On November 17, 2021, the U.S.-China Economic and Security Review Commission held a virtual public release of its 2021 Annual Report to Congress in Washington, DC. This report provides “a review of economics, trade, security, political, and foreign affairs developments in 2021” with a focus on the “CCP’s economic and technological ambitions, the Chinese government’s evolving control of the corporate sector, U.S.-China financial connectivity and risks to U.S. national security, China’s nuclear forces, Chinese military capabilities and decision-making for a war over Taiwan…”
After China was granted Most Favored Nation status by President Bill Clinton and allowed to become a member of the World Trade Organization, “the U.S.-China Economic and Security Review Commission (USCC) was created on October 30, 2000 by Public Law 106-398 (the Floyd D. Spence National Defense Authorization Act for 2001) as amended. The purpose of the USCC is to monitor, investigate, and report to Congress on the national security implications of the bilateral trade and economic relationship between the United States and the People’s Republic of China.”
Every year since 2001, the Commission has issued an annual report of its evaluation and findings as required by the law. The introduction of this year’s report notes that 2021 marked the 100-year anniversary of the founding of the Chinese Communist party, during which the CCP has “not only celebrated its successes in overseeing China’s transformation into a formidable power on the world stage but also presented its political and economic model to the world as superior to democracy and capitalism.”
The report states, “China’s strengths and the threats it presents to U.S. interests are considerable…The CCP was and is aggressively advancing its economic interests to control global resources and markets and influence decision-makers… At stake in this clash of identities and sovereignty is the safety and security of the United States and its partners, friends, and allies. The CCP is a long-term, consequential, menacing adversary determined to end the economic and political freedoms that have served as the foundation for security and prosperity for billions of people.”
The Commission found that “Despite continued tense rhetoric between Washington and Beijing during 2021, bilateral trade is returning to pre-tariff levels and U.S. capital flows to China are on the rise. As commercial and financial flows weave the economies closer together, the Biden Administration is consolidating a complex mix of the Trump Administration’s policy initiatives with its own to defend against China’s unfair economic policies and threats to U.S. national security…Many U.S. multinational corporations meanwhile, continue to view China as a priority market despite rising concerns about China’s protectionist business environment.”
China’s leaders know they are in direct competition with the U.S. for global economic leadership, and “China’s economic policy blueprint issued in March 2021, emphasizes innovation and development not only for economic growth but more importantly for technological self-sufficiency, national security, and international influence.”
Since the Executive Summary of the key findings and recommendations of the report are too lengthy to consider in depth, but I will summarize a just few of the most important as follows:
The Commission found that China faces “growing debt, income inequality, demographic decline, and technological dependence on the United States” and “the international environment as becoming increasingly hostile to the Party’s aims.”
China’s influence in Latin America and the Caribbean is expanding through trade for commodities and raw materials that China needs, as well as investment and financing through its Road and Belt Initiative. China has cultivated political relationships at all levels of government (local, state/province, and national.) The Commission warns that “China’s expanding control over entire supply chains in the region may also harm U.S. competitiveness and threaten U.S. access to critical inputs for emerging technologies.”
China’s government is “formalizing a legal and regulatory framework to counter foreign trade restrictions and sanctions, aimed especially at U.S. export controls on Chinese companies and financial sanctions on Chinese individuals.”
The CCP believes state control rather than economic liberalization is essential to achieving economic growth while maintaining political stability and is expanding government control of nonstate-owned companies by developing “numerous avenues through which to monitor corporate affairs and direct nonstate firms and resources toward advancing CCP priorities.”
- China is focused on augmenting emerging technologies, such as synthetic biology and new mobility. Synthetic biology includes chemicals, medicines, fuel, food, materials, agriculture, and human engineering. New Mobility “captures everything from ride-hailing services to autonomous vehicles [and] is a strategic imperative for the CCP as it seeks both to lower China’s carbon emissions and to improve domestic transportation.”
- China expansion of access to its financial markets for foreign investors “poses distinct economic risks to U.S. investors and national security risks to the United States” as China “further fuses military and civilian corporate operations” and tightens “control over China’s corporate sector.”
- The “CCP expanded efforts to control all aspects of Chinese society and culture it viewed as threatening” and “continued its repression of ethnic minorities in the frontier regions of Xinjiang, Tibet, and Inner Mongolia.”
- China “stepped up its use of military coercion in the East and South China Seas, the Taiwan Strait, and along the Indian border” through “forced sterilizations, coerced abortions, and other human rights abuses against Uyghurs and other ethnic and religious minorities…”
- China “grew more confrontational toward democratic countries” [and] “expanded its partnerships with Russia and Iran and attempted to cast itself as a leader of developing countries across Africa, the Middle East, and Central Asia.”
- “China is engaged in an unprecedented buildup of its nuclear forces…constructing hundreds of new silos for its intercontinental ballistic missiles…growing its stockpile of warheads, developing a nuclear triad, and improving the accuracy of its delivery systems…The scale of China’s nuclear buildup, however, suggests it could also be intended to support a new strategy of limited nuclear first use.”
- ”China’s increasingly coercive approach to Taiwan puts almost daily pressure on the cross-Strait status quo and increases the potential for a military crisis…if Chinese leaders believe the United States is not militarily capable of or politically willing to intervene…,” the risk of a Chinese invasion of Taiwan increases.
Lastly, “the CCP-controlled Hong Kong government’s implementation of the National Security Law upended the city’s social and political environment…Strict implementation of the National Security Law is stripping Hong Kong of long-held advantages that made it a global financial center. This means that
“The 1,283 U.S. companies and estimated 85,000 U.S. citizens residing in Hong Kong, as well as any who transit the territory, must now contend with the possibility of arrest…Changes diminishing corporate transparency and weakening rule of law endanger U.S. businesses in Hong Kong. “
The Commission made 32 recommendations to Congress, but emphasized 10 recommendations in the Executive Summary. Even these 10 recommendations are too lengthy to be quoted completely. As briefly summarized, the Commission recommends:
- “Congress consider comprehensive legislation to address risks to U.S. investors and U.S. interests from investments in Chinese equity, debt, and derivative instruments…”
- “Congress take urgent measures to strengthen the credibility of U.S. military deterrence in the near term and to maintain the ability of the United States to uphold its obligations established in the Taiwan Relations Act…”
- “Congress ensure the effective implementation of the Export Control Reform Act of 2018 and the Foreign Investment Risk Review Modernization Act of 2018 by enacting legislation that…”
- “Congress consider legislation to create the authority to screen the offshoring of critical supply chains and production capabilities to the People’s Republic of China (PRC) to protect U.S. national and economic security interests…”
- “Congress enact legislation expanding the jurisdiction of existing U.S. investment restrictions targeting Chinese entities placed on the Non-Specially Designated Nationals (SDN) Chinese Military- Industrial Complex (NS-CMIC) Companies List…”
- “Congress prevent the erosion of U.S. strategic nuclear superiority and respond to China’s qualitative and quantitative theater nuclear advantages by directing the Administration to continue implementation of the Obama-Trump Program of Record for nuclear modernization.”
- “Congress direct the SEC to require that publicly traded U.S. companies with facilities in China report on an annual basis whether there is a CCP committee in their operations and summarize the actions and corporate decisions in which such committees may have participated.”
- “Congress consider comprehensive legislation to ensure Chinese entities sanctioned under one U.S. authority be automatically sanctioned under other authorities unless a waiver is granted by the president or the authority applying the initial sanction.”
- “Congress mandate from Treasury an annual update of the accurate U.S. portfolio investment position in China since 2008, including money routed through offshore centers, such as the Cayman Islands.”
- “Congress direct U.S. Customs and Border Protection to initiate action to impose a region-wide Withhold Release Order on products originating from Xinjiang, China.”
The problem is that for the past 20 years Congress hasn’t paid much attention to this annual report and has rarely acted on any of the recommendations. Thus, I have no confidence that the current Congress will act on any of the recommendations of this report. Very few Americans realize the dangers China poses to our freedom of our way of life and our national security. The notion of many Western experts that China would become a more liberal, democratic China as it became more prosperous has proved false. We the people need to urge our elected Congressional representatives and senators to take this report seriously and act on these recommendations. Our individual freedom and national security are at stake.
