ANNUAL REPORT

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Table 1: 158 Chinese Attempted and Completed Acquisitions and Investments in U.S. Semiconductor Companies, 2015–2016—Continued U.S. Target Specialty Chinese Investor Value (US$ millions) Status Integrated Silicon Solutions (ISSI) Designer of chips for automotive and other industries Uphill Investment (consortium including Hua Capital Management, SummitView Capital, E- Town Memtek) $640 Acquisition completed, December 2015 Initio Designer of chips for storage devices Sage Microelectronics Not disclosed Acquisition completed, January 2016 Vivante Designer of chips for mobile, consumer, and automobile products VeriSilicon Holdings Not disclosed Acquisition completed, January 2016 Integrated Memory Logic Limited (subsidiary of Exar Corporation) Designer of chips for power management and color calibration for flat-panel display and LED lighting Beijing E-town Chipone Technology Co. (consortium including Chipone Technology Co. and Beijing E-Town International Investment and Development Co.) $136 Acquisition announced, June 2016 Fairchild Semiconductor Designer and manufacturer of chips for power management and mobile applications China Resources, Hua Capital Management $2,600 Fairchild rejected bid, citing concerns over Committee on Foreign Investment in the United States (CFIUS) * approval, February 2016; U.S. firm ON Semiconductors received approval from the U.S. Federal Trade Commission to acquire Fairchild for $2.4 billion in August 2016 dkrause on DSKHT7XVN1PROD with USCC * CFIUS is an interagency committee that reviews transactions that shift control of a U.S. business to a foreign person or business and the potential national security implications for the United States. U.S. Department of the Treasury, ‘‘The Committee on Foreign Investment in the United States,’’ December 20, 2012. VerDate Sep 11 2014 12:16 Nov 02, 2016 Jkt 020587 PO 00000 Frm 00068 Fmt 6601 Sfmt 6601 G:\GSDD\USCC\2016\FINAL\06_C1_C2_M.XXX 06_C1_C2_M
Table 1: 159 Chinese Attempted and Completed Acquisitions and Investments in U.S. Semiconductor Companies, 2015–2016—Continued U.S. Target Specialty Chinese Investor Value (US$ millions) Status Micron Technology Designer and manufacturer of memory chips; only U.S.-based dynamic random access memory (DRAM) manufacturer Tsinghua Holdings $23,000 Micron rejected bid, citing concerns over CFIUS approval, February 2016 Multi- Fineline Electronix Manufacturer of flexible circuits and assemblies Suzhou Dongshan Precision Manufacturing $610 Acquisition completed, February 2016 Western Digital (15% stake) Designer and manufacturer of computer hard drives Tsinghua Unisplendour $3,780 Withdrawn due to CFIUS concerns, March 2016 GigOptix (3.8% stake) Designer of chips for cloud connectivity, data centers, and highspeed optical and wireless networks Shanghai Pudong Science and Technology Investment $5 Purchase of minority stake completed, March 2016 Lattice Semiconductor Corporation (8.65% stake) Designer of lowpower, programmable chips for high-tech data centers and telecommunication networks with dual-use applications Tsinghua Unigroup $41.5 Purchase of 6% share completed, April 2016; share increased to 8.65% in May 2016 Mattson Technology Manufacturer and supplier of semiconductor manufacturing equipment Beijing E-Town Dragon Semiconductor Industry Investment Center $300 Acquisition completed, May 2016 Marvell Technology (∼2% stake) Designer of storage, cloud infrastructure, Internet of Things, connectivity and multimedia semiconductor chips Tsinghua Holdings $78.2 Purchase of minority stake completed, May 2016 dkrause on DSKHT7XVN1PROD with USCC Global Communications Semiconductors Designer and manufacturer of radio frequency, wireless, power electronic, and optoelectronic chips SAIC Acquisition (subsidiary of Xiamen Sanan Integrated Circuits) $226 Withdrawn after CFIUS rejected the merger, August 2016 VerDate Sep 11 2014 12:16 Nov 02, 2016 Jkt 020587 PO 00000 Frm 00069 Fmt 6601 Sfmt 6601 G:\GSDD\USCC\2016\FINAL\06_C1_C2_M.XXX 06_C1_C2_M
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USCC 2016 ANNUAL REPORT
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1 2016 REPORT TO CONGRESS of the U.
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U.S.-CHINA ECONOMIC AND SECURITY RE
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• The safety of food, drug, and o
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CONTENTS Page TRANSMITTAL LETTER TO
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IX Page Recommendations ...........
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2 ernment’s “going out” strat
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4 economically and politically stra
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6 wage rates are determined by free
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8 while allowing a greater role for
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10 began construction on its first
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12 from—the People’s Republic o
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14 cluding cyber and human intellig
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16 exporter of manufactured goods,
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18 Pakistan’s economic and securi
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20 Beijing appears to remain skepti
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22 trends in Hong Kong with regard
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24 UNSCR 2270. However, in May and
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26 Korea, designating Dandong Hongx
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28 tional order—both before and a
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30 to examine China’s economic an
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32 debt, and jeopardizing long-term
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Introduction CHAPTER 1 U.S.-CHINA E
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37 Statistics with Chinese Characte
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39 up from 52.3 percent in the seco
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41 Early signs suggest President Xi
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43 Figure 4: China’s Total Debt b
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45 reserves to defend the RMB. 75 I
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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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Page 137 and 138: 123 Addendum I: Section 15 of China
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Page 209 and 210: 195 The ultimate impact of the ruli
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Page 221 and 222: 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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