NEWS ANALYSIS : U.S. Fears Pushing China Into Enemy Column : Diplomacy: Withdrawing most-favored-nation status could turn Beijing from a testy former friend into something far worse, the Administration believes.

President Bush’s effort to maintain China’s most-favored-nation status reflects the belief that withdrawing the special trade benefits might turn Beijing from a testy former friend into an outright enemy of the United States.

Since the political upheavals at Tian An Men Square in 1989, Bush Administration officials have acknowledged their continuing worry that China could cause a host of new problems for U.S. foreign policy if the leadership in Beijing returns to the active anti-American hostility of the 1950s and early 1960s. And they fear that an outright withdrawal of trade benefits might revive such hostility.

Well before the Persian Gulf crisis, U.S. officials were concerned that China could make trouble for American policy in the Middle East by exporting new missiles or other advanced weapons to countries in the region. And they have worried that China could revert to more aggressive policies in East Asia, making new mischief for neighbors such as Cambodia and Taiwan.

“People around here have short memories,” said one senior Administration official. “We did go through two decades of nasty confrontation with these people (China), one with military overtones. And you could have such a confrontation again. We’d get by, but we would pay a significant price.”

Moreover, over the last year, the Gulf crisis has reinforced the Administration’s desire to avoid provoking Beijing by underscoring how important it is for the United States to deter China from using its veto power in the U.N. Security Council. While saying that it opposed military action against Iraq, China last November abstained from voting on a U.N. resolution authorizing the use of force, thus allowing the measure to take effect.

On Wednesday, in a reflection of these foreign-policy concerns, Bush told reporters that he favors maintaining China’s trade privileges for another year because he does not want to “isolate” China. The President also cited China’s support for Operation Desert Shield, the prewar American effort against Iraq.

The political sensitivity of Bush’s statement was reflected in the insistence by White House spokesman Marlin Fitzwater on Thursday that there still had been no “formal decision” to extend China’s trade benefits. Indeed, Fitzwater conceded that Bush had made his views known even before a recent Administration emissary to Beijing, Undersecretary of State Robert Kimmitt, had had a chance to discuss his trip with White House officials.

The White House must officially notify Congress by June 3 if the President wants to continue China’s preferential trade status for another year. Several congressmen have introduced bills to strip China of the trade benefits.

On Thursday, Senate Majority Leader George J. Mitchell (D-Me.) introduced a bill that would take away China’s most-favored-nation status in 180 days if it fails to satisfy a series of conditions concerning its human rights policies, trade and arms exports.

“Virtually all the human rights concerns which underlie American policy are being ignored and violated in China,” Mitchell said. “We should not pursue a policy which overlooks these realities. Internationally, China has not become a better world citizen, either.”

While conceding that China remains a powerful country, critics argue that Bush is making too many concessions too quickly to the leadership in Beijing.

“China is important, but this doesn’t mean we have to give them everything they want or send them high-level visitors or legitimize their regime,” said former U.S. Ambassador to China Winston Lord. “The Soviet Union is certainly important, too, but that hasn’t prevented us from having a mixed policy toward them over the past 40 years. No one’s talking about isolating China.”

The Administration may be overstating how much help China gave to the United States during the Persian Gulf crisis. In fact, China sought to water down some of the U.N. resolutions against Iraq. Moreover, to the considerable annoyance of U.S. officials, China occasionally gave vent to public denunciations of U.S. policies as an alleged effort to establish American “hegemony” in the Middle East.

On Friday, at a hearing of the Senate Foreign Relations subcommittee on Asia, Sen. Alan Cranston (D-Calif.)--who announced that he will press in Congress for outright withdrawal of China’s trade benefits--asked Assistant Secretary of State Richard H. Solomon if he knew anything about reports that China secretly provided supplies and other help to Iraq during the Gulf crisis.

Solomon carefully avoided denying these reports. “I’m aware of rumors,” he told Cranston. “I’m not aware of confirming evidence. But again, that’s something that probably a classified briefing is most appropriate for.”

In another reflection of continuing problems with Beijing’s weapons exports, Solomon disclosed that he recently talked to Chinese officials about their arms sales to the repressive military regime in Myanmar, formerly Burma.

The Administration’s biggest single worry about China, it appears, is the fear that the leadership in Beijing might destabilize the military balance in the Middle East by exporting its recently developed M-9 missiles to the region. These missiles are more accurate than the antiquated Scuds that Iraq fired into Israel and Saudi Arabia. Unlike the liquid-fueled Scuds, the M-9s operate on solid fuel and can be moved and fired within a shorter time span.

China reportedly signed a contract in 1988 to export these missiles to Syria and has offered to sell them to several other Mideast countries. There is no evidence that any of them have been delivered to Syria or anyone else.

One U.S. official admitted recently that China’s export of these new missiles “is China’s ultimate leverage over us. If things really fall apart, there would be nothing to prevent them from exporting those missiles.”

“The implicit threat to remove MFN (most-favored-nation) is our main leverage over China,” says one State Department official. “We don’t want to lose MFN, because that would remove all our leverage.”