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

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20wide comprehensive review of U.S. economic and security policiestoward China to determine the need for changes to address the increasinglycomplicated and serious challenges posed by China toU.S. international and domestic interests. Such a review should beexamined and debated as appropriate by Congressional committees.dkrause on DSKHT7XVN1PROD with $$_JOBVerDate Nov 24 2008 13:46 Nov 10, 2011 Jkt 067464 PO 00000 Frm 00032 Fmt 6601 Sfmt 6601 G:\GSDD\USCC\2011\067464.XXX 067464
dkrause on DSKHT7XVN1PROD with $$_JOBCHAPTER 1THE U.S.–CHINA TRADEAND ECONOMIC RELATIONSHIPSECTION 1: THE U.S.–CHINA TRADE ANDECONOMIC RELATIONSHIP’S CURRENT STATUSAND SIGNIFICANT CHANGES DURING 2011IntroductionIn the ten years since China joined the World Trade Organization(WTO), China has maintained a steep growth trajectory, outpacingboth Germany and Japan to become the second largest economyin the world. China’s gross domestic product (GDP) has grownfrom $1.32 trillion in 2001 to a projected $5.87 trillion in 2011.This represents an increase of more than 400 percent. In certainindustries, such as automobiles, mobile handsets, and personalcomputers, China’s market already exceeds that of America’s. Concurrently,China has lifted 400 million of its citizens out of povertyand has experienced the largest rural-to-urban migration in history.1At the same time, the concerns that originally surrounded China’saccession to the WTO—that China’s blend of capitalism andstate-directed economic control conflict with the organization’s freemarket principles—have proven to be prophetic. Although Chinadid not meet all of the traditional requirements for accession, theWTO took a calculated gamble that China could effectuate the reformsnecessary to conform to those requirements within a reasonableperiod of time. The U.S.-China Economic and Security ReviewCommission was established by the United States Congress in partto monitor the outcome of that gamble. Ten years later, China’sstate-directed financial system and industrial policy continue tocontribute to trade imbalances, asset bubbles, misallocation of capital,and dangerous inflationary pressures. Meanwhile, China’slegal reforms are in jeopardy from a bureaucratic backlash. 2 China’sadherence to WTO commitments remains spotty despite thedecade that the country’s rulers were given to adjust. These circumstancescreate an uneven playing field for China’s trading partnersand threaten to deprive other WTO signatories of the benefitof their bargain.Each of these issues will be analyzed in detail in this section, beginningwith an examination of U.S.-China trading relations, followedby U.S.-China financial relations and, finally, an evaluationof China’s role in the WTO. The fact that a decade has now passedsince China’s controversial admission to the WTO means that(21)VerDate Nov 24 2008 13:46 Nov 10, 2011 Jkt 067464 PO 00000 Frm 00033 Fmt 6601 Sfmt 6601 G:\GSDD\USCC\2011\067464.XXX 067464
Page 1 and 2: 12011REPORT TO CONGRESSof theU.S.-C
Page 3 and 4: U.S.-CHINA ECONOMIC AND SECURITY RE
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Page 7 and 8: CONTENTSPageTRANSMITTAL LETTER TO T
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Page 31 and 32: 23Figure 1:China’s Share of the U
Page 33 and 34: 25The weakness in U.S. exports of a
Page 39 and 40: 31Table 3:RMB Bond Issuances by Mul
Page 43 and 44: 35of bilateral negotiations under t
Page 45 and 46: 37Stonewalling the WTO: A Case Stud
Page 47 and 48: 39that China’s existing system of
Page 49 and 50: 41now. Because the structures of th
Page 51 and 52: 43How Big Is China’s State Sector
Page 53 and 54: 45Fortune Global 500, compared to j
Page 55 and 56: 47panies are less profitable, after
Page 57 and 58: 49erate primarily within state-cont
Page 65 and 66: 57Figure 1: Chinese FDI Stock in th
Page 71 and 72: 63U.S. firms with sensitive technol
Page 73 and 74: 65Addendum I: SASAC Companies, Larg
Page 75 and 76: 67Addendum I: SASAC Companies, Larg
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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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207China’s leadership also places
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211[General Armaments Department] p
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213Table 2: Select Chinese Satellit
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215weapons or coorbital satellite w
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217Malicious Cyber ActivitiesDirect
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RECOMMENDATIONSChina’s ‘‘Area
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239320. Chang Xianqi, Military Astr
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243woman Jiang Yu simply expressed
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245Table 1:Timeline of Sino-North K
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249China also provides economic sup
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251economic and social strains woul
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255Iran’s South Pars Gas Field af
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257When asked by Commissioners abou
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281trade, and dispute settlement. 2
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287of Request to the United States
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289fense, since its current fleet o
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3190aRCRD&ss=Hong+Kong&s=News; Pete
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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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