IV.       POLITICAL ENVIRONMENT

China's top political leaders are strongly supportive
of foreign business investment in China.  China
welcomed President Clinton's May 1994 decision to renew
most-favored-nation (MFN) status for China and to
delink trade and human rights concerns.  The
President's decision should remove a major element of
uncertainty from bilateral economic relations.  Despite
this, disagreements over human rights, proliferation
and trade issues could continue to affect bilateral
relations.

Rapid price inflation, corruption, lay-offs from state-
run enterprises, the growing gap between coastal
regions and the interior, and economic disparities
between rural and urban areas have contributed to
dissatisfaction among the populace.  Northwestern China
has been troubled by occasional unrest among minority
ethnic and religious groups.  Dissatisfaction has not
often been translated into widespread political
activity since 1989, in part because the government is
working to minimize tensions but also because most
believe Beijing is able and willing to swiftly repress
any sizeable anti-government protests.

In practice, major decisions are made by a few key
leaders of the Communist Party of China.  Ministries
and/or the Standing Committee of the National People's
Congress (China's legislature) formulate policy on
lesser issues.  Some provincial governments, especially
those in fast-growing coastal regions, actively adopt
local policy variations.  Senior political figures are
generally agreed on the need for further economic
reforms, but there are differences over the content,
pace and ending point of reforms.  Most observers
expect that the death of 89-year old Party elder Deng
Xiaoping will reshape leadership politics, but this
readjustment will probably be gradual.