ANNUAL REPORT

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436 150. Commission meeting with Taiwan interlocutors, Taipei, Taiwan, June 22, 2016. 151. Michael Lipin, ‘‘Rise of Hong Kong Localists in Election Puts US in Quandary,’’ Voice of America, September 15, 2016. 152. Data via U.S. Census Bureau; U.S. Department of State, Fact Sheet: U.S. Relations with Hong Kong, February 25, 2016. 153. Data via Hong Kong Census and Statistics Department. 154. U.S. Department of State, Hong Kong Policy Act Report, May 11, 2016. 155. U.S. Department of State, Hong Kong Policy Act Report, May 11, 2016. 156. Ben Bland, ‘‘Hong Kong: One Country, Two Economies,’’ Financial Times, July 19, 2016; Josh Horwitz and Tom Tsui, ‘‘ ‘The World is Watching’—Appalled Reactions to China’s Kidnapping of a Hong Kong Bookseller,’’ Quartz, June 17, 2016; and Ilaria Maria Sala, ‘‘Hong Kong’s Business Community Is ‘Freaked out’ over China’s Crackdown,’’ Guardian, February 9, 2016. 157. Ben Bland, ‘‘Hong Kong: One Country, Two Economies,’’ Financial Times, July 19, 2016. 158. Julie Steinberg, ‘‘Hong Kong Looks for Answers After HSBC Opts to Stay in London,’’ Wall Street Journal, February 16, 2016; Lawrence White, ‘‘HSBC Board to Meet, China’s Role in Hong Kong a Factor in HQ Debate,’’ Reuters, January 27, 2016. dkrause on DSKHT7XVN1PROD with USCC VerDate Sep 11 2014 14:49 Nov 01, 2016 Jkt 020587 PO 00000 Frm 00081 Fmt 6601 Sfmt 6621 G:\GSDD\USCC\2016\FINAL\09_C3_M.XXX 09_C3_M
dkrause on DSKHT7XVN1PROD with USCC SECTION 4: CHINA AND NORTH KOREA Introduction On September 9, 2016, North Korea conducted its fifth nuclear test—its second in 2016 and most powerful to date. The test follows a period of increased provocations under Kim Jong-un in defiance of the international community and North Korea’s neighbor and closest partner, China. Since 2012, when Chinese President and General Secretary of the Chinese Communist Party (CCP) Xi Jinping assumed leadership and Kim Jong-un emerged as the leader of North Korea, China-North Korea relations have become increasingly strained. This downturn has largely been due to the Kim regime’s increased belligerence and rejection of the international community’s efforts to coax North Korea to denuclearize. Since then, bilateral relations have been characterized by growing frustration and downgraded diplomatic ties. In response to Pyongyang’s fourth nuclear test in January 2016, China in March increased pressure on North Korea by agreeing to the most stringent UN resolution on North Korea to date. 1 As of the publication of this Report, the UN Security Council was negotiating a new resolution, which appears likely to further tighten economic sanctions, presenting Beijing with another opportunity to join the international community in meaningfully punishing Pyongyang’s behavior. It is too soon to fully evaluate China’s implementation of the March sanctions, but apparent gaps in enforcement have already emerged. Moreover, the decision by South Korea and the United States to deploy the United States’ Terminal High Altitude Area Defense (THAAD) ballistic missile defense system in South Korea by late 2017 has led China to interrupt what had been a period of increasingly friendly China-South Korea relations and obstruct international and regional cooperation on North Korea, though the long-term effects of the THAAD deployment are unclear. 2 Despite Pyongyang’s increasingly aggressive behavior, the overall direction of Beijing’s North Korea policy is unlikely to change. China has consistently sought to manage relations with North Korea, prioritizing stability by supplying Pyongyang with critical resources and hard currency, and helping to preserve the Kim regime in order to maintain a strategic buffer between China and U.S.-allied South Korea. This divergence between U.S. and Chinese strategic objectives on the Korean Peninsula is why perpetual U.S. hopes that China will use its supposed leverage to compel change in North Korea have not been fulfilled. This section discusses the basis of the China-North Korea relationship, drivers of China’s North Korea policy, China’s evolving policies and perceptions regarding North Korea, China’s enforcement of UN sanctions and its economic ties with North Korea, and the implications of the changing relationship for the United (437) VerDate Sep 11 2014 14:49 Nov 01, 2016 Jkt 020587 PO 00000 Frm 00082 Fmt 6601 Sfmt 6601 G:\GSDD\USCC\2016\FINAL\09_C3_M.XXX 09_C3_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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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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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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