China’s economy remained relatively healthy in 2002, despite economic slowdowns in other parts of the world. Foreign investment continued to pour into China, and the Chinese government effectively used public spending to boost the economy. However, painful economic reforms will be necessary to keep the economic strong in 2003 and beyond. The recent outbreak in early 2003 of a very contagious virus called SevereAcuteRespiratory Syndrome (SARS) in China appears to have had a short-term negative impact on the Chinese economy.

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.

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