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

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dkrause on DSKHT7XVN1PROD with $$_JOB38Finally, the Chinese government is growing increasingly assertivein international fora such as the WTO. The United States andthe European Union went to considerable lengths to design and negotiatea system of checks and balances that would permit Chinato accede to the WTO without jeopardizing the smooth functioningof the organization or endangering the position of existing membersin the international trading system. From start to finish, that negotiationprocess took 15 years. In less than ten years, China haslearned the nuances of WTO law and has begun to use it systematicallyto undo the finely wrought balance that U.S. and EU negotiatorsdesigned. At the same time, China has shown that it willsubordinate its international commitments to its domestic politicalpreferences and deny to its trading partners the benefit of theirbargain.Conclusions• The U.S.-China trade deficit in 2010 set a record high of $273billion. The U.S.-China trade deficit now accounts for more than50 percent of the total U.S. trade deficit with the world.• Over the last 12 months, the RMB has appreciated by 6 percent.Economists estimate, however, that it remains substantially undervalued.There is increasing grassroots pressure in China towiden the trading band of the RMB and increase the pace of appreciation.• The Chinese economy, generally, and Chinese exports, in particular,are moving up the value chain. On a monthly basis, theUnited States now imports roughly 560 percent more advancedtechnology products from China than it exports to China. Exportsof low-cost, labor-intensive manufactured goods as a share ofChina’s total exports decreased from 37 percent in 2000 to 14percent in 2010.• China’s foreign currency reserves are skyrocketing. A major contributorto this phenomenon is China’s continued policy of maintainingclosed capital accounts. China’s foreign currency reservescurrently exceed $3 trillion, three times higher than the nextlargest holder of foreign currency reserves, Japan.• Commensurate with growth in foreign currency reserves, China’sdomestic money supply is ballooning out of control. Between 2000and 2010, China’s money supply grew by 434 percent. China’smoney supply is now ten times greater than the U.S. money supply,despite the fact that China’s GDP is only one-third as large.• Such rapid growth in China’s domestic money has created stronginflationary pressure. This has helped create a real estate bubble,which resulted in price increases of more than 100 percentin some cities within a handful of years. In September, China’sconsumer price index topped 6.1 percent across the board andhigher in rural areas.• China has grown more assertive and creative in using WTO proceduresto alleviate, eliminate, and avoid certain restrictions inthe Accession Protocol. At the same time, the WTO has ruledVerDate Nov 24 2008 13:46 Nov 10, 2011 Jkt 067464 PO 00000 Frm 00050 Fmt 6601 Sfmt 6601 G:\GSDD\USCC\2011\067464.XXX 067464
39that China’s existing system of state monopoly over imports ofcultural products is inconsistent with WTO obligations. Chinahas not yet complied fully with the WTO ruling, and the UnitedStates has the right to initiate further proceedings to compelChina to do so.dkrause on DSKHT7XVN1PROD with $$_JOBVerDate Nov 24 2008 13:46 Nov 10, 2011 Jkt 067464 PO 00000 Frm 00051 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
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: 37Stonewalling the WTO: A Case Stud
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
Page 77 and 78: 69dkrause on DSKHT7XVN1PROD with $$
Page 79 and 80: 71January 2010, the heads of 19 U.S
Page 85 and 86: 77cause Beijing had sought to exclu
Page 89 and 90: 81China in Search of Western Techno
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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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