APRIL 1996 · VOLUME 17 · NUMBER 4

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T H E I R    M A S T E R S '    V O I C E

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TERRIFIED THAT CHINA could become a hot issue during this year's presidential election campaign, especially with Peking's "most-favored-nation" trade status up for review in June, several U.S. corporations have started a covert PR blitz to convince the public that the Chinese leadership is deserving of greater sympathy. To coordinate the public relations effort, the companies have hired Hill and Knowlton, whose president, Howard Paster, is President Clinton's former congressional lobbyist.

The stakes are vast. Bilateral trade between the two countries rose to $55 billion last year and U.S. direct investment in China has gone from $358 million in 1990 to $5.4 billion in 1995.

The business lobby has reason to worry. In Congress, China is being attacked by everyone from North Carolina Senator Jesse Helms, who views Peking as Red Central after the fall of the Soviet Union, to Representative Nancy Pelosi of California, a liberal Democrat and critic of China's human rights record.

Helms and his allies point to China's threats against Taiwan and its 1995 shipment of nuclear technology to Pakistan. Pelosi criticizes Peking's mass executions (11,000 last year, including people convicted only of petty theft or passing counterfeit currency); the abysmal conditions of orphanages in Shanghai, as documented by Human Rights Watch; the re-imprisonment of Wei Jingsheng, whose call for greater democracy earned him a 14-year prison sentence.

To counter Peking's critics, the U.S. companies have initiated a pro-China campaign that a source at a Washington, D.C. public relations firm says is budgeted at well over one million dollars.

"Five years ago, when U.S. companies talked about the political risk of investing in China they were worried about Peking," one business consultant says of the edgy mood among the China trade tycoons. "Now they see the political risk as coming from Washington."

The firms behind the PR campaign are among the biggest players in China:

• Boeing, which has provided Peking with 75 percent of its commercial air fleet -- including 64 planes sold for $3.9 billion two years ago -- views China as its major market during the next 50 years. The company estimates that during the next two decades alone China will spend $100 billion on new planes.

• AT&T forecasts earnings of $3 billion from its operations in China by the year 2000. In 1995, when human rights groups urged U.S. companies in China to adhere to a "code of conduct," AT&T led the resistance, saying that it "would be viewed by the Chinese government as another attempt to influence Chinese domestic politics and would be detrimental to U.S. business."

• GM closed a $2 billion joint venture in 1995 to manufacture automobiles for China's domestic market.

• Motorola has investments in China worth $1.2 billion and in February announced plans to build a new plant in China to produce pocket pagers.

• Ford, a latecomer to China, last November bought a $40 million share in a truck manufacturing plant in Jianxi province.

• Allied-Signal has entered into a lucrative joint venture in Shanghai to produce engine boosters.

Hill and Knowlton has represented human rights abusers like Kuwait, Turkey and Indonesia. Handling the China whitewash for the PR firm is Allan Myer. He has been putting company representatives in touch with members of Congress and renting scholars to draft op-ed articles for major newspapers and to speak at media events. These "third party" advocates, as they are dubbed by industry, are well paid for their labors but do not reveal their affiliations to the public.

Myer is also preparing upbeat promotional items which avoid disagreeable issues such as China's routine use of torture. These materials, which include a brochure on trade discussing the benefits of "engagement" and a movie which interviews young Chinese professionals about their hopes for the future, are to be distributed to journalists, schools and community groups such as the Rotary Club.

Myer is not eager to discuss his efforts, saying he would "decline to talk about anything that I might or might not be doing."

The China lobby also counts on support from the many U.S. consultants who advise U.S. companies about investing in China. These include ex-White House chief of staff Howard Baker and former secretaries of state Henry Kissinger, Al Haig and Lawrence Eagleburger. The Chinese are especially fond of Eagleburger, who traveled to Peking for a pleasant round of high-level chats shortly after the 1989 massacre in Tiananmen Square.

The secret China lobby won't have an easy fight. While President Clinton -- who in 1992 attacked George Bush for being too friendly towards China, a policy he described as "coddling dictators" -- seems sure to extend "most favored" status in June, some in Congress are wavering.

Representative Matt Salmon, R-Arizona, has long been an eager advocate of the argument that increased trade produces political freedom. But in March he sent out a "Dear Colleague" letter saying that "the events of recent months have shaken my confidence in that assessment."

Salmon is correct in his disquiet. There has been no easing of repression by the Chinese government. Just a few months ago, the State Department released its annual report on human rights which concluded that increased trade makes little difference "in the absence of a willingness by political authorities to abide by the fundamental international norms."

In 1994, the last time there was a high-profile battle over China's most favored nation listing, Peking celebrated the Clinton administration's extension by jailing a number of dissidents and beginning with long-delayed trials of labor organizers and human rights campaigners. -- Ken Silverstein