CHINESE FOREIGN POLICY
4. Since 1989, when the events of Tiananmen attracted world-wide condemnation backed up by EC and G7 sanctions, China has been rebuilding her international image. China's responsible and helpful attitude in the Security Council over the Gulf War helped rebuild fences and, except for military exchanges and arms sales, relations with most western countries are now back to normal although there is less warmth in the relationship than formerly.
5. China has been actively seeking commercial and economic agreements with the newly-independent states of the former Soviet Union. There have been rapprochements with both India and Vietnam, although disputes about the Indo-Chinese border and sovereignty over the Spratly (Nansha) Islands have not been resolved and remain a potential cause of friction.
6. The establishment of diplomatic ties with South Korea in August 1992 can be seen as both a betrayal of long-time ally North Korea and a victory vis-à-vis Taiwan, but more important for the future is the clear indication of pragmatic self-interest guiding Chinese policy. South Korea is an important trading partner total trade between the two countries this year is likely to exceed US$ 5 billion and a potentially major
source of investment.
7.
Following its success in hosting the Asian games in 1990, Peking is making a major effort to host the Olympic Games in 2000. The Emperor of Japan has accepted an invitation to visit China in October 1992, to mark the 20th Anniversary of the normalisation of relations.
THE CHINESE ECONOMY
8. The economic reforms which now affect about all areas of Chinese life with the glaring exception of politics began in 1979. The pace of reform accelerated dramatically under the premiership of Zhou Ziyang but slowed and became much more
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