Renewing China's most-favored-nation trade status, as requested by President Clinton, is the right thing to do - barely. Though open trade is the forerunner of open government and should be pursued, violations of human rights in China and elsewhere should not go unsanctioned either.

Yet economic and political engagement with the Chinese hold more promise for positive change than eschewal. Attempting to impose isolationism upon the awakening behemoth would be fruitless. There are too many other nations intent upon entering China's emerging marketplace, regardless of human-rights issues.Severing Sino-American trade ties would penalize American businesses more than it would the Chinese government. To sustain the unfolding marketplace, a liberalization of other rights must soon follow, resulting in a more independent Chinese middle class.

The current Sino model, capitalism controlled by a Communist state, will not last long without moving one direction or the other. Open trade engagement should nudge that toward greater overall openness.

The problem with this thinking is obvious: Matters of conscience, including religious and political persecution, should not be swept aside by business or other interests. The response to that, however, is to not ignore the latter. Trade provides common ground upon which to forge stronger political ties.

Where abuses exist, appropriate sanctions may be applied without necessitating blanket trade prohibitions. Congress currently is considering legislation that would penalize China and 76 other nations for religious oppression. House and Senate measures appear headed toward passage, despite opposition from business and the Clinton administration.

The congressional bills, expected to merge as one later this year, would create a State Department office to monitor and report religious persecution and to authorize sanctions against countries guilty of abuses. At this juncture, China would be among those penalized.

Penalties would be selected from a menu of options, so it is not inconceivable that China and other nations could have favorable trading status with the United States but still be penalized. That is preferred to denying MFS.

Unfortunately, this entire issue is muddied by allegations the Chinese have used campaign donations to influence U.S. elections. Because of Democratic fund-raisers and the president's eagerness to woo Asian donors, his support of Sino most-favored-nation status lacks credibility.

But the overriding importance of China as a trade partner should outweigh Democratic indiscretions. Free trade is a powerful force of change, needed now more than ever to maintain good relations with Beijing amid fears of a nuclear arms race in South Asia. It is a lifeline that must be kept fully open by granting China full trade status, with hopes it will help eliminate all forms of human-rights abuses.