Research
Research
China uses “United Front” work to co-opt and neutralize sources of potential opposition to the policies and authority of its ruling Chinese Communist Party (CCP). The CCP’s United Front Work Department (UFWD)—the agency responsible for coordinating these kinds of influence operations—mostly focuses on the management of potential opposition groups inside China, but it also has an important foreign influence mission. To carry out its influence activities abroad, the UFWD directs “overseas Chinese work,” which seeks to co-opt ethnic Chinese individuals and communities living outside China, while a number of other key affiliated organizations guided by China’s broader United Front strategy conduct influence operations targeting foreign actors and states. Some of these entities have clear connections to the CCP’s United Front strategy, while others’ linkage is less explicit. Today, United Front-related organizations are playing an increasingly important role in China’s broader foreign policy under Chinese President and General Secretary of the CCP Xi Jinping. It is precisely the nature of United Front work to seek influence through connections that are difficult to publically prove and to gain influence that is interwoven with sensitive issues such as ethnic, political, and national identity, making those who seek to identify the negative effects of such influence vulnerable to accusations of prejudice. Because of the complexities of this issue, it is crucial for the U.S. government to better understand Beijing’s United Front strategy, its goals, and the actors responsible for achieving them if it is to formulate an effective and comprehensive response.
Research
Highlights of This Month’s Edition• Bilateral trade: In the first half of 2018, the U.S. goods trade deficit with China reached $185.7 billion, up about 9 percent year-on-year; in the month of June, U.S. agricultural exports to China declined 34.4 percent and livestock declined 39.2 percent year-on-year; in services, the United States reached a record high trade surplus with China in Q1 2018, but exports of travel—the main driver of U.S. service exports to China—slowed to their lowest year-on-year growth in 14 years.
• Bilateral policy issues: Following tariffs imposed July 6, the United States initiated WTO cases against five trade partners, and published a list of tariffs on $200 billion worth of additional Chinese imports, as China threatens retaliation; Chinese regulators fail to approve Qualcomm’s proposed acquisition of NXP.
• Quarterly review of China’s economy: China’s officially-reported GDP growth slowed to 6.7 percent year-on-year in Q2 2018 as fixed asset investment, industrial output, and retail sales lose steam; Chinese policymakers implement measures to increase credit growth and spur economic activity despite pledges to focus on deleveraging; the RMB’s value falls due to trade tensions and signs of an economic slowdown in China, raising concerns Beijing could use currency devaluations to offset the impact of U.S. tariffs.
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Since joining the World Trade Organization in 2001, China has leveraged relatively cheap labor, large economies of scale, industrial policies, and the manufacturing capabilities of neighboring countries to become an export powerhouse in an increasing range of industries, while often limiting market access for foreign products. China’s scale as a trading power coupled with its protectionist policies have contributed to rising tensions in bilateral trade relations. This report describes and analyzes patterns in the U.S.-China trade relationship in 2012–2017 and is an update to a staff research report published by the Commission in November 2012 which covered trends in trade in 2000–2011.
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Highlights of This Month’s Edition• Bilateral trade: U.S.-China goods trade deficit reached $33.2 billion in May 2018, and $152.2 billion year-to-date.
• Bilateral policy issues: U.S. tariffs against $34 billion worth of Chinese imports go into effect as China implements retaliatory action and takes steps to dull the impact of U.S. tariffs on China’s economy; U.S. Department of Commerce reverses ZTE exclusion order, but Members of Congress are working on legislation to reinstate sanctions.
• Policy trends in China’s economy: Chinese investment in the United States fell 90 percent year-on-year to $1.8 billion in the first five months of 2018 due, in part, to Beijing’s intensified scrutiny of outbound flows; China issues new foreign investment negative list, lifting ownership restrictions in 22 industries, including airplane design and manufacturing, agriculture, automotive, banking, railway construction, and shipping.
• Sector Focus – China Pursues Foreign Semiconductor Technology: Since 2015, U.S. semiconductor firm Micron has been subject to a persistent, wide-ranging technology acquisition campaign from multiple Chinese actors, involving an attempted purchase, alleged IP theft, a direct challenge of Micron’s IP in China, and an on-going antitrust case.
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Since President Xi took office in 2013, Beijing has significantly bolstered its involvement in the Pacific Islands region, which comprises three U.S. territories and three countries freely associated with the United States that are important for U.S. defense interests in the Indo-Pacific. Much of China’s engagement in the region has focused on expanding economic ties with the Pacific Islands, but it has also increased its footprint in the diplomatic and security realms. This report examines China’s interests in the region, its comprehensive engagement in the Pacific Islands, and the implications of its expanding presence and influence for the United States.
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Highlights of This Month’s Edition• Bilateral trade: U.S. goods deficit with China increases 11.8 percent in the first four months of 2018 as growth in U.S. imports from China outpaces exports.
• Bilateral policy issues: The United States and China issue a joint statement on the ongoing trade negotiations, but outcomes remain in flux as tariff and investment action deadlines near; the U.S. government considers alternative penalties for ZTE’s violation of its 2017 settlement with U.S. authorities; China drops antidumping probe into U.S. sorghum, but U.S. soy exports still threatened.
• Policy trends in China’s economy: China compels multinational companies to list Taiwan as a Chinese territory, increasingly using Chinese domestic laws as leverage.
• Sector Focus — Autos: China’s auto market continues to grow, albeit slower than in previous years; as China prepares to lower tariffs on auto imports, European firms are better positioned to take advantage of increased market access than U.S. firms, most of which manufacture cars in China through joint ventures.
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The Chinese government is seeking to revamp its state sector through a series of billion dollar “megamergers” involving central state-owned enterprises (SOEs). These megamergers consolidate state control in strategic sectors of economy and eliminate intra-state competition in China. However, they also contribute to increased debt levels among Chinese SOEs and undermine the competitiveness of U.S. businesses and other global firms. This report assesses the objectives of China’s megamergers strategy and evaluates the implications of SOE megamergers (and, more broadly, Chinese government control over the economy) for the global competitive landscape.
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China’s digital game market has emerged as the largest in the world but remains heavily restricted to U.S. game companies. U.S. companies are required to license their games to Chinese operators who appear to claim a majority of the revenue a U.S. game earns in China. Intellectual property rights conditions in China create significant challenges for U.S. firms, facilitating piracy in other international markets through China’s manufacture of piracy-enabling devices and restricting the commercial viability of certain gaming genres and platforms within China due to widespread piracy. Chinese companies have acquired several foreign game companies, raising data privacy concerns given the power of the Chinese government to request information from domestic companies and the broad array of data that can be collected by mobile games.
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The report examines five categories of China’s advanced weapons systems (counter-space, unmanned systems, maneuverable reentry vehicles, directed energy and electromagnetic railguns) and artificial intelligence applications for national defense. The report also assesses the implications of China’s advanced weapons programs for the United States and its allies and provides recommendations.
Research
Highlights of This Month’s Edition• Bilateral trade: In the first quarter of 2018, the U.S. goods trade deficit with China grew about 15.5 percent year-on-year due to increased imports; in services, the United States reached record high trade surplus with China in 2017, but export growth was the lowest in over 13 years.
• Bilateral policy issues: U.S. Department of Commerce bans U.S. firms from exporting to ZTE due to ZTE’s repeated violations of its settlement with U.S. authorities; Chinese government strengthens long-standing policies to replace foreign technology with domestic equivalents; the EU and Japan join the United States in a challenge of China’s licensing regulations, while the EU joins China in its request for consultations regarding Section 232 tariffs; Beijing increases retaliatory pressure on the U.S. agriculture sector by imposing a 178.6 percent antidumping deposit on U.S. sorghum; 82 percent of all U.S. agriculture exports to China are subject to planned or enacted retaliatory Chinese tariffs.
• Quarterly review of China’s economy: The Chinese economy grew 6.8 percent year-on-year in the first quarter of 2018, benefitting from strong consumer demand and increased real estate investment.
• Policy trends in China’s economy: At the Boao Forum, President Xi pays lip service to globalization and economic liberalization, but offers modest commitments.