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

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258Table 4: Partial List of China’s Arms Sales to Iran, 2006–2010—ContinuedItem Quantity Date Delivered RangeC–704 antiship cruisemissile25 2010 c. 35 kmdkrause on DSKHT7XVN1PROD with $$_JOBC–801 antiship cruisemissileQW–11 man-portablesurface-to-air missile25 2006–2010 40–80 km500 2006–2010 5 kmSource: Stockholm International Peace Research Institute, ‘‘Arms Transfer Database’’ (Stockholm,Sweden: September 6, 2011). http://www.sipri.org/databases/armstransfers; Global Security.org,‘‘Chinese Missiles.’’ www.globalsecurity.org/military/world/china/missile.htm.Although officially China ended all assistance for Iran’s nuclearprogram in 1997 due to international pressure, there has beenspeculation that China, or Chinese entities, have quietly continuedto provide some support for Iran’s pursuit of weapons of mass destructionand ballistic missile capabilities. 94 Chinese companieswere accused in March 2009 and 2010 of providing sensitive materialsto Iran for its nuclear program. 95 In April 2009, a New Yorkgrand jury indicted the Chinese firm LIMMT Economic and TradeCo. for covertly using U.S. banks to finance the sale of restrictedhigh-strength metals with military applications to subsidiaries ofan Iranian military agency, potentially supporting Tehran’s ballisticmissile and nuclear weapons programs. 96 Secretary of StateHillary Rodham Clinton noted during President Hu’s January 2011visit to the United States that ‘‘we think that there are some entitieswithin China that we have brought to the attention of the Chineseleadership that are still not, shall we say, as in complianceas we would like them to be’’ with international efforts to not provideIran with nuclear technology and know-how. 97 In late spring2011, a UN report posited that Iran had acquired ballistic missiletechnology from North Korea by transshipping the technologythrough ‘‘a neighboring third country,’’ alleged to be China. 98 InMay 2011, the U.S. State Department sanctioned three Chinesecompanies and one Chinese citizen for their role in weapons proliferationinvolving Iran under The Iran, North Korea, and SyriaNonproliferation Act.* 99 It is unclear from reports, however, whatitems were proliferated and what was sent specifically to Iran, asopposed to Syria or North Korea.Implications for the United StatesChina’s continued support for Iran and North Korea have severalimplications for the United States. By continuing to defend Iranand North Korea in international fora, China undermines internationalefforts to compel these countries to discontinue pursuingagendas and programs that destabilize their respective regions.China’s tactics to weaken and delay international resolutions andreports provide both North Korea and Iran with valuable time todevelop their respective nuclear programs. Knowing that they canrely on China to defend them from international criticism creates* The individuals and entities sanctioned were Karl Lee, Dalian Sunny Industries, DalianZhongbang Chemical Industries Company, and Xian Junyun Electronic.Office of the Spokesperson, ‘‘Fact Sheet: Iran, North Korea and Syria Nonproliferation Act’’(Washington, DC: U.S. Department of State, May 24, 2011). http://www.state.gov/r/pa/prs/ps/2011/05/164129.htm.VerDate Nov 24 2008 13:46 Nov 10, 2011 Jkt 067464 PO 00000 Frm 00270 Fmt 6601 Sfmt 6601 G:\GSDD\USCC\2011\067464.XXX 067464
dkrause on DSKHT7XVN1PROD with $$_JOB259moral hazard in Pyongyang and Tehran where China’s support insulatesNorth Korea and, to a lesser extent, Iran, from the risk oftheir actions. As a consequence, China’s diplomatic defense couldembolden these nations, particularly North Korea, to undertakefurther destabilizing actions.China’s economic relationships with North Korea and Iran undermineinternational attempts to dissuade sanctioned activities byproviding these regimes with a means to acquire much-needed capital.Chinese investments and infrastructure deals provide hardcurrency that can be diverted to finance questionable programs. Byproviding valuable commodities, such as refined petroleum, to Iran,China allows the North Korean and Iranian elites to maintain theirhold on these countries. Furthermore, China’s lax implementationof international sanctions allows these countries to continue to bothacquire and proliferate sanctioned items.Finally, if reports of China’s arms sales to Iran are true, China’swillingness to continue to sell to Iran advanced conventional armsand dual-use technology would enhance Iran’s conventional militarycapabilities, thus providing Iran with a growing capacity tothreaten the region. A study from the Center for Strategic andBudgetary Assessments notes that, like China, ‘‘Iran seems determinedto continue developing more formidable A2/AD [antiaccessand area denial] capabilities.’’ To this end, China-supplied ballisticand cruise missiles ‘‘could be used not only to target Persian Gulfshipping, but also to hold at risk the oil and natural gas productionfacilities (to include overland pipelines) of other Gulf states.’’ 100Even minimal physical damage, for example, to Saudi Arabian production,refinement, or overland transport capacity would disproportionatelyaffect energy markets and surge prices. 101 With respectto shipping, China’s provision of antiship cruise missiles toIran could allow Iran to target, among other things, oil tankerstransiting the Strait of Hormuz. According to one analysis of thisthreat, ‘‘[e]xtended closure of the strait would remove roughly aquarter of the world’s oil from the market, causing a supply shockof the type not seen since the glory days of OPEC [Organization ofPetroleum Exporting Countries].’’ * Even relatively limited or ineffectualattacks could cause tanker operations in the area to ceaseor would at least increase insurance rates. 102Conclusions• China has continued over the past year to support North Koreadespite North Korea’s destabilizing actions. Diplomatically,China shields North Korea from pressure in international fora.China also continues to trade with and invest in North Korea,providing it with an economic lifeline in the face of growinginternational ostracism. Beijing’s continued support forPyongyang is primarily driven by its fear of a collapse of theNorth Korean regime and the consequences this would have for* This analysis also reviews Iranian mine warfare and missile warfare capabilities. It concludesthat, between mines and missiles, ‘‘[i]t does not take much imagination to suggest thatthe traffic in the Strait of Hormuz could be impeded for weeks or longer, with major air andnaval operations required to restore the full flow of traffic.’’ See Cailtin Talmadge, ‘‘ClosingTime: Assessing the Iranian Threat to the Strait of Hormuz,’’ International Security 33: 1 (Cambridge,MA: Summer 2008): 82.VerDate Nov 24 2008 13:46 Nov 10, 2011 Jkt 067464 PO 00000 Frm 00271 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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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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197ther moves toward independence,
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199trates the depth of China’s sp
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201Figure 2:Representation of Beido
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205ganization, modeled on the Europ
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Page 229 and 230: RECOMMENDATIONSChina’s ‘‘Area
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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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