The US has agreed to pay China $28 million in compensation for the destruction of the Chinese embassy in Belgrade by NATO missiles on May 7th, a US State Department official said in Beijing yesterday.
China also agreed to pay the US $2.87 million for damage to US diplomatic missions in China, particularly the US embassy in Beijing, during the angry protests that followed the NATO bombing of the embassy in Belgrade in which three people were killed.
The agreement follows several meetings between the two sides but it is not quite the end of the affair.
The Chinese side is still demanding that the United States give a satisfactory explanation of the bombing. The Chinese Foreign Ministry said that the US must do much more and see to it that those responsible are punished.
The bombing of the Chinese embassy came at the height of NATO's US-led air attacks on Yugoslavia to force it to withdraw its troops from Kosovo. Washington has always insisted that hitting the embassy was a mistake, due to outdated maps, but there have been unconfirmed reports that it carried out the strike deliberately as the US suspected China was allowing the embassy to be used to assist the Yugoslav side.
Diplomatic sources in Beijing also said that the floors hit in the embassy held China's signals intelligence operation for all of Europe.
In retaliation for the bombing, the Chinese authorities allowed furious demonstrators, mostly students, to parade past the US embassy in Beijing for several days, throwing stones and paint bombs.
Several embassy cars were also wrecked in a controlled response during which security officials directed the demonstrators and decided when the stoning should stop.
The Irish Embassy next door suffered collateral damage in the form of several broken windows in living quarters, and the staff were evacuated temporarily to a Beijing hotel.
The Chinese Diplomatic Services Bureau, which rents out the buildings, repaired the damage.
The compensation deal helps consign to history one of the most acrimonious breaches in Sino-US relations, and enhances the spirit of co-operation between the two countries which resulted in the trade agreement in November paving the way for China's entry to the World Trade Organisation (WTO).
"I hope this day marks the beginning of a more positive trend in US-China relations," the US State Department legal adviser, Mr David Andrews, told a news conference in Beijing.
"These figures reflect what both sides see as fair payment for the property damage based on the delegations' five meetings that comprised an extensive review."
Within hours of the deal being struck, President Jiang Zemin of China accepted the credentials of the new US ambassador to China, Mr Joseph Prueher, at the Great Hall of the People.
Western diplomats quoted by Reuters said Washington had sought around $5 million for damage to its missions and was reluctant to set a precedent for compensation resulting from military conflicts.
"This was a unique and tragic event. It does not set a precedent," a US official said.
A Foreign Ministry spokesman, Mr Zhu Bangzao, said the US government should still "conduct a comprehensive and thorough investigation into the bombing, severely punish the perpetrators and give a satisfactory account of the incident to the Chinese government and people as soon as possible".
The US paid separate compensation of $4.5 million for the families of three Chinese personnel killed in the bombing, and President Clinton made a public apology.