Research: Economics and Trade

Research
High-speed rail is a symbol of China’s technological progress and a significant source of national pride. In under a decade, China built the world’s largest high-speed rail network and developed globally competitive rail companies. Now Beijing is pursuing contracts for high-speed rail projects abroad. This staff report examines China’s high-speed rail diplomacy and growing footprint in the U.S. rail market. China’s initial forays in the U.S. rail market suggest Chinese rail firms have a mixed impact on U.S. industry. The United States does not have a domestic high-speed rail manufacturing industry, but China’s entry into the U.S. rail market could undermine competition by pitting heavily subsidized, state-owned companies against private firms.
Research
China is an important market for U.S. firms, but policies outlined in the 13th Five-Year Plan seek to create new Chinese competitors that will be able to challenge U.S. companies abroad while slowly closing market opportunities in China for U.S. and other foreign firms in important high-tech sectors such as biopharmaceuticals, robotics, and aviation. This staff report analyzes the 13th Five-Year Plan, the Chinese government’s most important strategy to address its economic, social, and environmental challenges over the next five years, focusing on key national targets (including subsequently announced localization and innovation targets), market access commitments, and its implications for the U.S. employment, innovation, and economic growth.
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Mass quantities of fentanyl, a low-cost and highly potent synthetic drug, are being produced in China and brought illegally to the United States, contributing to a growing U.S. opioid crisis. The rise of fentanyl in the United States can be traced back to China’s large chemical and pharmaceutical industries, which manufacture vast quantities of the drug and its analogues to export to the western hemisphere with little regulatory oversight. This report examines how China’s illicit chemical production and inefficient U.S. and international counternarcotic efforts have contributed to dramatic increases in fentanyl-related deaths in the United States.
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The report examines the rapidly increasing foreign direct investment by China in the United States and how the unprecedented level of investment, especially in sensitive sectors, raises new considerations for lawmakers regarding U.S. national and economic security. This report was prepared for the Commission by the Rhodium Group.
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The report examines the growth of China’s robotics industries and its development of unmanned industrial, service, and military systems, such as drones and driverless cars. The report assesses the economic and national security implications of these trends for the United States.
Research
A U.S.-China Bilateral Investment Treaty (BIT) is unique among other existing BITs insofar as it will have to balance the interests of two world powers that are both capital-importing and capital-exporting nations. It will not only determine future investment relations between the world’s two biggest economies, but will also set the precedent for U.S. investment relations with other major developing countries. While a U.S.-China BIT could potentially unlock sizable benefits, a number of significant challenges—many of which are unique to China’s involvement—complicate the debates around a prospective U.S.-China BIT. This report briefly summarizes each country’s history with BITs, identifies potential challenges in moving forward with negotiations, and highlights potential implications of the U.S.-China BIT for the United States. Drawing on the 2012 U.S. Model BIT, the evolution of China’s BIT practice, and China’s 2012 BIT with Canada, this report concludes by discussing a number of questions U.S. policymakers should consider.
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The report provides an assessment of China’s state plans for civilian and defense-related science and technology, industrial, and energy development and their economic and security implications for the United States. The authors are Tai Ming Cheung, Thomas Mahnken, Deborah Seligsohn, Kevin Pollpeter, Eric Anderson, and Fan Yang, writing for the University of California Institute on Global Conflict and Cooperation.
Research
Chinese tourism to the United States has expanded rapidly over the past ten years. From 2005 to 2015, Chinese tourism spending in the United States has increased eight-fold, and in 2015 contributed $27 billion to the U.S. economy. Today, tourism constitutes a significant part of the United States’ exports to China, making up 57 percent of U.S. service exports to China in 2015 and 12 percent of U.S. exports to China overall. This increase has been driven by rising Chinese incomes which have made China the largest source of international tourists in the world. While many Chinese travel to the United States for traditional tourism, an increasing number of Chinese students travel to the United States for secondary and tertiary education, with China now contributing more students to the United States than any other country. As Chinese tourism has increased, Chinese investment in U.S. hotels and hospitality facilities has grown by a factor of 9 from 2013 to 2015 following looser Chinese rules on outbound investment. This paper examines the rise in Chinese tourism to the United States and Chinese investment in the U.S. hospitality sector and the consequences of these trends for the United States.
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Over the last 15 years, Mexican drug organizations have replaced domestic producers as the main manufacturers and distributors of meth in the United States. While Mexican cartels produce the majority (around 90 percent) of meth used in the United States, around 80 percent of precursor chemicals used in Mexican meth come from China. Precursor chemicals are increasingly being shipped from China to Mexico and Central America, where they are manufactured into meth, transported across the southern border of the United States, and brought into southwestern states—Texas, Arizona, and California—before being shipped across the country. Despite international counternarcotic efforts, meth precursor manufacturers in China continue to thrive because the country’s vast chemical and pharmaceutical industries are weakly regulated and poorly monitored. This report examines the extent of China’s illicit chemical production and the effectiveness of U.S. and international efforts to reduce precursor chemical flows.
Research
From December 2013 to October 2015, China built artificial islands with a total area of close to 3,000 acres on seven coral reefs it occupies in the Spratly Islands in the southern part of the South China Sea. Although dredging, land reclamation, and the building of artificial islands are not unique to China, the scale and speed of China’s activities, the biodiversity of the area, and the significance of the Spratly Islands to the ecology of the region make China’s actions of particular concern. In addition to damage to the reefs, China’s island building activities have negatively impacted fisheries in the immediate area of the reclamation sites, and could negatively impact the health of fisheries in the coastal areas of the South China Sea. The building of these artificial islands will almost certainly lead to increased Chinese fishing in the surrounding waters, which could raise the risk of a clash between Chinese fishing boats and those of other claimant countries. Moreover, China’s island building activities may have violated some of its environmental commitments under international law; the ongoing case initiated by the Philippines at the Permanent Court of Arbitration in The Hague regarding China’s claims and activities in the South China Sea is considering this possibility.