Highlights of This Month’s Edition:
• Bilateral trade: In October 2018, the U.S. goods trade deficit increased 22.3 percent year-on-year to reach a record high of $43.1 billion; declines in export categories targeted by retaliatory tariffs contributed to the sharp deficit increase.
• Bilateral policy issues: Escalation in U.S. and Chinese tariffs halted for 90 days, but longstanding U.S. concerns about China’s technology transfer, intellectual property (IP) theft, and innovation policies remain unaddressed; the Chinese government commits to take additional steps to combat illicit fentanyl flows, purchase U.S. agricultural products, but details of the agreement remain unclear; the U.S. government took action against Fujian Jinhua Integrated Circuit, citing IP violations, and trade secret theft from Micron (the largest U.S. memory chip maker), and risks to the U.S. military supply chain; Huawei executive arrested for allegedly violating U.S. sanctions.
• Policy trends in China’s economy: Alibaba’s Singles’ Day sales reach another record high, but the pace of growth has slowed, reflecting a weaker Chinese economy and rising competition from other e-commerce platforms and promotional events.
• In Focus – Lithium-ion batteries: China has positioned itself to dominate global supply chains and production of lithium-ion batteries, a core technology enabling the adoption of electric vehicles and transportation.
China is the largest market for trafficked wildlife products. Its demand has been an important factor leading to declines in iconic species such as elephants and big cats, as well as in lesser-known species like pangolins. Although China’s legal regime establishes protections for many endangered species, loopholes regarding captive breeding and antitrafficking enforcement create opportunities for the illicit wildlife trade to flourish. Success in combating this trade varies by species: regarding the trade in elephant ivory, for example, a confluence of domestic and international pressure culminated in a U.S.-China joint ivory ban, completed in early 2018. Though indications following the ban appear promising, China’s recent partial reversal of its ban on the use of rhino horn and tiger bone highlights continuing shortcomings in its effort to combat wildlife trafficking.
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.
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.
Highlights of This Month’s Edition
• Bilateral trade: In August 2018, the U.S. goods deficit with China hit $38.6 billion, an increase of 10.5 percent year-on-year, and the highest monthly deficit with China on record.
• Bilateral policy issues: On September 24, the second and most recent round of tariffs went into effect: the United States imposed a 10 percent tariff on $200 billion of U.S. imports from China; Beijing responded by imposing a 5 to 10 percent tariff on $60 billion of U.S. exports to China, releasing a white paper criticizing the Trump Administration; tariffs increase manufacturing costs and hurt U.S. farmers and automakers, but niche manufacturers and metal producers reap benefits, labor groups offer qualified support.
• Policy trends in China’s economy: At the 2018 Forum on China-Africa Cooperation, an official forum between China and its 53 diplomatic partners in Africa, Beijing pledged $60 billion in financing commitments.
• In Focus – U.S. Supply Chain Risks from China: Increased reliance on China-based manufacturing and strategic materials worsens U.S. vulnerabilities to a supply disruption and Chinese government tampering of products and services.
Highlights of This Month’s Edition
• Bilateral trade: The U.S.-China goods trade deficit reached $36.8 billion in July 2018, the highest monthly deficit on record.
• Bilateral policy issues: President Trump signs FIRRMA into law, expanding CFIUS’s authority to screen foreign investment for national security threats; midlevel U.S. and Chinese financial officials meet to resume trade negotiations but accomplish little.
• Policy trends in China’s economy: Beijing is shifting toward monetary stimulus, stepping up efforts to boost bank lending amid cooling economic growth and fears that an intensifying trade conflict with the United States might trigger a sharper slowdown; China introduces new measures to curb risks from peer-to-peer lending in response to rising defaults across the industry; Chinese regulators enhance controls on currency movements, stabilizing the renminbi exchange rate after months of rapid depreciation against the dollar; although the Hong Kong Stock Exchange’s revised listing rules have improved its global competitiveness, the number of Chinese firms listed and the amounts raised are below initial expectations.
• Sector Focus – Pork: According to the U.S. Department of Agriculture, U.S. pork exports to China fell by 27 percent in May, then 19 percent in June relative to the previous year; Chinese tariffs on U.S. pork were raised to 62 percent in early July.
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.
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.
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.