Saving The Connection

By GEORGE J. CHURCH

The dilemma has become as familiar as it is painful. The U.S., as George Bush put it last week, "must stand wherever, in whatever country, universally for human rights." But it also has an interest in maintaining ties to regimes that occupy vital strategic positions. Never, though, has the U.S. faced that dilemma on the scale posed by today's China: the world's most populous nation, an important counterweight to the Soviet Union, until recently a force for stability in Asia and now a regime guilty of a massacre of its own people that has enraged Americans far more than anything ever done by Ferdinand Marcos in the Philippines or Chun Doo Hwan in South Korea.

Should the U.S. turn its back on the martyred students who rallied around a sculpture resembling the Statue of Liberty? Or break its ties with the Chinese government and risk a devastating setback to both strategic and commercial interests? Neither, said the President, who is something of an old China hand, having headed the U.S. mission to Beijing in 1974-75. Bush tried, as he put it, "to find a proper, prudent balance" -- to toe-dance between the horns of the dilemma.

At the start of the week, the President suspended all military sales to China. That froze in the pipeline some $500 million of undelivered equipment, mainly electronics gear to improve the performance of F-8 fighter planes. Bush also authorized the Immigration and Naturalization Service to extend the visas of Chinese students in the U.S., many of whom are afraid to go home. Later in the week, as outright civil war seemed to threaten, the State Department urged all Americans in China to get out, and made that an order for families and dependents of its diplomats. By week's end some 7,300 of the roughly 8,800 U.S. citizens in China had been evacuated, many by hastily arranged charter flights.

That did not satisfy some critics. In Congress the unlikely alliance of New York Representative Stephen Solarz, a highly liberal Democrat, and North Carolina Senator Jesse Helms, the curmudgeon of the Republican right, is pushing a bill that would compel the Administration, if the situation worsens, to stop all transfers of high-technology goods to China, suspend all investment and trade, recall Ambassador James Lilley and try to persuade international bodies such as the World Bank to cease making loans to China. Administration officials gloomily acknowledge that they may be driven to such steps if hard-line rulers in Beijing launch a purge of all who oppose them, further inflaming American opinion. But for the moment at least, the Administration is resisting.

At his Thursday-night news conference, Bush explained why. "The situation is still very, very murky," he stressed. Washington is simply unable to discover who is in and who is out among the Chinese leadership, let alone predict what actions they may take. The President disclosed that he personally attempted to telephone "a Chinese leader" (Deng Xiaoping, whom Bush got to know in his Beijing days), but "I couldn't get through."

While the situation is that fluid, it makes sense for the Administration to try to maintain strategic and commercial ties in hopes that a government will emerge that Washington can continue to get along with. The U.S., said Bush, "can't have totally normal relations unless there's a recognition ((by Beijing)) of the validity of the students' aspirations." On the other hand, he insisted, "there's a relationship over there that is fundamentally important to the United States, that I want to see preserved."

It is possible, though, that China, in the grip of either continuing chaos or harsh repression, may relapse into the hostile isolationism it maintained until the early 1970s. That would be a disaster for American interests. The value for the U.S. of "playing the China card" against the Soviet Union is not quite what it was in the days before Mikhail Gorbachev began lowering the level of hostility between Washington and Moscow -- as well as restoring correct Soviet relations with Beijing. But the presence of a huge Chinese army along a disputed border with the U.S.S.R. is still a useful check against any renewal of Kremlin adventurism. Beijing and Washington also share intelligence on Soviet missile tests and other military maneuvers picked up by two U.S.-built listening posts along the Chinese-Soviet border. The devices are described as valuable though not irreplaceable and are said to have continued functioning through all the turmoil last week.

More broadly, the U.S. has come to rely on China to help preserve peace in Asia. That faith has not always been rewarded; for example, Beijing has sold Iran Silkworm missiles that have been fired at ships plying the Persian Gulf. But on the whole, China has played the role Washington wanted it to: it has been expanding contacts with America's friends Taiwan and South Korea, it has assisted U.S. ally Pakistan, and it participated with the U.S. in aiding the rebels who defeated the Soviet invasion of Afghanistan. Currently, Washington is counting on Beijing to play a part in mediating a settlement among the factions in Cambodia that will compete for power as the Vietnamese withdraw. A Chinese retreat into isolation would open a huge and dangerous power vacuum in Asia and the Pacific.

The U.S. commercial stake in China cannot easily be separated from the military-diplomatic interest. China's political opening to the U.S. in the early '70s probably accelerated the free-market economic reforms that Deng launched later in the decade. Those reforms attracted U.S. trade and investment; the economic loosening then contributed to pressures for a corresponding political liberalization. Even after the Tiananmen Square massacre, Bush and his aides still hope that continued American trade and investment will help maintain economic freedom and that the dynamic force of a liberalized economy may yet renew the pressure for political reform.

Corporate executives would like nothing better. Western businessmen have dreamed of immense markets in China since the days of Marco Polo; for American corporations in the past few years, the dream started to come true. From a mere $1.2 billion ten years earlier, U.S. trade with China rocketed to $13.4 billion last year, including almost $5 billion of U.S. exports, such as farm goods, aircraft and oil-drilling equipment, and more than $8.5 billion of imports from China, such as clothing, toys and sporting goods. In addition, American corporations poured into China some $3.5 billion of direct investment. Everything from gelatin capsules to computers is churned out in more than 600 joint ventures or wholly owned U.S. subsidiaries (China, Viet Nam, Poland and Hungary are the only Communist countries that permit 100% foreign ownership of businesses operating on their soil).

American executives were too preoccupied last week with spiriting their non- Chinese employees to safety in Hong Kong, Japan or South Korea to make - long-term decisions. Besides, like the Bush Administration, they had trouble finding out what was going on; several were unable to discover whether their Chinese offices and factories were still open and working. The bloodshed and chaos were known to have stopped some operations. Work ceased at Shanghai factories owned partly by Massachusetts-based Foxboro, an electronics company, and aircraft-making McDonnell Douglas. Chemical Bank suspended its efforts to organize a syndicate of U.S. and Japanese banks that would share in a $120 million loan to Sinopec, China's national oil company.

Out of the confusion, a strategy of sorts emerged. Corporations will continue running their present operations in China as long as they can, and will carry through deals that are already under way as long as that is permitted. The dream of satisfying the demand of a billion or more new customers is too alluring to surrender easily. "You can't afford to just opt out of any world market, particularly one the size and potential of China," says Roger Sullivan, president of the U.S.-China Business Council. "For us to do that would be to just turn it over to the Japanese."

Simultaneously, however, U.S. executives are putting ideas of new investments on hold until they can see what sort of political and business climate emerges from the present turmoil. The wait may be a long one, and even when it ends, Western involvement will depend on whether the eventual winners are receptive to foreign influence or are isolationist hard-liners. Thermo Electron, a Waltham, Mass., company, is negotiating to build in China a $110 million co-generation plant that would turn out electric power and ferrosilicon metal by reusing the same fuel (coal). But, says chief executive George Hatsopoulos, "if the situation reverted to anything like the ((1960s)) Cultural Revolution, we wouldn't want to have anything to do with China."

The worst prospect for both U.S. business and strategic interests would be for hard-liners to win the power struggle and launch a massive crackdown, rounding up dissident students and workers by the tens of thousands and shipping them off to the Chinese Gulag, a little-known but long-established system of political prisons. "Then all the linkages will snap," says a State Department official. That is exactly what some policymakers fear is about to happen, and they see little that the U.S. can do to head it off. Says a White House official: "The U.S. has no influence over the Chinese government's behavior. Zero. None." A presidential adviser explains, "For the Chinese leaders this is a battle to the death, and they're not particularly interested in what we think of them."

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CAPTION: GRINDING TO A HALT

Pending U.S. weapons deals with China

With reporting by Robert Ajemian/Boston, William McWhirter/Chicago and Christopher Ogden/Washington