2011 report to congress - U.S.-China Economic and Security Review ...

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248ond uranium enrichment facility. Undisclosed Chinese companiesare also investing in the construction of a highway from the portto the border with China and building a new bridge over the YaluRiver, which separates China from North Korea. 31 Other Chinesejoint venture investments include mineral and metal extractionand processing and low-end manufacturing facilities. 32Unlike in many other countries where China invests, the majorityof Chinese investors operating in North Korea are not nationalstate-owned enterprises but rather ‘‘privately owned companies andprovincial, prefecture, and municipal-owned [state-owned enterprises],’’according to Mr. Thompson. 33 Only four out of 138 knownChinese companies engaging in joint ventures in North Korea werenational-level state-owned enterprises, and only two of the companiesrank among China’s top 100. 34 According to an Open SourceCenter report, of 86 Chinese joint ventures in North Korea, approximately65 percent originated from China’s northeastern provincesHeilongjiang, Liaoning, and Jilin, which border NorthKorea. 35 Explanations for the apparent lack of national-level investmentsare not clear, but it may provide China’s northeast provinceswith some influence over China’s foreign policy (see sec. 2 ofthis chapter for more on provinces as foreign policy actors).Unfortunately, accurate data on the amount of China’s investmentsin North Korea are unavailable. According to China’s Ministryof Commerce, China’s officially reported 2010 investments inNorth Korea totaled $12.1 million, a 52 percent increase over 2009.China’s total investment in North Korea since 2004 equaled $109.3million. 36 Yet recent activities by China cast doubt upon these statisticsor point to a recent radical uptick in investments. For example,a Chinese Foreign Ministry spokesperson stated that total investmentin one of the special economic zones will be between $300million and $500 million. 37 China’s funding for the Yalu bridgeproject is estimated at $260 million. 38 The Wall Street Journal reportedthat China’s investment in the Rason port project is estimatedat $2 billion. 39 If the estimate is accurate, and the projectis seen to completion, this will be China’s single largest investmentin North Korea and nearly 20 times the size of China’s claimed2004 to 2009 total investments in North Korea.Although precise data are unavailable, China’s foreign direct investmentin North Korea is substantial and provides the Northwith vital resources. Currently, excluding South Korea’s investmentin the Kaesong Industrial Complex, China is North Korea’slargest foreign direct investor. 40 While figures for 2009 and 2010are unknown, estimates indicate that in 2008 China provided 94percent of all investments in North Korea. 41 * Furthermore, whilemany nations are decreasing their investments in North Korea onaccount of its recent provocations, 42 China appears to be increasingits investment in North Korea as the large high-profile projects detailedabove demonstrate.dkrause on DSKHT7XVN1PROD with $$_JOB* By way of comparison, North Korea only receives a miniscule portion of China’s overall foreigndirect investments: only .02 percent in 2010, according to China’s official statistics. Ministryof Commerce, People’s Republic of China, ‘‘2010 Niandu Zhongguo Duiwai Zhijie TouziTongji Gongbao’’ (Statistical Bulletin on China’s Outward Direct Investment, 2010) (Beijing,China: 2011), p. 82.VerDate Nov 24 2008 13:46 Nov 10, 2011 Jkt 067464 PO 00000 Frm 00260 Fmt 6601 Sfmt 6601 G:\GSDD\USCC\2011\067464.XXX 067464
249China also provides economic support to North Korea by onlyloosely implementing international sanctions against North Korea.According to a Congressional Research Service study, despite China’spublicly strong support for UN sanctions against North Koreafor its nuclear program, China takes a ‘‘minimalist approach’’ to enforcingthose sanctions. The study continues, noting that Chinapersists in allowing North Korea trade and financial transactionsto transit Chinese territory without rigorous inspections, contraryto UN sanctions. 43 According to media reports, China has also beencomplicit in allowing North Korea’s continued support of Iran’s nuclearprogram by permitting cargo to transit through China uncheckedand failing to act on U.S.-provided intelligence toward thisend. 44 In addition, China continues to allow luxury goods, bannedby UN sanctions, to flow unobstructed to North Korea. 45UN Sanctions against North KoreaCurrently, the United Nations has two main sets of reinforcingsanctions against North Korea for Pyongyang’s illicit weapons ofmass destruction programs: UN Security Council Resolution1718 and UN Security Council Resolution 1874.UN Security Council Resolution 1718: passed in 2006 in responseto North Korea’s October 9, 2006, nuclear weapons test. This resolutioncalled upon member states to refrain from purchasing ortransferring to, or procuring from, North Korea large militaryplatforms (such as tanks and aircraft), nuclear and ballistic missilecomponents, and luxury items (undefined). 46UN Security Council Resolution 1874: passed in response toNorth Korea’s May 12, 2009, nuclear weapons test, this resolutionsought to tighten previous sanctions against North Korea.In particular, it called for expanding the arms embargo to allweapons except small arms, the active inspection of all goodstraveling to and from North Korea, and the curtailing of economictransactions with North Korea except when in support ofhumanitarian or denuclearization purposes. This resolution alsoestablished an expert panel to assess current efforts of implementingsanctions on North Korea. 47China’s military support for North KoreaDespite active measures to support the North Korean regimeboth economically and diplomatically, China appears to be providingNorth Korea with only minimal military support. David F.Helvey, principal director for East Asia Policy, Office of the Secretaryof Defense, described to the Commission how Beijing stillhas a mutual defense agreement with Pyongyang, the only mutualdefense agreement to which China is still obligated. 48 In previousyears, Beijing has provided military arms to North Korea but appearsto have refrained at least publicly from such activities sincedkrause on DSKHT7XVN1PROD with $$_JOBVerDate Nov 24 2008 13:46 Nov 10, 2011 Jkt 067464 PO 00000 Frm 00261 Fmt 6601 Sfmt 6601 G:\GSDD\USCC\2011\067464.XXX 067464
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12011REPORT TO CONGRESSof theU.S.-C
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U.S.-CHINA ECONOMIC AND SECURITY RE
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dkrause on DSKHT7XVN1PROD with $$_J
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CONTENTSPageTRANSMITTAL LETTER TO T
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23Figure 1:China’s Share of the U
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25The weakness in U.S. exports of a
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31Table 3:RMB Bond Issuances by Mul
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35of bilateral negotiations under t
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37Stonewalling the WTO: A Case Stud
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39that China’s existing system of
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41now. Because the structures of th
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43How Big Is China’s State Sector
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45Fortune Global 500, compared to j
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47panies are less profitable, after
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49erate primarily within state-cont
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57Figure 1: Chinese FDI Stock in th
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63U.S. firms with sensitive technol
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65Addendum I: SASAC Companies, Larg
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67Addendum I: SASAC Companies, Larg
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69dkrause on DSKHT7XVN1PROD with $$
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71January 2010, the heads of 19 U.S
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77cause Beijing had sought to exclu
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81China in Search of Western Techno
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83scious policy seeking to drive Ch
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89Like previous plans, the 12th Fiv
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95Consultative Conference National
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99panies account[ed] for fully 7 pe
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101Dr. Shih has testified before th
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103ment subsidies, which in turn wi
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105Addendum II: Figures 1-2Figure 1
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113drivers cited increased fuel pri
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123uating from college and hoping t
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131unfairly or unjustifiably harm U
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161gress, the DoD noted that China
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165eral U.S. military policies, inc
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167Figure 1:Territorial Disputes in
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171provides guidelines for dealing
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173network exploitations to facilit
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181ligence, surveillance, and recon
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187Therefore, the PLA maintains the
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189Of import, the PLA’s geographi
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Page 205 and 206: 197ther moves toward independence,
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Page 229 and 230: RECOMMENDATIONSChina’s ‘‘Area
Page 247 and 248: 239320. Chang Xianqi, Military Astr
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323mation Office. Day-to-day superv
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327Although the slogans change over
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335What Constitutes a ‘‘Core In
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339Selected CAIFC/CPD Track Two Exc
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341disseminated through diplomatic
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375ecutive Schedule under section 5
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APPENDIX IIIPUBLIC HEARINGS OF THE
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APPENDIX IIIALIST OF WITNESSES TEST
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393Alphabetical Listing of Panelist
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397In TaiwanU.S. Government• Amer
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APPENDIX VLIST OF RESEARCH MATERIAL
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401The National Security Implicatio
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APPENDIX VIACRONYMS AND ABBREVIATIO
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