The deaths of China's revered prime minister, Zhou Enlai (Chou En-lai), and of Mao himself in 1976 made that a watershed year. Soon thereafter the radical grouping known as the Gang of Four was removed from power. Under moderate leader Deng Xiaoping (Teng Hsiao-p'ing), China sought closer U.S. ties to aid in modernizing its economy; the two nations reestablished diplomatic relations in January 1979. China's leaders officially condemned (1981) the excesses of the Cultural Revolution, and Deng orchestrated a process of economic liberalization that resulted in the tripling of China's real per-capita gross national product between 1978 and 1993. An overheated economy and student demands for democratic reform, however, led to the purges of party leaders Hu Yaobang (Hu Yao-pang) in 1987 and Zhao Ziyang (Chao Tzu-yang) in 1989; a military crackdown (June 1989; see Tiananmen Square Massacre) on the student prodemocracy movement; and the imposition of economic austerity measures from 1993 to reduce inflation and speculation. Renewed Tibetan demands for independence were suppressed, as were protests by Muslim separatists in Xinjiang. In 1992 many leading party and military officials opposed to Deng's market-oriented reforms were "retired," and party leader Jiang Zemin (Chiang Tse-min), designated China's next paramount leader by Deng, was elected president. Deng died in February 1997. China's leaders still resisted political reform but agreed later that year to privatize most state-owned industries, a move that led to widespread unemployment. In 1998, under new premier Zhu Rongji, who assumed office in March, the government announced plans to dramatically reduce the size of the bureaucracy, reform the banking system, and institute other reforms designed to help China escape the economic crisis engulfing many of its Asian neighbors while strengthening the central government's overall control of the economy. Despite its willingness to reform the economy, the December 1998 sentencing of several leaders of a new Chinese opposition party to long jail terms indicated that the government still rejected the concept of Western-style democracy.

In foreign affairs, China and Britain reached agreement on the future of Hong Kong in 1984; under a 1987 accord with Portugal, Macao was to be returned to Chinese sovereignty in 1999. The 1991 collapse of the USSR left China determined to maintain its position as the world's only remaining Communist superpower while continuing to develop its economy. China resumed nuclear testing from 1992 to 1996, but it signed the 1996 nuclear test ban treaty. The expansion of democracy in Hong Kong and Taiwan's efforts to pursue a more visible international role strained China's relations with Britain and the United States, particularly when China conducted missile tests close to Taiwan in March 1996. Hong Kong was returned to Chinese sovereignty on July 1, 1997, marking perhaps the real beginning of the post-Deng era. Chinese president Jiang Zemin visited the United States in November of that year. In June 1998, U.S. president Bill Clinton paid a state visit to China — the first such visit by a U.S. president since the Tiananmen Square crackdown. Later that year, Jiang Zemin visited Russia and became the first Chinese president since World War II to visit Japan.

Relations between China and the United States frayed in 1999 as the U.S. trade deficit with China mounted and it was disclosed that China may have illicitly obtained important U.S. nuclear and submarine-detection technology. China denied the espionage allegations, and Zhu Rongji visited the United States in April of that year, where he failed to obtain long-sought U.S. backing for China's bid to enter the World Trade Organization. Progress in forging better relations between the two nations was further threatened after NATO forces accidentally bombed the Chinese embassy in Belgrade, Yugoslavia, in May 1999. The bombing sparked massive anti-Western demonstrations in China. Tensions increased even further after Taiwanese president Lee Teng-Hui announced in July 1999 that he was abandoning the ambiguous "one China" policy that had maintained an uneasy peace between Taiwan and the mainland for 50 years, although the United States continued to recognize the government in Beijing as the sole legal government of China. Amid fears that Lee's declaration might trigger Chinese military action, China announced that it had developed its own neutron bomb (without the use of stolen U.S. technology). In February 2000 the Chinese government demanded that Taiwan begin substantive negotiations on reunification or face military attack, although it promised equal footing for Taiwan in such negotiations and said that other issues could be discussed prior to political reunification.

Domestically, the Chinese government launched a crackdown on Falun Gong, a popular sect founded in 1992 whose members seek to improve their moral character through exercise, study, and meditation. The sect was officially outlawed in July 1999 after its members had organized several unprecedented mass nonviolent protests, and its swift rise in popularity was viewed as a challenge to the government's legitimacy as the country's economic woes continued. In 2001 the government launched a mass campaign by government workers, students, and other groups to denounce the outlawed movement.

On Oct. 1, 1999, as China celebrated 50 years of Communist rule, there were signs that the country had assumed the important place on the world stage that it felt it merited. The following month, China successfully launched and retrieved its first experimental spacecraft. In 1999 it signed trade agreements with the United States, Japan, and Canada, paving the way for China's entry into the World Trade Organization (WTO); a similar accord with India was signed in early 2000, and a bill normalizing U.S. trade links with China was approved by the U.S. government later that year. On Dec. 20, 1999, Macao was formally returned to China. That same month, the United States agreed to pay $28 million in reparations to China for the bombing of the Chinese embassy in Belgrade. In early 2001, in an attempt to improve its international image as it bid to host the 2008 Olympic Games and continued its efforts to join the WTO, China ratified the International Covenant on Economic, Social, and Cultural Rights.

The victory of proindependence candidate Chen Shui-bian in Taiwan's March 2000 presidential election raised tensions between Taiwan and the mainland to new levels, with the Communist government threatening war if Taiwan continued to delay talks on reunification. Subsequently, the Communist government approved Taiwan's unilateral move to improve relations by lifting the long-standing ban on direct shipping links between Taiwan and the mainland; the inaugural voyage, between Kinmen (Quemoy) and the mainland, took place in January 2001. The United States reiterated its "one China" policy while calling on both sides to resolve their differences peacefully. Meanwhile, China's long-strained relations with India, which had been aggravated by the latter's conducting underground nuclear tests in 1998, improved slightly. In April 2000, Asia's two largest nations began talks aimed at resolving their border disputes, and later that year China proposed building a highway that would link the two nations via Myanmar (Burma). In July the presidents of China, Russia, Tajikistan, Kyrgyzstan, and Kazakhstan set up a joint antiterrorism center in Bishkek, Kyrgyzstan, to coordinate their efforts to suppress Islamic separatist movements in Central Asia.

In April 2001 a Chinese fighter plane collided with a U.S. military aircraft conducting a routine surveillance patrol off the coast of China. The Chinese plane crashed and its pilot was killed; the U.S. aircraft made an emergency landing on the Chinese island of Hainan. The incident further damaged relations between the United States and China, with the U.S. government demanding the return of the aircraft and its crew and the Chinese government insisting that it must receive a formal apology first. The tense standoff took place in the midst of Chinese objections to proposals by the new U.S. president, George W. Bush, to proceed with a global missile-defense program and to provide Taiwan with weapons and sophisticated military equipment. Although the crew was finally released after 11 days in custody, dampening fears that the incident might escalate into a broader confrontation between the two countries, the plane itself remained in Chinese hands for several months. Tensions increased, however, after Taiwan staged a military exercise simulating the repelling of an invasion by mainland China and the United States went ahead with its decision to sell submarines, aircraft carriers, and destroyers to the island state; it also allowed former and present Taiwanese presidents Lee Teng-hui and Chen Shui-bian to visit the United States. The Chinese government subsequently staged its own military exercises off the coast of Taiwan, although it did reach agreement on how the spy plane was to be returned to the United States in June 2001. These events took place against the backdrop of Chinese domestic politics, where the government continued its crackdown on the Falun Gong and other opposition groups as it prepared for the expected replacement of five of the seven members of the ruling Communist party politburo in 2002. Jiang Zemin, Zhu Rongji, and Li Peng were among those leaving the politburo in 2002, and they and a number of other top officials were expected to retire in 2003. Vice-President Hu Jintao (Hu Chin-t'ao), the youngest member of the politburo, made his first visit to the West in the fall of 2001 and what was believed to be his first visit to the United States in April 2002; he replaced Jiang as head of the Communist party in November 2002, although Jiang remained influential because his allies controlled the all-important newly chosen politburo standing committee.

There was great celebration throughout the country in July 2001, when Beijing was selected as the site of the 2008 Olympic Games. That same month Russia and China signed a 20-year treaty of friendship and cooperation, and U.S. Secretary of State Colin Powell made his first official visit to China in an effort to improve relations between the United States and China in the wake of the spy-plane incident.

After 15 years of negotiations, China's application for admission to the World Trade Organization received formal approval in September 2001, and it was poised to become the world's leading supplier of mass-produced goods. The government also began to study the possibility of a free-trade zone that encompassed Hong Kong (another WTO member) and southern China. Relations with Taiwan, which had also gained WTO admission, remained relatively calm, despite the victory of proindependence candidates in the island's late-2001 legislative elections. In fact, the Beijing government made friendly overtures to the new Taiwanese government in January 2002, although it still insisted that full political talks must be based on the idea of "one country, two systems," an idea that the Taiwanese government had already rejected.

The Chinese government condemned the September 11, 2001, terrorist attacks on the United States, and Jiang met with U.S. president George W. Bush in Shanghai the following month. As U.S.-led retaliatory attacks on the Afghan Taliban regime and terrorist leader Osama bin Laden were launched in October, China closed its border with Afghanistan. In December, shortly before a new, broad-based interim government was installed in Afghanistan, China cracked down on its own Muslim extremists (mostly Uighurs), increasing the number of executions and saying that its Muslim separatists had received training in bin Laden's camps and were part of the international terrorist network. Bush paid a state visit to China in February 2002 to encourage greater support for the U.S.-led war on terrorism and ease Chinese concerns about the expansion of U.S. influence along its borders. He spoke directly to the Chinese people on the importance of a more open society on the 30th anniversary of Nixon's reestablishment of diplomatic relations between the United States and China.

In March 2002, in what was seen as a protest against a strengthening of ties between the United States and Taiwan, the Chinese government refused to allow a U.S. warship to make what would normally have been considered a routine call at Hong Kong; that same month was marked by some of China's worst labor protests in decades. In April, following the successful completion of its third unmanned spaceflight (a fourth such flight took place in January 2003), China announced that as early as 2003 it hoped to become the third country to send humans into space. In August 2002, in response to Taiwanese president Chen Shui-bian's suggestion that Taiwan hold a referendum on independence, the Chinese government said that it would use force if Taiwan made any moves toward formal independence.



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