Highlights of This Month’s Edition • Bilateral trade: In August 2017, U.S. goods trade deficit increased 3.1 percent year-on-year to reach $34.9 billion; U.S. exports to China were nearly $11 billion, up 16.3 percent year-on-year. • Bilateral policy issues: President Trump blocks an attempted acquisition of Lattice Semiconductor by a company with links to the Chinese government amid potential national security concerns. • Policy trends in China’s economy: Chinese regulators are putting the brakes on bitcoin and other virtual currencies; U.S. coal and liquefied natural gas exports to China surge due to favorable pricing and growing demand. • Sector focus – Waste and Scrap: China begins closing its waste and scrap market, putting $5 billion of U.S. exports at risk.
As space becomes more “congested, contested, and competitive,” as termed in the 2011 U.S. National Security Space Strategy, efforts by spacefaring nations to establish norms of behavior in space have become increasingly important. This issue brief examines China’s views on the Code of Conduct for Outer Space Activities proposed by the European Union, finding that Beijing instead continues to support a binding treaty that would ban the deployment of weapons in space, which it has jointly proposed with Russia. This treaty would significantly limit U.S. activities in space while doing little to reduce actual threats to space assets. China’s actions in regards to codes of conduct in other areas indicate it sometimes uses negotiations to prolong the status quo, and does not always adhere to its agreements. Should China continue to place a high value on developing military counterspace capabilities, its position should be expected to remain unchanged.
Highlights of This Month's Edition: • Bilateral trade: U.S. goods deficit with China reached $33.6 billion in July 2017, a 10.6 percent increase year-on-year, due to robust growth in U.S. imports. • Bilateral policy issues: The USTR launches a Section 301 investigation into China’s industrial policies; the United States imposes new secondary sanctions on Chinese companies over their engagement with North Korea. • Policy trends in China’s economy: To counter declining inbound foreign investment, China’s State Council announces several measures to improve business environment for foreign firms; meanwhile, China’s government continues the crackdown on outbound investment by restricting investment into foreign real estate, hospitality, and entertainment sectors; in its annual review of China’s economy, the IMF warns China’s current credit trajectory is “dangerous.” • Sector focus – Oil: U.S. oil exports to China rise markedly amid declining oil production in China and production cuts in other oil-exporting countries.
China maintains a network of prison labor facilities that use forced labor to produce goods intended for export—a violation of U.S.-China trade agreements and U.S. law. The United States continues to face difficulty in preventing these products from entering its borders, but the Trade Facilitation and Trade Enforcement Act (TFTEA) of 2015 has strengthened its ability to do so by closing a major legal loophole. Chinese authorities remain uncooperative with their U.S. counterparts; they routinely deny that forced labor occurs, and they have not allowed U.S. officials to visit suspected sites in years. Due to insufficient oversight, the supply chains of many U.S. companies remain vulnerable to forced labor-derived products.
Highlights of This Month’s Edition: • Bilateral trade: In the first six months of 2017, U.S. goods trade deficit grew to $171 billion, up 6 percent year-on-year; U.S. deficit in advanced technology products increases 124 percent year-on-year in the second quarter of 2017 as Chinese telecommunications exports soar and U.S. aerospace exports decline; U.S. services exports to China reach a new record, driven by increases in tourism, financial services, and intellectual property payments. • Bilateral policy issues: The inaugural Comprehensive Economic Dialogue concludes with no concrete agreements; China clamps down on the use of VPNs, threatening free flow of data and business operations. • Policy trends in China’s economy: China’s National Financial Work Conference produces modest outcomes; faced with mounting corporate debt and capital flight, the Chinese government introduces new regulations limiting large overseas investments, leading to the withdrawal of several high-profile deals in the United States. • Quarterly review of China’s economy: China’s economy grew 6.9 percent year-on-year in the second quarter of 2017, fueled primarily by surging industrial activity, property investment, and credit growth. • Sector focus – Rice: U.S. rice producers gain access to China’s market, but challenges remain.
In July 2016, the United States and South Korea announced the alliance decision to deploy a U.S. Terminal High Altitude Area Defense (THAAD) antimissile battery in South Korea to defend against the increasing North Korean missile threat. The move has angered Beijing, which perceives THAAD as mostly directed at China and a regional security concern, according to its official statements. In response, Beijing has used economic coercion, among other levers, to try to compel Seoul to abandon the THAAD deployment, but these efforts have proven unsuccessful. This report includes an overview of the THAAD system and its deployment, China’s stated concerns about THAAD, and China’s array of pressure directed against South Korea. It also examines the implications of China’s forceful response to the deployment for the United States and the geopolitical landscape in the Asia Pacific.



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