CLINTON SAYS AMERICA MUST DEAL WITH CHINA.

Byline: John M. Broder The New York Times

Declaring the isolation of China to be ``unworkable, counterproductive and potentially dangerous,'' President Clinton on Friday defended his policy of engagement with China as fundamental to America's economic and security interests.

The president's 25-minute address to a small group of Asia experts at Voice of America headquarters was broadcast to a global radio audience estimated at 100 million, and was meant to lay a foundation for next week's summit meeting with Chinese President Jiang Zemin. It was the first time in his presidency that Clinton has devoted an entire speech to a broad treatment of the relationship between America and China.

He said that even though he is having a high-profile meeting with Jiang - it's the first Chinese state visit in a dozen years - significant problems remain between Washington and Beijing. China stifles dissent, supplies weapons components to rogue states and does not adhere to international trading regimes, Clinton said. But the relationship with China is too important to base solely on points of friction, he asserted.

``As always, America must be prepared to live and flourish in a world in which we are at odds with China,'' he said. ``But that is not the world we want. Our objective is not containment and conflict; it is cooperation. We will far better serve our interests, and our principles, if we work with a China that shares that objective with us.''

The president touched all the bases of China policy without lingering very long on any one - human rights, trade, environmental protection, Chinese political liberalization and U.S. security interests in Asia.

The audience of diplomats, China scholars and government officials interrupted Clinton with polite applause only twice, when he made his most forceful statements on American determination to call attention to continuing human-rights abuses in China.

Clinton sought to inoculate himself against critics who claim that the United States should not act so cooperatively toward a repeat violator of press and religious freedoms, but should rather use its political and economic muscle to push Beijing toward more openness.

The president spoke of the profound economic changes under way in China and predicted that the growth of a market economy would bring with it greater political freedom.

``In the process, however, they have stifled political dissent to a degree and in ways that we believe are fundamentally wrong,'' he said. ``This approach has caused problems within China and in its relationship to the United States. Chinese leaders believe it is necessary to hold the nation together to keep it growing, to keep moving toward its destiny. But it will become increasingly difficult to maintain the closed political system in an ever more open economy and society.''

Despite these differences, Clinton insisted, the United States cannot afford to contain or isolate Beijing, nor could it succeed in doing so because such an approach would embolden the enemies of freedom in China and give European and Asian business competitors a jump on the world's largest emerging market.

``A pragmatic policy of engagement is the best way to advance our fundamental interests and values,'' he said.

Rep. Nancy Pelosi, D-Calif., criticized the president's speech as having glossed over Chinese human-rights violations, however.

``President Clinton's China speech was masterful in its craftiness in whitewashing China's record,'' Pelosi said. ``With this speech, President Clinton has tried to justify the failure of his trade policy and the failure of his human-rights policy with a fiction of China's cooperation on proliferation of weapons of mass destruction.''