U.S. companies continued to invest heavily in China, and the Chinese central government overtook Japan to become the largest holder of U.S. Treasuries used to finance the federal budget deficit, holding about $600 billion in Treasuries by the end of 2008. Some U.S. lawmakers suggested that U.S. policies should be reassessed in light of the PRC's continued strong economic growth and more assertive international posture. The financial crisis unfolding in the United States in 2008 and the Bush Administration's (and the incoming Obama Administration's) proposed financial rescue programs each required a substantial level of new U.S. government borrowing, with China positioned to be a major purchaser of this new U.S. government debt. These groups included: Tibetan activists pushing either for Tibetan independence or for more enlightened Chinese policies in Tibet, actions which may have led to the March 2008 protests in Tibet and China's crackdown there; activists for Darfur seeking to pressure China to withdraw its support for the Sudanese government (Steven Spielberg resigned in February 2008 as artistic advisor for the Beijing Olympics over this issue); and a number of groups, such as Reporters without Borders and Human Rights Watch, arguing that China had not kept its promises to the International Olympic Committee to provide journalistic freedom to reporters and a cleaner environment for the athletes during the games. The decision was denounced by Beijing as a move that "seriously interferes with China's internal affairs and damages U.S.-China relations." Demonstrations in Tibet in March 2008

On March 10, 2008, a series of demonstrations began in Lhasa and elsewhere in Tibetan regions of China to mark the 49 th anniversary of an unsuccessful Tibetan uprising against Chinese rule in 1959. These demonstrations also were contained by security forces. He used the occasion of the speech also to reiterate his support for Beijing's hosting of the August 2008 Olympic Games, and to urge Tibetans to work "peacefully and within the law" to ensure their legitimate rights as citizens of the PRC. Nevertheless, U.S. officials in the executive branch and in the 110 th Congress continued to voice private and public concerns about China's expanding military budget and issues potentially involving U.S. national security. China's Growing Military Power

The Pentagon released two congressionally mandated reports on China's Military Power during the 110 th Congress: one in May 2007, and one in March 2008. PRC Anti-Satellite Test and Space Activities

On January 11, 2007, the PRC carried out its first successful anti-satellite (ASAT) test by destroying one of its moribund orbiting weather satellites with a ballistic missile fired from the ground. A White House spokesperson later told reporters that China's Foreign Minister, Yang Jiechi, had assured President Bush at a White House meeting that the Kitty Hawk incident was a "misunderstanding." During the 110 th Congress, the PRC was the second-largest U.S. trading partner, with total U.S.-China trade in 2007 at $387 billion. Issues the 110 th considered in U.S.-China economic relations included the substantial and growing U.S. trade deficit with China (which climbed to $256 billion in 2007 and was projected to hit $267 billion in 2008), repeated PRC inabilities to protect U.S. intellectual property rights, and the PRC's continuing restrictive trade practices, such as its exchange rate policies. Some achievements included:
Increasing market access for the United States in China, including for U.S. products and the financial services industry; cooperating on development of new clean coal technology; and strengthening cooperation on intellectual property rights (May 2007)
Increasing cooperation on product safety, including drugs, food, chemicals, and consumer products; commitments on further financial reforms; and discussions on energy and environmental cooperation; progress on a bilateral investment treaty; and promoting transparency in administrative rule-making (December 2007)
Agreement on a Ten-Year Energy and Environment Cooperation Framework, including establishment of a steering committee to guide cooperation (June 2008)
Discussion of strategies to manage macroeconomic risk and address the global financial crisis (December 2008) 

			The Senior Dialogue

The Senior Dialogue (under the State Department), another relatively new bilateral dialogue in the U.S.-China process, held its fourth through the sixth rounds during the 110 th Congress: in Washington in June 2007; in Guiyang in January 2008; and in Washington D.C.in December 2008. By late May, Taiwan had accepted a PRC invitation to resume official talks in Beijing for the first time since October 1998. Other Taiwan initiatives remained in the discussion stage. Beijing resolved a decades-long boundary dispute with Russia. Timeline During the 110th Congress

		2008

12/05/08 —The fifth U.S.-China Strategic Economic Dialogue meeting wound up in China. 08/07/08 —President Bush left Thailand for Beijing to attend the opening ceremony of the 2008 Olympic Games. 03/10/08 —Monks in Lhasa launched a protest against Chinese rule on the 49 th anniversary of a violent 1959 anti-Chinese uprising.
This report deals with U.S.-China relations during the 110th Congress (2007-2008) and with a number of key events involving China during the two-year period. These events included: China's anti-satellite weapon test (January 2007); the 17th Party Congress (October 2007); a crackdown against demonstrations in Tibet (March 2008); the election of a new, pro-engagement government in Taiwan (March 2008); the massive Sichuan earthquake (May 2008); and Beijing's hosting of the 2008 Olympics (August 2008).
U.S.-China relations were remarkably smooth for much of the 110th, although there were signs that U.S. China policy had become subject to competing reassessments as the Bush Administration drew to a close in 2008. The White House continued to follow the policy of engagement it had unveiled in 2005 as a new framework for the relationship, one in which the United States was willing to work cooperatively with China while encouraging Beijing to become a "responsible stakeholder" in the global system. U.S. officials also continued to hold a series of regular senior dialogues the White House had established with Beijing, such as the U.S.-China Strategic Economic Dialogue. But other U.S. policymakers began to raise concerns on issues involving China and U.S.-China relations. They cited concerns about the impact of the PRC's strong economic growth and a more assertive PRC diplomacy in the international arena; failures in procedures to assure the quality of Chinese pharmaceuticals, food, and other products being imported into the United States; repeated PRC inabilities to protect U.S. intellectual property rights; and trade practices and policies in China that contributed to a growing U.S. trade deficit with China ($256 billion in 2007 and projected to hit $267 billion in 2008).
With total U.S.-China trade in 2007 reaching $387 billion, China during the 110th Congress was the second-largest U.S. trading partner. Beijing also was positioned to play an important potential role in efforts to resolve the global financial crisis that developed late in 2008, with China's central bank a major purchaser of U.S. debt. China was the second largest holder of U.S. securities and the largest holder of U.S. Treasuries used to finance the federal budget deficit. Taiwan, over which China claims sovereignty, remained the most sensitive bilateral issue in the 110th Congress, exacerbated by the pro-independence Taiwan administration that held power in 2007 and early 2008. But a March 2008 leadership change in Taiwan presented an opportunity to begin to lay a new framework in Taiwan-PRC relations—one moving away from the more confrontational policies of the past. As a result, tn June 2008, the first PRC-Taiwan talks in a decade were held in Beijing. The political status of Tibet also re-emerged as an issue in the 110th when monks in Lhasa launched a protest against PRC rule on March 11, 2008. The protests, at times resulting in violent clashes with police, spread to several other cities in the Tibetan Autonomous Region and beyond. Beijing's assertive response added to a drive urging a boycott of the Summer Olympic Games being hosted by Beijing in August 2008. But Beijing hosted a largely successful Games, and President Bush attended the opening ceremony in August 2008.
Other concerns about China appeared driven by security calculations, where U.S. officials question the motivations behind China's expanding military budget. One congressionally mandated report by the Defense Department concluded Beijing is greatly understating its military expenditures and is developing anti-satellite (ASAT) systems—a claim that gained more credence when the PRC used a ballistic missile to destroy one of its own orbiting satellites in January 2007. This report will not be updated. Current issues and actions in U.S.-China relations are covered in other CRS reports.