The Chinese government has strongly criticized U.S. announcements that it will develop or assist in deploying missile defense systems involving cooperation with U.S. allies in East Asia, and reports of such possible U.S. cooperation with Taiwan. For those in the United States, the U.S. plans have many perceived disadvantages and advantages;1 the latter include notably providing degrees of protection for the United States and its allies against ballistic missile attack. Many in China believe that proposed U.S. development and deployment of ballistic missile defenses at home and in East Asia pose potentially serious complications for China’s ability to use its nuclear weapons to deter possible U.S. pressure and aggression, and to use Chinese ballistic missile capability to exert leverage over Japan, Taiwan, and others in East Asia.

Tensions in the Taiwan Straits are prompting American policymakers to consider a range of measures that would demonstrate U.S. interests in Taiwan's security. President Clinton has ordered two U.S. carrier battle groups into the South China Sea, and Congress is considering legislation that would more forcefully express U.S. defense commitments to Taiwan.

This report addresses implications for U.S. economic interests related China’s response to the Global Financial Crisis.