# U.S.-China Relations > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/crs%3AR45898 ## Record - **Collection:** Congressional research report - **Document type:** CRS Report - **Published:** September 3, 2019 - **Citation:** R45898 ## Text U.S.-China Relations Susan V. Lawrence, Coordinator Specialist in Asian Affairs Caitlin Campbell Analyst in Asian Affairs Rachel F. Fefer Analyst in International Trade and Finance Jane A. Leggett Specialist in Energy and Environmental Policy Thomas Lum Specialist in Asian Affairs Michael F. Martin Specialist in Asian Affairs Andres B. Schwarzenberg Analyst in International Trade and Finance Updated September 3, 2019 Congressional Research Service 7-.... www.crs.gov R45898 SUMMARY U.S.-China Relations The United States and the People’s Republic of China (PRC or China) are involved in a prolonged stand-off over trade and in competition that is spilling from political and military areas into a growing number of other spheres, including technology, finance, and education, severely straining ties on the 40th anniversary of the two countries’ establishment of diplomatic relations. The two lead the world in the size of their economies, their defense budgets, and their global greenhouse gas emissions. Both countries are permanent members of the United Nations (U.N.) Security Council. In 2018, they were each other’s largest trading partners. During the Trump Administration, competition has dominated the relationship and areas of cooperation have shrunk. The 2017 National Security Strategy (NSS) describes both China and Russia as seeking to “challenge American power, influence, and interests, attempting to erode American security and prosperity.” To pressure China to change its economic practices, the United States has imposed tariffs on hundreds of billions of dollars of U.S. imports from China, with almost all imports from China scheduled to be subject to additional tariffs by December 15, 2019. U.S. tariffs and China’s retaliatory tariffs have reordered global supply chains and hit U.S. farmers and manufacturers particularly hard. Twelve rounds of negotiations have not resolved the dispute. On August 5, 2019, the U.S. Treasury Department labeled China a currency manipulator for the first time in a quarter century. The Administration has placed restrictions on the ability of U.S. firms to supply PRC telecommunications giant Huawei. The United States has also sought to warn other nations away from business dealings with Huawei and from cooperation with China on infrastructure projects under the framework of China’s Belt and Road Initiative (BRI). R45898 September 3, 2019 Susan V. Lawrence, Coordinator Specialist in Asian Affairs -redacted-@crs.loc.gov Caitlin Campbell Analyst in Asian Affairs -redacted-@crs.loc.gov Rachel F. Fefer Analyst in International Trade and Finance -redacted-@crs.loc.gov Jane A. Leggett Specialist in Energy and Environmental Policy -redacted-@crs.loc.gov Thomas Lum Specialist in Asian Affairs -redacted-@crs.loc.gov Michael F. Martin Specialist in Asian Affairs -redacted-@crs.loc.gov Many analysts ascribe the rising friction in the relationship today not only to the arguably more Andres B. Schwarzenberg confrontational inclinations of the Trump Administration, but also to more assertive behavior by Analyst in International China under President Xi Jinping. Xi assumed the top posts in the Communist Party of China in Trade and Finance November 2012 and added the state presidency in March 2013. Later in 2013, China began -redacted-@crs.loc.g building military outposts in the South China Sea and Xi launched BRI, an ambitious effort to ov boost economic connectivity—and China’s influence—across the globe. In 2015, China began enacting a suite of national security legislation that shrank the space for independent thought and For a copy of the full report, please call 7-.... or visit civil society, subjected ordinary citizens to stepped-up surveillance, and imposed onerous www.crs.gov. conditions on foreign firms operating in China. The same year, China launched its “Made in China 2025” plan, seeking to reduce China’s reliance on foreign technology and directing the considerable resources of the state toward supporting the development of “national champion” Chinese firms in 10 strategic industries. In 2017, at the end of his first five-year term in his Party posts, Xi tasked China’s military with turning itself into a “world-class” force by mid-century. Also in 2017, his government began forcing more than 1 million of his Turkic Muslim fellow citizens in the northwest region of Xinjiang into reeducation camps. Increasingly, the United States and China appear to be seeking to draw other countries into competing camps—those who agree to sign (often vague) BRI cooperation agreements with China (some 125 countries as of April 2019, by China’s count), and those who, at the U.S. government’s behest, do not; those who do business with Huawei, and those who, similarly at the U.S. government’s behest, do not; those who publicly censure China for its actions in Xinjiang, and those who offer support. U.S. allies are sometimes in China’s “camp.” China represents “a new kind of challenge,” Secretary of State Michael R. Pompeo has suggested, because “It’s an authoritarian regime that’s integrated economically into the West in ways the Soviet Union never was.” Important areas of remaining U.S.-China cooperation include maintaining pressure on North Korea to curb its nuclear weapons and missile programs; supporting the Afghanistan peace process; managing international public health challenges, from tuberculosis to influenza; and stemming the flow into the United States of China-produced fentanyl, a class of deadly synthetic opioids. Congressional Research Service U.S.-China Relations Contents Introduction ..................................................................................................................................... 1 Basic Facts About the People’s Republic of China ......................................................................... 5 Leadership ................................................................................................................................. 5 Provinces ................................................................................................................................... 6 Signature Policies of China’s President Xi ............................................................................... 7 Brief History of U.S.-PRC Relations .............................................................................................. 8 The Bilateral Relationship: Select Dimensions .............................................................................. 11 High-Level Dialogues .............................................................................................................. 11 Trade and Economic Relations................................................................................................ 12 Trade ................................................................................................................................. 13 Investment ......................................................................................................................... 14 Military-to-Military Relations ................................................................................................. 15 U.S. Foreign Assistance in China ............................................................................................ 17 Select Issues in the Bilateral Relationship..................................................................................... 19 Economic Issues ...................................................................................................................... 19 Section 301 Investigation and Tariffs ............................................................................... 19 Tariffs on Aluminum and Steel ......................................................................................... 21 Alleged PRC Currency Manipulation ............................................................................... 21 Bilateral Trade Deficit....................................................................................................... 22 Industrial Policies ............................................................................................................. 22 Intellectual Property Rights (IPR) and Cyber-Theft ......................................................... 23 Advanced Technology and Huawei .................................................................................. 23 China’s Status as a “Developing Country” in the WTO ................................................... 25 China’s Belt and Road Initiative (BRI)............................................................................. 26 Security Issues......................................................................................................................... 27 PRC Military Modernization ............................................................................................ 27 North Korea ...................................................................................................................... 28 East China Sea .................................................................................................................. 29 South China Sea ................................................................................................................ 29 Human Rights and Rule of Law .............................................................................................. 31 Xinjiang ............................................................................................................................ 31 Hong Kong ........................................................................................................................ 33 Tibet .................................................................................................................................. 34 Use of Surveillance Technology ....................................................................................... 35 Taiwan ..................................................................................................................................... 36 Select Other Issues .................................................................................................................. 39 Climate Change................................................................................................................. 39 Consular Issues ................................................................................................................. 40 Fentanyl ............................................................................................................................ 40 Legislation Related to China Introduced in the 116th Congress .................................................... 41 China in the National Defense Authorization Act for FY2020 ............................................... 51 Figures Figure 1. China’s Top Leaders ........................................................................................................ 6 Congressional Research Service U.S.-China Relations Figure 2. Map of China ................................................................................................................... 7 Figure 3. The South China Sea ...................................................................................................... 30 Tables Table 1. Summits Between Presidents Donald J. Trump and Xi Jinping ....................................... 11 Table 2. Trump Administration High-Level Dialogues with China .............................................. 12 Table 3. U.S.-China Trade in 2018 ................................................................................................ 13 Table 4. Select Security and Military Dialogues, 2009-Present .................................................... 17 Table 5. U.S. Foreign Assistance Programs in China (Department of State and USAID), FY2013-FY2018 ........................................................................................................................ 18 Table 6. U.S. Section 301 Tariff Actions ....................................................................................... 20 Table 7. Trump Administration Notifications of Major Foreign Military Sales to Taiwan .......... 38 Table 8. Legislation with Provisions Related to China Introduced in the 116th Congress, Arranged by Topic ...................................................................................................................... 42 Table 9. Provisions of H.R. 2500 that refer explicitly to the PRC, Hong Kong, Taiwan, or entities associated with them ...................................................................................................... 51 Table 10. Provisions of H.R. 2500 potentially related to the PRC, Hong Kong, or Taiwan.......... 52 Table 11. Provisions of S. 1790 that refer explicitly to the PRC, Hong Kong, Taiwan, or entities associated with them ...................................................................................................... 54 Table 12. Provisions of S. 1790 potentially related to the PRC, Hong Kong, or Taiwan .............. 55 Contacts Author Contact Information .......................................................................................................... 57 Congressional Research Service U.S.-China Relations Introduction The United States and the People’s Republic of China (PRC or China) are involved in a prolonged stand-off over trade, and in competition that is spilling from political and military areas into a growing number of other spheres, including technology, finance, and education, severely straining ties on the 40th anniversary of the two countries’ establishment of diplomatic relations. The two countries lead the world in the size of their economies, their defense budgets, and their global greenhouse gas emissions. Both countries are permanent members of the United Nations (U.N.) Security Council. In 2018, they were each other’s largest trading partners. Trump Administration strategy documents have set the tone for U.S. policy toward China. The December 2017 National Security Strategy (NSS) describes both China and Russia as seeking to “challenge American power, influence, and interests, attempting to erode American security and prosperity.”1 An unclassified summary of the January 2018 U.S. National Defense Strategy describes China as a “strategic competitor” and charges that it is pursuing a military modernization program that “seeks Indo-Pacific regional hegemony in the near-term and displacement of the United States to achieve global preeminence in the future.”2 The Department of Defense’s (DOD’s) June 2019 Indo-Pacific Strategy Report identifies “the primary concern for U.S. national security” as “inter-state strategic competition, defined by geopolitical rivalry between free and repressive world order visions.”3 The Trump Administration has leveled its strongest criticism at China’s economic practices. In a major October 4, 2018, address on China policy, Vice President Mike Pence charged that China has used “an arsenal of policies inconsistent with free and fair trade” to build its manufacturing base, “at the expense of its competitors—especially the United States of America.”4 In their public statements on the United States, China’s top leaders have generally refrained from direct criticism. In July 2019, PRC Vice President Wang Qishan stated that “profound shifts are taking place in the relations between major countries,” noting “mounting protectionism and populist ideologies” and “intensifying geopolitical rivalry and regional turbulence.”5 PRC Vice Foreign Minister Le Yucheng, speaking at the same forum, addressed U.S.-China relations directly. The bilateral relationship, Le asserted, is “now going through the most complex and sensitive period since diplomatic relations were formalized four decades ago.” Le called for “a China-US relationship based on coordination, cooperation and stability,” and pushed back at the idea that China is responsible for U.S. “challenges.” The wars in Afghanistan and Iraq “sapped [U.S.] strategic strength,” Le asserted, and the global financial crisis “exposed the deep-seated imbalances in the U.S. economy and society.” The United States should not make China “a 1 The White House, National Security Strategy of the United States, December 2017, https://www.whitehouse.gov/wp- content/uploads/2017/12/NSS-Final-12-18-2017-0905-2.pdf. 2 Department of Defense, “Summary of the 2018 National Defense Strategy,” January 19, 2018, https://dod.defense.gov/Portals/1/Documents/pubs/2018-National-Defense-Strategy-Summary.pdf. 3 Department of Defense, “Indo-Pacific Strategy Report: Preparedness, Partnerships, and Promoting a Networked Region,” June 1, 2019, https://media.defense.gov/2019/May/31/2002139210/-1/-1/1/ DOD_INDO_PACIFIC_STRATEGY_REPORT_JUNE_2019.PDF. 4 The White House, “Remarks by Vice President Pence on the Administration’s Policy Toward China,” October 4, 2018, https://www.whitehouse.gov/briefings-statements/remarks-vice-president-pence-administrations-policy-towardchina/. 5 Ministry of Foreign Affairs of the PRC, “Upholding Peace and Cooperation and Building a Community with a Shared Future for Mankind,” Address by Wang Qishan, Vice President of the PRC, at the opening ceremony of the Eighth World Peace Forum, July 8, 2019, https://www.fmprc.gov.cn/mfa_eng/wjdt_665385/zyjh_665391/t1679950.shtml. Congressional Research Service 1 U.S.-China Relations scapegoat,” Le argued, for “[p]roblems such as economic disparity, widening wealth gap and aging infrastructure.”6 U.S.-China tensions predated the Trump Administration. Frictions over such issues as Taiwan, trade, and China’s human rights record have been long-standing, as have been U.S. concerns about the intentions behind China’s ambitious military modernization efforts. United States Trade Representative (USTR) reports to Congress going back to the last years of the George W. Bush Administration document mounting U.S. frustrations with China’s failure to implement marketopening commitments it made when it acceded to the World Trade Organization (WTO) in December 2001.7 Previous Administrations concluded, however, that a modus vivendi with China was necessary for a broad array of U.S. policy objectives in the world, and they thus sought to balance competition and cooperation in the U.S.-China relationship.8 During the Trump Administration, competition has dominated the relationship and areas of cooperation have shrunk. To pressure China to change its economic practices, the United States has imposed tariffs on hundreds of billions of dollars of U.S. imports from China, with almost all imports from China scheduled to be subject to additional tariffs by December 15, 2019. U.S. tariffs and China’s retaliatory tariffs have reordered global supply chains and hit U.S. farmers and manufacturers particularly hard. Twelve rounds of negotiations have not resolved the dispute. On August 5, 2019, the U.S. Treasury Department labeled China a currency manipulator for the first time in a quarter century.9 The Administration has placed restrictions on the ability of U.S. firms to supply PRC telecommunications giant Huawei.10 The United States has also sought to warn other nations away from business dealings with Huawei and from cooperation with China on infrastructure projects under the framework of China’s Belt and Road Initiative (BRI). Feeding a persistent narrative that the Administration seeks to “decouple” the U.S. and Chinese economies, on August 23, 2019, President Trump wrote on Twitter, “Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the USA.” As his authority for such an order, the President cited the International Emergency Economic Powers Act (P.L. 95223), though he said on August 25, 2019, that he had “no plan right now” to trigger the law.11 6 Ministry of Foreign Affairs of the PRC, “China’s Foreign Policy in a Fast Changing World: Mission and Responsibility,” Speech by Vice Foreign Minister Le Yucheng at the Lunch Meeting of the Eight World Peace Forum, July 8, 2019, https://www.fmprc.gov.cn/mfa_eng/wjdt_665385/zyjh_665391/t1679454.shtml. 7 See, for example, The United States Trade Representative, “2008 Report to Congress on China’s WTO Compliance,” https://ustr.gov/sites/default/files/asset_upload_file192_15258.pdf. 8 See, for example, The White House, “America’s Future in Asia,” remarks as prepared for delivery by National Security Advisor Susan E. Rice at Georgetown University, November 20, 2013, https://obamawhitehouse.archives.gov/ the-press-office/2013/11/21/remarks-prepared-delivery-national-security-advisor-susan-e-rice. 9 U.S. Department of the Treasury, “Treasury Designates China as a Currency Manipulator,” August 5, 2019, https://home.treasury.gov/news/press-releases/sm751; CRS Insight IN11154, The Administration’s Designation of China as a Currency Manipulator, by Rebecca M. Nelson. 10 U.S. Department of Commerce, Bureau of Industry and Security, “Addition of Entities to the Entity List,” 84 Federal Register 22961, May 21, 2019, https://www.federalregister.gov/documents/2019/05/21/2019-10616/addition-ofentities-to-the-entity-list. 11 Donald J. Trump on Twitter, August 23, 2019, https://twitter.com/realdonaldtrump/status/1164914960046133249 and https://twitter.com/realdonaldtrump/status/1165111122510237696; The White House, “Remarks by President Trump and Prime Minister Johnson of the United Kingdom in Working Breakfast | Biarritz, France,” August 25, 2019, https://www.whitehouse.gov/briefings-statements/remarks-president-trump-prime-minister-johnson-united-kingdomworking-breakfast-biarritz-france/. Congressional Research Service 2 U.S.-China Relations Many analysts ascribe the rising friction in the relationship today not only to the arguably more confrontational inclinations of the Trump Administration, but also to more assertive behavior by China under President Xi Jinping. Xi assumed the top posts in the Communist Party of China in November 2012 and added the state presidency in March 2013. Later in 2013, China began building military outposts in the South China Sea and Xi launched BRI, an ambitious effort to boost economic connectivity—and China’s influence—across the globe. In 2015, China began enacting a suite of national security legislation that shrank the space for independent thought and civil society, subjected ordinary citizens to stepped-up surveillance, and imposed onerous conditions on foreign firms operating in China.12 The same year, China launched its “Made in China 2025” plan, seeking to reduce China’s reliance on foreign technology and directing the considerable resources of the state toward supporting the development of “national champion” Chinese firms in 10 strategic industries.13 In 2017, at the end of his first five-year term in his Party posts, Xi tasked China’s military with turning itself into a “world-class” force by midcentury.14 That year, his government also began forcing more than 1 million of his Turkic Muslim fellow citizens in the northwest region of Xinjiang into reeducation camps.15 In March 2018, China’s Communist Party-controlled legislature amended the state constitution to remove presidential term-limits, opening the way for Xi to stay in office indefinitely.16 Increasingly, the United States and China appear to be seeking to draw other countries into competing camps—those who agree to sign (often vague) BRI cooperation agreements with China (some 125 countries as of April 2019, by China’s count), and those who, at the U.S. government’s behest, do not; those who do business with Huawei, and those who, similarly at the U.S. government’s behest, do not; those who publicly censure China for its actions in Xinjiang, and those who offer support.17 U.S. allies are sometimes in China’s “camp.” China represents “a new kind of challenge,” Secretary of State Michael R. Pompeo has suggested, because, “It’s an authoritarian regime that’s integrated economically into the West in ways the Soviet Union never was.”18 Important areas of remaining U.S.-China cooperation include maintaining pressure on North Korea to curb its nuclear weapons and missile programs; supporting the Afghanistan peace process; managing international public health challenges, from tuberculosis to influenza; and stemming the flow into the United States of China-produced fentanyl, a class of deadly synthetic opioids. 12 Such legislation includes the National Security Law of the PRC (2015), Anti-Terrorism Law of the PRC (2015), Cyber Security Law of the PRC (2016), and National Intelligence Law of the PRC (2017). 13 The Chinese-language text of the Made in China 2025 plan, issued on May 19, 2015, is accessible on the website of China’s State Council, at http://www.gov.cn/zhengce/content/2015-05/19/content_9784.htm. 14 “Secure a Decisive Victory in Building a Moderately Prosperous Society in All Respects and Strive for the Great Success of Socialism with Chinese Characteristics for a New Era,” Xi Jinping speech delivered at the 19 th National Congress of the Communist Party of China, October 18, 2017, http://www.xinhuanet.com/english/download/Xi_Jinping's_report_at_19th_CPC_National_Congress.pdf. 15 For more on these trends, see Carl Minzner, End of an Era: How China’s Authoritarian Revival Is Undermining Its Rise, Oxford University Press, 2018. 16 See CRS In Focus IF10854, China’s Communist Party Absorbs More of the State, by Susan V. Lawrence. 17 For the number of BRI agreements signed, see Office of the Leading Group for Promoting the Belt and Road Initiative (PRC), The Belt and Road Initiative Progress, Contributions and Prospects, April 22, 2019, https://eng.yidaiyilu.gov.cn/zchj/qwfb/86739.htm. 18 U.S. Department of State, “Secretary of State Michael R. Pompeo with Peta Credlin of Sky News,” August 5, 2019, https://www.state.gov/secretary-of-state-michael-r-pompeo-with-peta-credlin-of-sky-news/, and U.S. Department of State, “The Special Relationship,” Remarks by Secretary of State Michael R. Pompeo in London, May 8, 2019, https://www.state.gov/the-special-relationship/. Congressional Research Service 3 U.S.-China Relations Many of the Trump Administration’s critics share the Administration’s concerns about PRC policies and actions, but disagree with the Administration’s framing of the relationship and with specific Administration policies. Signatories to an open letter on China addressed to the President and Members of Congress and published in The Washington Post on July 3, 2019, acknowledge “troubling behavior” by China. They argue, nonetheless, that China is not “an economic enemy or an existential national security threat that must be confronted in every sphere; nor is China a monolith, or the views of its leaders set in stone.” They warn, “If the U.S. presses its allies to treat China as an economic and political enemy, it will weaken its relations with those allies and could end up isolating itself rather than Beijing.”19 Former Obama Administration officials Kurt M. Campbell and Jake Sullivan argue that, “The basic mistake of engagement was to assume that it could bring about fundamental changes to China’s political system, economy, and foreign policy.” They warn that, “Washington risks making a similar mistake today, by assuming that competition can succeed in transforming China where engagement failed—this time forcing capitulation or even collapse.” Campbell and Sullivan call for “a steady state of clear-eyed coexistence on terms favorable to U.S. interests and values,” with elements of competition and cooperation in four domains: military, economic, political, and global governance.20 Peter Varghese, a former senior diplomat for Australia, a U.S. ally, asserts that, “it would be a mistake for the US to cling to primacy by thwarting China. Those of us who value US leadership want the US to retain it by lifting its game, not spoiling China’s.”21 Many analysts fault the Trump Administration for giving up leverage against China by withdrawing from international agreements and institutions, by allegedly paying insufficient attention to maintaining strong relationships with allies, and by engaging in inconsistent messaging around trade, human rights, and other issues. In January 2017, the Administration notified the 11 other signatories to the Trans-Pacific Partnership (TPP), a proposed free trade agreement (FTA) of Asia-Pacific countries (not including China), that it would not be ratifying the agreement.22 In June 2018, the Administration announced its withdrawal from the U.N. Human Rights Council.23 Signatories of another high-profile open letter addressed to the President urge him, however, to “stay the course on your path of countering Communist China.” The letter states that supporters of engagement with China told American policymakers “that the PRC would become a ‘responsible stakeholder’ once a sufficient level of economic modernization was achieved.” The letter argues, “This did not happen and cannot so long as the CCP [Chinese Communist Party] rules China.” The letter assures the President, “We welcome the measures you have taken to 19 M. Taylor Fravel, J. Stapleton Roy, Michael D. Swaine, Susan A. Thornton, and Ezra Vogel, “China Is Not an Enemy,” Washington Post, July 3, 2019, https://www.washingtonpost.com/opinions/making-china-a-us-enemy-iscounterproductive/2019/07/02/647d49d0-9bfa-11e9-b27f-ed2942f73d70_story.html. For an up-to-date list of signatories, see, “Open Letter to the President and Congress on China Policy,” accessed August 5, 2019, https://www.openletteronuschina.info/. 20 Kurt M. Campbell and Jake Sullivan, “Competition Without Catastrophe: How America Can Both Challenge and Coexist with China,” Foreign Affairs, August 1, 2019, https://www.foreignaffairs.com/articles/china/competition-withchina-without-catastrophe. 21 The United States Studies Centre at the University of Sydney, “Australia, the United States and the Indo-Pacific: Keynote Address Delivered by Peter Varghese AO,” August 21, 2019, https://www.ussc.edu.au/analysis/australia-theunited-states-and-the-indo-pacific-keynote-address-delivered-by-peter-varghese-ao. 22 CRS In Focus IF10000, TPP: Overview and Current Status, by Brock R. Williams and Ian F. Fergusson. 23 CRS Report RL33608, The United Nations Human Rights Council: Background and Policy Issues, by Luisa Blanchfield. Congressional Research Service 4 U.S.-China Relations confront Xi’s government and selectively to decouple the U.S. economy from China’s insidious efforts to weaken it.”24 Basic Facts About the People’s Republic of China The Communist Party of China (CPC) established the PRC 70 years ago, on October 1, 1949, after winning a civil war against the Nationalist (also known as Kuomintang or KMT) forces of the Republic of China (ROC) led by Chiang Kai-shek. Today, China is the world’s most populous nation (with a population of 1.39 billion), the world’s largest emitter of greenhouse gases (responsible for approximately 30% of global energy-related carbon dioxide emissions in 2016), the world’s second-largest economic power (in nominal terms, with a gross domestic product or GDP of $13.6 trillion), and the only Communist Party-led state in the G-20 grouping of major economies. With the United States, France, Russia, and the United Kingdom, China is also one of five permanent members of the U.N. Security Council. Leadership Since 2012, Xi Jinping (his family name, Xi, is pronounced “shee”) has been China’s top leader. He holds a troika of top positions: Communist Party General Secretary, Chairman of the Party’s Central Military Commission, and State President. In 2018, China’s unicameral legislature, the National People’s Congress (NPC), amended the PRC constitution to include a reference to “Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era,” putting Xi’s guiding philosophy on a par with the philosophies of two powerful predecessors, Mao Zedong and Deng Xiaoping. Another constitutional amendment removed term limits for the state presidency, opening the way for Xi to stay in the position indefinitely after the conclusion of his second fiveyear term in 2023.25 Xi is the top official in China’s most senior decisionmaking body, the seven-man Communist Party’s Politburo Standing Committee (see Figure 1), which is drawn from the larger 25-person Politburo. Xi personally chairs multiple Communist Party policy committees, including those on foreign affairs, Taiwan, “deepening overall reform,” financial and economic affairs, cyberspace, and “comprehensive rule of law.” Some foreign observers refer to him as “chairman of everything.”26 Other members of the Politburo Standing Committee concurrently lead China’s other major political institutions, including the State Council, China’s cabinet; the NPC; and a political advisory body, the Chinese People’s Political Consultative Conference (CPPCC). The arrangement ensures that the Communist Party maintains firm control over all the country’s political institutions. Xi has repeatedly reminded his countrymen that, “The Party exercises overall leadership over all areas of endeavor in every part of the country.”27 24 James E. Fannell, Captain USN (Ret.) “Stay the Course on China: An Open Letter to President Trump,” Journal of Political Risk, July 18, 2019, http://www.jpolrisk.com/stay-the-course-on-china-an-open-letter-to-president-trump/. Fannell is a former Director of Intelligence and Information Operations, U.S. Pacific Fleet. 25 See CRS In Focus IF10854, China’s Communist Party Absorbs More of the State, by Susan V. Lawrence. 26 Jane Perlez, “Q. and A.: Geremie R. Barmé on Understanding Xi Jinping,” New York Times, November 8, 2015, https://sinosphere.blogs.nytimes.com/2015/11/08/china-xi-jinping-geremie-barme-maoing-xi-jinping/. 27 “Secure a Decisive Victory in Building a Moderately Prosperous Society in All Respects and Strive for the Great Success of Socialism with Chinese Characteristics for a New Era,” Xi Jinping speech delivered at the 19 th National Congress of the Communist Party of China, October 18, 2017, http://www.xinhuanet.com/english/download/Xi_Jinping's_report_at_19th_CPC_National_Congress.pdf. Congressional Research Service 5 U.S.-China Relations Figure 1. China’s Top Leaders Members of the Seven-Man Communist Party Politburo Standing Committee Source: Website of the Communist Party of China, http://www.cpcnews.cn. Notes: Leaders are listed in rank order, with Xi Jinping ranked no. 1 and Han Zheng ranked no. 7. Provinces China presents itself as comprised of 34 provincial-level administrative units (see Figure 2). They include 23 provinces; five geographic entities that China calls “autonomous regions,” all of which have significant ethnic minority populations (Guangxi, Inner Mongolia, Ningxia, Tibet, and Xinjiang); four municipalities that report directly to the central government (Beijing, Chongqing, Shanghai, and Tianjin); and the two special administrative regions of Hong Kong and Macau, which were returned to China in the 1990s by the governments of the United Kingdom and Portugal respectively. The PRC’s count of 23 provinces includes Taiwan, an island democracy of 23 million people that the PRC has never controlled, but over which it claims sovereignty. Taiwan calls itself the Republic of China. Provinces have their own revenue streams, and governments at the provincial level and below are responsible for the lion’s share of the country’s public expenditure, including almost all public spending on education, health, unemployment insurance, social security, and welfare.28 Provinces also have the right to pass their own laws and regulations, which may extend national laws and regulations, but not conflict with them. Beijing gives provinces considerable leeway in adopting policies to boost economic growth and encourages provinces to undertake approved policy experiments. Provinces do not have their own constitutions, however, and do not have the power to appoint their own leaders.29 28 Tony Saich, Governance and Politics of China, 3rd ed. (Palgrave Macmillan, 2011), p. 200. 29 CRS Report R41007, Understanding China’s Political System, by Susan V. Lawrence and Michael F. Martin. Congressional Research Service 6 U.S.-China Relations Figure 2. Map of China Showing Provincial-Level Administrative Jurisdictions Source: Created by CRS. Map information from U.S. Department of State and Esri 2018 Data and Maps. Notes: (1) Beijing, Chongqing, Shanghai, and Tianjin are cities with the administrative status of provinces. (2) Hong Kong and Macau are special administrative regions of China with the administrative status of provinces. (3) The PRC claims sovereignty over Taiwan, but has never controlled it. Taiwan officially calls itself the Republic of China. (4) This map abbreviates the name of Afghanistan as “AFGH” and that of Tajikistan as “TJK.” Signature Policies of China’s President Xi President Xi has sought to rally China’s citizens around a “China Dream of Great Rejuvenation of the Chinese Nation.” The China Dream incorporates a pledge to build “a moderately prosperous society in all respects” by 2021, the centenary of the Party’s founding, in part by doubling China’s 2010 GDP and per capita income for both urban and rural residents. It also includes a pledge to make China, “a modern socialist country that is prosperous, strong, democratic, culturally advanced, and harmonious” by 2049, the centenary of the founding of the People’s Republic of China.30 (The term “democratic” refers to Chinese-style “socialist 30 “The Two Centennial Goals,” China.org.cn, November 18, 2014, http://www.china.org.cn/english/china_key_words/ 2014-11/18/content_34158771.htm. “Full text of Hu Jintao’s report at 18th Party Congress,” Xinhua News Agency (English), November 17, 2012. Congressional Research Service 7 U.S.-China Relations democracy” under uncontested Communist Party rule.) The “China Dream” includes a “dream of a strong military.”31 Externally, Xi has promoted his vision of a “community with a shared future for mankind” (also translated as “community of common destiny for mankind”). In a January 2017 speech at the U.N. office in Geneva, Xi described the “community with a shared future” as an effort to “establish a fair and equitable international order.” In such an order, he said, there should be no interference in countries’ internal affairs, and all countries should “have the right to independently choose their social system and development path,” an implicit rejection of U.S.-led democracypromotion efforts around the world. Appearing to address the United States directly, he stated, “Big countries should treat smaller ones as equals instead of acting as a hegemon imposing their will on others. No country should open the Pandora’s box by willfully waging wars or undermining the international rule of law.”32 At the CPC’s 19th Congress in late 2017, the CPC incorporated the “community with a shared future for mankind” into its charter. Xi boasted of “a further rise in China’s international influence, ability to inspire, and power to shape” and said China was “moving closer to center stage.”33 In March 2018, China incorporated the “community with a shared future for mankind” into the state constitution. Later that year, Xi pledged that China would play “an active part in leading the reform of the global governance system, and build a more complete network of global partnerships.”34 Brief History of U.S.-PRC Relations After the Communist Party took power in China in 1949, the United States continued to recognize Chiang Kai-shek’s ROC government on Taiwan as the legitimate government of all China. A year later, the United States and China found themselves on opposite sides of the Korean War, a conflict that killed 36,547 U.S. military personnel and at least 180,000 Chinese military personnel.35 China’s name for the conflict is the “War to Resist U.S. Aggression and Aid Korea.” Early in the conflict, the United States sent its Seventh Fleet to the Taiwan Strait “to prevent the Korean conflict from spreading south,” effectively preventing Communist forces from realizing their goal of finishing the Chinese Civil War by wresting control of Taiwan from Chiang’s forces.36 31 “Building a Strong Army Through Reform,” Xinhua, March 16, 2016, http://www.xinhuanet.com//mil/2016-03/16/ c_128804009.htm. 32 “Work Together to Build a Community of Shared Future for Mankind,” Xi Jinping speech at the United Nations Office at Geneva, China Global Television Network (CGTN), January 18, 2017, https://america.cgtn.com/2017/01/18/ full-text-of-xi-jinping-keynote-speech-at-the-united-nations-office-in-geneva. 33 “Secure a Decisive Victory in Building a Moderately Prosperous Society in All Respects and Strive for the Great Success of Socialism with Chinese Characteristics for a New Era,” Xi Jinping speech to the 19th National Congress of the Communist Party of China, October 18, 2017. 34 “Xi Urges Breaking New Ground in Major Country Diplomacy with Chinese Characteristics,” Xinhua, June 24, 2018, http://www.xinhuanet.com/english/2018-06/24/c_137276269.htm. 35 CRS Report RL32492, American War and Military Operations Casualties: Lists and Statistics, by Nese F. DeBruyne; Yan Jie, “180,000 Chinese Soldiers Killed in Korean War,” China Daily, June 28, 2010, http://www.chinadaily.com.cn/china/2010-06/28/content_10026788.htm. China has never provided official casualty figures. Western scholars’ estimates of Chinese deaths in the Korean War range from 400,000 to 600,000. 36 U.S. Department of State, Office of the Historian, “The Taiwan Strait Crises: 1954-1955 and 1958,” https://history.state.gov/milestones/1953-1960/taiwan-strait-crises. Congressional Research Service 8 U.S.-China Relations In 1971, changing Cold War dynamics, including the Sino-Soviet split, led the Nixon Administration to undertake a profound shift in U.S. policy. Then-Secretary of State Henry Kissinger made a secret visit to China in July 1971. In October of the same year, the United States supported U.N. General Assembly Resolution 2758, recognizing the PRC’s representatives as “the only legitimate representatives of China to the United Nations,” and expelling “the representatives of Chiang Kai-shek.”37 President Richard Nixon formally ended nearly a quarter of a century of estrangement between the United States and the PRC with his historic visit to China in February 1972. On January 1, 1979, President Jimmy Carter and China’s Deng Xiaoping presided over the establishment of diplomatic relations between their two nations. The joint communiqué they signed, one of three that China considers to lay the foundation for the U.S.-China relationship, states that the United States “acknowledges the Chinese position that there is but one China and Taiwan is part of China.” It also states that “the people of the United States will maintain cultural, commercial, and other unofficial relations with the people of Taiwan.”38 In April 1979, Carter signed the Taiwan Relations Act (P.L. 96-8, U.S.C. 3301 et seq.), providing a legal basis for the unofficial U.S. relationship with Taiwan and committing the United States to sell defensive arms to Taiwan. The same year, Deng launched a bold program of “reforming and opening” to the outside world that would transform China from a backward, isolated country into the economic powerhouse, emerging military power, and shaper of global institutions that it is today. Through the 1970s and 1980s, the overriding strategic rationale for the U.S.-China relationship was counterbalancing a shared enemy, the Soviet Union. With the collapse of the Soviet Union in 1991, U.S. and Chinese leaders cast about for a new rationale for their relationship. President Bill Clinton and China’s then-leader Jiang Zemin both came to see benefits in expanding bilateral economic ties, including by working together to bring China into the WTO. On October 10, 2000, Clinton signed into law P.L. 106-286, granting China permanent normal trade relations and paving the way for China to join the WTO, which it did in December 2001. In 2018, the Trump Administration argued that “the United States erred in supporting China’s entry into the WTO on terms that have proven to be ineffective in securing China’s embrace of an open, market-oriented trade regime.”39 A former George W. Bush Administration official suggests that “identifying a preferable alternative, even with the benefit of hindsight, is surpassingly difficult.”40 After the terrorist attacks of September 11, 2001, the George W. Bush Administration settled on counterterrorism cooperation as a new strategic rationale for the U.S.-China relationship, but China complicated that rationale when it persuaded the United States to apply a terrorist label to separatist ethnic Uyghurs from its northwest Xinjiang region.41 During the Obama Administration, even as U.S.-China friction mounted over economic issues, cyber espionage, human rights, and the South China Sea, the two sides embraced as a strategic rationale for their relationship the need for their cooperation to address some of the world’s most pressing 37 U.N. General Assembly 26th Session, Resolution 2758, “Restoration of the Lawful Rights of the People’s Republic of China in the United Nations,” October 25, 1971. 38 U.S. Department of State Office of the Historian, “Address by President Carter to the Nation,” December 15, 1978, https://history.state.gov/historicaldocuments/frus1977-80v01/d104. 39 U.S. Trade Representative, “2017 USTR Report to Congress on China’s WTO Compliance,” January 2018, p. 2, https://ustr.gov/sites/default/files/files/Press/Reports/China%202017%20WTO%20Report.pdf. 40 Philip Levy, “Was Letting China into the WTO a Mistake? Why There Were No Better Alternatives,” Foreign Affairs, April 2, 2018, https://www.foreignaffairs.com/articles/china/2018-04-02/was-letting-china-wto-mistake. 41 See Richard Bernstein, “When China Convinced the U.S. That Uighurs Were Waging Jihad,” The Atlantic, March 19, 2019, https://www.theatlantic.com/international/archive/2019/03/us-uighurs-guantanamo-china-terror/584107/. Congressional Research Service 9 U.S.-China Relations challenges, including weak global economic growth, climate change, and nuclear proliferation.42 Observers broadly credited U.S.-China cooperation for contributing to the conclusion of the July 2015 Joint Comprehensive Plan of Action (JCPOA) nuclear deal with Iran and the December 2015 Paris Agreement under the U.N. Framework Convention on Climate Change.43 Over the past four decades, the U.S.-China relationship has faced some high-profile tests:      In June 1989, a decade after normalization of U.S.-China relations, China’s leaders ordered the People’s Liberation Army (PLA) to clear Beijing’s Tiananmen Square of peaceful protestors, killing hundreds, or more. In response, the United States imposed sanctions on China, some of which remain in place today.44 In 1995-1996, a U.S. decision to allow Taiwan President Lee Teng-hui to make a private visit to the United States and deliver a speech at his alma mater, Cornell University, led to what became known as the Third Taiwan Strait Crisis. China expressed its anger at the visit by conducting a series of missile exercises around Taiwan, prompting the Clinton Administration to dispatch two aircraft carrier battle groups to the area.45 In May 1999, two decades after normalization of U.S.-China relations, a U.S. Air Force B-2 bomber involved in North Atlantic Treaty Organization (NATO) operations over Yugoslavia mistakenly dropped five bombs on the Chinese Embassy in Belgrade, killing three Chinese journalists and injuring 20 embassy personnel. The event set off anti-U.S. demonstrations in China, during which protestors attacked U.S. diplomatic facilities.46 In April 2001, a PLA naval J-8 fighter plane collided with a U.S. Navy EP-3 reconnaissance plane over the South China Sea, killing the Chinese pilot. The U.S. crew made an emergency landing on China’s Hainan Island, where Chinese authorities detained them for 11 days. Negotiations for return of the U.S. plane took much longer.47 In February 2012, a Chongqing Municipality Vice Mayor sought refuge in the U.S. consulate in the western China city of Chengdu, where he is believed to 42 Other issues on which the Obama White House sought to cooperate with China included North Korea, Afghanistan, global public health, international development, the transnational flow of terrorist fighters, wildlife trafficking, and ocean conservation. 43 See CRS Report R43333, Iran Nuclear Agreement and U.S. Exit, by Paul K. Kerr and Kenneth Katzman, and CRS Report R44609, Climate Change: Frequently Asked Questions About the 2015 Paris Agreement, by Jane A. Leggett and Richard K. Lattanzio. 44 See CRS Report R44605, China: Economic Sanctions, by Dianne E. Rennack. 45 See CRS Report R44996, Taiwan: Issues for Congress, by Susan V. Lawrence and Wayne M. Morrison. 46 U.S. Department of State, “Thomas Pickering, Under Secretary of State, Oral Presentation to the Chinese Government Regarding the Accidental Bombing of The P.R.C. Embassy in Belgrade,” June 17, 1999, https://19972001.state.gov/policy_remarks/1999/990617_pickering_emb.html; U.S. Department of State, “China—Property Damage Agreements,” December 16, 1999, https://1997-2001.state.gov/briefings/statements/1999/ps991216b.html. The United States agreed to pay China $28 million for damage to the Chinese Embassy in Belgrade. China agreed to pay the United States $2.87 million for damage to U.S. diplomatic facilities in China. 47 John Keefe, “A Tale of ‘Two Very Sorries’ Redux,” Far Eastern Economic Review, March 21, 2002, available online at http://www.freerepublic.com/focus/f-news/646427/posts; Association for Diplomatic Studies and Training, “A U.S.-Chinese Mid-Air Collision and ‘The Letter of Two Sorries,’ https://adst.org/2016/04/a-u-s-chinese-mid-aircollision-and-the-letter-of-two-sorries/. Congressional Research Service 10 U.S.-China Relations  have shared explosive information about wrongdoing by his then-boss, an ambitious Politburo member. Thirty-six hours later, U.S. officials handed the Vice Mayor over to officials from Beijing. The Politburo member, Bo Xilai, soon fell from grace in one of the most spectacular political scandals in PRC history.48 In April 2012, after Chinese legal advocate Chen Guangcheng, who is blind, escaped house arrest in China’s Shandong Province, the U.S. Embassy in China rescued him from the streets of Beijing and brought him into the U.S. Embassy compound, where he stayed for six days. High-stakes negotiations between U.S. and PRC diplomats led to Chen moving first to a Beijing hospital, and then, in May 2012, to the United States.49 The Bilateral Relationship: Select Dimensions High-Level Dialogues Presidents Trump and Xi have met face-to-face five times: three times in 2017, once in 2018, and once in 2019 (see Table 1). Three of their five meetings have been on the sidelines of summits of the G-20 nations. Even as he has excoriated PRC policies, Trump has generally described his relationship with Xi in warm terms, frequently referring to Xi as “my friend.” Writing on Twitter on August 23, 2019, he questioned whether the Federal Reserve chairman or Xi “is our bigger enemy.”50 Three days later, however, the President wrote on Twitter that Xi is “a great leader & representing a great country” and stated publicly, “I have great respect for President Xi.”51 Table 1. Summits Between Presidents Donald J. Trump and Xi Jinping Date of Meeting Venue April 6-7, 2017 Mar-a-Lago Estate, Palm Beach, FL, during President Xi’s visit to the United States July 8, 2017 Hamburg, Germany, on sidelines of a G-20 summit November 8-10, 2017 Beijing, China, during President Trump’s state visit to China December 1, 2018 Buenos Aires, Argentina, on sidelines of a G-20 summit June 29, 2019 Osaka, Japan, on the sidelines of a G-20 summit Source: The White House. In their April 2017 meetings, Trump and Xi agreed to establish four high-level dialogues to manage the U.S.-China relationship, replacing dialogues that operated during the Obama Administration (see Table 2).52 All of the dialogues convened in 2017. Perhaps reflecting 48 See Max Fisher, “Clinton Reveals U.S. Role in High-Level 2012 Incident with China,” The Washington Post, October 18, 2013, https://www.washingtonpost.com/news/worldviews/wp/2013/10/18/clinton-reveals-u-s-role-in-highlevel-2012-incident-with-china/. 49 See CRS Report R42554, U.S.-China Diplomacy Over Chinese Legal Advocate Chen Guangcheng, by Susan V. Lawrence and Thomas Lum. 50 Donald J. Trump on Twitter, August 23, 2019, https://twitter.com/realdonaldtrump/status/1164914610836783104; The White House, “Remarks by President Trump and President El-Sisi of the Arab Republic of Egypt Before Bilateral Meeting | Biarritz, France,” August 26, 2019, https://www.whitehouse.gov/briefings-statements/remarks-presidenttrump-president-el-sisi-arab-republic-egypt-bilateral-meeting-biarritz-france/. 51 Donald J. Trump on Twitter, August 26, 2019, https://twitter.com/realdonaldtrump/status/1165919483191599104. 52 U.S. Department of State, “Previewing the U.S.-China Diplomatic and Security Dialogue,” briefing by Acting Congressional Research Service 11 U.S.-China Relations vacancies in senior positions in the Trump Administration and rising tensions in the U.S.-China relationship, only the Diplomatic and Security Dialogue (D&SD) convened in 2018.53 None of the dialogues has convened in 2019. Table 2. Trump Administration High-Level Dialogues with China Established April 2017 Dialogue Name U.S. Cochair(s) PRC Cochair Dates Convened Diplomatic and Security Dialogue (D&SD) Secretary of State and Secretary of Defense Politburo Member/Director of Communist Party Central Committee Foreign Affairs Commission Office (Minister of Defense also participated in second meeting, but the PRC does not consider him a cochair.) June 2017, November 2018 Comprehensive Economic Dialogue Secretary of the Treasury and Secretary of Commerce Politburo Member/Vice Premier June 2017 Law Enforcement and Cybersecurity Dialogue Attorney General and Secretary of Homeland Security Politburo Member responsible for police and judiciary October 2017 Social and Cultural Issues Dialogue Secretary of State Politburo Member/Director of Communist Party Central Committee Foreign Affairs Commission Office September 2017 Source: White House, State Department, and Xinhua News Agency. Trade and Economic Relations54 U.S.-China trade and economic relations have expanded significantly over the past three decades. In 2018, China was—in terms of goods—the United States’ largest trading partner, third-largest export market, and largest source of imports. China is also the largest foreign holder of U.S. Treasury securities.55 The economic relationship has grown increasingly fraught, however. In 2017, the Trump Administration launched an investigation into China’s policies on intellectual property (IP), subsidies, advancing technology, and spurring innovation. Beginning in 2018, the Trump Administration imposed tariffs on $250 billion worth of Chinese imports.56 Tariffs appear Assistant Secretary of State for East Asian and Pacific Affairs Susan Thornton, June 19, 2017, https://www.state.gov/r/ pa/prs/ps/2017/06/272014.htm. 53 Office of the Spokesman, U.S. Department of State, “U.S.-China Diplomatic and Security Dialogue,” Media Note, November 9, 2018, https://www.state.gov/u-s-china-diplomatic-and-security-dialogue-3/. 54 Unless otherwise noted, data in this section is from U.S. Department of Commerce, Bureau of Economic Analysis. 55 U.S. Department of the Treasury, “Foreign Residents’ Portfolio Holdings of U.S. Securities,” April 30, 2019, https://www.treasury.gov/resource-center/data-chart-center/tic/Pages/shlreports.aspx. 56 The White House, “Presidential Memorandum on the Actions by the United States Related to the Section 301 Investigation,” March 22, 2018, https://www.whitehouse.gov/presidential-actions/presidential-memorandum-actionsunited-states-related-section-301-investigation/. For more detail, see CRS Insight IN10943, Escalating U.S. Tariffs: Congressional Research Service 12 U.S.-China Relations to have contributed to a sharp contraction in U.S.-China trade in the first half of 2019. On August 1, 2019, President Trump stated that beginning on September 1, 2019, the United States would impose 10% tariffs on nearly all remaining imports from China.57 His Administration later exempted some goods from the 10% tariffs and delayed the imposition of tariffs on other goods, but on August 23, 2019, the President also announced his intention to raise the tariff rate for these remaining imports from 10% to 15%.58 The President has sometimes suggested what some observers characterize as an ambivalence toward the trade relationship. In reference to the persistent large size of the U.S. trade deficit with China, the President stated on August 1, 2019, “If they don’t want to trade with us anymore, that would be fine with me. We’d save a lot of money.”59 Trade According to U.S. trade data, U.S. exports of goods and services to China totaled $178.0 billion (7.1% of total U.S. exports) in 2018, while imports from China amounted to $558.8 billion (17.9% of total U.S. imports). As a result, the overall bilateral deficit was $380.8 billion, up $43.6 billion (12.9%) from 2017. Trade in Goods U.S. goods exports to China totaled $120.8 billion in 2018, a 7.3% ($9.4 billion) decrease from the 2017 level (see Table 3). The value of U.S. goods imports from China was $540.4 billion over the same period, up 6.8% ($34.4 billion) from 2017. The decrease in U.S. exports and increase in U.S. imports resulted in a $43.8 billion (11.7%) increase in the bilateral trade deficit, to $419.6 billion. Exports to China accounted for 7.2% of all U.S. goods exports, while imports from China accounted for 21.1% of all U.S. goods imports. Table 3. U.S.-China Trade in 2018 U.S.$ (billions) % Change from 2017* Total U.S. Exports to China 178.0 -4.5 Exports of Goods 120.8 -7.3 Exports of Services 57.1 2.0 Total U.S. Imports from China 558.8 6.7 Imports of Goods 540.4 6.8 Imports of Services 18.3 5.1 Total Balance (Deficit) -380.8 12.9 Balance on Goods (Deficit) -419.6 11.7 Balance on Services (Surplus) 38.8 0.6 Timeline, coordinated by Brock R. Williams; CRS Insight IN10971, Escalating U.S. Tariffs: Affected Trade, coordinated by Brock R. Williams; and CRS Insight IN11135, U.S. Trade Friction with China Intensifies, by Wayne M. Morrison. 57 President Donald J. Trump on Twitter, August 1, 2019, https://twitter.com/realdonaldtrump/status/ 1156979446877962243. 58 Donald J. Trump on Twitter, August 23, 2019, https://twitter.com/realdonaldtrump/status/1165005929831702529. 59 The White House, “Remarks by President Trump Before Marine One Departure,” August 1, 2019, https://www.whitehouse.gov/briefings-statements/remarks-president-trump-marine-one-departure-56/. Congressional Research Service 13 U.S.-China Relations Source: U.S. Bureau of Economic Analysis, Department of Commerce, June 20, 2019. Note: *not adjusted for inflation. Top U.S. goods exports to China in 2018 were capital goods, not including automotive products ($52.9 billion or 43.8% of U.S. goods exports to China), industrial supplies ($40 billion or 33.1%), and automotive vehicles and parts ($10.4 billion or 8.6%). Leading U.S. goods imports from China were consumer goods, not including food and automotive ($248.2 billion or 45.9% of U.S. goods imports from China), industrial supplies ($55.6 billion or 10.3%), and automotive vehicles and parts ($23.1 billion or 4.28%). China has levied retaliatory tariffs on most U.S. agricultural and food products. The tariffs reportedly contributed to the sharp overall decline of these exports to China (particularly of U.S. soybeans) in 2018.60 Total U.S. agricultural exports to China amounted to $9.1 billion, a decline of 53.0% from 2017, while the value of U.S. agricultural imports from China was $4.9 billion, up 8.9% from 2017.61 China’s share of total U.S. agricultural exports declined from 14.1% in 2017 to 6.6% in 2018. Trade in Services In 2018, U.S. services exports to China totaled $57.1 billion (up 2.0% or $1.1 billion), while U.S. imports of services from China grew 5.1% ($887 million) to $18.3 billion. The bilateral trade surplus in services stood at $38.8 billion (up 0.6% from 2017). Exports to China accounted for 6.9% of all U.S. services exports, while imports from China accounted for 3.2% of all U.S. services imports. Travel represented the largest category of U.S. services exports to China, accounting for 56.1% ($32.1 billion). Other significant categories were charges for the use of IP rights (14.8% of all services exports to China or $8.5 billion) and transport (9.3% or $5.3 billion). Leading U.S. services imports from China were transport (27.4% of all services imports from China or $5.0 billion) and travel (24.7% or $4.5 billion). Investment Foreign Direct Investment62 Despite a surge in U.S. foreign direct investment (FDI) in China following the PRC’s entry into the World Trade Organization (WTO) in 2001, levels of investment have remained relatively low. China’s foreign investment regulatory regime, combined with policies or practices that favor state-owned enterprises (SOEs), has traditionally limited the sectors open to—and levels of— foreign investment. Amid trade tensions, a U.S. vetting regime with a newly broadened scope for reviewing certain foreign investments for national security implications, and tighter Chinese regulations on capital outflows, Chinese FDI in the United States has slowed since 2016. 60 For more detail, see CRS In Focus IF11085, China’s Retaliatory Tariffs on U.S. Agricultural Products, by Jenny Hopkinson, and CRS Report R45448, Profiles and Effects of Retaliatory Tariffs on U.S. Agricultural Exports, by Jenny Hopkinson. 61 U.S. Department of Agriculture, USDA Global Access Trading System (GATS), FATUS Total Agricultural Exports and Imports. 62 For more detail, see CRS In Focus IF11283, U.S.-China Investment Ties: Overview and Issues for Congress, by Andres B. Schwarzenberg. Congressional Research Service 14 U.S.-China Relations According to the U.S. Bureau of Economic Analysis, net U.S. FDI flows to China in 2018—the most recent year for which data are available—were $7.6 billion (down 22.9% from 2017), while net Chinese FDI flows into the United States were negative (-$754 million, compared to $25.4 billion in 2016), as outflows exceeded inflows (e.g., asset divestitures).63 Additionally, the stock of U.S. FDI in China was $116.5 billion (up 8.3% from 2017), while that of China in the United States was $60.2 billion (up 3.7%), on an ultimate beneficiary ownership (UBO) basis.64 China accounts for approximately 2.0% of total U.S. FDI stock abroad. China’s Holdings of U.S. Treasury Securities As of May 2019, approximately three-fourths (or $1.1 trillion) of China’s total U.S. public and private holdings are Treasury securities, which investors generally consider to be “safe-haven” assets.65 Chinese ownership of these securities has decreased in recent years from its peak of $1.3 trillion in 2011. Nevertheless, it remains significantly higher than in 2002, both in dollar terms (up over $1 trillion) and as a percentage of total foreign holdings (from 8.5% to 17.0%). In 2009, China overtook Japan to become the largest foreign holder of Treasury securities. Military-to-Military Relations The United States and China formalized military ties in 1979, the year the two countries established diplomatic relations, although they had cooperated on some security issues previously. The two countries enjoyed high levels of military cooperation until the PRC’s 1989 military crackdown in Tiananmen Square, after which the United States suspended military engagement. The Clinton Administration in 1993 resumed military ties, reportedly in an attempt to reassure Chinese military leaders of the United States’ benign intentions toward China, but military relations never again achieved the scope and depth of the previous decade.66 China on several occasions suspended military ties when it perceived the United States to have harmed Chinese interests (for example, in response to U.S. arms sales to Taiwan). In 1999, Congress included a provision in the National Defense Authorization Act for FY2000 (P.L. 10665) placing restrictions on military relations with China. The act states that the Secretary of Defense may not authorize any military contact with the PLA that would “create a national security risk due to an inappropriate exposure” of the PLA to 12 operational areas of the U.S. military.67 In recent years, U.S.-China military exchanges have included high-level visits, recurrent exchanges between defense officials, and functional and academic exchanges (see Table 4). 63 U.S. Department of Commerce, Bureau of Economic Analysis, “International Data: Direct Investment and MNE,” July 24, 2019. 64 FDI stock, or FDI position, captures the cumulative value of investments at a single point in time. According to the U.S. Bureau of Economic Analysis, ultimate beneficiary ownership refers to the “person, or entity, that ultimately owns or controls a U.S. affiliate of a foreign company and that derives the benefits associated with ownership or control.” 65 U.S. Department of the Treasury, “Foreign Residents' Portfolio Holdings of U.S. Securities,” April 30, 2019. 66 Robert G. Sutter, Shaping China’s Future in World Affairs: The Role of the United States, 1996. 67 The 12 areas are force projection operations, nuclear operations, advanced combined-arms and joint combat operations, advanced logistical operations, chemical and biological defense and other capabilities related to weapons of mass destruction, surveillance and reconnaissance operations, joint warfighting experiments and other activities related to transformations in warfare, military space operations, other advanced capabilities, arms sales or military-related technology transfers, release of classified or restricted information, and access to a U.S. Department of Defense laboratory. The FY2000 NDAA (P.L. 106-65) requires the Secretary of Defense to inform Congress annually about any contacts with the PLA that violate the act. Congressional Research Service 15 U.S.-China Relations According to U.S. Department of Defense (DOD) reports, the frequency of these engagements has declined in recent years, from 30 in 2016 to 12 planned for 2019.68 The two militaries also occasionally engage in multilateral fora, such as multinational military exercises, and coordinate or de-conflict activities such as counterpiracy patrols in the Gulf of Aden. DOD reporting indicates U.S. objectives for military-to-military relations with China have narrowed in recent years from a broader focus on building trust and fostering cooperation on security issues of mutual interest to a narrower focus on risk reduction.69 The Trump Administration has been more vocal than past Administrations in expressing its concerns about China’s military, and frictions have occasionally flared into public view. Eighteen “unsafe and/or unprofessional interactions” between U.S. and PRC military forces in the maritime realm have occurred since 2016, according to a U.S. Pacific Fleet spokesperson.70 In late May 2018, the United States disinvited China from the 2018 iteration of the biennial U.S.led multinational Rim of the Pacific (RIMPAC) maritime exercise in response to China’s continued militarization of its outposts in the South China Sea.71 In September 2018, the U.S. Treasury Department sanctioned the PLA’s Equipment Development Department and its head for arms purchases from Russia under the Countering America’s Adversaries through Sanctions Act (CAATSA) (P.L. 115-44).72 The PRC’s response to that action, and a September 2018 U.S. arms sale to Taiwan, included suspension of the two militaries’ year-old Joint Staff Dialogue.73 These tensions notwithstanding, both countries appear committed to military-military engagement. Then-U.S. Secretary of Defense Jim Mattis and Chinese Defense Minister Wei Fenghe met three times in 2018.74 At a meeting of the two countries’ Diplomatic and Security Dialogue in November 2018, they “recognized that the U.S.-China military-to-military 68 U.S. Department of Defense, Annual Report to Congress: Military and Security Developments Involving the People’s Republic of China 2019, May 2, 2019, p. 119; U.S. Department of Defense, Annual Report to Congress: Military and Security Developments Involving the People’s Republic of China 2018, May 16, 2018, pp. 106-109; U.S. Department of Defense, Annual Report to Congress: Military and Security Developments Involving the People’s Republic of China 2017, May 15, 2017, pp. 85-89; Department of Defense, Annual Report to Congress: Military and Security Developments Involving the People’s Republic of China 2016, April 26, 2016, pp. 96-101. 69 DOD’s most recent report to Congress on China’s military states: “In 2018, DoD’s plan for military-to-military contacts with China focused on three interconnected priorities: (1) encouraging China to act in ways consistent with the free and open international order; (2) promoting risk reduction and risk management efforts that diminish the potential for misunderstanding or miscalculation; and (3) deconflicting forces operating in close proximity. U.S. Department of Defense, Annual Report to Congress: Military and Security Developments Involving the People’s Republic of China 2019, May 2, 2019, p. 107. 70 Ryan Browne, “US Navy has had 18 Unsafe or Unprofessional Encounters with China Since 2016,” CNN, November 3, 2018, https://www.cnn.com/2018/11/03/politics/navy-unsafe-encounters-china/index.html. 71 U.S. Department of Defense, “Remarks by Secretary Mattis at Plenary Session of the 2018 Shangri-La Dialogue,” June 2, 2018, https://dod.defense.gov/News/Transcripts/Transcript-View/Article/1538599/remarks-by-secretary-mattisat-plenary-session-of-the-2018-shangri-la-dialogue/. 72 U.S. Department of the Treasury, “CAATSA—Russia-Related Designations,” September 20, 2018, https://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20180920_33.aspx. 73 U.S. Defense Security Cooperation Agency, “Taipei Economic and Cultural Representative Office in the United States (TECRO)–Foreign Military Sales Order (FMSO) II Case,” Transmittal No. 18-09, September 24, 2018, http://www.dsca.mil/major-arms-sales/taipei-economic-and-cultural-representative-office-united-states-tecro-foreign; Robert Burns, “China Denies Request for a Hong Kong Port Call by USS Wasp,” Associated Press, September 25, 2018, https://www.military.com/daily-news/2018/09/25/china-denies-request-hong-kong-port-call-uss-wasp.html; Jane Perlez, “China Cancels High-level Security Talks with the U.S.” New York Times, September 30, 2018, https://www.nytimes.com/2018/09/30/world/asia/china-us-security-mattis.html. 74 The two men met in Beijing in June 2018, in Singapore in October, 2018, and in Washington, DC, for the second meeting of the D&SD in November 2018. Congressional Research Service 16 U.S.-China Relations relationship could be a stabilizing factor for the overall bilateral relationship, and committed to a productive mil-mil relationship.”75 In May 2019 remarks, Assistant Secretary of Defense for Indo-Pacific Security Affairs Randall Schriver echoed this sentiment, saying, “We continue to pursue a constructive result-oriented [military-to-military] relationship between our countries.”76 Table 4. Select Security and Military Dialogues, 2009-Present Years Convened Dialogue Name Rank/Level of Current Cochairs Notes Diplomatic and Security Dialogue (est. 2017) Secretaries of State and Defense | CPC Politburo Member responsible for foreign affairs 2017, 2018 PRC Minister of Defense attended 2018 meeting, but the PRC has not designated him a cochair Defense Consultative Talks (est. 1997) Undersecretary of Defense for Policy | PRC cochair position vacant 2009-2014 In hiatus since 2014 Asia-Pacific Security Dialogue (est. 2015) Assistant Secretary of Defense for IndoPacific Security Affairs | Director, CPC Central Military Commission Office of International Military Cooperation 2015, 2017, 2019 Forum for discussion of regional security issues Defense Policy Coordination Talks (est. 2006) Deputy Assistant Secretary of Defense for Asian and Pacific Security Affairs | Deputy Director, CPC Central Military Commission Office of International Military Cooperation 2009-2018 (planned for 2019) Sets annual agenda for military exchanges Maritime Military Consultative Agreement Talks (est. 1998) Various 2009-2018 (planned for 2019) Forum for discussion of concerns about air and maritime operational safety Joint Staff Dialogue Mechanism (est. 2017) Director of Joint Staff J5 | Deputy Chief of Central Military Commission Joint Staff Department 2017 (planned for then suspended in 2018; planned for 2019) Dialogue to reduce risks from miscalculations Source: U.S. Department of Defense, U.S. Department of State. Notes: The PRC established the Central Military Commission Office of International Military Cooperation in 2016; its predecessor organization was the Ministry of National Defense Foreign Affairs Office. U.S. Foreign Assistance in China Since 2001, U.S. assistance efforts in China have aimed to support human rights, democracy, rule of law, and environmental programs and to promote sustainable development and environmental conservation and preserve indigenous culture in Tibetan areas in China. The U.S. government 75 U.S. Department of State, “U.S.-China Diplomatic and Security Dialogue,” November 9, 2018, https://www.state.gov/u-s-china-diplomatic-and-security-dialogue-3/. 76 U.S. Department of Defense, “Assistant Secretary of Defense for Indo-Pacific Security Affairs Schriver Press Briefing on the 2019 Report on Military and Security Developments in China,” May 3, 2019, https://dod.defense.gov/ News/Transcripts/Transcript-View/Article/1837011/assistant-secretary-of-defense-for-indo-pacific-security-affairsschriver-press/source/GovDelivery/. Congressional Research Service 17 U.S.-China Relations does not provide assistance to PRC government entities or directly to Chinese NGOs. The direct recipients of Department of State and U.S. Agency for International Development (USAID) grants have been predominantly U.S.-based nongovernmental organizations (NGOs) and universities.77 Between 2001 and 2018, the U.S. government provided approximately $241 million for programs in China administered by the Department of State’s Bureau of Democracy, Human Rights, and Labor (DRL); $99 million for Tibetan programs; $72 million for rule of law and environmental efforts in the PRC; $43 million for health programs in China focused upon HIV/AIDS prevention, care, and treatment and countering the spread of pandemic diseases; and $8.0 million for criminal justice reform.78 DRL programs across China have supported rule of law development, civil society, government transparency, public participation in government, and internet freedom. Since 1993, Peace Corps volunteers have engaged in environmental awareness programs and teaching English as a second language in China.79 Since 2015, Congress has appropriated funds for Tibetan communities in India and Nepal ($6 million in FY2019). Since 2018, Congress has provided an additional $3 million annually to strengthen institutions and governance in the Tibetan exile communities. (See Table 5.) Table 5. U.S. Foreign Assistance Programs in China (Department of State and USAID), FY2013-FY2018 (Constant $US thousands) Account (Program) 2013 2014 2015 2016 2017 2018 est. Economic Support Fund and Democracy Fund (administered by StateDRL) 10,000 10,000 13,000 12,000 11,000 10,000 Economic Support Fund (Tibetan Areas— administered by USAID) 7,032 7,000 7,900 8,000 8,000 8,000 Economic Support Fund (rule of law, environment— administered by USAID) 3,092 3,000 3,500 5,000 5,000 5,000 Global Health Programs (USAID) 2,977 1,500 0 1,500 1,500 0 International Narcotics Control and Law Enforcement (criminal justice—administered by State-INL)a 823 800 825 800 800 2,000 Totals 23,924 22,300 25,225 27,300 26,300 25,000 Peace Corps 3,200 2,500 4,100 4,200 4,200 4,100 77 For further information, see CRS Report RS22663, U.S. Assistance Programs in China, by Thomas Lum. 78 Criminal Justice programs are administered by the Department of State’s Bureau of International Narcotics and Law Enforcement Affairs (INL). 79 Peace Corps, “Peace Corps in China,” https://www.peacecorps.gov/china/. Congressional Research Service 18 U.S.-China Relations Source: U.S. Department of State. a. INL—Bureau of International Narcotics and Law Enforcement Affairs. The Consolidated Appropriations Act, 2019 (P.L. 116-6) appropriated an estimated $25.8 million for programs in China. This total includes ESF funding of $17 million for programs in China (non-Tibetan areas), ESF of $8 million for Tibetan areas in China, and INCLE funding of $800,000 for rule of law programs. Of the ESF appropriation for non-Tibetan areas, DRL administers human rights and democracy programs amounting to $11 million. In addition, P.L. 116-6 provided $17.5 million for Global Internet Freedom efforts, of which China programs are a major recipient. The FY2020 Department of State foreign operations budget justification does not include a funding request for programs in China. Appropriations for such programs are determined largely by congressional foreign operations appropriations legislation. Select Issues in the Bilateral Relationship Economic Issues Section 301 Investigation and Tariffs In March 2018, the USTR released the findings of an investigation into PRC policies related to technology transfer, IP, and innovation under Sections 301-308 of the Trade Act of 1974 (19 U.S.C. 2411-2418).80 The investigation concluded that four IP rights-related PRC policies justified U.S. action: forced technology transfer requirements; cyber-enabled theft of U.S. IP and trade secrets; discriminatory and nonmarket licensing practices; and state-funded strategic acquisition of U.S. assets. Subsequently, the Trump Administration imposed increased 25% tariffs on three tranches of imports from China worth approximately $250 billion (see Table 6). China in turn raised tariffs (at rates ranging from 5% to 25%) on approximately $110 billion worth of U.S. products. After negotiations to resolve the standoff broke down in May 2019, the President ordered the USTR to begin the process of levying increased 25% tariffs on nearly all remaining imports from China.81 Following a 12th round of talks between U.S. and Chinese trade negotiators in Shanghai at the end of July 2019, the President on August 1, 2019, announced that the United States would impose additional 10% tariffs on these remaining imports beginning September 1, 2019.82 On August 13, 2019, the Trump Administration announced that some imports from China previously identified as potentially subject to the additional 10% tariffs would be exempted “based on health, safety, national security and other factors,” and that for some other imports from China, including 80 The White House, “Presidential Memorandum on the Actions by the United States Related to the Section 301 Investigation,” March 22, 2018. For more detail, see CRS Insight IN10943, Escalating U.S. Tariffs: Timeline, coordinated by Brock R. Williams; CRS Insight IN10971, Escalating U.S. Tariffs: Affected Trade, coordinated by Brock R. Williams; and CRS Insight IN11135, U.S. Trade Friction with China Intensifies, by Wayne M. Morrison. 81 Office of the U.S. Trade Representative, “Notice of Modification of Section 301 Action: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation,” 84 Federal Register 20459, May 9, 2019, https://www.federalregister.gov/documents/2019/05/09/2019-09681/notice-of-modification-of-section-301action-chinas-acts-policies-and-practices-related-to. 82 Donald J. Trump on Twitter, August 1, 2019, https://twitter.com/realdonaldtrump/status/1156979446877962243. Congressional Research Service 19 U.S.-China Relations cell phones, laptop computers, video game consoles, computer monitors, and some toys and footwear and clothing items, the additional 10% tariffs would be delayed until December 15.83 China responded to the President’s August 1, 2019, announcement by allowing its currency, the renminbi or RMB, to weaken against the U.S. dollar, making Chinese exports more competitive abroad, and in part “offsetting” the impact of U.S. tariffs. Chinese companies also suspended new purchases of U.S. agricultural products.84 On August 23, 2019, China’s Ministry of Finance announced plans to impose retaliatory tariffs of 5% to 10% on $75 billion worth of imports from the United States. Tariffs on some products took effect on September 1, 2019; tariffs on the rest are to go into effect on December 15, 2019.85 The Ministry also announced restoration of 5%25% tariffs on U.S. autos and auto parts, to go into effect December 15, 2019.86 President Trump responded, in turn, to China’s tariff announcements by stating that he would increase the tariff rate for $250 billion worth of imports from China from 25% to 30%, effective October 1, 2019, and that he would increase the proposed tariff rate for the remaining imports from China from 10% to 15%, to go into effect for some products on September 1, 2019, and for other products on December 15, 2019.87 Trade negotiators from the two sides are scheduled to meet for a 13th round of negotiations in Washington, DC, in September 2019. Table 6. U.S. Section 301 Tariff Actions Date U.S. Tariffs Imposed 07/06/2018, 10/01/2019 (proposed) Tariff Rates (ad valorem) 25%, proposed to rise to 30% Stated Value of Imports Affected $34 billion China’s Reaction 25% tariffs on $34 billion of U.S. goods (effective 7/06/2018) 83 Office of the U.S. Trade Representative, “USTR Announces Next Steps on Proposed 10 Percent Tariff on Imports from China,” August 13, 2019, https://ustr.gov/about-us/policy-offices/press-office/press-releases/2019/august/ustrannounces-next-steps-proposed; Office of the U.S. Trade Representative, “Notice of Modification of Section 301 Action: China's Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation,” 84 Federal Register 43304, August 20, 2019, https://www.federalregister.gov/documents/2019/08/20/2019-17865/noticeof-modification-of-section-301-action-chinas-acts-policies-and-practices-related-to. 84 Ministry of Commerce of the PRC, “中国相关企业暂停新的美国农产品采购” (“Relevant Chinese Enterprises Suspending New Purchases of U.S. Agricultural Products”) (CRS translation), August 6, 2019, http://www.mofcom.gov.cn/article/ae/ag/201908/20190802887951.shtml; Hallie Gu and Tom Daly, “U.S. Farmers Suffer ‘Body Blow’ as China Slams Door on Farm Purchases,” Reuters, August 5, 2019. 85 Ministry of Finance of the PRC, “国务院关税税则委员会关于对原产于美国的部分进口商品 (第三批）加征关 税的公告” (“Customs Tariff Commission of the State Council Notice on Increased Tariffs for Some Products of U.S. Origin (Third Tranche”) (CRS translation), August 23, 2019, http://gss.mof.gov.cn/zhengwuxinxi/zhengcefabu/201908/ t20190823_3372928.html. 86 Ministry of Finance of the PRC, “国务院关税税则委员会关于对原产于美国的汽车及零部件恢复加征关税的公 告” (“Customs Tariff Commission of the State Council Notice on Restoration of Tariffs on U.S.-Manufactured Autos and Parts”), August 23, 2019, http://gss.mof.gov.cn/zhengwuxinxi/zhengcefabu/201908/t20190823_3372941.html. 87 Donald J. Trump on Twitter, August 23, 2019, https://twitter.com/realdonaldtrump/status/1165005929831702529; Office of the United States Trade Representative, “Request for Comments Concerning Proposed Modification of Action Pursuant to Section 301: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation,” 84 Federal Register 46212, September 3, 2019, https://www.govinfo.gov/content/pkg/FR2019-09-03/pdf/2019-18946.pdf. Congressional Research Service 20 U.S.-China Relations Date U.S. Tariffs Imposed Tariff Rates (ad valorem) Stated Value of Imports Affected China’s Reaction 08/23/2018, 10/01/2019 (proposed) 09/24/2018, 06/15/2019, 10/01/2019 (proposed) 25%, proposed to rise to 30% $16 billion 25% tariffs on $16 billion of U.S. goods (effective 8/23/2018) 10%, then 25%, proposed to rise to 30% $200 billion 5%-10% tariff hikes on $60 billion worth of imports from United States (effective 9/24/2018); then tariffs on some items raised to up to 25% (effective 6/01/2019) 09/01/2019 (initial tranche), 12/15/2019 second tranche) (proposed) 15% $300 billion Allowed currency to depreciate; suspended new purchases of U.S. agricultural goods; announced 5%-10% tariffs on $75 billion of imports from United States, (effective 9/01/2019 and 12/15/2019); announced restoration of 5%-25% tariffs on U.S. autos and auto parts, to go into effect 12/15/2019. Source: CRS with data from USTR and China’s Ministry of Finance Tariffs on Aluminum and Steel In March 2018, President Trump issued a proclamation imposing a 10% tariff on aluminum and a 25% tariff on steel products from most countries, including China, based on “national security” justifications under Section 232 of the Trade Act of 1962 (P.L. 87-794; 19 U.S.C. §1862).88 In response, China raised tariffs by 15% to 25% on $3 billion worth of U.S. imports.89 China is also pursuing legal action against the United States at the WTO.90 In turn, the United States filed its own WTO complaints over China’s retaliatory tariffs.91 Alleged PRC Currency Manipulation On August 5, the U.S. Treasury Department labeled China a currency manipulator under Section 3004 of the Omnibus Trade and Competitiveness Act of 1988 (P.L. 100-418) and announced that Treasury Secretary Steven Mnuchin would “engage with the International Monetary Fund [IMF] to eliminate the unfair competitive advantage created by China’s latest actions.”92 In its annual review of China’s economic policies, released on August 9, 2019, however, the IMF stated, 88 Presidential Proclamation 9704 of March 8, 2018, “Adjusting Imports of Aluminum into the United States,” 83 Federal Register 11619, March 15, 2018, and Proclamation 9705 of March 8, 2018, “Adjusting Imports of Steel Into the United States,” 83 Federal Register 11625, March 15, 2018. Australia, Argentina, Canada, and Mexico negotiated exemptions from the tariffs. Brazil and South Korea gained exemptions from the steel tariffs but are still subject to aluminum tariffs. 89 For more detail, see CRS Report R45249, Section 232 Investigations: Overview and Issues for Congress, coordinated by Rachel F. Fefer. 90 World Trade Organization, “DS544: United States—Certain Measures on Steel and Aluminum Products,” January 25, 2019. 91 USTR, “United States Challenges Five WTO Members Imposing Illegal Tariffs Against U.S. Products,” press release, July 2018, https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/july/united-stateschallenges-five-wto. 92 U.S. Department of the Treasury, “Treasury Designates China as a Currency Manipulator,” August 5, 2019, https://home.treasury.gov/news/press-releases/sm751; CRS Insight IN11154, The Administration’s Designation of China as a Currency Manipulator, by Rebecca M. Nelson. Congressional Research Service 21 U.S.-China Relations “[e]stimates suggest little FX [foreign exchange] intervention by” China’s central bank, the People’s Bank of China.93 Bilateral Trade Deficit President Trump has raised concerns about U.S. bilateral trade imbalances, particularly with China.94 Some policymakers view the large U.S. trade deficit as an indicator of an unfair trade relationship resulting from Chinese trade barriers, such as comparatively high tariffs, and currency manipulation. Others view conventional bilateral trade deficit data as misleading, given multinational firms’ growing use of global supply chains.95 Supporters of the latter view note that products may be invented or developed in one country and manufactured or assembled elsewhere—using imported components from multiple foreign sources—and then exported. Conventional U.S. trade data may not fully reflect the value added in each country, and thus are often a relatively poor indicator of who benefits from global trade.96 Economists generally agree that the overall size of the trade deficit stems largely from U.S. macroeconomic policies and an imbalance between saving and investment in the economy, rather than from foreign trade barriers.97 Industrial Policies The Trump Administration, some Members of Congress, and others charge that the Chinese government employs policies, including subsidies, tax breaks, low-cost loans, trade and investment barriers, discriminatory IP and technology practices, and technology transfer mandates, to support and protect domestic firms, especially state-owned enterprises (SOEs). Chinese government plans, such as “Made in China 2025,” appear to signal an expanded role for the government in the economy, which many analysts fear could distort global markets and hurt the global competitiveness of U.S. firms.98 Separately, some U.S. officials are concerned that participation by Chinese firms in certain global supply chains, such as information and 93 International Monetary Fund, “People’s Republic of China: 2019 Article IV Consultation-Press Release; Staff Report; Staff Statement and Statement by the Executive Director for China,” Country Report No. 19/266, August 9, 2019. 94 Office of the U.S. Trade Representative, “U.S. Trade Representative and the U.S. Department of Treasury respond to the ‘White Paper’ issued by China on June 2, 2019,” press release, June 3, 2019, https://ustr.gov/about-us/policyoffices/press-office/press-releases/2019/june/us-trade-representative-and-us. 95 For more detail, see CRS In Focus IF10619, The U.S. Trade Deficit: An Overview, by James K. Jackson; CRS Report R45243, Trade Deficits and U.S. Trade Policy, by James K. Jackson; and CRS Report RL33274, Financing the U.S. Trade Deficit, by James K. Jackson. 96 For a discussion on the limitations of trade data, see CRS Report R45434, U.S. Trade with Major Trading Partners, by Andres B. Schwarzenberg. 97 James McBride and Andrew Chatzky, “The U.S. Trade Deficit: How Much Does It Matter?” Backgrounder, Council on Foreign Relations, March 8, 2019, https://www.cfr.org/backgrounder/us-trade-deficit-how-much-does-it-matter; Congressional Budget Office, “Causes and Consequences of the Trade Deficit: An Overview,” CBO Memorandum, March 2000, https://www.cbo.gov/sites/default/files/106th-congress-1999-2000/reports/tradedef.pdf; and CRS Report R45243, Trade Deficits and U.S. Trade Policy, by James K. Jackson. 98 See U.S. Chamber of Commerce, Made in China 2025: Global Ambitions Built on Local Protections, March 5, 2017, https://www.uschamber.com/sites/default/files/final_made_in_china_2025_report_full.pdf; CRS In Focus IF10964, The Made in China 2025 Initiative: Economic Implications for the United States, by Wayne M. Morrison; and “Made In China 2025: The Domestic Tech Plan That Sparked an International Backlash,” SupChina, June 28, 2018, https://supchina.com/2018/06/28/made-in-china-2025/. Congressional Research Service 22 U.S.-China Relations communications technology (ICT) products and services, could pose risks to U.S. national security, primarily because of PRC firms’ relationships with the Chinese state. Intellectual Property Rights (IPR) and Cyber-Theft As noted in the Section 301 investigation, the Trump Administration considers Chinese IPR violations to be a major source of U.S. economic losses. U.S. firms cite lax IPR enforcement as one of the biggest challenges to doing business in China, and some view the enforcement shortfalls as a deliberate effort by the Chinese government to give domestic firms an advantage over foreign competitors. In 2018, the U.S. National Counterintelligence and Security Center described China as having “expansive efforts in place to acquire U.S. technology to include sensitive trade secrets and proprietary information.” It warned that if the threat is not addressed, “it could erode America’s long-term competitive economic advantage.”99 The U.S. government’s first charges against a state actor for cyber-enabled economic espionage were against China. In May 2014, the Obama Administration Justice Department indicted five PRC military officers for hacking into and stealing secrets from U.S. firms in the nuclear power, metals, and solar products industries.100 All those indicted remain at large. In September 2015, the Obama Administration and China reached a bilateral agreement on cybersecurity during President Xi’s state visit to the United States. Under that agreement, Presidents Xi and Obama pledged that neither country’s government would conduct or knowingly support cyber-enabled theft of intellectual property for commercial purposes.101 In February 2018 testimony to Congress, the U.S. intelligence community assessed that PRC cyber activity continued, but at “volumes significantly lower than before” the 2015 agreement.102 In October 2018, however, the cofounder of cybersecurity firm CrowdStrike asserted that after a lull, China was “back to stealing intellectual property on a massive scale.”103 In 2019, the intelligence community’s testimony to Congress stated, “China remains the most active strategic competitor responsible for cyber espionage against the US Government, corporations, and allies.”104 Advanced Technology and Huawei105 The Trump Administration has raised national security concerns over global supply chains of advanced technology products, such as ICT equipment, where China is a major global producer 99 U.S. National Counterintelligence and Security Center, Foreign Economic Espionage in Cyberspace, 2018, July 26, 2018, https://www.dni.gov/files/NCSC/documents/news/20180724-economic-espionage-pub.pdf. 100 U.S. Department of Justice, “U.S. Charges Five Chinese Military Hackers for Cyber Espionage Against U.S. Corporations and a Labor Organization for Commercial Advantage,” May 19, 2014, https://www.justice.gov/opa/pr/uscharges-five-chinese-military-hackers-cyber-espionage-against-us-corporations-and-labor. United States District Court Western District of Pennsylvania, United States of America v. Wang Dong, Sun Kailiang, Wen Xinyu, Huang Zhenyu, and Gu Chunhui, May 1, 2014. 101 White House, “Fact Sheet: President Xi Jinping’s State Visit to the United States,” September 25, 2015. 102 Testimony of Director of National Intelligence Daniel R. Coats, “Worldwide Threat Assessment of the U.S. Intelligence Community,” before Senate Select Committee on Intelligence, February 13, 2018, https://www.dni.gov/ files/documents/Newsroom/Testimonies/2018-ATA—Unclassified-SSCI.pdf. 103 Ken Dilanian, “China’s Hackers are Stealing Secrets from U.S. Firms Again, Experts Say,” NBC News, October 9, 2018, https://www.nbcnews.com/news/china/china-s-hackers-are-stealing-secrets-u-s-firms-again-n917836. 104 Testimony of Director of National Intelligence Daniel R. Coats, “Worldwide Threat Assessment of the U.S. Intelligence Community,” before U.S. Congress, Senate Select Committee on Intelligence, January 29, 2019, https://www.dni.gov/files/ODNI/documents/2019-ATA-SFR—SSCI.pdf. 105 For more on Huawei, see CRS Report R45485, Fifth-Generation (5G) Telecommunications Technologies: Issues for Congress, by Jill C. Gallagher and Michael E. DeVine, and CRS In Focus IF11251, National Security Implications of Congressional Research Service 23 U.S.-China Relations and supplier. In 2017, the President blocked a proposed Chinese acquisition of a U.S. semiconductor firm on national security grounds.106 On May 15, 2019, citing a “national emergency,” President Trump signed Executive Order 13873, authorizing the Secretary of Commerce to ban certain technology transactions involving “foreign adversaries.”107 The Trump Administration has subjected Chinese telecommunications firm Huawei Technologies Co., Ltd. to particular scrutiny. On May 16, 2019, the U.S. Department of Commerce added Huawei and 68 of its non-U.S. affiliates to the Bureau of Industry and Security’s (BIS’s) Entity List, generally requiring U.S. companies to apply for an export license for the sale or transfer of U.S. technology to those entities, with a “presumption of denial” for such applications. The BIS entity list decision cites “reasonable cause to believe Huawei has been involved in activities contrary to the national security or foreign policy interests of the United States,” and notes Huawei’s indictment in the U.S. District Court for the Eastern District of New York on charges of violating Iran sanctions.108 On May 20, 2019, BIS eased the effect of the entity list decision by issuing a three-month temporary general license authorizing some continued transactions with Huawei and its non-U.S. affiliates.109 On August 19, 2019, BIS added an additional 46 non-U.S. Huawei affiliates to the entity list, while also extending the temporary general license for another three months, to November 18, 2019.110 In apparent response to U.S. actions, China’s Ministry of Commerce in June 2019 announced plans for its own “unreliable entities list,” to include foreign entities that damage “the legitimate rights and interests” of Chinese firms or “boycott or cut off supplies to Chinese companies for non-commercial reasons.”111 Vice President Pence and U.S. Secretary of State Pompeo have repeatedly urged allies not to work with Huawei. In Ottawa, Canada, in May 2019, Pence argued, “The simple fact is that the legal framework within China gives the Chinese government access to information and data that is collected by Chinese companies like Huawei,” making Huawei “incompatible with the security interests of the United States of America or our allies in freedom-loving nations across the Fifth Generation (5G) Mobile Technologies, by John R. Hoehn and Kelley M. Sayler. 106 U.S. Department of the Treasury, “Statement on The President’s Decision Regarding Lattice Semiconductor Corporation,” Press Center, September 13, 2017. 107 The White House, “Executive Order on Securing the Information and Communications Technology and Services Supply Chain,” May 15, 2019, https://www.whitehouse.gov/presidential-actions/executive-order-securing-informationcommunications-technology-services-supply-chain/. 108 U.S. Department of Commerce, Bureau of Industry and Security, “Addition of Entities to the Entity List,” 84 Federal Register 22961, May 21, 2019, https://www.federalregister.gov/documents/2019/05/21/2019-10616/additionof-entities-to-the-entity-list. 109 U.S. Department of Commerce, Bureau of Industry and Security, “Temporary General License,” 84 Federal Register 23468, May 22, 2019, https://www.federalregister.gov/documents/2019/05/22/2019-10829/temporary-generallicense. 110 U.S. Department of Commerce, Bureau of Industry and Security, “Addition of Certain Entities to the Entity List and Revision of Entries on the Entity List,” 84 Federal Register 43493, August 19, 2019, https://www.federalregister.gov/ documents/2019/08/21/2019-17921/addition-of-certain-entities-to-the-entity-list-and-revision-of-entries-on-the-entitylist; U.S. Department of Commerce, Bureau of Industry and Security, “Temporary General License: Extension of Validity, Clarifications to Authorized Transactions, and Changes to Certification Statement Requirements, effective August 19, 2019,” 84 Federal Register 43487, August 21, 2019, https://www.federalregister.gov/documents/2019/08/ 21/2019-17920/temporary-general-license-extension-of-validity-clarifications-to-authorized-transactions-and. 111 Ministry of Commerce of the PRC, “MOFCOM Spokesman Meets the Press on China’s Introduction of ‘Unreliable Entities List’ Regime,” June 1, 2019, http://english.mofcom.gov.cn/article/newsrelease/press/201906/ 20190602873151.shtml. Congressional Research Service 24 U.S.-China Relations world.”112 Pompeo warned European allies, partners, and friends in June 2019, “don’t do anything that would endanger our shared security interests or restrict our ability to share sensitive information.”113 Of U.S. allies, only Australia has so far barred Huawei completely from its networks. China’s Foreign Ministry accuses the United States of seeking to “strangle [Chinese companies’] lawful and legitimate operations.”114 The Huawei issue has spilled into U.S.-Canada and Canada-China relations. In 2018, the United States requested that Canada detain top Huawei executive Meng Wanzhou, a daughter of Huawei’s founder, and charged her with financial fraud related to alleged violation of Iran sanctions. She faces possible extradition to the United States. China has retaliated against Canada by detaining and later arresting Canadians Michael Kovrig and Michael Spavor on state secrets charges and cutting off imports first of Canadian canola seed, and then of Canadian meat.115 China’s Status as a “Developing Country” in the WTO The 164-member WTO allows members to designate themselves as either developed or developing economies, with the latter eligible for special and differential treatment (SDT) both in the context of existing WTO obligations and in new negotiations. Developed countries, including the United States and the European Union, have expressed frustration at those rules, under which two-thirds of WTO members, including China, have designated themselves as “developing.” On July 26, 2019, President Trump issued a “Memorandum on Reforming Developing-Country Status in the World Trade Organization.”116 The President stated that the WTO dichotomy between developed and developing countries is outdated and “has allowed some WTO Members to gain unfair advantages in the international trade arena.” He specifically called out China, stating that “the United States has never accepted China’s claim to developing-country status, and virtually every current economic indicator belies China’s claim.” The President instructed USTR to work to reform the WTO self-declaration practice and, if no substantial progress is made within 90 days, to take certain unilateral actions, such as no longer treating a country as developing if the USTR believes that designation to be improper, and to publish a list of all economies USTR believes to be “inappropriately” claiming developing-economy status. Responding to the U.S. memorandum, a PRC Foreign Ministry spokesperson insisted that the principle of SDT “reflects the core values and basic principles of the WTO” and “must be safeguarded no matter how the WTO is reformed.” At the same time, she stated that in claiming the status, “China does not intend to shy away from its due international responsibilities.” The U.S. position, she said, shows the United States to be “capricious, arrogant and selfish.”117 112 The White House, “Remarks by Vice President Pence and Prime Minister Trudeau of Canada in Joint Press Statements | Ottawa, Canada,” May 30, 2019, https://www.whitehouse.gov/briefings-statements/remarks-vicepresident-pence-prime-minister-trudeau-canada-joint-press-statements-ottawa-canada/. 113 U.S. Department of State, “Secretary of State Michael R. Pompeo and Dutch Foreign Minister Stef Blok at a Press Availability,” June 3, 2019, https://www.state.gov/secretary-of-state-michael-r-pompeo-and-dutch-foreign-ministerstef-blok-at-a-press-availability/. 114 Ministry of Foreign Affairs of the PRC, “Foreign Ministry Spokesperson Geng Shuang’s Remarks on the U.S. Indictments of Huawei,” January 29, 2019. 115 Maham Abedi, “Canada-China Tension: Why They Began and What’s Happened Since,” Globe News (Canada), June 27, 2019, https://globalnews.ca/news/5433842/canada-china-detentions-trade-extradition/. 116 The White House, “Memorandum on Reforming Developing-Country Status in the World Trade Organization,” July 26, 2019, https://www.whitehouse.gov/presidential-actions/memorandum-reforming-developing-country-status-worldtrade-organization/. 117 Ministry of Foreign Affairs of the PRC, “Foreign Ministry Spokesperson Hua Chunying’s Regular Press Congressional Research Service 25 U.S.-China Relations China’s Belt and Road Initiative (BRI) In 2013, President Xi launched two projects aimed at boosting economic connectivity across continents by land, an effort known as the “Silk Road Economic Belt,” and by sea, an effort known as the, “21st Century Maritime Silk Road.” Collectively, China refers to the two projects as the “Belt and Road Initiative” (BRI). Under the initiative, PRC institutions are financing transportation and energy infrastructure projects in dozens of countries and PRC government agencies are working to reduce investment and trade barriers and boost people-to-people ties. BRI is also intended to alleviate overcapacity in the Chinese economy, bring new economic activity to China’s western provinces, and promote PRC diplomatic and security interests, including securing energy supply routes and perhaps facilitating future Chinese military or intelligence use of Chinese-built ports and other infrastructure around the world.118 The size and scale of PRC financing, investments, and loans issued under BRI is debated. China does not issue its own authoritative figures. PRC financing has the potential to address serious infrastructure shortfalls in recipient countries, but China’s initial implementation of BRI has sometimes been rocky. A June 2019 Asia Society Policy Institute report examines BRI projects in Southeast Asia and faults China for a “laissezfaire approach” that allows mainly Chinese developers “to benefit by cutting corners and evading responsibility for legal, social, labor, environmental, and other issues.” The report identifies such problems as rushed agreements, a failure to conduct feasibility studies and environmental and social impact assessments, and financing terms that create unsustainable debt for host governments. All those issues “have begun to alienate local communities and taint the BRI brand,” the report asserts.119 Some countries have sought to renegotiate the terms of their BRI agreements. The Trump Administration has adopted a sharply critical stance toward BRI. In his October 4, 2018, speech on China policy, Vice President Pence accused China of engaging in “so-called ‘debt diplomacy.’” The terms of PRC loans, he said, “are opaque at best, and the benefits flow overwhelmingly to Beijing.”120 In Congress, the Better Utilization of Investments Leading to Development (BUILD) Act of 2018 (P.L. 115-254) established a new U.S. International Development Finance Corporation (IDFC) by consolidating existing U.S. government development finance functions. It is widely portrayed as a U.S. response to BRI.121 At the Second Belt and Road Forum in Beijing in April 2019, Xi appeared to respond to criticism from the United States and other countries when he referenced the “need to ensure the commercial and fiscal sustainability of all projects so that they will achieve the intended goals as planned.” He declared that in pursuing BRI, “everything should be done in a transparent way, and we should have zero tolerance for corruption.” He also vowed to “adopt widely accepted Conference,” July 29, 2019, https://www.fmprc.gov.cn/mfa_eng/xwfw_665399/s2510_665401/2511_665403/ t1684227.shtml. 118 U.S. Department of Defense (DOD), “Assessment on U.S. Defense Implications of China’s Expanding Global Access,” report to Congress mandated by Section 1259b of the National Defense Authorization Act for FY2018 (P.L. 115-91), January 14, 2019, https://media.defense.gov/2019/Jan/14/2002079292/-1/-1/1/EXPANDING-GLOBALACCESS-REPORT-FINAL.PDF. 119 Daniel R. Russel and Blake Berger, “Navigating the Belt and Road Initiative,” Asia Society Policy Institute, June 2019, https://asiasociety.org/policy-institute/belt-and-road-initiative. 120 The White House, “Remarks by Vice President Pence on the Administration’s Policy Toward China,” October 4, 2018. 121 CRS Report R45461, BUILD Act: Frequently Asked Questions About the New U.S. International Development Finance Corporation, by Shayerah Ilias Akhtar and Marian L. Lawson. Congressional Research Service 26 U.S.-China Relations standards and encourage participating companies to follow general international rules and standards in project development, operation, procurement and tendering and bidding.”122 Security Issues PRC Military Modernization U.S. policymakers are concerned about the challenges that China’s ambitious military modernization program is now posing to U.S. interests in Asia and elsewhere. China’s military modernization program has emerged in recent years as a significant influence on U.S. defense strategy, plans, budgets, and programs, and the U.S.-China military competition has become a major factor in overall U.S.-China relations. Since 1978, the PRC has worked to transform the PLA from an infantry-heavy, low-technology, ground forces-centric military into a hightechnology, networked force with an increasing emphasis on joint operations, maritime and information domains, offensive air operations, power projection, and cyber and space operations. The PLA is becoming a global military, as demonstrated by a navy increasingly capable of operating far from home. The PLA undertakes counterpiracy patrols in the Gulf of Aden, regular patrols in places like the South China Sea and the Indian Ocean, and task group and goodwill deployments all over the world, and in 2017 established China’s first-ever overseas military base in Djibouti.123 President Xi has set two major deadlines for the PLA: to complete its modernization process by 2035, and to become a “world class” military by 2049, the centenary of the establishment of the PRC.124 According to China’s July 2019 defense white paper, China seeks to build “a fortified national defense and a strong military commensurate with the country’s international standing and its security and development interests” in service of several national defense aims.125 According to DOD, the PLA is seeking to develop “capabilities with the potential to degrade core U.S. operational and technological advantages.”126 As China’s military advances, it increasingly is in a position to challenge U.S. dominance in certain domains, including air, space, and cyberspace, where the PLA has directed significant political, organizational, and financial resources in recent years. China also is investing heavily in advanced military technologies such 122 “Xi’s Keynote Speech at the Opening Ceremony of the Second Belt and Road Forum for International Cooperation,” Xinhua, April 26, 2019, https://eng.yidaiyilu.gov.cn/home/rolling/88233.htm. 123 U.S. Department of Defense, Annual Report to Congress: Military and Security Developments Involving the People’s Republic of China 2018, May 16, 2018, pp. 66-67. 124 According to DOD, “[S]ome observers have interpreted [the “world-class” goal] as meaning developing capabilities on par with other global militaries, especially the United States.” U.S. Department of Defense, Annual Report to Congress: Military and Security Developments Involving the People’s Republic of China 2019, May 2, 2019, p. 14. 125 These aims are: “(1) to deter and resist aggression; (2) to safeguard national political security, the people’s security, and social stability; (3) to oppose and contain ‘Taiwan independence’; (4) to crack down on opponents of separatist movements such as ‘Tibet independence’ and the creation of ‘East Turkestan’; (5) to safeguard national sovereignty, unity, territorial integrity and security; (6) to safeguard China’s maritime rights and interests; (7) to safeguard China’s security interests in outer space, electromagnetic space and cyberspace; (8) to safeguard China’s overseas interests; and (9) to support the sustainable development of the country.” PRC State Council Information Office, China’s National Defense in the New Era, July 2019, http://english.scio.gov.cn/2019-07/24/content_75026800_3.htm. 126 U.S. Department of Defense, Annual Report to Congress: Military and Security Developments Involving the People’s Republic of China 2019, May 2, 2019, p. iii. Congressional Research Service 27 U.S.-China Relations as autonomous and unmanned systems, maneuverable reentry vehicles (including hypersonic missiles), and artificial intelligence and other enabling technologies.127 Chinese officials insist China’s military posture is defensive in nature. In January 2018, a spokesperson for China’s Ministry of National Defense stated, “China resolutely follows the path of peaceful development and upholds a defensive national defense policy.” The spokesperson added, “China is not interested in dominance.”128 North Korea The United States and China have both committed to the goal of denuclearization of North Korea, but have sometimes disagreed on the best path toward that goal. Between 2006 and 2017, China voted for U.N. Security Council Resolutions imposing ever stricter sanctions on North Korea over its nuclear weapons and missile programs, though it often sought to weaken the resolutions first. With China sharing a 880-mile border and serving as North Korea’s primary trading partner, the Trump Administration deems China’s sanctions implementation to be “at times inconsistent, but critical.”129 The Treasury Department has designated mainland China-based companies, Hong Kong-based shipping companies, and PRC nationals for alleged violations of U.S. North Korea sanctions.130 In both 2018 and 2019, the United States led efforts to request that a U.N. sanctions committee declare that North Korea had procured refined petroleum products at levels greater than U.N. sanctions permit, and to halt all new deliveries. Both times, China and Russia are reported to have blocked the effort. North Korea is alleged to have obtained the above-quota petroleum products through illegal ship-to-ship transfers at sea.131 The announcement of President Trump’s June 2018 summit with North Korean leader Kim Jongun led to a thaw in previously frosty China-North Korea ties. Since March 2018, Kim has visited China four times and President Xi has visited North Korea once, in June 2019. China urges all parties to undertake “phased and synchronized steps” in a “dual-track approach” to a political settlement of issues on the Korean Peninsula, with one track focused on denuclearization and the other on establishing a peace mechanism.132 127 Tate Nurkin, et al., China’s Advanced Weapons Systems, Jane’s by IHS Markit, May 12, 2018. 128 Li Jiayao, “Military Rebuts U.S. Report Calling China a Threat,” China Daily, January 22, 2018. 129 U.S. Department of State, Report to Congress on Strategy to Address the Threats Posed by, and the Capabilities of, the Democratic Republic of Korea, April 2019. 130 U.S. Department of the Treasury, Specially Designated Nationals and Blocked Persons List (SDN) Human Readable Lists, https://www.treasury.gov/resource-center/sanctions/SDN-List/Pages/default.aspx. 131 Edith M. Lederer, “Russia, China Block UN from Saying Nkorea Violated Sanctions,” Associated Press, June 19, 2019, https://www.apnews.com/cb6be1337d2a48ecbde14dac590be083. United States Mission to the United Nations, “Remarks to Press by Secretary Pompeo and Ambassador Haley at the UN,” July 20, 2018, https://usun.usmission.gov/ remarks-to-press-by-secretary-pompeo-and-ambassador-haley-at-the-un/. 132 Ministry of Foreign Affairs of the PRC, “Adhering to the ‘Dual-Track Approach’: The Realization of Denuclearization of the Korean Peninsula and the Establishment of Peaceful Mechanism on the Korean Peninsula,” April 5, 2018, https://www.fmprc.gov.cn/mfa_eng/zxxx_662805/t1548991.shtml; Ministry of Foreign Affairs of the PRC, “Wang Yi Talks About Promoting the Political Settlement Process of the Korean Peninsula Issue,” August 2, 2019, https://www.fmprc.gov.cn/mfa_eng/zxxx_662805/t1686491.shtml. Congressional Research Service 28 U.S.-China Relations East China Sea133 In the East China Sea, the PRC is involved in a territorial dispute with Japan over the sovereignty of uninhabited land features known in Japan as the Senkaku Islands and in the PRC as the Diaoyu Dao. The features are also claimed by Taiwan, which refers to them as the Diaoyutai.134 The United States does not take a position on the sovereignty dispute over the Senkakus, but it does recognize Japanese administration of the features. That recognition, reaffirmed by every U.S. Administration since Nixon, has given the United States a strong interest in the issue because Article 5 of the U.S.-Japan Treaty of Mutual Cooperation and Security covers areas under Japanese administration. The U.S. military regularly conducts freedom of navigation operations (FONOPs) and presence operations, as well as combined exercises with the Japan Self-Defense Force, in and above the East China Sea. Since 2012, China has stepped up what it calls “routine” patrols to assert jurisdiction in China’s “territorial waters off the Diaoyu Islands.”135 In November 2013, China established an air defense identification zone (ADIZ) in the East China Sea covering the Senkakus as well as airspace that overlaps with the existing ADIZs of Japan, South Korea, and Taiwan.136 South China Sea137 China makes extensive, though imprecise, claims in the South China Sea, which is believed to be rich in oil and gas deposits as well as fisheries, and through which a major portion of world’s trade passes. On maps, China depicts its claims with a “nine-dash line” that, if connected, would enclose an area covering approximately 90% of the sea. China physically controls the Paracel (known in China as the Xisha) Islands in the northern part of the sea, seven of the approximately 200 geographic features in the Spratly (Nansha) Islands chain in the southern part of the sea, and Scarborough Shoal (Huangyan Island) in the eastern part of the sea (see Figure 3).138 Areas claimed by the PRC are also claimed in part by Brunei, Malaysia, the Philippines, and Vietnam, and in entirety by Taiwan, with the fiercest territorial disputes being those between China and Vietnam and China and the Philippines. The South China Sea is bordered by a U.S. treaty ally, the Philippines, and is a key strategic waterway for the U.S. Navy. 133 See CRS Report R42784, U.S.-China Strategic Competition in South and East China Seas: Background and Issues for Congress, by Ronald O'Rourke. 134 China and Japan also dispute maritime rights in the East China Sea more broadly, with Japan arguing for a “median line” equidistant from each country’s claimed territorial border dividing the two countries’ exclusive economic zones in the East China Sea; China rejects Japan’s claimed median line, arguing it has maritime rights beyond this line. Japan Ministry of Foreign Affairs, “Japan’s Legal Position on the Development of Natural in the East China Sea,” August 6, 2015, https://www.mofa.go.jp/a_o/c_m1/page3e_000358.html. 135 “China Coast Guard Vessels Patrol Diaoyu Islands, [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/crs%3AR45898. Public record. Not legal advice.