NCPA - National Center for Policy Analysis

Cato Institute: Peace Requires Trade with China

January 23, 1996

Growing tensions between the United States and China over trade, Taiwan and human rights could lead to a military crisis in East Asia, according to some experts.

These experts suggest that increasing trade and investment can do more to liberalize China's political structure, increase its compliance with international commercial law and maintain peace in the region than a policy of confrontation by the U.S.

Economically, China has been moving in the right direction:

  • Rapid economic growth, economic reforms and trade liberalization have led in recent years to the transformation of China into the world's largest trading country.
  • Total trade between China and the U.S. rose from $4.8 billion in 1981 to $48.1 billion in 1994, turning China into the sixth largest trading partner of the U.S.
  • China's gross domestic product (GDP) is expected to grow by about 9 percent annually through 2000, and some experts predict its GDP will exceed the United States' by 2020.
  • The World Bank calculated that China's per capita GDP in 1990 was close to $1,950.

Other Pacific Asian countries are also becoming major economic powers, and the GDP of Southeast Asia is expected to grow in under a decade from $500 billion to $1.2 trillion, while their trade with the U.S. could surpass U.S.-Japanese trade by 2000.

Thus, other countries in the region may achieve an economic and military "balance of power" with China and Japan that will ensure regional stability.

Source: Leon T. Hadar, "The Sweet-and-Sour Sino-American Relationship," Policy Analysis No. 248, January 23, 1996, Cato Institute, 1000 Massachusetts Avenue, NW, Washington, DC 20001, (202) 842-0200.


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