Emergence as a Global Economic Power } 691
Shanghai. The Chinese side had insisted that maximum “domestic con-
tent” be used by the plant. Volkswagen had resisted, but finally agreed to
China’s demand. But the parts supplied by Chinese producers simply did
not meet German standards of quality or safety. For example, the steel for
the car chassis provided by China’s most advanced steel rolling mill at the
time was too thin to be used. The overall result was a vehicle far below the
quality standards of Volkswagens produced in other countries. It gradu-
ally dawned on China’s leaders that such an approach would prevent
China from becoming a world leading competitor. They eventually recog-
nized automobiles as a key leading industry, and decided that for China
to succeed in that industry, it would have to be able to compete on global
markets. But in tandem with the decision to subject China’s auto produc-
ers to strong foreign competition, China’s leaders also adopted what Li
Lanqing calls China’s “first industrial policy” to upgrade the “techniques”
of Chinese suppliers of auto parts and components.^31
In early 1999, Jiang Zemin decided that conditions were right for a bold push
involving substantial concessions to long-standing US demands, to break the
WTO deadlock with the United States. In March 1998, Zhu Rongji replaced
Li Peng as premier. As significantly, Li Lanqing, with many years’ experi-
ence handling trade negotiations with the United States and strongly in favor
of WTO membership, was appointed executive vice premier. Relations with
the United States had also improved after the difficult 1989–1996 period. In
October 1997, Jiang had made a successful state visit to the United States. Vice
President Al Gore had visited China in March 1998, and President Clinton
was scheduled to visit in June.^32 Jiang placed great stress on stabilizing China’s
relation with the United States, aligning the two countries more closely in
order to ensure China’s stable development, and he saw WTO accession as a
major way of achieving this.^33 Among other things, WTO membership would
end the annual review of China’s MFN status by the US Congress, a review
that provided a regular venue for high-profile airing of all sorts of grievances
against China.
Late in 1998 or early in 1999, Jiang Zemin endorsed a package of major
concessions to be delivered to the United States by Premier Zhu Rongji.^34 In
a number of these areas, China had previously steadfastly refused to com-
promise. China’s leaders, or at least Jiang, Zhu, and Li Lanqing, expected
that this package of concessions would be welcomed by the United States
and would open the way to an accession agreement. Zhu was scheduled
to visit Washington to deliver China’s bold proposal and lobby for a final
deal on WTO accession. Then, on March 24, 1999, NATO began a bombing
campaign against Yugoslavia because of its ethnic cleansing of Muslims
in the Kosovo region. The day after the NATO bombing campaign began,
the Politburo met to deliberate whether Zhu should proceed as sched-
uled with his visit to Washington to deliver the package of concessions.