I can understand why it's difficult for the US to fight the Japanese on this ... they have their own interests in Japan to consider. But I really hope that Bush holds the US line.''

The Japanese plan is just one indication that the post-Tiananmen Square international consensus to extend only the most basic assistance to China is wearing thin.

World Bank assistance, slashed $780 million last year to protest Chinese repression, has also been partly reinstated. A $300 million reforestation loan, which may fall outside the purview of basic human needs, was approved on May 29, a move Bush supported. More loans are in the pipeline, says a bank spokesman.

Many observers agree that the US is powerless to oppose Japan's moves.

Some members of Congress see a potential lever on the Chinese government in the US's contribution of some 20 percent of the World Bank's total development financing.

Support for a US-Chinese relationship conditioned on Chinese political and economic reform is gaining rapid and broad support, says US Rep. Nancy Pelosi (D) of California, who chairs the Congressional Working Group on China. ``We have passed legislation in the House Appropriations Committee and the Banking Committee that we will deduct the US share of World Bank loans to China that are not made on the basis of basic human needs,'' she says.

Calling the Japanese decision ``unfortunate,'' Representative Pelosi says it is folly to give ``billions of dollars to a centralized economy that has hardened its line.''

Before Bush left for Houston, she says, she sent him a letter bearing 160 congressional signatures calling for continued G-7 support for only limited World Bank funding for China. ``We will soon consider a $3 billion contribution to the World Bank, and we want the G-7 to be aware of our position,'' she says.

When Bush returns from Houston, he will have another congressional issue brewing: opposition to most-favored-nation status for China.

Just before China's MFN status was to expire on June 3, Bush extended it for a year. Opponents have until Aug. 31 to pass a joint resolution disapproving the decision.

Among the conditions that Pelosi says she would like to see attached to most-favored-nation status are a halt to China's jamming of Voice of America broadcasts, its release of political prisoners, and the end of Beijing's ``harassment'' of Chinese dissidents in the US.

US Rep. Lee Hamilton (D) of Indiana, chairman of the Joint Economic Committee (JEC), says, ``The president is doing the right thing by extending MFN for another year, but he should make it conditional upon China's performance with respect to human rights and reforms.''

A Central Intelligence Agency assessment of China's economy, released to the JEC late last month, concludes that the country's economic problems threaten its stability. Severe unemployment and urban blight are the result of ``overly restrictive austerity policies'' and a reversal of any progress toward market-oriented reform.

Beijing also tightened import controls to save precious foreign exchange. Flows of foreign investment, tourism revenues, and concessional financing shrank severely following the Tiananmen incident last year.

US-Sino trade has reached $18 billion a year, and 1,000 US companies have invested a total of $4 billion in China. Ambassador Lord says that while the White House should wait for reforms, American businesses should look at China from a strictly economic perspective.

``It's too much to ask them to make decisions on political grounds,'' he says. He says US private-sector initiatives can help maintain links with emerging Chinese reformers.

Shanghai Mayor Zhu Rongji is one Chinese leader who, Lord says, ``is very reform minded on the economic front and an important provincial leader.'' Many China-watchers see the mayor as a strong prospect for national leadership.

He is joined by five other mayors from China's largest cities, who arrived in the US this week to meet with government officials, business leaders, and academics.

Among the sponsors of the trip are the US Information Agency and several US corporations, including Abbott Laboratories, AT&T, and Citicorp/Citibank.