
This Report responds to the mandate for the Commission “to monitor, investigate, and report to Congress on the national secu- rity implications of the bilateral trade and economic relationship between the United States and the People’s Republic of China.” The Commission reached a broad and bipartisan consensus on the con- tents of this Report, with all 12 members voting to approve and submit it to Congress. In accordance with our mandate, this Report, which is current as of October 6, includes detailed treatment of our investigations of the areas identified by Congress for our examination and recommendation
Transmittal Letter to the Congress .................................................................. iii
Commissioners Approving the Report ................................................................. vi
Executive Summary ................................................................................................. 1
Key Recommendations ..................................................................................... 29
Introduction ............................................................................................................. 31
2017 Report To Congress of the U.S.-China Economic and Security Review Commission
Chapter 1: U.S.-China Economic and Trade Relations ............................. 35
Section 1: Year in Review: Economics and Trade .............................................. 35
Key Findings ...................................................................................................... 35
Introduction ........................................................................................................ 36
U.S.-China Bilateral Trade ............................................................................... 37
China’s Domestic Economic Rebalancing ....................................................... 42
U.S.-China Bilateral Economic Engagement .................................................. 53
United States and China at the WTO ........................................................... 58
Section 2: Chinese Investment in the United States ........................................ 71
Key Findings ...................................................................................................... 71
Recommendations .............................................................................................. 72
Introduction ........................................................................................................ 73
Chinese Investment in the United States ..................................................... 73
Chinese Companies on U.S. Stock Exchanges ............................................... 91
Implications for the United States ................................................................. 101
Section 3: U.S. Access to China’s Consumer Market ......................................... 112
Key Findings ...................................................................................................... 112
Recommendations .............................................................................................. 113
Introduction ........................................................................................................ 113
E-Commerce ....................................................................................................... 114
Logistics .............................................................................................................. 124
Financial Services ............................................................................................. 128
Implications for the United States ................................................................. 140
Chapter 2: U.S.-China Security Relations ..................................................... 153
Section 1: Year in Review: Security and Foreign Affairs .................................. 153
Key Findings ...................................................................................................... 153
Introduction ........................................................................................................ 154
Major Developments in China’s Security and Foreign Affairs in 2017 ...... 154
China’s Global Security Activities in 2017 .................................................... 170
U.S.-China Security Relations in 2017 ........................................................... 179
Section 2: China’s Military Modernization in 2017 ........................................... 199
Key Findings ...................................................................................................... 199
Recommendations .............................................................................................. 199
Introduction ........................................................................................................ 200
China’s 2017 Defense and Security Budget ................................................... 200
Overview of Guidance for Military Modernization ........................................ 201
PLA Army .......................................................................................................... 202
PLA Navy ........................................................................................................... 203
PLA Air Force .................................................................................................... 207
PLA Rocket Force .............................................................................................. 211
PLA Strategic Support Force ........................................................................... 212
Implications for the United States ................................................................. 214
Section 3: Hotspots along China’s Maritime Periphery ..................................... 232
Key Findings ...................................................................................................... 232
Recommendations .............................................................................................. 233
Introduction ........................................................................................................ 234
Security Environment ....................................................................................... 235
Chinese Strategists’ Thinking about Hotspots .............................................. 239
Contingency Planning ....................................................................................... 245
Contingency Operations along China’s Maritime Periphery ........................ 250
Regional Responses and Implications for the United States ....................... 256
Chapter 3: China and the World ...................................................................... 281
Section 1: China and Continental Southeast Asia ............................................. 281
Key Findings ...................................................................................................... 281
Recommendations .............................................................................................. 283
Introduction ........................................................................................................ 283
Chinese Economic Engagement with Continental Southeast Asia ............. 284
China’s Relations with Burma ......................................................................... 294
China’s Relations with Cambodia ................................................................... 305
China’s Relations with Laos ............................................................................ 307
China’s Relations with Thailand ..................................................................... 309
Implications for the United States ................................................................. 314
Section 2: China and Northeast Asia .................................................................. 326
Key Findings ...................................................................................................... 326
Recommendations .............................................................................................. 327
Introduction ........................................................................................................ 327
China-North Korea Relations .......................................................................... 328
China-South Korea Relations .......................................................................... 342
China-Japan Relations ...................................................................................... 349
South Korea-Japan Relations and Trilateral Security Cooperation ............ 355
Implications for the United States ................................................................. 357
Section 3: China and Taiwan ................................................................................ 371
Key Findings ...................................................................................................... 371
Recommendations .............................................................................................. 372
Introduction ........................................................................................................ 372
Cross-Strait Relations ....................................................................................... 373
Taiwan’s Economy and Cross-Strait Trade and Investment ........................ 382
Taiwan’s International Engagement ............................................................... 386
Taiwan Military and Security Issues .............................................................. 389
U.S.-Taiwan Relations ....................................................................................... 397
Implications for the United States ................................................................. 401
Section 4: China and Hong Kong ........................................................................ 414
Key Findings ...................................................................................................... 414
Recommendations .............................................................................................. 415
Introduction ........................................................................................................ 415
Hong Kong’s Political Developments ............................................................... 416
Beijing’s Degradation of Rule of Law in Hong Kong ................................... 425
Declining Freedom of Expression in Hong Kong .......................................... 427
Economic Relations with Mainland China ..................................................... 435
Implications for the United States ................................................................. 439
Section 5: China’s Domestic Information Controls, Global Media Influence, and Cyber Diplomacy ........................................................................................ 452
Key Findings ...................................................................................................... 452
Recommendations .............................................................................................. 452
Introduction ........................................................................................................ 453
China’s Domestic Information Controls .......................................................... 454
China’s Global Media Influence ....................................................................... 467
Beijing’s Concept of “Internet Sovereignty” ................................................... 482
Implications for the United States ................................................................. 484
IX Page Chapter 4: China’s High-Tech Development ................................................. 507
Section 1: China’s Pursuit of Dominance in Computing, Robotics, and Biotechnology ............................................................................................. 507
Key Findings ...................................................................................................... 507
Recommendations .............................................................................................. 508
Introduction ........................................................................................................ 508
China’s Industrial Policies ................................................................................ 509
Computing .......................................................................................................... 515
Industrial Robotics ............................................................................................ 523
Artificial Intelligence ......................................................................................... 525
Nanotechnology .................................................................................................. 527
Biotechnology ..................................................................................................... 528
Implications for the United States ................................................................. 531
Section 2: China’s Pursuit of Advanced Weapons .............................................. 553
Key Findings ...................................................................................................... 553
Introduction ........................................................................................................ 554
Drivers of China’s Advanced Weapons Programs .......................................... 554
China’s Advanced Weapons Programs ............................................................ 557
Inputs to China’s Advanced Weapons Programs ........................................... 577
Implications for the United States ................................................................. 580
Comprehensive List of the Commission’s Recommendations .................. 597
Additional Views of Commissioners ................................................................ 602
Appendices: Appendix I: Charter ........................................................................................... 605
Appendix II: Background of Commissioners .................................................... 613
Appendix III: Public Hearings of the Commission During 2017 .................... 625
Appendix IIIA: List of Witnesses Testifying Before the Commission During 2017 .......................................................................................................... 629
Appendix IV: List of Research Material ............................................................ 633
Appendix V: Conflict of Interest and Lobbying Disclosure Reporting .......... 637
Appendix VI: Acronyms and Abbreviations ....................................................... 639
2017 Commission Staff and Acknowledgements .......................................... 643
China watchers, China investors, foreign affairs policy officals, State Department officials, U.S. Military leadership, Congressional leadership, international relations observers and experts, Unites Nations officials, Asia and Pacific Rim officials and consultants.
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