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Ron Brown's `Lovefest' In Beijing


International Business

RON BROWN'S `LOVEFEST' IN BEIJING

They came. They schmoozed. They cut deals. With 24 American CEOs in tow, Commerce Secretary Ronald H. Brown made billions worth of rain for U.S. companies on his August China trip. Chinese officials, grateful for his backslapping "commercial diplomacy," responded by agreeing to resume human rights talks. Brown's visit, the first since President Clinton renewed China's most-favored-nation trade status in June, contrasts with the disastrous trip in March by Secretary of State Warren M. Christopher. This time, says a U.S. official, the meetings were a "lovefest."

For an Administration plagued by foreign policy crises, Brown's trip is shaping up as a much needed success. U.S. companies signed over $6 billion in deals, many for giant infrastructure and manufacturing projects. The test is to turn the good feelings into more progress. Washington wants cooperation on a number of irritants such as China's growing trade surplus. The U.S. will hold out for concessions before approving Beijing's application to enter the General Agreement on Tariffs & Trade.

LEGAL AID. The deals assure U.S. companies of a key role in China's industrial development. General Electric and Westinghouse announced power deals worth at least $200 million, while Boeing won $1 billion in airline orders. IBM said it was forming a joint venture to develop an information superhighway. More announcements are expected, possibly including a coveted minivan contract for Chrysler Corp. Moreover, China agreed to regular meetings on areas such as telecommunications, automobiles, and the environment, providing a window for future deals. The U.S. also pledges more assistance for developing and promoting commercial law in China.

While editorialists in the U.S. have excoriated Brown for kowtowing to China, human rights activists in Hong Kong have reacted with restraint. Chinese dissidents "have known for some time that they cannot count on America," says one Chinese activist. Moreover, with the succession to Deng Xiaoping, 90, so unclear, there's little influence any U.S. policy could have on Beijing's nervous leaders, says John Kamm, a U.S. businessman active in human rights issues. But now "we may get some improvement along the margins," says Kamm.

Markets reacted more emphatically to the visit. Hong Kong's Hang Seng index rose 2.5% on Aug. 31 to close at 9,926, capping a 9% jump over five days. The rise reflected "the fundamental change in the relationship between the U.S. and China," says Eugene Law, director of research at Standard Chartered Securities Ltd. in Hong Kong.

After the euphoria fades, formidable obstacles will remain. They include China's trade surplus with the U.S.--$23 billion last year--American demands for greater protection of intellectual property rights, and China's GATT application. U.S. leverage over GATT won't do much in the human rights talks. And some analysts doubt the Chinese will follow through on some of the commercial pledges made to Brown. "You don't know how many of the deals will really happen," says Nick Amesworth, senior equity salesman with Morgan Stanley Asia Ltd. in Hong Kong.

Nonetheless, Brown has broken the logjam. More commercial diplomacy is on the way. In October, Export-Import Bank Chairman Kenneth D. Brody will visit China to back up many of the deals with cash. Ex-Im officials expect to approve financing for up to $1.1 billion in export contracts to China this year, a 40% increase from 1993.

To prove that constructive engagement works better than confrontation, though, Clinton has to do more. He won't have much time. The annual Asia Pacific Economic Cooperation summit will be held in November in Indonesia. There the President will come face to face with China's President Jiang Zemin. By then, Clinton hopes he can show that his new policy does more than bring home dollars to U.S. companies.Dave Lindorff in Hong Kong, Lynne Curry in Beijing, and Douglas Harbrecht in Washington


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