He said he had concluded that "We're more likely have a positive influence on China by engaging them than we are by trying to isolate them".
The US president delighted his White House audience of businessmen with the announcement, which came two weeks earlier than expected and caught his critics off guard. Mr Clinton had until 3 June to make his decision and it was predicted that he would leave it until the last possible moment.
The US Congress has another 30 days to decide whether to approve it. Yesterday's early announcement guarantees a furious debate in Congress, where China's most favoured nation status (mfn) was already expected to be given a rougher ride than in recent years.
The handover of Hong Kong to China on 1 July is one reason why the renewal of China's status is particularly contentious this year. Some US supporters of democracy in Hong Kong had advocated a renewal of China's mfn status for only six months, to make its longer-term renewal conditional on China's treatment of Hong Kong.
Britain, however, and several leading members of Hong Kong's democracy movement, including Martin Lee, had opposed this, saying that removal of China's mfn status could have the effect of undermining the Hong Kong economy, without acting as any sort of sanction on China.
Hong Kong, though, is only one element in a much bigger equation for the United States. US opinion, not just in Congress, is profoundly split about the Administration's current China policy, which is termed "constructive engagement" and rests on the argument that contact and business with such a giant as China are better than none.
One argument used by Mr Clinton's opponents is economic. Mfn allows China access to the US market for its exports without payment of punitive tariffs. China enjoyed a $7bn (pounds 4.2bn) trade surplus with the US in the first two months of this year, and low-price goods made in China are now on sale throughout America. While these imports appear not to have depressed jobs in the US, they are blamed for widening the US trade deficit.
A second argument concerns human rights. In earlier years, the US appeared able to pull policy levers that had some effect on human rights in China: a dissident released or allowed to emigrate, for instance. A visit to China earlier this year by Vice-President Gore, however, only offered the spectacle of Mr Gore raising a champagne glass to a big aircraft order alongside the Chinese prime minister, Li Peng, who is held responsible for the assault on Tiananmen Square eight years ago.Reuse content