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just under 1% of total US foreign direct investment.⁵⁹

While some of the industries and individual companies involved in pressuring the Clinton administration were already doing substantial business with (or in) China, many were not. The varying experiences of several large and influential corporations illustrate the point. According to a survey of references in the press and the Congressional record, Boeing, AT&T, and General Motors were the three most vocal and visible players in the MFN campaign.⁶⁰ Of these, by the early 1990s, Boeing had already sold 200 commercial aircraft to China’s still-antiquated airlines, amounting to fully one-sixth of its total overseas sales, with many more potential purchases in sight.⁶¹ Meanwhile, despite having made the decision that China would be a critical “strategic manufacturing location,” and a “key country” in its “globalization effort,” AT&T’s self-confessed “stumbles and missed opportunities” had left it with only a handful of small joint ventures dedicated to the manufacture of some pieces of network-switching equipment.⁶² For its part, General Motors was eager to get into what promised to be both a booming market for car sales and a promising site for the manufacture of low-cost auto parts, but, with the exception of a recently signed joint venture agreement to build trucks, it had been absent from China since the Communists took power in 1949.⁶³

While Tiananmen cast a temporary pall, subsequent events sharpened the appetites and restored the animal spirits of American business. After a period of disruption and retrenchment, Chinese leader Deng Xiaoping relaunched his program of “reform and opening up” with a highly publicized 1992 tour of the country’s fast-developing southern provinces. A burst of renewed growth and an influx of foreign investment quickly followed. Between 1991 and 1993, China’s economy expanded by 60%.⁶⁴ By 1993, its annual growth rate had risen to the astonishing figure of over 13%,⁶⁵ making it the fastest-growing economy on the planet and, according to a study released by the International Monetary Fund, the world’s third largest, having surpassed Germany and closing in rapidly on Japan.⁶⁶ During this same period, foreign direct investment grew by 450%,⁶⁷ with Chinese companies signing over 83,000 contracts with foreign investors in 1993 alone.⁶⁸ Some of this money came from American corporations, but the even greater sums flowing in from Japan, Germany, and other sources meant that the US share of total foreign direct investment in China was starting to undergo a marked decline.⁶⁹ If the Clinton administration suspended China’s MFN status, or even if it continued to threaten to do so, American companies feared that they would lose out on unprecedented opportunities, even if, in many cases, they had not yet begun fully to enjoy them. A letter to the president from a newly formed coalition of trade associations put the matter concisely: “The persistent threat of MFN withdrawal does little more than create an unstable and excessively risky environment for US companies considering trade and investment in China, and leaves China’s booming economy to our competitors.”⁷⁰

      As James Mann explains, during the 1980s, Beijing had observed that former US government officials and politicians “often sought to make money from their China connections” once they left office.⁷¹ The CCP was not shy about encouraging these “old friends” to weigh in on its behalf with their former colleagues, and the Chinese government also started to retain law and public relations firms in Washington for the same purpose.⁷² What was truly distinctive about the fight over MFN status, however, was not Beijing’s direct lobbying of US officials, but its broad, brazen, and systematic use of threats and inducements to shape the behavior of American companies, and through them the policies of the US government.

      As early as 1990, a Chinese commercial counselor had written to American executives urging them to “display your impact” and “do some promotion work” with Congress, the White House, and the “news mediums [sic].” Exhortations were soon accompanied by action. Three years later, in the runup to yet another vote on MFN status renewal, Chinese trade delegations fanned out across the United States on a well-publicized, multi-city “shopping spree” that resulted in promises to purchase hundreds of millions of dollars’ worth of cars, planes, and oil exploration equipment. At the same time, albeit more discreetly, US companies were being “regularly threatened with cancellation of orders or loss of future deals” if China lost its preferred trade status.⁷³

By 1994, Beijing had honed its tactics to a fine edge, dispatching the “largest-ever trade and investment mission” and signing agreements worth a total of $11 billion with great fanfare, even as anonymous Chinese officials warned of unspecified “disastrous results” for American companies if MFN status was revoked.⁷⁴ At this point, writes David Lampton, “the essence of Beijing’s strategy” was to convince the United States that it was “isolated internationally” and risked ceding “the ‘big cake’ of the Chinese market to its competitors” if it did not abandon attempts to link trade to human rights.⁷⁵ The tactics employed were hardly subtle. In one notable instance, at virtually the same moment as President Jiang Zemin was visiting Boeing’s headquarters in Seattle and giving a speech in which he urged the removal of “negative factors and artificially imposed obstacles” to future business, a delegation of German executives was arriving in Beijing to ink an order for six aircraft from Airbus, Boeing’s archrival.⁷⁶ The message was clear: if Boeing did not do enough to “display its impact” in Washington, China would take its business elsewhere.

      According to a senior figure at one of China’s leading think tanks, as the date for Clinton’s decision approached, “[W]e began to realize that economic interests were deepening and started to think that the US wouldn’t dare cancel MFN.”⁷⁷ This judgment turned out to be correct, but the analyst’s observation is incomplete and also rather coy. The mobilization of American business, and the political outcome that it helped to produce, were not simply the inevitable byproducts of an objective deepening in economic relations between the United States and China; they were the result also of a deliberate and highly orchestrated influence campaign by Beijing.

      On May 26, 1994, President Clinton announced that he would not only renew China’s MFN status but also, henceforth, “delink human rights” from the annual process of extension.⁷⁸ Despite appeals from human rights advocates, labor unions, and the representatives of older manufacturing industries already feeling the weight of import competition from China, Congress voted to uphold this decision. The impact was immediate. With the specter of suspension removed, at least for another year, and China’s development back on track, trans-Pacific commerce was free to grow faster than ever before. Within weeks, companies like Caterpillar, Apple, Owens-Corning, and Kentucky Fried Chicken all announced plans for major new investments in China.⁷⁹

Seizing an opportunity to win greater support from the business community, President Clinton had shrewdly reversed course. Henceforth, he argued, the United States should seek to change China not by threatening to constrict trade, but by expanding it. As trade and investment compounded during the 1990s, so too did the breadth and depth of enthusiasm for ever-expanding economic ties. Annual Congressional debates over MFN status renewal would continue until the end of the decade, but after 1994 the issue was never seriously in doubt. Finally in 2000, at the urging of the White House, and in response to another powerful lobbying campaign, Congress voted to establish “permanent normal trading relations” with Beijing, abandoning what had become an increasingly empty threat and clearing the way for China’s entry into the WTO. The process of engagement had reached critical mass and was now self-sustaining, self-reinforcing, and, for all practical purposes, unstoppable.

Notes

      1 1. James Mann, About Face: A History of America’s Curious Relationship with China, from Nixon to Clinton (New York: Knopf, 1998), pp. 35–6.

      2 2. Aaron L. Friedberg, A Contest for Supremacy: China, America, and the Struggle for Mastery in Asia (New York: W.W. Norton, 2011), pp. 74–85.

      3 3. Bernard Gwertzman, “Reagan Decides to Relax Curbs on China Trade,” New York Times, June 6, 1981.

      4 4. Hugo Meijer, Trading with the Enemy: The Making of US Export Control Policy toward the People’s Republic of China (New York: Oxford

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