This issue brief provides an update to the Commission's February 2017 report on fentanyl flows from China, examining the progress of negotiations between U.S. and Chinese law enforcement authorities. Although the Chinese government has taken steps to reduce the manufacture and export of fentanyl-like substances, China remains the largest source of illicit fentanyl and fentanyl-like substances in the United States. To combat these flows, U.S. authorities have begun taking legal actions against known Chinese drug traffickers, including announcing the first ever indictments and sanctions against Chinese fentanyl traffickers.
The U.S.-China Economic and Security Review Commission is mandated by Congress to investigate, assess, and report to Congress annually on “the national security implications of the economic relationship between the United States and the People’s Republic of China.” Pursuant to this mandate, the Commission’s 2018 Annual Report to Congress covers a range of topics on the U.S.-China economic and security relationship. These include U.S.-China economic challenges; China’s agricultural policies; military modernization; the Belt and Road Initiative; relations with U.S. allies and partners, Taiwan, and Hong Kong; evolving strategy toward North Korea; and investment in next generation connectivity.
Highlights of This Month’s Edition
• Bilateral trade: In Q3 2018, the U.S. goods trade deficit with China grew 12 percent to $115.6 billion on importers rushing orders as tariffs begin to bite; U.S. services exports to China reach a record $20.5 billion.
• Bilateral policy issues: The U.S. Department of the Treasury declined to name China a currency manipulator in its October 2018 currency report, but kept China on a monitoring list, citing its significant trade surplus with the United States.
• Quarterly review of China’s economy: China’s GDP grew 6.5 percent in Q3 2018, its slowest pace since 2009; the Chinese government is implementing stimulus measures to support short-term economic growth; Chinese households’ falling consumption and rising debt levels prompt worries about China’s rebalancing; local governments resurrect share-buying program to placate jittery stock market investors; state-run media ordered to cloak signs of falling consumer confidence; President Xi conjures images of Deng Xiaoping’s Southern Tour, stresses the need for “self-reliance” in manufacturing and technology.
The United States maintains close cultural, economic, and security ties with countries in Latin America and the Caribbean (LAC). While the United States remains the largest economic and security partner in LAC, in the last decade China has rapidly deepened its economic, diplomatic, and military engagement to become the region’s largest creditor and second-largest trading partner. China’s efforts in the region are driven by four key objectives: (1) ensuring its access to the region’s abundant natural resources and consumer markets; (2) gaining LAC support for its foreign policies; (3) shaping LAC perceptions and discourse about China; and (4) gaining geopolitical influence in a region geographically close and historically subject to U.S. influence. Closer ties with China may reduce U.S. influence in the region; they can also reinforce the region’s overreliance on highly cyclical exports and create unsustainable debt burdens for some LAC countries, which China could use for political leverage. This report examines China’s objectives in the region, its economic, diplomatic, and military and security engagement in Latin America and the Caribbean, and the implications of its expanding regional presence and influence for the United States.
The U.S.-China Economic and Security Review Commission was created by the United States Congress in October 2000 with the legislative mandate to monitor, investigate, and submit to Congress an annual report on the national security implications of the bilateral trade and economic relationship between the United States and the People’s Republic of China, and to provide recommendations, where appropriate, to Congress for legislative and administrative action.