Highlights of This Month’s Edition
• Bilateral trade: In February 2018, U.S. goods deficit with China hit $29.3 billion, a 27.4 percent jump year-on-year; U.S. exports stall at their 2017 level.
• Bilateral policy issues: The USTR’s Section 301 report details unfair Chinese government technology transfer and IP practices; the USTR subsequently launched a WTO complaint regarding China’s licensing regulations and is working to identify imports to target with tariffs; a GAO report recommends Treasury review staffing and resource levels for CFIUS to determine whether they are sufficient for handling an increasingly difficult workload; President Trump blocks Qualcomm acquisition by Singapore-based Broadcom amid concerns it could weaken Qualcomm’s long-term ability to compete with Chinese firms.
• Policy trends in China’s economy: China’s National People’s Congress passes measures tightening the CCP’s control, including eliminating presidential term limits and approving a sweeping government reorganization plan; sweeping reforms to China’s government bureaucracy highlight government priorities and seek to reduce regulatory confusion, increasing efficiency and Party control over policy.
• Sector focus – 5G: China’s drive for global leadership in 5G creates new economic and national security concerns for the United States.
This hearing will explore Beijing’s objectives in its relations with U.S. allies and partners in Europe and the Asia Pacific and the means by which Beijing seeks to achieve those objectives. It will examine how Beijing employs and integrates various elements of its national power to influence these countries, these countries’ responses to
Beijing’s efforts, and the implications for the United States’ interests and its relations with its European and Asia Pacific allies and partners.
The Chinese government has a comprehensive, long-term industrial strategy to build internationally competitive domestic firms and replace foreign technology and products with domestic equivalents first at home, and then abroad. This issue brief serves as a primer on the policies in the Chinese government’s toolbox for achieving its technonationalist targets, to include localization, massive subsidies for R&D, government procurement, China-specific standards, foreign investment restrictions, recruitment of foreign talent, state-directed acquisition of foreign technology and intellectual property, and, in some cases, industrial espionage.
In November and December 2017, China’s People’s Liberation Army (PLA) Air Force conducted at least nine long-distance training flights over maritime areas along China’s periphery, continuing a trend that began in 2015. Since 2015, long-distance over-water training has become more frequent, featured a greater variety of aircraft, and extended into areas in which the air force had not previously operated. The long-distance over-water training is part of a broader PLA Air Force effort to transition from a service focused on territorial air defense to one capable of conducting offensive and defensive operations beyond China’s coast. These flight activities potentially challenge U.S. interests by (1) improving the PLA Air Force’s capability to execute maritime missions against the United States and U.S. allies and partners in the region; (2) gathering intelligence against the U.S. military and U.S. allies and partners; and (3) reinforcing claims in maritime disputes and pressuring Taiwan.
Highlights of This Month’s Edition
• Bilateral trade: In January 2018, the U.S. goods deficit with China grew 14.8 percent year-on-year to reach $36 billion—its highest ever for January and its highest monthly level since September 2015.
• Bilateral policy issues: The U.S. Department of Commerce submits its Section 232 recommendations for tariffs or quotas on U.S. steel and aluminum imports; SEC blocks acquisition of Chicago Stock Exchange by Chinese-led investor group based on concerns over transparency, oversight, and compliance with ownership limits; AmCham and USCBC surveys of U.S. businesses in China find some signs of rising optimism due to increasing profits and confidence in China’s economic growth, but regulatory and market access challenges persist as firms feel increasingly unwelcome in Chinese markets.
• Policy trends in China’s economy: In their continuing battle against financial risks, Chinese regulators maintain focus on shadow banking, issuing a series of measures to curb riskier forms of lending.
• Sector focus – Sorghum and Soybeans: In response to defensive U.S. trade measures, China considers duties against U.S. sorghum and soybeans, putting 67 percent of U.S. agricultural exports to China at risk.
This hearing will compare and contrast U.S. and Chinese pursuit of next generation connected devices and networks and the implications for U.S. economic competitiveness and national security. The hearing will focus on U.S. and Chinese 5th generation wireless technology (5G) and Internet of Things standards and technology development, U.S. usage of Chinese Internet of Things technologies and 5G networks, and the ability of Chinese firms to collect and utilize data from U.S. consumers through Internet of Things technologies.
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.