INTRODUCTION
In 2000, Congress established this Commission to monitor and report on the national security implications of the U.S.-China economic relationship. Over the years, we have tracked the People’s Republic of China’s (PRC) accountability to its global commitments, including those made in its accession to the World Trade Organization. Two decades later, the Chinese Communist Party (CCP) selectively adheres to its global economic, trade, and political obligations and has abandoned any concern for international opinion. Now the CCP envisions itself atop a new hierarchical global order in which the world acquiesces to China’s worldview while supplying it with markets, capital, resources, and talent.
The novel coronavirus (COVID-19) pandemic has focused public attention on China, but the PRC’s ambitions are neither new nor secret. For decades, the CCP has made its ambitions clear through industrial policy and planning documents, leadership speeches, and military directives. Under General Secretary Xi Jinping, however, the CCP is aggressively asserting its interests both domestically and globally.
In the past, the CCP focused its attempts at economic dominance on legacy sectors of steel, aluminum, and transportation, among others. Its current goals are to dominate the world’s newest and most cutting-edge industries, including biotechnology, semiconductors, artificial intelligence, and clean energy. Though the focus of China’s industrial policies is changing, the government’s strategy and objectives retain the same mercantilist and coercive tools: compelling foreign entrants to transfer technology to their domestic competitors for limited market access, lavishing generous subsidies on state-owned enterprises and domestic national champions, and leveraging illicit methods, including cyber-enabled theft, to obtain valuable intellectual property and mountains of data.
China’s security laws threaten the arrest of anyone who criticizes China, its leaders, or its policies. This threat now extends to Americans inside China as well as those who live in or travel to countries that have an extradition treaty with China. Foreign journalists live in fear of detention or expulsion.
The CCP claims to protect the interests of the Chinese people. Its true purpose, however, is to protect its own existence and grow its power, no matter the costs. Party leaders judge any sign of criticism to be too great a risk to CCP rule. The CCP’s response is harsh and swift whether reacting to the single voice of a doctor raising health alarms about the emergence of COVID-19, to internal criticism, or to millions of peaceful prodemocracy demonstrators in Hong Kong. This year, the CCP undertook new levels of effort to silence critics and prevent the flow of information.
COMPREHENSIVE LIST OF THE COMMISSION’S RECOMMENDATIONS
Chapter 1: U.S.-China Global Competition
Section 1: A Global Contest for Power and Influence: China’s View of Strategic Competition with the United States
The Commission recommends:
1. Congress adopt the principle of reciprocity as foundational in all legislation bearing on U.S.-China relations. Issues to be considered in applying this principle should include but are not limited to the following:
• The ability of journalists and online media to operate without undue restriction;
• The ability of nongovernmental organizations to conduct meaningful engagement with civil society;
• Access to information, including but not limited to financial and research data; • Access for social media and mobile apps from U.S. companies;
• Access for diplomatic personnel, including but not limited to diplomats’ freedom of travel and ability to meaningfully exchange views with the host country public; and
• Market access and regulatory parity, including but not limited to companies’ ability to participate in trade, investment, and financial market transactions, cross-border capital transfer, and protections of intellectual property.
2. Congress direct the U.S. Department of State to produce an annual report detailing China’s actions in the United Nations and its subordinate agencies that subvert the principles and purposes of the United Nations. Such a report would at a minimum document the following:
• China’s actions violating United Nations treaties to which it is a party;
• China’s actions to influence the votes of United Nations members, including through coercive means;
• China’s actions to nominate or support candidates for United Nations leadership positions that do not adhere to United Nations standards for impartiality or are subject to the influence of the Chinese government;
• Actions by nationals of the People’s Republic of China and others currently holding United Nations leadership positions that appear to support the interests of the Chinese government in violation of United Nations impartiality standards;
• Actions by nationals of the People’s Republic of China serving in functional positions in United Nations organizations impacting hiring practices, internal policies, and other functions that appear to support the interests of the Chinese government in violation of United Nations impartiality standards;
• Actions by Chinese military and support personnel engaged in United Nations peacekeeping operations that are inconsistent with the principles governing these missions, including China’s deployment of these personnel to protect its economic interests and improve the power projection capabilities of the People’s Liberation Army; and
• The number and positions of United States personnel employed by the United Nations and its agencies.
3. Congress expand the authority of the Federal Trade Commission (FTC) to monitor and take foreign government subsidies into account in premerger notification processes.
• The FTC shall develop a process to determine to what extent proposed transactions are facilitated by the support of foreign government subsidies.
• The definition of foreign government subsidies shall encompass direct subsidies, grants, loans, below-market loans, loan guarantees, tax concessions, governmental procurement policies, and other forms of government support.
• Companies operating in the United States that benefit from the financial support of a foreign government must provide the FTC with a detailed accounting of these subsidies when undergoing FTC premerger procedures.
• If the FTC finds foreign subsidies have facilitated the transaction, the FTC can either propose a modification to remedy the distortion or prohibit the transaction under Section 7 of the Clayton Act, which prohibits mergers and acquisitions where the effect “may be substantially to lessen competition, or to tend to create a monopoly.”
4. Congress direct the Administration, when sanctioning an entity in the People’s Republic of China for actions contrary to the economic and national security interests of the United States or for violations of human rights, to also sanction the parent entity.
5. Congress amend the Immigration and Nationality Act to clarify that association with a foreign government’s technology transfer programs may be considered grounds to deny a nonimmigrant visa if the foreign government in question is deemed a strategic competitor of the United States, or if the applicant has engaged in violations of U.S. laws relating to espionage, sabotage, or export controls. Association with a foreign government’s technology transfer programs can include any of the following:
• Participation in a foreign government-sponsored program designed to incentivize participants to transfer fundamental research to a foreign country via a talent recruitment program or in a foreign government-sponsored startup competition;
• Acceptance of a government scholarship that requires recipients to study specific strategic scientific and technological fields, to return to the foreign country for a government work requirement after the scholarship term ends, or facilitates coordination with talent programs;
• Association with a university or a department of a university that the U.S. government has designated as a participant in the foreign government’s military-civil fusion efforts; or
• Status (current or past) as a scientist, technician, or officer for a foreign military, if the applicant does not disclose such information when applying for a visa.
Section 2: The China Model: Return of the Middle Kingdom
The Commission recommends:
6. Congress hold hearings to consider the creation of an interagency executive Committee on Technical Standards that would be responsible for coordinating U.S. government policy and priorities on international standards. This Committee would consist of high-level political appointees from executive departments with equities relating to international technical standards, including the Department of Commerce, the Department of State, the Department of Defense, the Department of Energy, the Office of Science and Technology Policy, and other agencies or government stakeholders with relevant jurisdiction. The Committee’s mandate would be to ensure common purpose and coordination within the executive branch on international standards. Specifically, the Committee would:
• Identify the technical standards with the greatest potential impact on American national security and economic competitiveness;
• Coordinate government efforts relating to those standards;
• Act as a liaison between government, academia, and the private sector to coordinate and enhance joint efforts in relation to standards;
• Manage outreach to counterpart agencies among U.S. allies and partners;
• Set funding priorities and recommendations to Congress; and
• Produce annual reports to Congress on the status of technical standards issues and their impact on U.S. national security and economic competitiveness.
Section 3: China’s Strategic Aims in Africa
The Commission recommends:
7. Congress require the Office of the U.S. Trade Representative, within 180 days, to prepare a report on China’s use of rules of origin intended to benefit countries eligible for the African Growth and Opportunity Act (AGOA) to ensure AGOA countries obtain the benefit of favorable trade policies and China is not using them to circumvent U.S. trade policies.
Chapter 2: U.S.-China Economic and Trade Relations
Section 2: Vulnerabilities in China’s Financial System and Risks for the United States
The Commission recommends:
8. Congress enact legislation establishing a China Economic Data Coordination Center (CEDCC) at the Bureau of Economic Analysis at the U.S. Department of Commerce. The Center would be mandated to collect and synthesize official and unofficial Chinese economic data on developments in China’s financial markets and U.S. exposure to risks and vulnerabilities in China’s financial system, including:
• Data on baseline economic statistics (e.g., gross domestic product [GDP]) and other indicators of economic health;
• Data on national and local government debt;
• Data on nonperforming loan amounts;
• Data on the composition of shadow banking assets;
• Data on the composition of China’s foreign exchange reserves; and
• Data on bank loan interest rates.
9. Congress request that the Administration prepare a report on the research and development activities of the affiliates of U.S. multinational enterprises operating in China and the implications of such activities for U.S. production, employment, and the economy.
Section 3: U.S.-China Links in Healthcare and Biotechnology
The Commission recommends:
10. Congress enact legislation to require ancestry and health testing services to (1) require explicit consent from customers to provide, sell, lease, or rent to any party individual data that is aggregated for the purposes of research; and (2) disclose to customers any parent company or subsidiary relationship.
11. Congress establish a new U.S. national laboratory focusing on biotechnology or designate an existing U.S. national laboratory to focus on biotechnology.
12. Congress consider establishing a “Manhattan Project”-like effort to ensure that the American public has access to safe and secure supplies of critical lifesaving and life-sustaining drugs and medical equipment, and to ensure that these supplies are available from domestic sources or, where necessary, trusted allies. Such a project would supplement the recommendation the Commission made in its 2019 Annual Report that Congress hold hearings with a view toward enacting legislation requiring the U.S. government to procure medicines only from U.S. production facilities or from facilities that have been certified compliant with U.S. standards.
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2020_Annual_Report_to_CongressAlexander A. Bowe is a Policy Analyst on Security and Foreign Affairs at the U.S.-CHINA Economic and Security Review Commission.
Kendra Brock is a Research Assistant on Economics and Trade at the U.S.-CHINA Economic and Security Review Commission.
Erik Castillo is an Operations Support Specialist at the U.S.-CHINA Economic and Security Review Commission.
Jameson Cunningham is the Director of Congressional Affairs and Communications at the U.S.-CHINA Economic and Security Review Commission.
Kevin Fashola is a Congressional Fellow at the U.S.-CHINA Economic and Security Review Commission.
Christopher P. Fioravante is the Director of Operations and Administration at the U.S.-CHINA Economic and Security Review Commission.
Benjamin B. Frohman is the Director of Security and Foreign Affairs Will Green, and a Policy Analyst in Security and Foreign Affairs at the U.S.-CHINA Economic and Security Review Commission.
Charles Horne is a Research Coordinator and Policy Analyst in Economics and Trade at the U.S.-CHINA Economic and Security Review Commission.
Sierra Janik is a Policy Analyst in Security and Foreign Affairs at the U.S.-CHINA Economic and Security Review Commission.
Anastasya Lloyd-Damnjanovic is a Policy Analyst in Security and Foreign Affairs at the U.S.-CHINA Economic and Security Review Commission.
Kaj Malden is a Policy Analyst in Economics and Trade at the U.S.-CHINA Economic and Security Review Commission.
Leyton Nelson is a Policy Analyst in Economics and Trade at the U.S.-CHINA Economic and Security Review Commission.
Emma Rafaelof is a Policy Analyst in Economics and Trade at the U.S.-CHINA Economic and Security Review Commission.
Nargiza Salidjanova is the Director of Economics and Trade at the U.S.-CHINA Economic and Security Review Commission.
Howard Wang is a Policy Analyst in Security and Foreign Affairs at the U.S.-CHINA Economic and Security Review Commission.
Daniel W. Peck is the Executive Director of the U.S.-CHINA Economic and Security Review Commission.