Since 1990, Congress has faced an annual, contentious decision on whether, and under what conditions, to renew normal trade relations (NTR) status with China for another year. This annual exercise occurred because under U.S. law, China's NTR status is temporary, and the President has to recommend its renewal each year by June 3. In 2000, the 106th Congress considered and passed H.R. 4444, which would eliminate the annual NTR renewal process and grant permanent NTR to China. The President signed the bill into law on October 10, 2000, as P.L. 106-286. But this Act only grants permanent NTR to China once it joins the World Trade Organization. Although this was expected to occur by late 2000, it has not yet happened and is now unlikely to occur until the end of 2001. Consequently, the President again this year will be compelled to recommend another temporary extension of China's NTR status for one year if this status is to continue uninterrupted. The NTR renewal is subject to enactment of a joint resolution of disapproval by Congress.

U.S.-China economic ties have expanded substantially over the past several years. China is now the third largest U.S. trading partner, its second largest source of imports, and its fourth largest export market. However, U.S.-China commercial ties have been strained by a number of issues, including a surging U.S. trade deficit with China, China's refusal to float its currency, and failure to fully comply with its World Trade Organization (WTO) commitments, especially its failure to provide protection for U.S. intellectual property rights (IPR). This report explores these issues in detail, especially concerning the lack of protection for U.S. IPR.

Currently, China’s short-term economic outlook is unclear. Economic slowdowns in Asia and the United States in the beginning of 2001 have hurt China’s export industries, and the September 11, 2001 terrorist attacks against the United States will likely further dampen foreign demand for Chinese products and could reduce the level of planned foreign investment in China. The Chinese government has used public spending in recent years to boost the economy, and it is likely that it will continue to maintain such policies until the global economy begins to recover.