WASHINGTON -- Premier Zhao Ziyang of China told President Reagan Tuesday night his nation will pursue closer ties with the United States but improved relations are jeopardized by the chronic issue of nationalist Taiwan.

In his toast to Reagan at the White House after a day of generally cordial meetings with the president and other top U.S. officials, Zhao reviewed American-Sino relations since full diplomatic relations were restored in 1979.


The relations have endured 'twists and turns, with both advances in many fields and difficulties and obstacles cropping up along the way,' he said.

'The jolts and uncertainties in Sino-U.S. relations do not serve the interests of the two peoples, nor those of world peace,' he said. 'We hope that this disturbing situation will soon be brought to an end.'

But in his talks with Zhao, Reagan pledged he would uphold the Taiwan Relations Act, which provides for unofficial relations between the nationalist government and Washington.

Reagan was equally firm in restating his commitment to the 1982 agreement to gradually phase out the sales of arms to Taiwan in recognition of China's fundamental policy to seek peaceful reunification with what it regards as a breakaway province.

After the dinner, Reagan said he objected to communist North Korea's calls for three-way talks with the United States and China on the future of the penisula. The talks would exclude the U.S. ally of South Korea.

'I think it would be just useful if it would be a four-way conference,' he said.


Reagan said the subject came up in his talks with Zhao but not in detail.

Reagan said the purpose of the talks could be to seek stability in the penisula if the two Koreas could have a 'meeting of minds and stop being two armed camps.'

U.S. and Chinese officials described the day's talks, led by Reagan and Secretary of State George Shultz, as frank but cordial. Reagan and Zhao stressed the desire to restore momentum to the Sino-American relationship through expanding trade, economic investment and the transfer of advanced U.S. technology -- the chief purpose of Zhao's four-day visit.

But the nagging problem of Taiwan clouds the future.

'The Taiwan issue is the major difference between Cina and the United States, or in other words, the principal obstacle to the growth of Sino-U.S. relations,' the premier said, calling for strict observance of agreements between the two countries on Taiwan.

The United States and China are negotiating a nuclear technology exchange agreement, but there is American concern about China's proliferation policy. Zhao said his country, with his atomic arsenal, still 'stands for the complete prohibition and thorough destruction of nuclear weapons.'

Reagan said the world has shrunk since his schoolboy days and China is no longer a far-away nation.

'Technology has made us neighbors,' he said. 'It's up to us to make certain that we are also friends.'

Reagan said he places great value on positive and expanding ties with China while acknowledging differences.

'Goodwill and friendship do not always, as we have found, bring agreement on every issue,' Reagan said. 'But friendship gives us the freedom to disagree, even to criticize, without fear of lessing cooperation in our many areas of mutual friendship.'


Reagan began the day in honoring Zhao with a full honor guard reception on the south lawn of the White House and quickly set the tone of his approach to the talks with the old adversary.

'For our part, we recognize the differences between our two countries, but we stand ready to nurture, develop and build upon the many areas of accord to strengthen the ties between us,' Reagan said.

After Reagan and Zhao met for 70 minutes, a senior official told reporters: 'Their feeling is that the whole issue (of Taiwan) is their internal affair. The president was candid about the fact that we take seriously our commitments to old friends and we don't walk away from them.'

Shultz said the relationship between China and the United States is so complex that 'we can hardly expect the slate to ever be free of problems.' But he said the two nations must look to a future of mutual trust and economic benefit.

'With a good will that both sides must bring to bear on these occasional irritations, we will take them as they come, argue vigorously for our respective interests and surely work out mutually acceptable solutions in the end,' Shultz said in toasting Zhao at a State Department luncheon.

Reagan stood in the grey overcast chill and welcomed the premier in a ceremony filed with fanfare on the south lawn. Both leaders did not appear to notice the faint chants of 'Peking, no, no, no' from nearly 1,000 pro-Taiwan demonstrators outside the distant White House fences.


'Today, we know it is within our grasp to reap enormous rewards from the courage and foresight of those who opened the doors of Chinese-American friendship,' the president said.

Reagan, by rewards, meant trade. In his four-day visit Zhao will discuss obtaining computers, cooperation in nuclear and fossil energy exploration, and industrial development and investment.

Zhao called on both governments to 'embark on a smooth path,' building on a relationship that began with sailing traders 200 years ago, then was interrupted by the communist revolution, the Korean war and 30 years of Cold War chill before diplomatic relations were restored in 1979.

Premier Zhao Ziyang said Wednesday China is eager to reap the technology and know-how of the industrial world and never again will close its door to world trade.

But the premier, in a major speech to American businessmen, warned that political difficulties with the United States could jeopardize the emergence of a flourishing trade.

'I hope that you will use your influence to help overcome these difficulties,' he said.

The Chinese leader, in the second full day of his visit, emphasized the primary goal of his mission -- gaining greater American technology in energy exploration, transportation and communications systems, and business credits. He arranged talks with Commerce Secretary Malcolm Baldrige and Defense Secretary Caspar Weinberger.

Wearing a blue-grey business suit and speaking through an interpreter, the 64-year-old Zhao told the businessmen that for 30 years after the 1949 communist revolution China 'was virtually cut off' from trade with the West despite a willingness to open its markets.


He did not refer to the chaos the Cultural Revolution made of Chinese society, but said Peking's new leaders are embarked on a rapid program of economic development and need the technology and managers of the developed world.

'We resolve to blaze a new trail and build socialism with Chinese characteristics,' Zhao told the National Council for U.S.-China Trade.

'China has opened its door and will never close it again,' he said, pledging a national 'policy of opening to the outside world.'

Zhao, relaxed and often smiling while the interpreter read his remarks, said the world's most populous nation is improving its agricultural production, building railways and harbors and communication systems while developing tastes for such products as television sets.

'In all these endeavours, massive capital and advanced technology are required,' he said.

He said U.S. business, with its credits and know-how, is in a good position to develop the vast Chinese market despite the 'difference social and economic systems' of the two nations.

In comparison, China is relatively inexperienced in international economic affairs and is 'aware of the complaints our foreign friends' have about its system, Zhao said.

'We are doing our utmost to make improvements in his field.'

But he said China needs another form of help from American businessmen -- on the political level.

In an apparent reference to the chronic problem of Taiwan, disputes about textiles and grain purchases, Zhao said it is impossible to separate political considerations from economic activities.

'The expansion of Sino-U.S. economic relations will promote Sino-U.S. political relations,' he said. 'Conversely, setbacks in Sino-U.S. politicl relations cannot but adversely affect Sino-U.S. economic relations.'