Engage China, Don't Isolate It

Napoleon once said, "When China wakes, it will shake the world." The sound you hear on the world scene today is the alarm clock ringing.

China's economy is already the world's third largest - behind only the US and Japan - and if it continues its extraordinary growth rate of around 10 percent a year, it could overtake the US in the next generation.

US investment in China is already well over $3.5 billion, and trade between the two nations last year hit the $58 billion mark. Thousands of American jobs depend on trade between the two countries. No wonder the ground is rumbling as Congress debates the renewal of China's most-favored-nation (MFN) trade status.

I could trot out many convincing arguments in favor of MFN renewal: the economic benefit of additional American jobs and lower consumer prices; the ineffectiveness of unilateral sanctions; the certainty of Chinese retaliation; and the competitive advantage provided to China's other trading partners in Europe and Japan by our yearly haggling over the issue. But I think the most useful contribution I can make to the debate is to comment briefly on Aetna's experience in dealing with the Chinese.

Last month, I discussed international trade with Chinese President Jiang Zemin. The president quoted a Chinese poem, illustrating that people who are distant from each other can still look at the same moon and share its beauty. His point was that trade can benefit our nations, and we should separate our differences on other issues from economic matters to make that possible.

I don't believe we can or should ignore our serious differences on such issues. Given China's growing influence, the whole world has an interest in seeing that it conducts itself as a responsible member of the community of nations. But I believe trade can be the bright moon - the common focus - whose benefits will demonstrate to China the strength of free-market principles and the desirability of adhering to international norms.

Aetna, together with Bank of China and an Asian private-equity manager, has organized an investment fund in China called The China Dynamic Growth Fund, backed by major institutional investors, including US pension funds, European and Japanese financial institutions, and the World Bank. This fund will bring prosperity to thousands of Chinese through such ventures as a regional airline, a tire manufacturer, a pharmaceutical firm, a diversified manufacturing concern, and commercial property development.

It is clear to us that the Chinese, who are managing and investing in these ventures, have an outlook much like ours when it comes to business. They are interested in making profits - and achieving that requires the establishment of reliable structures and economic institutions.

China has started down a road from which there is no turning back. Its entry into world markets has created a new class of entrepreneurial leaders whose influence will grow as China's economy does. And the globalization of China's economy is increasingly exposing them and others to political systems and cultural influences we believe go hand in hand with free markets. In countries such as Mexico, Chile, and the Philippines we've seen how the development of a vibrant economy and a growing middle class has supported positive political change.

Our interest is in keeping China on that road. That's not to say China should be let off the hook on specific matters. But to deny MFN status to influence Chinese actions on these issues is to use a meat-ax where a scalpel is needed. The key to encouraging political change and responsible international citizenship is to engage China, not isolate it.

* Ronald E. Compton is chairman and chief executive officer of Aetna in Hartford, Conn.

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