ANNUAL REPORT

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VIII Page Military Modernization: Implications for Developing an Expeditionary Capability ........................................................................................................... 263 Joint Training and Operational Deployments: Lessons Learned for Developing China’s Expeditionary Capability ..................................................... 269 Implications for the United States and U.S. Allies and Partners ................ 273 Conclusions ....................................................................................................... 278 Recommendations ............................................................................................. 279 Section 3: China’s Intelligence Services and Espionage Threats to the United States .................................................................................................... 289 Introduction ...................................................................................................... 289 China’s Intelligence Services ........................................................................... 289 China’s Intelligence Collection Capabilities ................................................... 292 China’s Intelligence Process ............................................................................ 293 China’s Intelligence Collection Operations against U.S. National Security Entities .......................................................................................................... 294 U.S. Responses to Chinese Espionage ............................................................ 300 Implications for U.S. National Security ......................................................... 302 Conclusions ....................................................................................................... 303 Recommendations ............................................................................................. 304 Chapter 3: China and the World ..................................................................... 313 Section 1: China and South Asia ........................................................................ 313 Introduction ...................................................................................................... 313 China’s Objectives in South Asia .................................................................... 313 China-India Relations ...................................................................................... 323 China-Pakistan Relations ................................................................................ 333 Implications for the United States .................................................................. 339 Conclusions ....................................................................................................... 344 Section 2: China and Taiwan .............................................................................. 356 Introduction ...................................................................................................... 356 Cross-Strait Relations ...................................................................................... 356 Taiwan’s International Engagement ............................................................... 369 Taiwan Military and Security Issues .............................................................. 375 U.S.-Taiwan Relations ..................................................................................... 382 Implications for the United States .................................................................. 388 Conclusions ....................................................................................................... 389 Recommendations ............................................................................................. 391 Section 3: China and Hong Kong ........................................................................ 404 Introduction ...................................................................................................... 404 Hong Kong’s Changing Political Landscape ................................................... 404 Disappearance of Hong Kong Booksellers ...................................................... 409 Declining Freedom of Expression in Hong Kong ........................................... 413 Hong Kong’s Economy and its Economic Ties with Mainland China .......... 418 Hong Kong’s Security Ties with Mainland China ......................................... 422 Implications for Taiwan of Beijing’s Control over Hong Kong’s Political Development .................................................................................................. 425 Implications for the United States .................................................................. 425 Conclusions ....................................................................................................... 427 Recommendations ............................................................................................. 429 Section 4: China and North Korea ..................................................................... 437 Introduction ...................................................................................................... 437 Overview of Contemporary China-North Korea Relations ............................ 438 Recent Developments in China-North Korea Relations ................................ 439 Evolution in China’s Policies and Perceptions Regarding North Korea ...... 449 Differences between China and the United States on North Korea Policy . 458 Implications for the United States .................................................................. 460 Conclusions ....................................................................................................... 461 Recommendations ............................................................................................. 463 Chapter 4: China and the U.S. Rebalance to Asia ...................................... 475 Introduction ...................................................................................................... 475 The U.S. Rebalance to Asia Strategy .............................................................. 475 China’s Regional Activities since the Rebalance ............................................ 485 Conclusions ....................................................................................................... 495
IX Page Recommendations ............................................................................................. 496 Comprehensive List of the Commission’s Recommendations .................. 507 Dissenting Views of Commissioners ................................................................ 511 Appendices: Appendix I: Charter .......................................................................................... 513 Appendix II: Background of Commissioners ..................................................... 525 Appendix III: Public Hearings of the Commission During 2016 ...................... 535 Appendix IIIA: List of Witnesses Testifying Before the Commission During 2016 .......................................................................................................... 539 Appendix IV: List of Research Material ............................................................. 543 Appendix V: Acronyms and Abbreviations ....................................................... 549 2016 Commission Staff and Acknowledgements .......................................... 553
Page 1: USCC 2016 ANNUAL REPORT
Page 5 and 6: 1 2016 REPORT TO CONGRESS of the U.
Page 7 and 8: U.S.-CHINA ECONOMIC AND SECURITY RE
Page 9 and 10: • The safety of food, drug, and o
Page 11: CONTENTS Page TRANSMITTAL LETTER TO
Page 16 and 17: 2 ernment’s “going out” strat
Page 18 and 19: 4 economically and politically stra
Page 20 and 21: 6 wage rates are determined by free
Page 22 and 23: 8 while allowing a greater role for
Page 24 and 25: 10 began construction on its first
Page 26 and 27: 12 from—the People’s Republic o
Page 28 and 29: 14 cluding cyber and human intellig
Page 30 and 31: 16 exporter of manufactured goods,
Page 32 and 33: 18 Pakistan’s economic and securi
Page 34 and 35: 20 Beijing appears to remain skepti
Page 36 and 37: 22 trends in Hong Kong with regard
Page 38 and 39: 24 UNSCR 2270. However, in May and
Page 40 and 41: 26 Korea, designating Dandong Hongx
Page 42 and 43: 28 tional order—both before and a
Page 44 and 45: 30 to examine China’s economic an
Page 46 and 47: 32 debt, and jeopardizing long-term
Page 49 and 50: Introduction CHAPTER 1 U.S.-CHINA E
Page 51 and 52: 37 Statistics with Chinese Characte
Page 53 and 54: 39 up from 52.3 percent in the seco
Page 55 and 56: 41 Early signs suggest President Xi
Page 57 and 58: 43 Figure 4: China’s Total Debt b
Page 59 and 60: 45 reserves to defend the RMB. 75 I
Page 61 and 62: 47 The pace of U.S. export growth t
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49 The United States continued to r
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51 commitments, China has only take
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53 Table 3: Top Five Business Chall
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55 U.S. Tech Firms and Their Chines
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57 ment of Justice’s May 2014 ind
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59 Internet Censorship As a result
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61 on the future of U.S.-China rela
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63 Chapter 1, Section 2, “State-O
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65 Table 5: Failed Chinese Bids for
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67 • Accelerating Bilateral Inves
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69 cess capacity, which will share
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71 United States Challenges Chinese
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73 rulings of the DSB [Dispute Sett
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75 Conclusions • In 2015, the U.S
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77 Addendum I: WTO Cases Recent and
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79 ENDNOTES FOR SECTION 1 1. Lucy H
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81 55. Gabriel Wildau and Don Weinl
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83 119. American Chamber of Commerc
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85 and Espionage Operations, oral t
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87 217. Kane Wu, “Chinese Compani
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89 271. Office of the U.S. Trade Re
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dkrause on DSKHT7XVN1PROD with USCC
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93 Lardy, senior fellow at the Pete
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99 pany competitiveness and stimula
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105 Table 2: Select Chinese Overcap
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107 levels. 135 The situation is on
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109 Figure 5: China’s Monthly Cru
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111 Figure 6: U.S. Steel Industry Q
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123 Addendum I: Section 15 of China
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125 Addendum II: AD and CVD Investi
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141 dkrause on DSKHT7XVN1PROD with
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143 lifetime cost of bringing the e
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145 gets achieved). 57 Using satell
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147 cost of compliance,’’ and p
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151 boost the efficiency of China
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Table 1: 157 Chinese Attempted and
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Table 1: 159 Chinese Attempted and
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163 Figure 4: China’s Total Debt-
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173 weapons, opens the U.S. militar
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175 ests, and allow for greater vol
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177 Addendum I: Key Targets in Chin
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179 Addendum I: Key Targets in Chin
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195 The ultimate impact of the ruli
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197 Environmental Impact of China
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201 China’s Maritime Disputes in
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203 Reform and Reorganization of th
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207 • PLA Army Headquarters: Chin
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211 Figure 5: Type 072A Tank Landin
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215 Figure 7: JL-2 Missile Range Co
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221 Space-Tracking Facility in Arge
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223 Table 1: Significant PLA Bilate
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227 Nigeria will be the first expor
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231 tional annexes to the 2014 Noti
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233 Select U.S.-China Security-Rela
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257 China’s Core Interests—Cont
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259 guerrillas in Colombia and held
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271 stan. 109 In 2014, the PLA Air
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275 conflict Chinese expeditionary
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279 RECOMMENDATIONS Developments in
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SECTION 3: CHINESE INTELLIGENCE SER
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291 Strategic Support Force In Dece
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293 of advanced intelligence, surve
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295 tives, and sexual entrapment. 4
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297 information to a Chinese intell
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299 such as power transmission grid
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301 for transferring trade secrets
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303 nal U.S. discussions of issues
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305 ENDNOTES FOR SECTION 3 1. U.S.-
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307 29. U.S. Department of Justice,
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309 63. U.S. Department of Justice,
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311 106. Eric Holder, “Attorney G
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314 sure its own ambitions in South
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316 Chinese foreign direct investme
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318 • Pakistan: In 2015, China an
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320 India “Acts East” and Puts
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322 Counter Terrorism and Religious
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324 tivities of the Dalai Lama and
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326 incursions across the border fr
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328 conducive to sea lane protectio
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330 Karachi Port, that could eventu
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332 India and OBOR India has not en
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334 China’s Arms Sales to Pakista
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336 For China, the goals of CPEC ar
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338 according to Mr. Small, “The
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340 side the Treaty on the Non-Prol
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342 Facets of U.S.-India Defense Re
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344 of China, but has advocated for
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346 • Recent U.S.-China tensions
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348 24. Debasish Roy Chowdhury, “
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350 71. Jeff Smith, Cold Peace: Chi
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352 127. U.S.-China Economic and Se
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354 2016, 86; Andrew Small, The Chi
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358 Taiwan’s Economic Challenges
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364 agreements. 57 Since then, many
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366 $67.2 billion, comprising 25.4
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368 Foreign Direct Investment China
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370 is leading the initiative, have
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374 Taiwan and the 11-Dash Line The
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384 trade-based partner to an innov
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390 • China’s military moderniz
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410 Hong Kong’s Political Gossip
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414 moving up one place compared to
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418 Chinese Censorship of Prize-Win
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420 Hong Kong and the ‘‘Panama
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424 Table 1: Select PLA Hong Kong G
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428 sitive periods in Hong Kong, le
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436 150. Commission meeting with Ta
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442 Korea. The resolution also bans
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444 increase pressure on Pyongyang.
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446 pand China-South Korea ties. 54
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448 Technical Details of THAAD The
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456 Korea runs perpetual merchandis
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460 pressure is more likely to brin
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462 ty for sanctions violations, co
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479 sailors would be stationed in J
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485 Table 1: U.S. Goods Trade with
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489 basis for President Obama’s c
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APPENDIX II BACKGROUND OF COMMISSIO
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APPENDIX III PUBLIC HEARINGS OF THE
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537 June 9, 2016: Public Hearing on
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APPENDIX IIIA LIST OF WITNESSES TES
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541 Alphabetical Listing of Panelis
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APPENDIX IV LIST OF RESEARCH MATERI
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547 China’s Military Agreements w
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APPENDIX V ACRONYMS AND ABBREVIATIO
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551 OPM PBOC PLA PMI PPI PPP PRC QD
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553 2016 COMMISSION STAFF MICHAEL R
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