US-China Commission Report - Fatal System Error

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CONTENTS Page TRANSMITTAL LETTER TO THE CONGRESS ............................................................... iii COMMISSIONERS APPROVING THE REPORT .............................................................. v EXECUTIVE SUMMARY ............................................................................................... 1 KEY RECOMMENDATIONS TO CONGRESS ........................................................... 17 INTRODUCTION .......................................................................................................... 19 2008 REPORT TO CONGRESS OF THE U.S.-CHINA ECONOMIC AND SECURITY REVIEW COMMISSION Chapter 1: The United States-China Trade and Economic Relationship ....................................................................................................................... 23 Section 1: The U.S.-China Trade and Economic Relationship’s Current Status and Significant Changes During 2008 ..................................................... 23 Section 2: China’s Capital Investment Vehicles and Implications for the U.S. Economy and National Security ............................................................. 43 Section 3: Research and Development, Technological Advances in Some Key Industries, and Changing Trade Flows with China ...................................... 69 Section 4: A Case Study of the Local Impact of Trade with China: Seafood Imports from China into Louisiana and the U.S. Gulf Coast, and Related Safety Issues ..................................................................................................... 83 Recommendations .................................................................................................. 103 Chapter 2: China’s Activities Directly Affecting U.S. Security Interests ........................................................................................................................ 125 Section 1: China’s Proliferation Policies and Practices ..................................... 125 Section 2: China’s Views of Sovereignty and Methods of Controlling Access to its Territory .................................................................................................. 140 Section 3: The Nature and Extent of China’s Space and Cyber Activities and their Implications for U.S. Security ......................................................... 156 Recommendations .................................................................................................. 168 Chapter 3: China’s Energy and Environment Policies and Activities .. 183 Section 1: China’s Current Energy Picture ........................................................ 183 Section 2: Tackling the Consequences of China’s Energy Consumption ......... 198 Recommendations .................................................................................................. 220 Chapter 4: China’s Foreign Activities and Relationships ........................ 231 Section 1: China’s Expanding Global Influence and its Foreign Policy Goals and Tools ........................................................................................................... 231 Section 2: China’s Relationships and Activities in East Asia .......................... 251 Part 1: Taiwan .................................................................................................... 253 Part 2: Japan’s Relationship with China ......................................................... 264 Part 3: The Republic of Korea’s Relationship with China .............................. 269 Part 4: Hong Kong ............................................................................................. 274 Recommendations .................................................................................................. 279 Chapter 5: China’s Media and Information Controls—The Impact in China and the United States ......................................................................... 291 Recommendations .................................................................................................. 310 (VII)
VIII Page Chapter 6: China’s Compliance with Agreements Pertaining to its Export to the United States of Prison Labor Products .......................... 317 Recommendations .................................................................................................. 332 Comprehensive List of the Commission’s Recommendations .................. 337 Additional Views of Commissioners ................................................................ 344 Appendices: Appendix I: United States-China Economic and Security Review Commission Charter .......................................................................................................... 349 Appendix II: Background of Commissioners ...................................................... 359 Appendix III: Public Hearings of the Commission .............................................. 371 A. List of Witnesses Testifying Before the Commission—2008 Hearings ........ 375 Appendix IV: Interlocutors’ Organizations—2008 Asia Fact-finding Trips ...... 381 Appendix V: List of Sanctions Imposed on Chinese Entities from June 2004 to October 2008 .................................................................................................... 385 Appendix VI: List of Research Material .............................................................. 389 Appendix VII: Abbreviations and Acronyms ........................................................ 391 Commission Staff and Acknowledgements .................................................... 395
Page 1 and 2: USCC 2008 ANNUAL REPORT
Page 3 and 4: 1 2008 REPORT TO CONGRESS of the U.
Page 5 and 6: U.S.-CHINA ECONOMIC AND SECURITY RE
Page 10 and 11: INDEX OF TABLES AND FIGURES 2008 RE
Page 12 and 13: 2 economic, security, diplomatic, a
Page 14 and 15: 4 China’s Capital Investment Vehi
Page 16 and 17: 6 • Antidumping penalties imposed
Page 18 and 19: 8 rities of other nations and cause
Page 20 and 21: 10 Conclusions China’s Current En
Page 22 and 23: 12 other countries that rely on Chi
Page 24 and 25: 14 vein, there appears to be a stro
Page 26 and 27: 16 lator of all financial services
Page 28 and 29: 18 • Identifying substandard ship
Page 30 and 31: 20 During the year, China continued
Page 32 and 33: 22 U.S. inspections of prisons to e
Page 34 and 35: 24 to the uncertainty during the su
Page 36 and 37: 26 U.S. exports to China were 20 pe
Page 38 and 39: 28 currency for RMB to obtain forei
Page 40 and 41: 30 of supply and demand in the fore
Page 42 and 43: 32 troversial is whether the treaty
Page 44 and 45: 34 erty (IP) rights holders from en
Page 46 and 47: 36 New Currency Rules China’s und
Page 48 and 49: 38 brought in 2006 by the United St
Page 50 and 51: 40 sectoral talks on farm trade. In
Page 52 and 53: 42 tinue buying foreign exchange, t
Page 54 and 55: 44 difference between temporary, th
Page 56 and 57: 46 The Administrative Structure and
Page 58 and 59:
48 U.S. dollar and has appreciated
Page 60 and 61:
50 Development Committee and other
Page 62 and 63:
52 drawn some fairly conventional l
Page 64 and 65:
54 demonstrates the great length to
Page 66 and 67:
56 cent revelations of the activiti
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58 of China by way of the investmen
Page 70 and 71:
60 Ltd. attempted to acquire the U.
Page 72 and 73:
62 not be applied necessarily in th
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64 economy—from ports and telecom
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66 asset allocations, benchmarks, a
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68 the investments, viewing them as
Page 80 and 81:
70 and printed circuits in order to
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72 2006, R&D spending in China from
Page 84 and 85:
74 tios—two of Asia’s technolog
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76 The last time the United States
Page 88 and 89:
78 pendent players. However, this m
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80 aviation industry and has a role
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SECTION 4: A CASE STUDY OF THE LOCA
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85 The rise of industrial fish farm
Page 97 and 98:
87 According to the Southern Shrimp
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89 the increasing import base. The
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91 nated fish are discovered after
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93 At the time this Report was comp
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95 port with the hope it will be ad
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97 Restaurants also are exempted by
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99 entire dusted product is from Ch
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101 written and approved, which is
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RECOMMENDATIONS The U.S.-China Trad
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105 gress could enable consumers to
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107 26. ‘‘China Central Bank to
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109 82. USTR, ‘‘2008 National T
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111 121. U.S.-China Economic and Se
Page 123 and 124:
113 173. ‘‘China’s Stake in B
Page 125 and 126:
Page 127 and 128:
117 282. International Working Grou
Page 129 and 130:
Page 131 and 132:
121 361. Food & Water Watch, ‘‘
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123 Louisiana and the U.S. Gulf Coa
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126 While witnesses concluded that
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128 China’s Nonproliferation Comm
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130 State during the interdiction o
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132 Northwest National Laboratory
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134 UN Security Council resolutions
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136 ployment, this change would inf
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138 ing Iran’s missile program on
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SECTION 2: CHINA’S VIEWS OF SOVER
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142 ficing the principle behind it.
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144 baseline. Other states enjoy ov
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146 India, Vietnam, Taiwan, and oth
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148 as, ‘‘What constitutes a sp
Page 160 and 161:
150 The proposed PAROS treaty itsel
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152 enhance China’s assertions of
Page 164 and 165:
154 Media and Public Opinion Warfar
Page 166 and 167:
SECTION 3: THE NATURE AND EXTENT OF
Page 168 and 169:
158 Today, China’s space program
Page 170 and 171:
160 The Management Structure for Ch
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162 • Launching geostationary orb
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164 bility to conduct cyber operati
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166 tions between the NIPRNet and t
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RECOMMENDATIONS China’s Prolifera
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170 ENDNOTES FOR CHAPTER 2 1. U.S.-
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172 41. U.S.-China Economic and Sec
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174 80. Janice E. Thomson, ‘‘St
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176 112. Reinhard Drifte, ‘‘Jap
Page 188 and 189:
Page 190 and 191:
Page 193 and 194:
CHAPTER 3 CHINA’S ENERGY AND ENVI
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185 A growing share of energy deman
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187 pleted. Without the discovery a
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189 A Survey of China’s Interests
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191 projects that imports of natura
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193 and design of the units. 71 Chi
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195 dioxide, nitrous oxide, mercury
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197 sions are realized and producti
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199 ferent interests that motivate
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201 the oil, gas, coal, and power i
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203 fluential figures in business a
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205 The Terminology Used to Describ
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207 velop international and domesti
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209 that growth must occur in an en
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211 servation. Officials highlighte
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213 grated Gasification Combined Cy
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215 Obtaining sufficient movement f
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217 nology and finding ways to make
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219 • As the negotiations for a p
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Page 233 and 234:
223 tent.aspxdata=EmergingMktlconte
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225 13, 2008. These tools include s
Page 237 and 238:
Page 239 and 240:
229 ergy Group, Environmental Energ
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CHAPTER 4 CHINA’S FOREIGN ACTIVIT
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233 China will seek to displace the
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235 China to help resolve them. 22
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237 presenting itself as an accepta
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239 China’s infrastructure invest
Page 251 and 252:
241 IMF. The Angolan government exp
Page 253 and 254:
243 China’s Conventional Arms Sal
Page 255 and 256:
245 Kurlantzick testified that Chin
Page 257 and 258:
247 pendent of their legislatures a
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249 diplomacy and in the internatio
Page 261 and 262:
SECTION 2: CHINA’S RELATIONSHIPS
Page 263 and 264:
PART 1: TAIWAN The Significance of
Page 265 and 266:
255 PRC pressure directed against T
Page 267 and 268:
257 this end. 150 (Additional infor
Page 269 and 270:
259 Discussions Regarding Arms Sale
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261 ernment is committed to set ann
Page 273 and 274:
263 • Arms purchases from the Uni
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265 China, appreciation of the RMB,
Page 277 and 278:
267 Days later, although they did n
Page 279 and 280:
Introduction PART 3: THE REPUBLIC O
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271 South Korean officials emphasiz
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273 mount among the ROK’s diploma
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275 Even after approving these grad
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277 exercising undue influence—be
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RECOMMENDATIONS China’s Expanding
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283 42. UN Conference on Trade and
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287 134. Calculation performed by C
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289 184. ‘‘Factbox: Key facts o
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CHAPTER 5 CHINA’S MEDIA AND INFOR
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293 The central role of the Propaga
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295 thoritarian post-Soviet governm
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297 Some of the measures taken by C
Page 309 and 310:
299 Images of ‘‘Jing-Jing’’
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301 Legislation was introduced duri
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303 In addition to promoting a powe
Page 315 and 316:
305 Chinese Government Restrictions
Page 317 and 318:
307 search engine and the servers s
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309 media, the Internet, popular en
Page 321 and 322:
311 ENDNOTES FOR CHAPTER 5 1. David
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313 image-of-internet-police-jingji
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Page 328 and 329:
318 China’s prison labor system,
Page 330 and 331:
320 most literal sense, the term la
Page 332 and 333:
322 treatment of Falun Gong practit
Page 334 and 335:
324 lowing its signing. According t
Page 336 and 337:
326 granted just three of 18 prison
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328 Mr. Marck, who is the partial o
Page 340 and 341:
330 complaints involving internatio
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RECOMMENDATIONS • The Commission
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334 28. U.S. Department of Homeland
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COMPREHENSIVE LIST OF THE COMMISSIO
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339 gram. By expanding this volunta
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341 27. The Commission recommends t
Page 353 and 354:
343 43. The Commission recommends t
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345 ADDITIONAL VIEWS OF COMMISSIONE
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347 ADDITIONAL VIEWS OF COMMISSIONE
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APPENDIX I UNITED STATES-CHINA ECON
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351 (iii) make all subsequent appoi
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353 (2) Information. The Commission
Page 365 and 366:
355 In each Section and Subsection
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357 ecutive Schedule under section
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360 member of the Academic Advisory
Page 372 and 373:
362 nomic, defense, and foreign pol
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364 formulated by the Committee suc
Page 376 and 377:
366 Commissioner Shea is an attorne
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368 than twenty years, leaving his
Page 381 and 382:
APPENDIX III PUBLIC HEARINGS OF THE
Page 383 and 384:
373 May 20, 2008: Public Hearing on
Page 385 and 386:
APPENDIX IIIA LIST OF WITNESSES TES
Page 387 and 388:
377 Alphabetical Listing of Panelis
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379 Alphabetical Listing of Panelis
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382 REPUBLIC OF KOREA, JAPAN AND TA
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APPENDIX V LIST OF U.S. SANCTIONS I
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387 Date Imposed Entity/Person Cont
Page 401 and 402:
APPENDIX VII ABBREVIATIONS AND ACRO
Page 403:
393 UNGA UN PKO USD USDA USITC USTR
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