ANNUAL REPORT

dkrause on DSKHT7XVN1PROD with USCC
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Implications for the United States
The 13th FYP lays out an ambitious economic and social reform
agenda to reorient China’s economy toward more sustainable economic
drivers: domestic consumption and services. If implemented,
China’s focus on improving the quality of its public services, reducing
its environmental footprint, and opening up the service sector
provides numerous opportunities for U.S. businesses and opens
avenues for U.S.-China bilateral cooperation. But the Chinese government’s
continued commitment to state-led economic growth is a
growing challenge for U.S. and foreign firms seeking to both enter
China’s market and compete with its state-supported firms abroad.
Furthermore, failure to implement politically difficult reforms could
ensnare China’s economy in a cycle of low growth, dampening global
economic prospects and limiting commercial opportunities for
U.S. firms.
China’s push for urbanization creates new opportunities for domestic
and potentially U.S. and other foreign firms in healthcare,
services, transportation, and water and wastewater projects—provided
these firms have market access. For example, growing Chinese
demand for better healthcare could benefit U.S. pharmaceutical,
hospital, and insurance firms, according to testimony from
Yanzhong Huang, senior fellow for global health at the Council on
Foreign Relations and professor at Seton Hall University. 258 China’s
pharmaceutical market is the world’s second largest after the
United States and is forecast to nearly double from $105 billion in
2014 to $200 billion by 2020. 259
However, U.S. and other foreign biopharmaceutical firms have
raised concerns about the treatment they receive in China, including
forced technology transfers, lack of patent protection, long
delays in approval of pharmaceutical products, and preferential
treatment toward domestic firms and China-manufactured
drugs. 260 For instance, U.S. biopharmaceutical firms maintain a
competitive advantage in terms of size, technology, and R&D investment,
but this sector has been identified by the Chinese government
as a strategic emerging industry under the 12th FYP and
a priority in the 13th FYP. 261 To support this industry, the Chinese
government has provided subsidies for domestic firms ranging from
preferential loans to tax breaks on land and capital investments,
disadvantaging U.S. and other foreign competitors. 262 In addition,
China’s push for greater localization, a large and qualified talent
pool of scientists, and lower operational costs may lead U.S. biopharmaceuticals
and medical devices firms to outsource their production
to China, eroding U.S. employment in the long run. 263
The enormous growth in China’s consumer spending could benefit
the U.S. service sector, which in 2014 comprised 80 percent of
the U.S. economy, employed 80 percent of the U.S. workforce, and
accounted for 30 percent of U.S. exports. 264 The degree to which reforms
open up China’s service sector will determine the overall
benefit for U.S. firms and the economy. For instance, the Chinese
government’s efforts to address its environmental degradation and
shift toward a greener economic model may present opportunities
for U.S. environmental technology and service firms, which employed
around 1.6 million people and exported $51.2 billion worth
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