[Senate Hearing 116-215]
[From the U.S. Government Publishing Office]
S. Hrg. 116-215
A NEW APPROACH FOR AN ERA
OF U.S. CHINA COMPETITION
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON FOREIGN RELATIONS
UNITED STATES SENATE
ONE HUNDRED SIXTEENTH CONGRESS
FIRST SESSION
__________
MARCH 13, 2019
__________
Printed for the use of the Committee on Foreign Relations
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web:
http://www.govinfo.gov
U.S. GOVERNMENT PUBLISHING OFFICE
40-644 PDF WASHINGTON : 2020
COMMITTEE ON FOREIGN RELATIONS
JAMES E. RISCH, Idaho, Chairman
MARCO RUBIO, Florida ROBERT MENENDEZ, New Jersey
RON JOHNSON, Wisconsin BENJAMIN L. CARDIN, Maryland
CORY GARDNER, Colorado JEANNE SHAHEEN, New Hampshire
MITT ROMNEY, Utah CHRISTOPHER A. COONS, Delaware
LINDSEY GRAHAM, South Carolina TOM UDALL, New Mexico
JOHNNY ISAKSON, Georgia CHRISTOPHER MURPHY, Connecticut
JOHN BARRASSO, Wyoming TIM KAINE, Virginia
ROB PORTMAN, Ohio EDWARD J. MARKEY, Massachusetts
RAND PAUL, Kentucky JEFF MERKLEY, Oregon
TODD, YOUNG, Indiana CORY A. BOOKER, New Jersey
TED CRUZ, Texas
Christopher M. Socha, Staff Director
Jessica Lewis, Democratic Staff Director
John Dutton, Chief Clerk
(ii)
C O N T E N T S
----------
Page
Risch, Hon. James E., U.S. Senator From Idaho.................... 1
Menendez, Hon. Robert, U.S. Senator From New Jersey.............. 3
Talent, Hon. James M., Commissioner, U.S.-China Economic and
Security Review Commission, Washington, DC..................... 5
Prepared statement........................................... 8
Mastro, Dr. Oriana, Assistant Professor of Security Studies,
Edmund A. Walsh School of Foreign Service, Georgetown
University, Washington, DC..................................... 16
Prepared statement........................................... 19
Additional Material Submitted for the Record
China's Technonationalism Toolbox: A Primer...................... 12
The Build-Up of China's Military Forces in Asia.................. 30
U.S. Senate PSI Staff Report on China's Impact on the U.S.
Education System............................................... 42
Response of Hon. James Talent to Question Submitted by Senator
Johnny Isakson................................................. 55
(iii)
A NEW APPROACH FOR AN ERA
OF U.S.-CHINA COMPETITION
----------
WEDNESDAY, MARCH 13, 2019
U.S. Senate,
Committee on Foreign Relations,
Washington, DC.
The committee met, pursuant to notice, at 10:19 a.m. in
room SD-419, Dirksen Senate Office Building, Hon. James E.
Risch, chairman of the committee, presiding.
Present: Senators Risch [presiding], Rubio, Johnson,
Gardner, Romney, Isakson, Portman, Young, Cruz, Menendez,
Cardin, Shaheen, Coons, Murphy, Kaine, Markey, and Merkley.
OPENING STATEMENT OF HON. JAMES E. RISCH,
U.S. SENATOR FROM IDAHO
The Chairman. I thank everyone for joining us here today.
Today what we are going to do is, as the Foreign Relations
Committee of the United States Senate of the 116th Congress, we
are going to continue our review from a 30,000 or 50,000 foot
level of observations about what the world looks like today and
where we are headed as we journey into the 21st century
further. We are, of course, approaching the end of the first
quarter of the 21st century, and there are some things that
have become evident. And that is what we are going to continue
to focus on in these hearings.
And today, of course, we are going to talk about China and
where we have been and where we are headed as far as our
relationship with China is concerned.
After 20 years of helping China prosper economically and
hoping they would emerge as a responsible partner on the world
stage, it is time for U.S. policymakers to acknowledge this
path was not the right path. But, of course, we have the
advantage of hindsight now which we did not have when we
started on this journey.
Today, China steals our intellectual property and uses it
to put our people out of work. It intimidates its neighbors,
including close U.S. allies, while increasing its military
capabilities in the South and East China Seas. China exports
corruption and its authoritarian model across the globe. It
uses cheap financing as a debt trap and has built a police
state that the Chinese Communist Party uses to limit free
expression that contradicts the party line.
These are not the actions of a responsible stakeholder.
Rather, it proves that the assumption that as China continued
to rise, it would begin to mature into a responsible
international actor was and is wrong.
It is clear the Chinese Communist Party does not share the
same values that the United States and our partners have. To
them, life, liberty, and the pursuit of happiness are not
aspirations to deliver to their people but values the Communist
Party should fear and control.
As we enter a new era of relations with China, we must be
clear-eyed and honest about the challenges ahead. China is
seeking to be a preeminent power in Asia, but its ambitions are
broader. It is building naval bases in Africa, stealing the
intellectual property of Western companies, subsidizing its
companies overseas to gain economic and political leverage, and
threatening military conflict with its neighbors.
Given Chinese behavior over the past several years,
economic, political, and military, some now believe conflict is
inevitable. I do not think it is, at least not yet. But the
relationship must be rebalanced in order to avoid future
conflict and provide a sustainable way forward for both
countries.
The Trump administration has forced a new conversation on
what the relationship will look like moving forward. Its trade
policies show Beijing that business as usual is over. We will
not stand for our ideas and technologies being stolen, and we
will not stand for our people losing their jobs to unfair
competition.
The best example of this type of behavior comes from my
home State of Idaho. Micron Technology, the second largest
producer of semiconductors in the world, has had their
intellectual property stolen by a Chinese company, patented in
China, and then used to sue Micron in Chinese courts directed
by the Chinese Government. To its credit, the Trump
administration imposed sanctions for this action and brought
criminal charges against those responsible.
But economics is not the whole ball game. Chinese foreign
policy is increasingly aggressive, and Chinese military
activity in the region is on the rise. They have created and
armed artificial outposts in the South China Sea, illegally
claimed annexation of nearly the entire sea, and claimed
territorial waters from sovereign countries like the
Philippines, Vietnam, and Taiwan.
As a side note, it is important to note that China and its
victims in its maritime misadventures are all members of the
Law of the Sea Treaty, which has been useless against China in
this conflict.
If China is allowed to control the western Pacific, it
would present a major challenge to the free movement of goods
across the globe, potentially allowing Beijing to hold the
international trade system hostage.
The territorial issues in the South and East China Seas
need to be resolved according to internationally recognized
norms, and we need to support all countries that wish to use
and abide by this process.
Let us be clear. China has no allies, only transactional
partners and states too weak to push back. The strength of the
United States is found in our alliances and partnerships. These
partnerships are critical to protecting international laws and
norms and push back on Chinese coercion and economic leverage
around the world.
Domestically if a Chinese citizen wants to prosper, the
Communist Party requires them to surrender to surveillance
state and party line. To those who refuse, they are subject to
immense suppression tactics, such as imprisonment and forced
disappearances of political prisoners.
To whole groups the Communist Party opposes, such as the
Uighurs and other ethnic minorities, the solution is even more
simple: send them to reeducation camps. It is hard for China to
be a responsible world actor if it violates the most basic
human rights of its own people. Unfortunately, the Communist
Party also does not realize that diversity actually encourages
innovation and prosperity. U.S. policy must defend those who
struggle for freedom.
But it is not all lost yet. I believe there is still time
to rebalance our relations and address the foundational
problems impacting our relationship like the rule of law and
trade that is free and fair. The Trump administration has
already engaged in this process, but much, much more needs to
be done.
My hope is that China will take the opportunities at hand
and itself change its own policies and commit to working with
the rest of the world in order that all benefit and prosper
under the rule of law, human rights, restrained military
activity, and economic action that is free, fair, and absent
corruption.
With that, I will yield to the ranking member, Senator
Menendez.
STATEMENT OF HON. ROBERT MENENDEZ,
U.S. SENATOR FROM NEW JERSEY
Senator Menendez. Thank you, Mr. Chairman.
Let me thank Senator Talent and Dr. Mastro for joining us
today and helping us understand one of the biggest foreign
policy challenges on our nation's agenda: dealing with the
strategic challenge of a rising and perhaps risen China.
When we consider the strategic challenge of China, the
characterization does speak to a deeper truth. China is playing
four dimensional chess across every element of national
security: militarily, economically, diplomatically, and
culturally.
In the maritime domain, and in the South China Sea in
particular, China's aggressive island-building campaign and its
rejection of international law threaten not just regional
stability but longstanding U.S. interests in the free flow of
commerce, freedom of navigation, and diplomatically resolving
disputes consistent with international law.
Economically, I sincerely hope that the current U.S.-China
trade negotiations will result in real structural reform. Over
the past decade, we have seen a determined China bend the rules
to its own benefit on trade and economic matters as it has made
its way to be the world's second largest economy. But
structural challenges remain: in China's often cyber-enabled
theft of intellectual property rights; in its unfair advantages
by manipulating market access; and in its underwriting of
state-owned enterprises. And the entwined relationships between
companies like Huawei and the Chinese national security
apparatus raise serious questions.
Diplomatically, China has fashioned a brand of
international diplomacy often rooted in manipulative
investment. More subtly, China's Belt and Road Initiative has
seen its influence work its way across the world in port
contracts and United Nations voting patterns. Overtly, China
continues cooperation with North Korea where, after some
initial toughening in 2017 and 2018, we once again see a
lessening of pressure out of concern for regime stability.
China has developed complex influence campaigns by
traditional and non-traditional means. China may not manipulate
social media the way we saw with Russian tradecraft in 2016,
but its tentacles of influence are far-reaching. The launch of
the Confucius Institutes on many U.S. campuses, a desire to set
up party cells in U.S. businesses, and espionage targeted at
universities pursuing high tech research all speak to the
pervasive extent of China's united front efforts.
And while we consider Chinese foreign policy endeavors, let
us also point out that domestically Xi Jinping has overseen the
emergence of a neo-Maoist authoritarian model and a total
surveillance state. The government is pursuing a brutal
crackdown on the Uighurs in Xinjiang, including the internment
of an estimated 1 million people in camps subjected to, quote,
``reeducation campaigns, forced labor, and total
surveillance.''
All of these dynamics make constructing an effective China
policy uniquely challenging for U.S. policymakers.
Now, I know it may surprise some of my colleagues, but I
agree with President Trump when it comes to recognizing the
scope of the challenge that China presents to the United States
and to the entire international order. But I do not think the
President has found the right approach.
As others have noted, merely being more confrontational
with China does not make us more competitive with China.
So we have to ask, are there still opportunities for
cooperation? What are the risks of the competition becoming
conflict? 30 years ago, we debated whether or not China would
rise to be a major power. 10 years ago, we wondered what sort
of power China would be. Today, the book is not by any means
closed. On the contrary, new pages and chapters are beginning
to emerge. And I have to tell you, Mr. Chairman, the reading so
far is not promising.
We must be holistically strategic, leveraging all of our
diplomatic tools. Slashing America's foreign affairs budget, as
the Trump administration has yet again proposed, weakens our
ability to effectively confront China's economic and diplomatic
reach around the globe.
As we contemplate a more competitive environment with
China, we also need to pay attention to building, not
destroying, our alliances and partnerships.
I have repeatedly argued that core American values must be
the centerpiece of our foreign policy. China's model is
appealing, unfortunately, in all too many parts of the world.
We must offer a better model.
In celebrating the 40th anniversary of the Taiwan Relations
Act and a strong partnership with Taiwan, we also celebrate the
values of a flourishing democracy.
So I look forward to hearing from our witnesses today on
how to better understand the strategic and economic realities
unfolding with the rise of China and how to best structure U.S.
policy to safeguard our national interests and our values.
The Chairman. Thank you, Senator Menendez.
And with that, we will turn to our first witness, Senator
Jim Talent, who is currently a commissioner on the U.S.-China
Economic and Security Review Commission, a body that was
established in part to review the national security
implications of trade and economic ties between the United
States and the People's Republic of China.
Additionally, Senator Talent is a senior fellow at the
Bipartisan Policy Center, as well as the Director of the
National Security 2020 Project and visiting senior fellow at
the American Enterprise Institute.
Previously, Senator Talent served the people of Missouri
here in Washington, DC for 14 years, first as a Member of the
House of Representatives and then here in the United States
Senate.
With that, Senator Talent, welcome. Thank you for joining
us today. We look forward to hearing from you.
STATEMENT OF HON. JAMES M. TALENT, COMMISSIONER, U.S.-CHINA
ECONOMIC AND SECURITY REVIEW COMMISSION, WASHINGTON, DC
Senator Talent. Thank you, Mr. Chairman, and thanks to
Senator Menendez and the committee for inviting me. I am pretty
certain you asked me here basically because I am on the China
Commission and have served there for 6 years.
I will say a word about the commission. It was established
in 2000 upon China's accession to the WTO. Its function is to
review every year annually the economic and security
relationship between the United States and China. We hold
hearings. We produce papers. We produce an annual report that
is like 550 pages long. It is very thoroughly documented. It
has become a kind of standard reference I think in the field,
and I am proud of the staff and the commission, particularly
the longstanding members. It is very professional, and I
recommend it to you as a resource.
My views here are my own. My main message from the
commission is that we are statutorily and functionally a
creature and servant of the Congress of the United States. So
anything we can help you with, any requests, I would encourage
you or your staff to make it if we can help you in any way.
My statement goes through the background that both the
chairman and the ranking member covered. I will cover it very
briefly. It is hard to be brief. I did serve in this body and
some habits are hard to break, but I will do it.
I think it is fair to say that for really 40 years after
Richard Nixon visited China in 1972, our government pursued a
policy of encouraging and assisting China in developing
economically and participating in international affairs. And I
think we have to be fair. There were reasons for believing that
China's trajectory would be hopeful. They were introducing a
number of the features of economic liberalization in their
economy. There were and are voices in China, even after
Tiananmen Square, arguing for political liberalization, and
that was a period of time when many authoritarian regimes were
becoming democracies. And so there was a reason for the
prevailing view during the period, and many of you served in
that period. I did.
The logic was if the Chinese Communist Party wanted China
to become wealthy--and it did--it would have to continue
liberalizing its economy. There was a good chance that that
would lead to political liberalization, and even if it did not,
the discipline of participating in the world economic system
would end up at least making China a responsible player in
regional and world affairs. So, in other words, the prevailing
view was that full participation in the world economic system
would change China in the right direction.
But I also think it is fair to say that what actually
happened is that China, under the Chinese Communist Party, is
changing the world trading system and is threatening the
broader international order, as well as the interests and the
security of the United States and its allies in the region.
So my statement goes through two of the categories of
methods that they have developed pretty systematically to do
that. And I will refer to an attachment that I put in my
statement I know Senators have. And by the way, Mr. Chairman, I
understand I need to ask that the attachments be included in
the record.
The Chairman. It will be. Thank you.
Senator Talent. China's techno-nationalism toolbox, which
is a really good short resource for you and your staff about
the tools that the CCP, the Chinese Communist Party, has
developed to maximize the benefits it receives under the world
trading system while pretty systematically avoiding its
obligations.
So those include massive subsidies to firms particularly in
the sectors that are part of the Made in China 2025 project
that lowers the cost of capital, enables them to compete not
just effectively at home but capture markets abroad against
competitors; forced technology transfer requiring joint
ventures with Chinese firms as a condition of doing business
and then getting the technology; foreign investment
restrictions designed to grow domestic champions;
discriminatory regulatory enforcement against Chinese firms.
We heard testimony a couple years ago that over a 3-year
period, the Chinese antitrust regulatory body filed like 24
antitrust actions, all of them against foreign firms. There
were like no Chinese firms that had any antitrust problems.
China's specific tech standards that discourage foreign
firms from entering. And then as the chair and the ranking
member mentioned, outright theft of technology. It amounts to
probably several hundred billion dollars a year.
Now, again, to be fair, there are many countries that
maneuver on the margin of the world trading system to get
advantages for themselves. But I do think this is the first
time we have seen an economy of this size so systematically
attempt to evade the obligations of the system. And I think it
amounts to a subversion or an attempted subversion of the
system, and the WTO procedures, which do not anticipate that,
are inadequate to deal with it.
China has used this growing wealth, among other things, for
a massive buildup of its armed forces. I am bumping up against
the 5-minute limit. So I will refer to my statement on that.
That has empowered them, as the chair and the ranking member
mentioned, in a series of provocative and aggressive actions in
their near seas. The committee is as familiar with that as I
am.
Now, what I do want to say is that fortunately the Obama
administration in 2011 reacted I think pretty quickly and
decisively to the provocations with its pivot or rebalance
policy. In form, that was a redirection of American foreign
policy towards Asia. In fact, it was a signal that the era of
wishful thinking about Chinese intentions was over, and the
administration followed it up by shifting additional forces to
the region, to the extent we had them to shift--you cannot
shift ships that you do not have--firming up our alliances,
highlighting, for example, Chinese cyber espionage.
And the Trump administration, I agree, has extended and
deepened the strategic shift embodied in the rebalance. The
National Security Strategy names great power competition as the
primary goal of American foreign policy, or an object of it,
and names China appropriately as the greatest challenge. And
the administration has also canvassed and reinvigorated the
economic tools that it is using to leverage against the Chinese
illicit actions.
I do want to say I am very proud of the role Congress has
played in the last 3 years as a former Senator and former
Member, lifting the defense sequester, strengthening CFIUS,
passing the BUILD Act, which was a miracle that you guys
accomplished. I think it is a tremendous foundation going
forward. And then ARIA, the Asia Reassurance Initiative Act,
which I think foreshadows many more good things to come. So you
do not get many compliments, but I want to give you one.
So I will just close with three things.
First, I think the right way to think of where we are now
is in a time of transition that is similar to the 1945-1955
time frame, not in the sense that we are entering a Cold War. I
do not think we are, and I do not think we want to think of it
that way. But it was during that period of time that, on a
bipartisan basis, the Congress and the executive through two
administrations built the architecture of tools, doctrine, and
institutions that successive administrations used in the Cold
War for the 40 years thereafter. And I see what is happening
now as the same thing albeit applied to a different kind of
challenge.
Second, there are reasons--and my statement goes through
them--why the Chinese Communist Party is doing what it is
doing. Those are powerful reasons rooted deeply in their
thinking. They are not going to voluntarily and fundamentally
change policy. We can expect this to continue in more or less
this form unless and until costs and consequences are imposed
which channel them in a different direction.
Third, it is important to keep in mind our competition is
not with the Chinese people. The problem here is not the pride
of the Chinese people in their history or their culture or
their aspirations for the future. The problem is the way in
which the Chinese Communist Party is defining its ambitions for
China and the methods it is using to achieve those ambitions.
And finally, I would remind you all--there is a formula
that I find helpful to think of that influences the product of
intention and capability. Intention is relatively easy to
change. You all have changed intention, going back to the
rebalance and pivot. And I do not think the intention is
changing back when I listened to the statements of the chairman
and the ranking member. Capability is not easy to change. And
the truth of the matter is that we allowed too many of the
tools of influence to atrophy over the years and failed to
build up others that were appropriate to this challenge.
So what you are doing now really is thoughtfully but
vigorously and quickly considering the tools that we are going
to need going forward and putting them into place. And I would
encourage you to think of your work in that way. I know the
committee is going to be at the epicenter of it, and I am very
encouraged by what you have done.
And again, the commission stands ready to help you, as do I
personally in any way that I can.
[The prepared statement of Senator Talent follows:]
Prepared Statement of Senator James M. Talent
Mr. Chairman, Senator Menendez, and Senators, thank you for
inviting me to share my views regarding the U.S.-China relationship.
It's my understanding that the Committee intends to hold a series of
hearings on this subject. I congratulate you on that.
The Committee's remit of course extends to every aspect of
America's global foreign relations. But you are right to focus on U.S.-
China affairs. The United States and China have the two largest
economies and the two most powerful armed forces in the world; the two
countries are in an era of competition, and the way that competition is
conducted will have a decisive impact on the future security and
prosperity of both countries, and indeed of the world, in the 21st
Century.
I should say a word about the U.S.-China Commission on which I have
served for the last 6 years. It was created by Congress in 2000 to
provide oversight over the impact China's WTO accession would have on
our economy and national security. It's a standing bipartisan
Commission whose mandate is to hold hearings, produce papers, and
publish a comprehensive Annual Report with recommendations to Congress
for legislative action.
The Commission is a creature and servant of the Congress. While the
views expressed in this testimony are my own, I speak on behalf of the
Commission when I say that we stand ready to assist you or your staff
in any way or in response to any request.
background
For 40 years after Richard Nixon's visit to Beijing in 1972,
successive administrations and Congresses facilitated the rise of
China, granting it diplomatic recognition, providing China access to
the American market and to America's technology and educational system,
and assisting the Chinese as they sought full participation in various
international organizations and bodies. The initial reasons for this
policy were largely geo-political; successive administrations wanted to
play the China card in the Cold War against the Soviet Union.
By the time the Berlin Wall fell, China had fully emerged from the
Mao era and, for over 10 years, had been pursuing a new economic model
which Deng Xiaoping had called ``socialism with Chinese
characteristics.'' In the process, the Chinese state had relinquished a
significant degree of direct control over the economy and introduced
many of the features of a market system.
By the end of the 1990s, China was urgently petitioning to be
admitted to the WTO; that hinged on being granted Permanent Normal
Trade Relations (PNTR) with the United States. The Clinton
administration supported that change, and Congress approved it in May
of 2000. I was serving in the House at the time, and I supported the
administration's policy.
Many Senators will no doubt remember the vigorous debate over PNTR,
particularly in the House. There were many vocal opponents, but the
view that prevailed was that if the Chinese Communist Party (CCP)
wanted China to grow economically, it would have to pursue further
economic liberalization and continue the progress towards a market
based system. While after Tiananmen Square it seemed unlikely that the
CCP would ever voluntarily relinquish its control over the country, the
belief was that economic liberalization in China would lead inevitably
to greater political freedom in the country, or at minimum that full
participation in the world trading system would make China a
responsible player in the broader international order.
In other words, the dominant view at the time in our government,
and for years afterwards, was that participating fully in the world
trading system would change China. But it's fair to say that the
opposite happened--that China has succeeded in changing the world
trading system.
Over time, Beijing developed a comprehensive set of policies that
enabled it to enjoy the benefits of the system while evading many of
its obligations. These include: enormous subsidies to Chinese firms in
key sectors that lower the cost of doing business and enable them to
control domestic markets and capture markets abroad, forced technology
transfer as a condition of doing business in China, subterfuges to
avoid Beijing's commitments to liberalize its import regime, regulatory
discrimination against foreign firms, foreign investment restrictions
to keep out competition, and massive outright theft of vital
technology.
The U.S.-China Commission has prepared a very useful summary of the
tools which the CCP has developed and used to gain wealth through
illicit methods. It's a short paper called ``China's Technonationalism
Toolbox: A Primer''. I have attached it to this testimony and recommend
it as a resource for Senators and staff.
It's certainly true that there is a great deal of legitimate
competition and innovation by Chinese firms. No one should discount the
energy and dynamism of the Chinese people. It's also true that many
countries regularly try, on the margins, to game the WTO rules for
their own benefit. But that does not change the fact that Beijing has
purposely developed and implemented a comprehensive set of policies
that, taken together and given the size and influence of the Chinese
economy, constitute an unprecedented threat to both the spirit and the
letter of the world trading system.
As China grew in economic power, the CCP was also engineering a
massive, 25 year buildup of the People's Liberation Army (PLA). That
effort has borne fruit over the last decade. Here are some features of
the build-up.
The PLA Navy is now larger than the navy of the United
States, with modern multi-mission vessels, and far larger than
the portion of the U.S. fleet assigned to the Indo-Pacific.
China continues to build more ships annually than the United
States, and its shipbuilding capacity is the largest in the
world.
The PLA has the world's largest inventory of sophisticated
cruise and ballistic missiles capable of hitting sea or ground
targets at great distances.
The PLA is upgrading and growing its arsenal of nuclear
missiles.
The PLA Air Force has over 2,000 capable fighters, has
introduced fifth generation fighters, and is developing a
stealthy long range bomber capable of delivering nuclear
weapons.
The PLA has developed effective anti-satellite capability
that can threaten America's space architecture in every orbital
domain.
The PLA is pouring resources and energy into developing
advanced weapons, like hypersonics, and already has very
substantial national cyber capabilities.
Beijing's purpose in this buildup was initially to develop the
capability to exclude American forces from China's near seas during a
conflict; hence the missile-centric focus of the effort. But in the
last decade the PLA has also been investing in expeditionary
capabilities in a way that clearly indicates the intention to achieve
global reach.
I do not want to suggest that the PLA is ten feet tall. They have
continued deficiencies and disadvantages. For one thing, they are
operationally inexperienced compared to America's armed forces. For
another, the United States has close regional treaty partners with
substantial capabilities of their own that partially offset the PLA's
advantage in proximity to the region.
But there is no question that the Chinese buildup has shifted the
balance of forces in its near seas. By way of illustration, I have
attached to this statement a graphic from a briefing at Indo-Pacific
Command, then known as PACOM, that the Commission received several
years ago.
This shift in forces, coupled with China's tremendous economic
growth, has had profound consequences for the stability of the region.
As the Committee knows, Beijing systematically challenges the
rights of its neighbors in the East and South China Seas and about 8
years ago began increasing its confrontations. The list of recent
provocations includes: using naval and air forces to encroach on the
Senkaku Islands, declaring an ADIZ over the East China Sea, taking
control of the Scarborough Shoal from the Philippines and threatening
the Second Thomas Shoal, ignoring an adverse international arbitration
decision, drilling for oil in contested waters while coercing its
neighbors into abandoning drilling projects in their own exclusive
economic zones, constant encroachment on the fishing waters of other
nations, and reclaiming and militarizing a number of coral reefs in the
South China Sea--the last in express contradiction of explicit
commitments made to President Obama.
Fortunately, when these provocations began the Obama administration
reacted quickly with its Rebalance policy. The Rebalance was in form a
recognition of the primary importance of Asia generally to America's
long term interests, but in fact it was a signal that the era of
wishful thinking about Beijing's intentions was ending. The Rebalance
affirmed America's commitment to the region, led to closer
relationships with our treaty partners and--most important of all--made
clear that the object of our policy was to uphold the rights of the
United States to trade and travel in the region and the integrity of
the norm based global order.
The Trump administration has refined and deepened the scope of the
Rebalance. The new national security strategy properly identifies great
power competition as the main focus of our foreign policy and
explicitly and appropriately features China as a threat. In furtherance
of the new strategy, the administration is developing and applying a
range of economic tools capable of imposing costs and consequences on
Beijing.
In addition, Congress has played a vigorous role in the last few
years. The following steps were of particular importance: lifting the
defense sequester and increasing the budget for the armed forces,
amending and strengthening CFIUS to provide greater protection against
Chinese investments in the United States that threaten our national
security, and passing the BUILD Act to enable the United States to
contest the One Belt One Road initiative with an alternative that
emphasizes respect for labor standards, the environment, and the
interests of local workers and economies. Most recently, Congress
passed the Asia Reassurance Initiative Act to deter aggression,
including from China, promote partnerships in the region, and ensure
the American budgetary commitment to the Indo Pacific more closely
matches our national interest in the region.
Those were major achievements, and this hearing is a sign that more
are coming. As a former Member and Senator, I'm proud of how Congress
is responding.
conclusion and recommendations
We are now in a time of transition similar to the decade following
the Second World War. At that time the Truman and Eisenhower
administrations recognized the danger of Soviet aggression, defined the
nature of the threat and the strategy necessary to counter it, and
built an architecture of tools necessary to carry out the strategy.
To be sure, it would be inaccurate and unhelpful to think of the
U.S.-China relationship as a cold war. It's better framed as a
competition between two powerful nations which have conflicting
interests and very different visions of the world.
The CCP is seeking for China a kind of regional hegemony, with the
broader and longer term goal of reshaping the world order. There are
three sets of reasons motivating the regime:
1. Economic and strategic: Beijing wants to leverage its economic
strength to capture markets, secure unfettered access to critical
resources, attain technological dominance, and promote its economic
model abroad.
2. Nationalistic and historical: The United States and its allies
have midwifed an international system that fosters, however
imperfectly, free access to the international ``commons,'' neutral
rules governing trade, and the peaceful resolution of disputes. China's
leaders are happy to accept the benefits of such a system but chafe at
the constraints. Their vision is of a world where the powerful
countries get most of the benefits, at least within their respective
spheres of influence. They are moving to create such a sphere, at least
in Asia.
3. Political: The CCP is well aware that it lacks the legitimacy of
a democratically elected government. To strengthen its popular support,
the Party believes it must deliver economic growth, a better quality of
life, and a reassertion of China's historic place as the Middle Kingdom
in Asia and a leading power in the world. Success in those areas is
therefore not just a matter of national interest, but vital, in the
CCP's view, to the continued stability of the regime.
These reasons are deeply rooted in the psyche of the CCP leadership
and in their own interests as they have defined them. That means that
we cannot expect China, as long as it is controlled by the CCP, to
abandon either its hegemonic goals or the means it has used to achieve
them, unless and until costs and consequences are imposed which channel
the Party in a different and acceptable direction.
The problem is that the path which the CCP has chosen for China
constitutes a serious threat to the peace of the region, the security
and legitimate interests of the United States and its allies, and the
norm based international order that promotes equal rights for all
nations and the peaceful resolution of disputes.
That is the reason this national competition is now underway.
The immediate task for the United States government is to build on
the progress made in recent years and, in concert with allies and
partners, complete the creation of a national security architecture for
the challenge that lies ahead.
Certain strategic considerations should be kept firmly in mind as
this process unfolds.
It will be necessary to sustain bipartisan agreement on what
success in this national competition means, and on the highest
order principles and methods that will be used to achieve it.
Only such an agreement can sustain the kind of prolonged
national effort that will be necessary to achieve a favorable
result.
China is a great power that is reassuming its place as a
leading figure in the community of nations. The United States
should welcome and respect that development. The problem here
is not the aspirations of the Chinese people or the pride they
take in the history and culture of their country. The problem
is how the CCP is defining its ambitions for China and the
coercive and illicit methods it is using to achieve them. In
this context, it will be necessary clearly to communicate to
the CCP leadership what is and is not acceptable and to impose
real costs and consequences for actions which cross the line.
Congress should focus on continuing to develop a range of
flexible tools for imposing costs in a way that does not
escalate confrontations into crises. The majority of those
tools should be economic, diplomatic, or reputational. While it
is vital to continue rebuilding our armed forces and to
maintain a substantial forward presence in the region, the
primary mission of American hard power should be to prevent
escalating armed conflict so that the tools of soft or smart
power have time to work.
Here are some specific recommendations for the Committee:
1. The Committee is right to be concerned about China's One Belt
One Road (OBOR) program and generally about the PRC's use of investment
and other incentives to interfere with America's bilateral
relationships. I am particularly concerned about the maritime aspects
of OBOR. An estimated 70 percent of the world's container traffic flows
through Chinese owned or invested ports, generating substantial
economic leverage China could convert into broader political and
military influence. The Committee should consider investigating the
details of those investments, or securing an assessment by the
intelligence community or the Federal Maritime Administration, with a
view towards developing an appropriate response.
2. The BUILD Act was a vital first step in creating a development
alternative for countries targeted by One Belt One Road. The Committee
should oversee the creation of the new agency to ensure that it works
with other development bodies to maximize its impact, and to contest in
appropriate ways the Chinese narrative regarding One Belt One Road.
3. I am sure the Committee intends to vigorously oversee
implementation of the Asia Reassurance Initiative Act. The
authorization in the bill should be fully funded, and the Committee
should press for additional funding after the program is up and
running. The Committee might also consider encouraging colleagues on
the Armed Services Committee to authorize an Indo Pacific Deterrence
Initiative, modeled off the European Deterrence Initiative (EDI), to
further enhance U.S. military presence and commitment to the region.
4. The Chinese are actively using investments and promises of
support, particularly in Eastern Europe, to fragment the EU's response
to China's human rights record and unfair trade practices. Though the
European Deterrence Initiative is directed mostly at Russia, it (and
NATO) could be a good vehicle for increasing our influence in Europe in
support of the EU where China is concerned.
5. The Committee is aware of the CCP's use of ``sharp'' power to
protect its narrative by manipulating opinion in other countries. A
hearing directed to that subject, with a focus on the CCP's United
Front activities, could be the basis for legislation expanding the
capabilities of the State Department and other agencies to respond in a
manner consistent with our values. Long term, this tool will be
essential in the national competition.
I'll close by quoting the final paragraph of the introduction to
the Commission's 2018 Report:
For several decades, U.S. policy toward China was rooted in hopes
that economic, diplomatic, and security engagement would lay the
foundation for a more open, liberal, and responsible China. Those hopes
have, so far, proven futile. Members of Congress, the administration,
and the business community have already begun taking bipartisan steps
to address China's subversion of the international order. Washington
now appears to be calling with a unified voice for a firmer U.S.
response to China's disruptive actions. In many areas, the CCP will be
quick to cast any pushback or legitimate criticism as fear,
nationalism, protectionism, and racism against the Chinese people. As a
new approach takes shape, U.S. policy makers have difficult decisions
to make, but one choice is easy: reality, not hope, should drive U.S.
policy toward China.
Again, I speak on behalf of the U.S.-China Commission when I say we
want to assist you in any way we can as you move forward with your
efforts.
[The information referred to follows:]
China's Technonationalism Toolbox: A Primer
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
The Chairman. Senator Talent, thank you very much. As you
noted, you went substantially over your time. Even though you
have hung up your toga, you have not given up the Senate
habits.
[Laughter.]
The Chairman. So in that regard, you have our forgiveness.
Senator Talent. I very much appreciate your indulgence and
that of the ranking member. Thank you.
The Chairman. But thank you so much. Those were great
statements.
Now we have Dr. Oriana Mastro. Dr. Mastro is an assistant
professor of security studies in the Edmund A. Walsh School of
Foreign Service at Georgetown University where she focuses on
Chinese military and security policy, Asia-Pacific issues, war
termination, and course of diplomacy.
She is also an officer in the United States Air Force
Reserve--thank you--for which she works as a political military
affairs strategist at PACAF and is currently the Jeane
Kirkpatrick Fellow at the American Enterprise Institute.
Previously, Dr. Mastro was a Stanton Nuclear Security
Fellow at the Council on Foreign Relations, a fellow in the
Asia-Pacific Security Program at the Center for a New American
Security, a University of Virginia Miller Center National
Fellow, a Center for Strategic and International Studies
Pacific Forum Sasakawa Peace Fellow, and a pre-doctoral fellow
at the Institution for Security and Conflict Studies at George
Washington University.
Additionally, she has worked on China policy issues at the
Carnegie Endowment for International Peace, RAND Corporation,
U.S. Pacific Command, and Project 2049.
Doctor, thank you so much for joining us, and we look
forward to hearing from you.
STATEMENT OF DR. ORIANA MASTRO, ASSISTANT PROFESSOR OF SECURITY
STUDIES, EDMUND A. WALSH SCHOOL OF FOREIGN SERVICE, GEORGETOWN
UNIVERSITY, WASHINGTON, DC
Dr. Mastro. Thank you, Mr. Chairman, Ranking Member
Menendez, and distinguished members of the committee. Thank you
for the opportunity to discuss some of the ways China is
increasing its power and influence, in some cases at the
expense of the United States.
The views I am about to express are my own, though given
the time constraints, I am going to try to use more of my
military training and less of my academic training to make my
comments as brief as possible.
China's economic growth has been astounding. But for me
perhaps even more significant has been China's ability to
translate its economic growth into vast economic, political,
and military power on the world stage, especially over the past
20 years. This is surprising because China actually started out
in a weaker position vis-a-vis the United States. China's
systems and values are generally less attractive to most around
the world than those of the United States. China also does not
have any allies or really strong partners. Its military is so
greatly inferior to that of the United States in terms of power
projection capabilities, though I list in my testimony how it
has managed to create some severe operational difficulties in
the region.
China's economy, we have to remember, has been smaller than
that of the United States over the past 20 years, and it
entered an international order in which the United States
wielded a disproportionate degree of influence.
But even with all these disadvantages, China's relative
power has grown to the point that we now find ourselves in a
great power competition.
And so this situation highlights the theme of my testimony
today, which is to look at how China has managed to make such
power gains over the past 20 years. I think answering this
question can provide some critical insights into how the United
States should increase its own competitiveness in this great
power competition.
In my written testimony, I go through this obviously in
much more detail. But my bottom line argument is that to date,
China has gained power and influence by focusing on areas where
the U.S.'s ability and willingness to compete has been
relatively weak, and then leveraging China's own strengths, its
own comparative advantages in new and entrepreneurial ways to
build power in those areas. Admittedly, China's efforts have
not always been successful, but we know that its share of world
power has increased, suggesting that it succeeds more often
than it fails.
In terms of China's approach to building political power,
it has been mentioned that China only joined many of these
international institutions in the 1990s, and the United States
largely supported this change with the idea that the more China
participated, the more it would be socialized into the then-
current norms and rules of behavior. We know now that the logic
of this U.S. support was proven flawed.
But to me the problem is not China's participation in
international institutions. The central problem is that these
institutions have not adapted to ensure that China is
accommodated in the few cases where its aims are legitimate and
that the institutions can constrain Chinese behavior when
Chinese aims are not legitimate. The United States has also not
attempted to build new institutions to address contemporary
issues.
As a result, China has been able to build up power by
exploiting many gaps in the international order by building
alternative institutions, and then actually by shaping a lot of
rules and norms in its favor. There are many areas where these
norms are either nonexistent or weak, and China has been
actively working to shape them so that they benefit China
economically, politically, and militarily.
In terms of their approach to military power, I think this
is one area where their entrepreneurial approach is extremely
clear. China has long understood that to succeed in reaching
great power status, they had to avoid a strong response from
the United States to delay action. And they have done so by
being relatively ambiguous to date, at least until the past
couple of years, about what their intentions have been.
There is nowhere I think that China's entrepreneurial
strategies are more evident than their anti-access/area denial
strategy. This is when they focus on low-cost asymmetric
capabilities designed to erode U.S. military supremacy and to
make it difficult for the United States to come to the aid of
our allies in the region in case of a conflict with China.
Another area where they have been very entrepreneurial is
in their approach to building up power and influence in the
South China Sea. Instead of directly confronting the United
States--in my position and I would say from reading Chinese
writings and listening to Chinese speeches, this is not
controversial--is that China wants to be dominant in the Indo-
Pacific region, and that dominance includes pushing the United
States military out of the region.
But to do so, they have not done it directly. They engage,
for example, in gray zone activities, which means that China
increases the risk of the United States in operating in the
South China Sea by harassing our vessels and aircraft with non-
military platforms. This makes it very difficult for us to
respond.
In my written testimony, I go through great detail about
China's strategy to control the South China Sea, and I do so
only to highlight one of my final points, which is that the
South China Sea lies, in my view, at the center of this
geopolitical competition.
To sum up, I do not think it is fair to say that China has
been outcompeting the United States. In many ways the United
States has not been competing. We have not been present in many
of these areas and many of these countries where China has
focused on building its influence when they use industrial
policy or infrastructure building. The amount of money that the
United States has focused on these efforts has been quite
small.
And when it comes to the military, while balancing is a
step in the right direction, the United States military still
does not have the platforms, the posture, the basing, and the
training that it needs to ensure it prevails in most conflicts
in Asia.
Washington needs to get back into the game. We need to
start competing again. And I do not think we should do so by
lowering our standards to China's level. While imperfect in
implementation, the values and principles behind U.S. global
power and leadership ensure that others also benefit. China's
Achilles heel in my mind is that its leaders have failed to
articulate a vision of Chinese dominance that is beneficial for
anyone but China. In the pursuit of economic, political, and
military power, I believe the protection of liberal values
needs to be our guidepost and a priority.
There are many things that we can do to be more
competitive--and I am happy to address some of those in the
Q&A. But I do think Washington needs to embark on a program of
institution building and take seriously the idea that we need
to shape international norms in our favor and fill gaps so that
China cannot exploit the international system to its benefit.
And we need to leverage our own strengths against Chinese
weaknesses, one of which is our allies and partners and ability
to build coalitions. This is not a great power competition
between the United States and China. This is between China and
the United States with our allies and partners. And being
competitive does not mean confronting China and undermining
China. It means making ourselves a more attractive global
partner.
It will take immense political capital to facilitate such
cooperation among nations, but this is the only way I believe
to ensure that the United States, in conjunction with its
allies and partners, maintains the vast share of power and
influence in the international system, which I believe is to
all countries' benefit.
Thank you very much.
[The prepared statement of Dr. Mastro follows:]
Prepared Statement of Dr. Oriana Mastro
Chairman Risch, Ranking Member Menendez, and distinguished members
of the committee, thank you for the opportunity to discuss some of the
ways China is challenging U.S. primacy in the region and in the
international system more broadly. Before I begin describing the
tactics China has been employing to accumulate power and influence, at
times at the United States' expense, I want to be upfront about the
strategic framework that colors my thinking.
First, I do not believe China is inherently a threat to the United
States. But China has defined its interests and goals in such a way
that they conflict with those of the United States. Specifically, China
believes that dominance of the Indo-Pacific is central to its security
and interests, meaning that Beijing cannot feel secure with the U.S.
forward presence in the region. And the United States cannot protect
its own interests and national security without the ability to operate
there. Thus, we have a serious conflict of interest.
Second, China prefers to use political and economic tools to
achieve its security goals, but as its military becomes more
proficient, it will not shy away from using this tool as well if the
issue at hand is important and the other tools do not suffice. In other
words, I believe Chinese leaders are being truthful when they say they
would prefer to achieve China's goals peacefully. But this just means
that they hope the United States and others will fully accommodate
their position without a fight.
Lastly, I believe China's territorial aims are limited. It wants
control over the South China Sea, the East China Sea and Taiwan, and
nothing more. Thus, if the United States conceded to China the sphere
of influence of Northeast, Southeast, Central, and South Asia, our
points of contention would be greatly lessened. However, I also believe
these demands are too much and that the U.S. cannot concede to them
without seriously jeopardizing its own security and that of its allies
and partners in the region. In other words, it is easy to avoid
conflict if you give the other side everything it wants.
the strategy behind china's rise
China's rise has been meteoric in pace and astounding in scale.
Since Deng Xiaoping's market reforms in 1979 that shifted China to a
more market-based economy, Chinese gross domestic product growth has
``averaged nearly 10 percent a year . . . and has lifted more than 800
million people out of poverty.'' \1\ Today, China is the second-largest
economy and the largest single contributor to world growth since the
2008 financial crisis.\2\ Between 2005 and 2018, China invested around
$1,941.53 billion (USD) worldwide.\3\ In the same time frame, nominal
Chinese military spending increased from $76.6 billion (USD) to $228.2
billion.\4\
China has managed to translate its economic growth into vast
economic, political, and military power on the world stage. On the most
basic level, power is the ability to get other countries to do what you
want. China's system and values are generally less attractive than
those of the United States. China also does not have allies or even the
long-standing relationships that the United States has around the
world, its military is still greatly inferior to that of the United
States in power projection capabilities, its economy has been smaller,
and it entered an international order in which the United States
wielded a disproportionate degree of influence. But even with all these
disadvantages, Chinese relative power has grown to the point that we
now find ourselves in a great power competition.
This situation highlights the theme of my testimony today: how
China has managed to make relative power gains from its weaker position
over the past 20 years. My bottom-line argument is that China has
consistently chosen a position in the international system from which
it can best limit the degree to which other states' policies affect it
and from which it can influence the nature and terms of competition.
For example, China spent much of the 1990s and 2000s finding places and
issues where the competition among states was the weakest--military
operations other than war such as peacekeeping and infrastructure
development as a key component of economic aid and engagement with
specific countries in Africa, Latin America, and Asia that had a weak
U.S. presence. China then leveraged its strengths and took
entrepreneurial actions to outmaneuver the United States, tipping the
balance of power in its favor. Admittedly, China is not always
successful in its endeavors. But its share of world power has
increased, suggesting that it succeeds often enough. I argue that this
is not because the United States is insufficiently competitive on the
world stage as a political, economic, or military partner, but because
Washington has simply not been competing.
china's approach to building political power
The United States set up international institutions after WWII as
means of promoting cooperation and constraining states in ways that
encouraged responsible, stabilizing foreign policy choices on the part
of the participants. This experiment has largely been successful.
States are more cooperative than ever before, and the rate of
interstate conflict is at a historical low. (And the interstate wars
that do erupt are shorter and less violent.) These institutions also
facilitate the promotion of structures, norms, principles, and values
that support U.S. power and reduce the transaction costs of diplomacy,
making it easier for the United States to exercise its power.
For these reasons, China avoided international institutions during
the Cold War and criticized them as tools of U.S. hegemonic power. In
the 1990s, however, Chinese leaders decided it would be to their
benefit to become less isolated economically and politically, so China
joined almost all of the existing institutions. The United States
supported this change, as American strategists believed that the more
China participated, the more it would be socialized into the then-
current norms and rules of behavior.
The logic behind the U.S. support has proved flawed. This does not
imply, however, that the inclusive approach is incorrect. That others
benefit from U.S. leadership is one of the greatest competitive
advantages the United States wields over China. And there is little
evidence that China wants to overturn the current order, as Beijing
benefits greatly from aspects of it. As a member of the permanent five
with veto power, China has gained significant power over international
security from its participation in the United Nations Security Council.
As of April 2018, the World Bank had lent China more than $60.495
trillion for 416 projects on domestic growth in transportation, urban
development, rural development, water resources management, energy, and
the environment. China's accession to the World Trade Organization
(WTO) expanded China's access to foreign markets, leading to a surge in
exports that fueled its impressive economic growth.
The biggest issue is not China's participation in international
institutions. The central problems are not only that these institutions
have not adapted to ensure that China is accommodated when its aims are
legitimate and constrained when they are not, but also that the United
States has not attempted to build new institutions to address
contemporary issues. As a result, China has been able to build up its
political power in three ways: by exploiting blind spots in the
international order, by building alternative institutions, and by
shaping roles and norms in its favor. The result of this strategy is
twofold. First, China is more inured from international pressure,
making it more difficult to shape Chinese behavior. Second, states are
dependent on Beijing economically and politically, which allows China
to compel others to accommodate its will. States' desire to avoid
Beijing's wrath to not become targets of its political warfare or
economic coercion makes many, including allies and partners of the
United States, unwilling to support U.S. policies that push back
against China or condemn some of its irresponsible behavior.
Exploiting Strategic Blind Spots. First, the U.S.-led world order
has weaknesses and gaps that China has successfully exploited. When
China began to enter international institutions, some parts of the
world were largely outside the U.S.-led world order and consequently
were not benefiting from it. Thus, China initially chose to focus on
increasing its influence in parts of the world where the U.S. presence
was weak or nonexistent. These areas included unsavory regimes that the
U.S. had abandoned such as North Korea, Myanmar, and Zimbabwe. China's
relationships with these regimes increase its political power without
threatening the United States. They also included parts of the world
that the United States had neglected. China did not supplant the United
States in Central Asia or in many African countries; the U.S. was
simply not there. U.S. companies in particular have been conspicuously
absent. For example, in Ecuador, Chinese companies invested $1.8
billion USD in 2005, while U.S. companies invested less than
$50,000.\5\
Second, Beijing actively builds defenses against aspects of the
order that are unfavorable to its interests. It has done so, for
example, by infiltrating groups to render them ineffective, as in the
case of the U.N. Human Rights Council (UNHRC).\6\ Within the UNHRC,
China has used its position to shield itself from criticism about its
domestic human rights violations and change norms surrounding
transparency and accountability in dealing with human rights violations
in other countries.\7\ For instance, China has blocked the
accreditation of certain nongovernmental organizations that criticize
or investigate human rights violations. It has also emphasized
principles such as ``sovereignty'' to shield states from having to
disclose certain information about domestic human rights violations.\8\
The United States, instead of strengthening its role in the UNHRC to
ensure that the institution performs as originally intended, has
conceded ground by withdrawing from it.
When it does not infiltrate international organizations to render
them ineffective, Beijing repurposes institutions for its own strategic
purposes. For example, it uses INTERPOL's ``red notice'' system to
track down dissidents. Since Meng Hongwei,\9\ a former Chinese vice
minister of public security, was elected the leader of INTERPOL in
2016, INTERPOL has released nearly 100 red notices for Chinese
dissidents abroad.\10\
Building Alternative Institutions. In some cases, China has worked
to change the rules of institutions to gain a greater official say in
their activities and decisions. It has sought to rewrite the rules in
institutions like the WTO, the International Monetary Fund (IMF), and
the World Bank to increase its voting power to be commensurate with its
economic stature. For example, during the 2001-09 WTO Doha development
rounds, China led a group of developing countries in pushing back
against the developed nations to demand better trade deals for
developing nations worldwide.\11\ At the IMF, voting power and
governance are based on special drawing rights (SDR), or an
international reserve asset.\12\ In 2015, China fought to make the
renminbi part of the SDR, and its quota share increased from 4 percent
to 6.41 percent.\13\
Yet when China believes it cannot achieve a level of influence
commensurate with its economic status, it is often prepared to create
its own institutions. For example, the Asian Infrastructure Investment
Bank (AIIB) shows China's willingness to found organizations that
further its interests but that are still tied to the international
trade system. After years of arguing for better infrastructure
investment in Asia at the World Bank and the IMF, China launched the
AIIB in 2016 to invest in projects that were ``high quality, low cost''
in infrastructure and connectivity.\14\ In the most recently available
Annual Report (2017), the AIIB claims to have 84 approved members and
over $4.22 billion USD worth of investments in projects and funds.\15\
The United States has no influence in this institution because
Washington refused to participate.
The most significant initiative for building and exercising Chinese
power globally is the Belt and Road Initiative (BRI). Since 2013, over
70 countries have signed contracts for projects under the BRI, and it
is reported that between 2013 and 2018 China spent a total of $614
billion USD on BRI projects.\16\ In Africa, the BRI has built airports,
railways, manufacturing hubs, and infrastructure improvements with
significant investments in Nigeria, Ethiopia, and Kenya. In Europe, the
BRI has made inroads in central and eastern Europe and has recently
been in dialogue with Portugal and Greece (with a specific interest in
port access). In Asia, the BRI has made significant investments in
railway and port construction, with proposals in Indonesia, Laos, and
Malaysia.\17\
But the initiative is not just about building infrastructure.
Through the BRI, China is attempting to leverage its economic power for
political and security purposes, which include making the world a safe
place for authoritarian governments. Nadege Rolland, in her definitive
book on the BRI, writes that ``BRI is intended to enable China to
better use its growing economic clout to achieve its ultimate political
aims without provoking a countervailing response or a military
conflict'' to achieve its ultimate goal ``of establishing itself as the
preponderant power in Eurasia and a global power second to none.'' \18\
Many of these countries take Chinese funding because they have few
other options--and the Trump administration's initiative to dedicate
$113 million to new technology, energy, and infrastructure initiatives
in emerging Asia is far from sufficient to change this calculus.
Shaping Rules and Norms in China's Favor. Third, China has sought
to establish new standards, rules, norms, and processes to give it a
competitive advantage where the established order is weak, ambiguous,
or nonexistent. For example, China is trying to shape governance and
policy in artificial intelligence in ways that give its companies an
edge, legitimize its internal social uses of technologies such as face
recognition software, and weaken the voices of independent civil
society actors who inform the debate in North America and Europe.
In the cyber realm, China has been pushing an idea of ``cyber
sovereignty'' that considers cyberspace to be primarily governed by
states and recognizes the legitimacy of every state's efforts to govern
content within its borders, rather than just ensuring the functioning
of the internet. This idea stands in contrast to the United States'
desired model, which is multilateral and guarantees a role for
nonstate, civilian actors. To shift the norm in its preferred
direction, China has put the brakes on U.S.-led norm building in the
U.N. Group of Governmental Experts (the main norm-setting body for
Western governments in cyberspace) and has held its own annual World
Internet Conference in Wuzhen since 2014. China has been watching the
2016 U.S. election hacking with keen interest to see if Western
countries will start to follow China's lead in favoring content
controls over the internet and will walk back from the ideas set out in
the UNHRC's ``internet freedom'' speech.
In the maritime realm, the United States insists that freedom of
navigation of military vessels is a universally established and
accepted practice enshrined in international law, but not all countries
accept this interpretation. Argentina, Brazil, China, India, Indonesia,
Iran, Malaysia, the Maldives, Oman, and Vietnam argue that warships
have no automatic right of innocent passage in their territorial seas.
Twenty other developing countries (including Brazil, India, Malaysia,
and Vietnam) insist that military activities such as close-in
surveillance and reconnaissance by a country in another country's
exclusive economic zone (EEZ) infringe on coastal states' security
interests and therefore are not protected under freedom of navigation.
China is exploiting this lack of consensus, and that the United States
has not even ratified U.N. Convention on the Law of the Seas, to its
advantage. It is seeking to establish a code of conduct with
Association of Southwest Asian Nations (ASEAN) countries that could
legitimize Chinese expansionist activities in the South China Sea.
china's approach to building military power
Chinese leaders and strategists have long understood that to rise
to great power status, they must avoid a strong negative response from
the U.S. In the late 1990s, China adopted a strategy of reassurance
that emphasized ``regional economic integration and multilateral
confidence building in an effort to assuage the fears of China's
neighbors during its ascendance to great-power status.'' \19\ Chinese
military modernization came last and is therefore a relatively new
phenomenon. Ten years ago, Chinese defense spending was a third of what
it is today. By all standard measures, the Chinese military was
backward. Its navy was a glorified coast guard that could not sail
beyond visual range of the coastline. Its pilots, poorly trained and
with few flight hours, did not fly at night or over water. Its nuclear
forces still relied on liquid fuel and storage in silos, both of which
greatly reduced its survivability. And none of the services had modern,
mechanized equipment. Indeed, the mechanization of the Chinese military
is only scheduled to be completed 2 years from now.
Once China did begin modernizing, it focused on defensive military
capabilities first. China's desire to engage in ``military operations
other than war'' such as peacekeeping, humanitarian assistance, and
disaster relief under Hu Jintao's New Historic Missions reassured many
that China planned to use its military for the global good. China has
been the number one contributor of peacekeeping troops among the
permanent five since 2012.\20\
This is all to say that China's overwhelming economic power and
military capabilities are relatively new phenomena and that there is a
clear connection between China's increasing clout and its shift from
reassurance to a growing reliance on coercion to achieve its goals. In
its defense policy, China made a conscious shift to prioritize the
military as a key tool of national power and to leverage it for
national security purposes, especially the aim of protecting its
territorial integrity and sovereignty as defined by China. Xi Jinping
has put the military at the forefront of China's efforts to achieve
national rejuvenation. A strong military is one of the key components
of the China Dream, and Xi has called on China's armed forces to be
prepared to fight and win wars. This assertiveness is no longer new; it
began in 2009 with coercive diplomacy in the South China Sea. This fact
suggests that China's reliance on coercion will only increase. It is
also telling that Chinese leaders and strategists perceive coercion as
an effective strategy.
Two reasons explain why Deng's approach of keeping a low profile
was jettisoned for a more assertive, confident, and proactive foreign
policy. First, the previous policy of taoguangyouhui was seen as
insufficient to protect national interests because it did not persuade
others to respect China's interests in the region. Second, while some
admit that the United States and China's neighboring countries are
uncomfortable with the new approach, they argue that it is more
practical and effective than letting China suffer disgraces and insults
for the sake of ``biding its time.'' Many Chinese thinkers complain
that the potential benefits of keeping a low profile--a positive
international image or greater support and friendship from neighboring
countries--have not materialized.\21\ Neighboring powers were
suspicious of China's rise long before the foreign policy shift, and
the behavior of other South China Sea claimants during that period
suggests that an ``unprincipled'' strategy like ``biding time'' does
not command respect or prevent countries from harming China's core
interests.\22\
Perhaps nowhere is the challenge of China's entrepreneurial
strategies more evident than in military competition. First, China's
anti-access area denial (A2AD) strategy, in which it developed
relatively low-cost asymmetric capabilities to erode U.S. military
supremacy, significantly complicates any U.S. plans to come to the aid
of Japan, Taiwan, or the Philippines in the event of a conflict with
China. China is also building economic and political power that it can
leverage during a time of conflict to convince countries not to host or
support U.S. military operations. This strategy includes using all the
tools at its disposal to create wedges between the U.S. and its allies
so that countries such as Japan or Australia will chose to stay neutral
in a conflict between China and the United States over Taiwan or the
South China Sea, for example.
Second, instead of directly confronting the United States to push
it out of the Asia-Pacific with military force, China has engaged in
gray-zone activities. Specifically, China has increased the risk to the
U.S. of operating in the South China Sea by harassing U.S. vessels and
aircraft with nonmilitary platforms. In this way, it maintains a degree
of deniability that discourages a U.S. response. With these tactics,
China has made significant political and territorial gains without
crossing the threshold into open conflict with the United States or
rival claimants, especially in the South China Sea. These strategies
help China build relative power vis-a-vis the United States. Beijing
also strives to reduce U.S. credibility as a security partner and ally
to erode the U.S.-led security order in Asia.
China's Strategy to Control the South China Sea. China's strategy
of focusing on areas where competitive forces are weakest and then
leveraging its comparative advantages is strikingly evident in its
strategy to control the South China Sea--an end China is actively
pursuing.
On the military side, Beijing is positioning itself in a way that
weakens the conventional U.S. deterrent against China. China wants the
ability to deny foreign military vessels and aircrafts access to the
sea and airspace over the South China Sea. It has been making progress
toward this goal by building bases in the South China Sea, specifically
on Fiery Cross, Subi, and Mischief Reefs in the Spratlys (known as the
Big 3). All these bases will have approximately 10,000 foot runways and
the airfield support facilities (including reinforced hangars) to
accommodate fighters, bombers, tankers, large transport, patrol
airborne early warning, and aircraft refueling.\23\ China's largest
island in the Paracels, Woody Island, is also China's largest military
outpost in the South China Sea. China has developed airstrips and port
facilities and placed permanently stationed military personnel and
temporarily deployed fighters, surface-to-air missiles, and anti- ship
cruise missiles on the island.\24\
These bases will eventually house systems that will expand the
reach and increase the layers of China's A2AD capabilities and the
range of China's own power projection capabilities. For example, if
China were to deploy H6-K bombers to the Big 3, it could then hold U.S.
defense facilities in northern Australia and Guam at risk. If they were
stationed at Woody Island, almost all of the Philippines, including the
five sites selected for U.S. base development, would fall within
range.\25\ If China put HQ-9s and anti-ship on Woody Island and Fiery
Cross Reef, Subi Reef, or Mischief Reef, it could hold any U.S. assets
that dared to operate in most of the South China Sea at severe risk.
I could spend pages laying out the possible combinations and what
they mean for U.S. operations. But the bottom line is that while China
is building facilities to house military systems, they are still in the
initial stages. In May 2018, the Chinese landed a H6-K bomber on Woody
for the first time. HQ-9 anti-aircraft missiles were first reported on
Woody Island, an island disputed by China, Taiwan, and Vietnam, in 2016
(though they were removed in 2018 and then redeployed).\26\ Since April
2016, China has deployed, at various times, Y-8 military transport
planes, YJ-12B cruise missiles, and HQ-9B surface-to-air missile
systems on each of the Big 3.\27\ In February 2019, after the People's
Liberation Army Navy conducted a monthlong series of drills in the
South China Sea, an anonymous source mentioned that the People's
Liberation Army Strategic Rocket Force was looking to deploy its HQ-9
anti-air missiles and YJ anti-ship missiles on Woody Island on a
permanent basis.\28\ We should thus expect the pace and scale of future
deployments to increase. With these deployments, China will be in a
position to enforce an overly expansive air defense identification zone
or eventually even a maritime exclusion zone in the region, which will
put the burden of escalation on the United States if it chooses not to
recognize the zones. This means that the present moment is a crucial
time for U.S. policy. If Washington hopes to deter or prevent the
militarization of the South China Sea Islands, it has to take a tougher
stance now.
Yet China's preferred strategy is to sidestep, rather than
confront, the United States and to cajole other countries into agreeing
to resolve their claims on terms favorable to Beijing. China calls this
the ``dual-track'' principle, according to which regional neighbors
negotiate to resolve disputes and cooperate to maintain peace and
stability.\29\ This doctrine implies exclusion of the U.S. and other
non-regional powers, as well as international institutions. For
example, after the Permanent Court of Arbitration (PCA) ruled in favor
of the Philippines in its case against China in 2016, China deemed the
PCA illegitimate because the Philippines had violated the Declaration
on the Conduct of Parties in the South China Sea by taking the case
beyond the concerned parties.\30\
China also uses influence operations and predatory economics to
coerce neighboring countries to reorder the Indo-Pacific region to its
advantage.\31\ For example, after the PCA ruling, the Philippines'
President Rodrigo Duterte said he would ``set aside'' the ruling ``in
the play of politics'' to avoid ``impos[ing] anything on China.'' \32\
This position was widely attributed to Duterte's view of China as an
``essential ally'' that he hoped would fund his infrastructure plans in
the Philippines.\33\ At the July 2016 ASEAN meeting, Cambodia--a close
political ally of China's--blocked any mention of the PCA ruling,
effectively shielding China from any ASEAN-led multilateral approaches
to dealing with Chinese actions in the South China Sea.\34\ Laos, which
heavily relies on Chinese investments, supported Cambodia's block,
demonstrating China's ability to leverage its economic and political
clout over small regional neighbors.\35\ China has tried to insert
language that would prevent countries from engaging in military
exercises with countries from outside the region (read: the United
States) unless the parties concerned, such as China, do not object.
The Implications of Chinese Control. If China controlled the South
China Sea, the restrictions it would impose there would likely depend
on the activity. On the more permissive side, China has not shown
interest in disrupting commercial transit through the South China Sea.
In 2016, global trade transiting through the South China Sea reached
$3.37 trillion USD, with most exports coming from China, or about 39.5
percent of the total Chinese trade goods passing through these
waters.\36\ These commercial activities benefit China, and there is
little incentive to disrupt them wholesale.
However, China has shown a great willingness to engage in economic
coercion to signal its displeasure with other countries' foreign
policies, and if it controlled the South China Sea, it might disrupt
selectively and periodically to the same end. In 2010, after a
territorial dispute with Japan in the East China Sea, China implemented
a rare earth minerals embargo against Japan. (This ban was later
extended to include the United States and Europe after the Obama
administration called for investigations into whether this ban violated
international trade law).\37\ In 2017, after South Korea confirmed its
purchase of the U.S. Terminal High Altitude Aerial Defense battery,
China retaliated against South Korean companies in China and
significantly reduced Chinese tourism to South Korea. A year later, the
Bank of Korea estimated that this backlash had reduced South Korea's
economic growth rate by 0.4 percent.\38\ In other words, while China
will not seek to deny commercial access to the South China Sea as it
will deny military access, it may periodically hold commercial
interests at risk as part of a campaign to coerce a country to concede
on something.
In the middle of the spectrum would be China's approach to the
exploited natural resources in the waters that fall within the nine-
dash line. These resources include oil and gas deposits and fisheries.
An estimated 190 trillion cubic feet of natural gas and 11 billion
barrels of oil reserves lie within the South China Sea, and access to
these energy resources is crucial for all of the claimants
involved.\39\ On the fisheries side, the South China Sea is in the top
five ``most productive fishing zones,'' with half of the fishing
vessels in the world operating in these waters and accounting for over
10 percent of the global fish catch.\40\
China has proposed a number of joint cooperative ventures with
other claimants. Since 2007, China and Vietnam have conducted regular
joint Gulf of Tonkin exploration ventures,\41\ and China and Brunei
embarked on joint oil and gas development ventures last year.\42\ In
2017, China supported the idea of a joint energy venture with the
Philippines that would develop oil fields and exploration and
exploitation in the South China Sea.\43\ This is the aspect of their
strategy that Chinese leaders highlight to present their position as
fair, legitimate, and peaceful. An analysis of the statements made on
the South China Sea by members of the Political Bureau of the Communist
Party of China Central Committee, for example, show these leaders use
terms such as ``cooperation'' and ``political solution'' six times more
frequently than competitive themes such as ``sovereignty,''
``military,'' ``tension,'' ``freedom of navigation,'' or other U.S.
themes.\44\
On the other end of the spectrum, China would be the most
restrictive about military activities, which is why the issue is
central to U.S. national security. Chinese domestic law attempts to
extend more state power over China's EEZ than international law allows,
including jurisdiction over hydrographic surveys, military surveys, and
intelligence gathering.\45\ China believes the EEZ does not constitute
the high seas, and therefore the U.S. does not have the right to
conduct intel gathering activities or other military activities
there.\46\ China also claims the Paracels and Spratlys, including the
artificial islands. Each is surrounded by a 200-mile EEZ, and China
argues that the islands should be treated as archipelagos, which means
the waters between them would be territorial waters (according to
international law).\47\ It is through this manipulation of
international law that China deems the South China Sea within its EEZ
and claims that the U.S. military is not allowed to operate there.
Much more is at stake for the United States if it concedes to China
in the South China Sea. First, China currently claims nearly the entire
East and South China Seas as its historic waters and EEZ.\48\ If China
proves successful at changing the interpretation of maritime law so
that the EEZ is equivalent to territorial waters, then (1) the United
States will be unable to conduct operations vital to U.S. national
security in much of the world's oceans and (2) ``freedom of navigation
near the shore will be diminished, impairing naval and air operations
and diminishing power-projection and forced-entry capabilities of
amphibious forces.'' \49\
Politically, U.S. acquiescence to Chinese coercive diplomacy could
increase anxiety among U.S. allies and strategic partners, leading to
Asian policy changes that could undermine regional stability.\50\
Moreover, U.S. deterrence against China would be severely weakened.
Without the ability to operate militarily in the South China Sea, given
the tyranny of distance, the United States' ability to hold China at
risk would be greatly reduced. This is the whole point of China's South
China Sea strategy--to push the U.S. military out so that China can do
whatever it wants without having to answer to the United States. For
deterrence purposes, the United States needs to be able to threaten
China with unacceptable costs. It cannot do so if the U.S. military
does not maintain a presence in Asia and the ability to operate freely
around China. And the United States cannot protect and defend South
Korea, Japan, Taiwan, or the Philippines without the ability to operate
in the waters surrounding China. This is simply the reality of current
technology.
To sum up, China is not outcompeting the United States; the U.S. is
not competing. China is gaining power and influence at the expense of
the United States by focusing on areas where the U.S. ability and
willingness to compete have been weakest and then leveraging its
strengths in entrepreneurial ways to build power in those areas.
Washington needs to get back in the game, but without lowering its
standards to China's level. While perhaps imperfect in implementation,
the values and principles behind U.S. global power and leadership
ensure others benefit. China's Achilles' heel is that its leaders have
failed to articulate a vision of Chinese dominance that is beneficial
for anyone but China. In its pursuit of economic, political, and
military power, the protection of liberal values needs to be a
guidepost and a priority.
The South China Sea lies at the center of this geopolitical
competition. The United States has to move beyond symbolic displays of
force such as the freedom of navigation operations to include actions
that improve the United States' ability to operate in those waters.
This could include building a new institution or coalition of like-
minded states that patrol the waters and protect all countries' rights
of freedom of navigation in the South China Sea. Or the U.S. could make
peace in the South China Sea a real diplomatic priority, getting all
parties to the negotiating table, and if China is unwilling to
participate, the U.S. could bring the other claimants together without
Beijing to establish a consensus at least among them that supports U.S.
interpretation of freedom of navigation. And if the United States wants
to deter the militarization of these islands, which threaten U.S.
sovereignty, it has to threaten unacceptable costs on China, for
example, by communicating to Beijing that the United States will build
its own bases in the area in response.
Beyond the South China Sea, Washington needs to embark on a program
of institution building that will shape norms in our favor and fill the
gaps in the order that China has been able to exploit. The United
States needs to leverage its own strengths against Chinese weaknesses,
one of which is the ability to build coalitions. This should not be a
great power competition between China and the United States but between
China and the United States along with its allies and partners. China
cannot outspend the United States and the European Union together. For
example, it cannot prevail in a regional conflict against the United
States, Japan, and Australia. So, if China uses economic coercion
against a country, U.S. allies and partners should ban together and
sanction China. We should be patrolling the South China Sea together to
ensure that every country, even those that are not treaty allies of the
United States, has the ability to sail and fish there. And the U.S.
needs to lead by example. If Washington is unwilling to stand up to
China as the most powerful nation in the world, it cannot expect anyone
else to do so. It will take immense political capital to facilitate
such cooperation among nations, but it is the only way to ensure the
United States, in conjunction with its allies and partners, maintains
the vast share of power and influence in the international system.
------------------
Notes
\1\ World Bank, ``China--Overview,'' September 26, 2018.
\2\ World Bank, ``The World Bank Group in China--Facts and
Figures,'' July 2018. en-2018.pdf.
\3\ Derek Scissors, ``Worldwide Chinese Investments and
Construction 2005-2018,'' American Enterprise Institute, accessed March
4, 2019.
\4\ CSIS China Power, ``What Does China Really Spend on its
Military?,'' March 4, 2019.
\5\ Derek Scissors, ``China Global Investment Tracker,'' American
Enterprise Institute, accessed March 7, 2019, and CEIC, ``Ecuador
Foreign Direct Investment: America,'' March 7, 2019.
\6\ Human Rights Watch, ``The Costs of International Advocacy:
China's Interference in United Nations Human Rights Mechanisms,''
September 5, 2017.
\7\ Ted Piccone, ``China's Long Game on Human Rights at the United
Nations,'' Brookings Institution, September 2018.
\8\ Ted Piccone, ``China's Long Game on Human Rights at the United
Nations.''
\9\ Note: Meng Hongwei is now detained in China for alleged
corruption.
\10\ Sunny Chao, ``Interpol, Headed by China's Police Vice-
Minister, Abuses Red Notices to Track Down Dissidents Overseas,'' Epoch
Times, May 17, 2018.
\11\ North-South Institute, ``The BRICS at the WTO Doha Development
Round,'' September 28, 2009.
\12\ International Monetary Fund, ``IMF Executive Directors and
Voting Power,'' March 5, 2019.
\13\ International Monetary Fund, ``IMF Executive Directors and
Voting Power.''
\14\ Sue-Lin Wong, ``China Launches New AIIB as Power Balance
Shifts,'' Reuters, January 15, 2016.
\15\ Asian Infrastructure Investment Bank, ``Financing Asia's
Future: 2017 AIIB Annual Report and Financials,'' 2018.
\16\ Derek Scissors, ``China Global Investment Tracker,'' American
Enterprise Institute, accessed March 5, 2019.
\17\ Jonathan E. Hillman, ``How Big Is China's Belt and Road,''
Center for Strategic and International Studies, April 3, 2018.
\18\ Nadege Rolland, China's Eurasian Century? Political and
Strategic Implications of the Belt and Road Initiative, National Bureau
of Asian Research, May 23, 2017.
\19\ Thomas J. Christensen, ``The Advantages of an Assertive China:
Responding to Beijing's Abrasive Diplomacy,'' Brookings Institution,
March 25, 2011.
\20\ Providing for Peacekeeping, ``IPI Peacekeeping Database,''
March 4, 2019.
\21\ Yan Xuetong, ``From Keeping a Low Profile to Striving for
Achievement,'' Chinese Journal of International Politics 7, no. 2
(Summer 2014): 161.
\22\ Zhang Liwei, ``Zhongguo waijiao fengge zhuanxing xu jinshen,''
[Prudence must be practiced when changing China's diplomatic style],''
Financial Times, December 17, 2013, and Yan, ``From Keeping a Low
Profile.''
\23\ ``China Lands First Bomber on South China Sea Island,'' Center
for Strategic and International Studies, May 18, 2018, and Thomas
Shugart, ``China's Artificial Islands Are Bigger (and a Bigger Deal)
Than You Think,'' War on the Rocks, September 21, 2016.
\24\ Ankit Panda, ``South China Sea: What China's First Strategic
Bomber Landing on Woody Island Means,'' Diplomat, May 22, 2018, and
Asia Maritime Transparency Initiative, ``Woody Island,'' Center for
Strategic and International Studies, March 4, 2019.
\25\ Center for Strategic and International Studies, ``China Lands
First Bomber on South China Sea Island.''
\26\ Gordon Lubold and Chun Han Wong, ``China Positions Missiles on
Disputed South China Sea Island,'' Wall Street Journal, February 17,
2016.
\27\ Center for Strategic and International Studies, ``China Lands
First Bomber on South China Sea Island.''
\28\ Liu Zhen, ``China Just Finished a Month of Unannounced Drills
in the South China Sea to Test Its Wartime Command System,'' Business
Insider, February 21, 2019.
\29\ Ministry of Foreign Affairs, ``Wang Yi: ``Wang Yi: shuanggui
silu shi jiejue nanhai wenti zuiwei xianshi kexing de banfa'' [Wang Yi:
`Two- track thinking' is the most realistic and practical way to solve
the South China Sea problem],'' April 21, 2016.
\30\ Xinhua, ``Zhongguo waizhang wang yi jiu suowei nanhai zhongcai
ting caijue jieguo fabiao tanhua,'' [Chinese Foreign Minister Wang Yi
makes statement about the results of the so-called South China Sea
Arbitration Tribunal],'' July 12, 2016.
\31\ Department of Defense, ``Summary of the 2018 National Defense
Strategy,'' 2018.
\32\ Guardian, ``Philippines to `Set Aside' South China Sea
Tribunal Ruling to Avoid Imposing on Beijing,'' December 17, 2016.
\33\ Eijas Ariffin, ``The Philippines and China: Two Years Since
the PCA,'' ASEAN Post, July 13, 2018.
\34\ Manuel Mogato, Michael Martina, and Ben Blanchard, ``ASEAN
Deadlocked on South China Sea, Cambodia Blocks Statement,'' Reuters,
July 25, 2016.
\35\ Economist, ``Laos Ushers Through ASEAN Statement,'' July 29,
2016.
\36\ ChinaPower, ``How Much Trade Transits the South China Sea?,''
March 4, 2019.
\37\ Jongryn Mo, ``China's Changing Economic Leverage,'' Wall
Street Journal, December 14, 2010.
\38\ South China Morning Post, ``Chinese Tourists Returning to
South Korea After Missile Tensions Cool,'' May 2, 2018.
\39\ South China Sea Working Group, ``A Blueprint for Cooperation
on Oil and Gas Production in the South China Sea,'' Center for
Strategic and International Studies, Asia Maritime Transparency
Initiative, July 25, 2018.
\40\ South China Sea Working Group, ``A Blueprint for Fisheries
Management and Environmental Cooperation in the South China Sea,''
Center for Strategic and International Studies, Asia Maritime
Transparency Initiative, September 13, 2017.
\41\ Ralph Jennings, ``China and Vietnam Explored Almost a Decade
Together for Oil. What Went Wrong?,'' Forbes, April l9, 2018.
\42\ Liu Zhen, ``China and Brunei to Step Up Oil and Gas
Development in Disputed South China Sea,'' South China Morning Post,
November 19, 2018.
\43\ Manuel Mogato, ``China Backs Joint Energy Development with
Philippines in Disputed Sea,'' Reuters, July 25, 2017.
\44\ This analysis is based on the full content regarding the SCS
from 2013 to 2018 under the ``Leadership Activities'' category in the
People Data (data.people.com.cn). The database collects data from
official media and websites.
\45\ For the details of the legal positions, see Law of the
People's Republic of China on the Exclusive Economic Zone and the
Continental Shelf, June 26, 1998; United Nations Convention on the Law
of the Sea, and China's Statement upon Ratification. For a thorough
analysis, see Peter A. Dutton, ``Maritime Disputes and Sovereignty
Issues in East Asia,'' Testimony before the United States Senate
Committee on Foreign Relations, July 15, 2009.
\46\ Ying Yang, ``Zhuanshu Jingji Qu Zhidu Yu Junshi Huodong de
Falv Poxi'' [An analysis of laws and military activities regarding the
Exclusive Economic Zone], Social Science Journal no. 5 (2017): 118-24;
Zirong Yang and Feng Xiao, ``Hangxing Ziyou Jue Bushi `Junshi Huodong
Ziyou'' ' [Freedom of navigation is not freedom of military
activities], Jiefangjun Bao, May 12, 2016, and Cheng Zhao, ``Meishi
`Hangxing Ziyou' Chongji Guoji Haiyang Zhixu'' [American `freedom of
navigation' disrupts international maritime orders], Renmin Ribao, July
27, 2016.
\47\ Lei Hong, ``2016 Nian 7 Yue 8 Ri Waijiaobu Fayanren Hong Lei
Zhuchi Lixing Jizhehui'' [July 8th, 2016 the Spokesman of the Foreign
Affairs Ministry, Hong Lei, hosted regular press conference], Foreign
Affairs Ministry, July 8, 2016, and Ziwen Zhang, Song Qu, and Yang Bai,
``Nansha Diaojiao Jianshe Shu Zhongguo Hefa Quanli'' [To construct on
the Spratlys is China's legal right], Renmin Ribao, July 25, 2016.
\48\ James Kraska, ``Sovereignty at Sea,'' Journal of the
International Institute of Strategic Studies 51 (June/July 2009): 13-
18.
\49\ Kraska, ``Sovereignty at Sea.''
\50\ Even if the U.S. regional maritime presence is not reduced,
but rather shifted to different zones, U.S. concessions in the face of
Chinese coercive diplomacy would still cause anxiety among U.S. allies
about the United States' willingness to absorb costs to stay active in
the region and protect its allies' interests.
The Chairman. Thank you.
We will now go to a round of questions. I am going to take
just a brief shot here at the beginning.
Dr. Mastro, that was an interesting observation you made
regarding China's work around the world where they build
infrastructure. They are really focused on that. We see that
everywhere where we go where their hands are involved in that.
And interestingly, our hand is there too, but instead of
infrastructure, it is on humanitarian aid.
What do you think about the balance of the spending, our
doing it on humanitarian aid and their doing it on
infrastructure building? How would you address that?
Dr. Mastro. Mr. Chairman, I think this really highlights
the point of the fact that we need to look at our own
comparative advantages instead of trying to respond to China by
doing exactly what they do. So a lot of countries do have this
demand for infrastructure, and I think the United States needs
to get more involved in that game. But, on the other hand,
humanitarian aid, assistance, disaster relief--these are some
of the ways that the United States has provided leadership in
the international system that are to the benefit of other
nations and where China is actually relatively weak. And so I
think we should be doing much more of this humanitarian aid and
highlighting to the countries around the world that this is a
service that the United States provides that China does not
provide.
The Chairman. Do you agree that--what I find--I do not know
if others find this too, but that particular item, and that is
us doing humanitarian things, the Chinese doing infrastructure
things where they are actually trying to get their hands on
something in a country, is becoming better and better known
around the world. Each of us, the United States and China, is
developing a reputation in that regard. Do you agree or
disagree with that?
Dr. Mastro. I agree with that. I think in general China
prefers weaker partners, and that is another fundamental
difference between us and the Chinese. Now, the jury is still
out on how successful their strategy is going to be because I
think countries are learning that over time it is not
beneficial for them to be in that weaker position vis-a-vis
China as the Chinese are willing to use coercion to ensure that
their will is accommodated.
But those countries need alternatives. For example, one of
the areas the BRI, the Belt and Road Initiative, first entered
into was Central Asia. This is not a place where China was
replacing the United States. We were not present not only sort
of politically and militarily, but also economically. So we
need to be able to provide countries with alternatives to this
cheap investment.
The Chairman. Senator Menendez.
Senator Menendez. Thank you, Mr. Chairman.
Thank you both for very thoughtful testimony.
Let me say it seems that there are as many opinions
regarding China's global intentions as there are analysts, with
some saying that it is strictly economic, while others saying
they seek to change the global system of governance, and still
others asserting that China only wants to achieve regional
hegemony.
So I would like to ask both of you, in your view, what does
China want in the near term, in the long term, and why? And
secondly, what are in your views the three most important
things the United States can do to protect its interests in all
of its dimensions vis-a-vis China?
Senator Talent. You have really asked a $64 question,
Senator, which is what is the ultimate object of these
policies. I refer in my statement to the fact that they are
seeking a kind of hegemony in East Asia, but what does that
really mean? I think I want to answer that with reference to
one of the reasons that they are doing it. In my statement, I
talk about sets of reasons. One set of reasons is nationalistic
and historical.
So a Japanese scholar said to me a few years ago when I was
visiting, he said you have to understand we view the world
horizontally and they view it vertically. So we view the
international order as one in which nations relate to each
other basically according to agreed-upon rules and resolve
disputes according to those rules and resolve them peacefully
where there are no rules, negotiate peacefully.
He said they view the relations between nations as one in
which the larger and more powerful nations naturally get the
benefits. And if you think in terms of the history, their way
of looking at the world has actually been the predominant way
in which nations have related to each other through most of
history. I am not going to even attack them for this. And I
think they are more comfortable in that kind of a setting just
as we are more comfortable in ours.
The order that we and our allies and most of the world has
built comports with our values. We believe it preserves the
peace, and it is one in which we have prospered and, as Dr.
Mastro said, many nations have had an opportunity to prosper.
So I do think as an ultimate objective they want to move
the world more in the direction of their view of how nations
ought to relate to each other.
Senator Menendez. Any suggestions on the top two or three
things we should be doing?
Senator Talent. Well, look, I have to say I put an
attachment to the Senators, which we got from PACOM a few years
ago, showing how the balances of forces in the region has
changed from 1999 to 2016. And it shows the disproportion in
terms of Chinese numbers, platforms, ships, planes, et cetera
in the region.
I think we and our allies have to think very thoughtfully
about how we are going to begin effectively redressing that
balance because I think I am very concerned that if we do not
effectively deter kinetic aggression in the region better than
I think we are doing now--I agree with Dr. Mastro that
operationally we have a lot of advantages. But if we continue
to allow the balance of power to shift, there is a danger that
they may get opportunistic and may move quickly in some area.
And I am really concerned about Taiwan, for example, becoming a
flashpoint. What we do not want is a confrontation to become
escalating armed aggression.
So the point is that--and I will be try and be quick. The
armed services, by preventing that, are also the foundation for
the tools of soft power to work. So I would say we need to
restore the deterrent more strongly. We need to build tools
that allow us to get our narrative out, which we are not doing
effectively. I think you have laid the basis for that with
ARIA. And I would work on how the State Department can be more
effective in that.
And then I think we have to think very strongly about how
we can make the WTO more effective and on a multilateral basis
in dealing with the broader set of tactics. WTO tools are not
sufficient.
[The information referred to follows:]
The Build-Up of China's Military Forces in Asia
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Senator Menendez. Let me turn to Dr. Mastro.
Dr. Mastro. I think China, as I mentioned, wants to
dominate the Indo-Pacific, but it just wants veto power
everywhere else. So I do not think they really want to replace
the United States. They just want to displace the United States
in order to widen their own freedom of maneuver. China wants,
in capitals around the world, countries to ask themselves,
first, what would China think and, second what would the United
States think.
I would say in terms of the global system, they do want to
change it, but they do not want to overthrow it. It is not that
they hate all aspects of it. Some they benefit from. But the
aspects that they do not benefit from, they either render those
ineffective like in terms of the human rights commissions or
they try to change those institutions from within.
In terms of the three things that we should do about it,
first I just want to double down on restoring the deterrent.
Right now, this is China being deterred. We are seeing the best
of Chinese behavior right now, and that is because China does
not have faith in its own military capabilities. But that is
not going to be the case forever. They have embarked on a
massive military reform program that, by their estimation,
should be done by 2025. I am very concerned if the United
States does not make some significant changes, not only in the
quality of some of our platforms, but the quantity, because
that becomes very important in conflicts, that China is no
longer going to be deterred by that time frame.
The second thing I think we need to do is invest at home.
Now, I am a military specialist, but I look at the economic
power as the basis for U.S. power in the world. I heard a
statistic yesterday that China is now graduating more data
scientists out of one university than we are in all of our
universities combined. And so I think providing the necessary
incentives for research, development, and improving our
education at home is one way we need to compete.
And lastly, we need to get serious about global leadership.
In my view an America First strategy is a very Chinese
strategy. We need to be thinking more about our role in the
world, and that includes building new institutions. I am not
surprised that institutions built decades ago cannot handle
what to do about cyber, what to do about attacks in space, and
other norms of behavior in terms of the standards for AI, for
example. So we really need to get serious again about building
institutions and enhancing our global leadership.
Senator Menendez. Thank you.
The Chairman. Thank you, Senator Menendez.
Senator Rubio.
Senator Rubio. Thank you both for being here.
There is a concept: war of choice. It is where a nation
sort of picks a time and place of their choosing in which to
engage militarily--somewhere where they think they can wrap up
the conflict quickly, but they do it, first, to project power,
to sort of send the message that we have capability. Second of
all is to build capacity, to learn where their weaknesses are
and build upon it.
What, in the short- and mid-term, do either of you think is
a risk of a war of choice by China, whether it is a border
conflict with Vietnam that they could quickly wrap up, a Taiwan
contingency, but some military engagement in which they are
able to choose the timing and the place of it, they can wrap it
up before there could be U.S. or other invention, and in the
process sort of prove to the world some muscularity, some of
their capability, and also learn a little bit about their
weaknesses, in essence, use it almost as a low-risk military
exercise?
Dr. Mastro. Sir, I think the likelihood of that is quite
high, especially in the timeline that I laid out. So one of the
big issues with the military reforms was that the Chinese
military has never conducted a joint operation before, the idea
that the air force and the navy could work together. In most
contingencies, such as Taiwan, the South China Sea, and the
East China Sea, that is what is necessary.
So when Xi Jinping came into power, he took a look at the
military forces and decided they were not ready to fight and
win. And so he has this phrase of preparing for military
struggle, and that was the whole reform period.
In my view, they need to test those capabilities against
opponents that they know they can win against because there are
also domestic political factors here. The Chinese people are
paying attention to how much money they are spending on the
military, even as the economy is slowing. So it would look very
bad for the Chinese not to perform well. They need to make sure
that they can perform well before they take on a reunification
with Taiwan or a U.S. treaty ally that can bring in the United
States.
My bets are on a naval skirmish with Vietnam. I think it
probably will not be on the border because they are not
practicing as much ground operations as they are air and naval
operations. But I think we might see some more forceful actions
after they militarize the islands in the South China Sea in
which they try to occupy some of the islands that are currently
occupied by others.
Senator Talent. Yes. I think they are legitimately,
sincerely concerned about their operational capabilities. This
is a constant theme. It is very significant that they have
undertaken this reorganization of the armed forces. It is their
parallel to the Goldwater-Nichols reforms that we engaged in
about 35 years ago. Xi Jinping constantly talks about the need
to train for combat. They talk about the five incapables, their
concerns about what their military can do operationally, and I
think they respect the operational effectiveness of the United
States.
So I think they would like to get through that
reorganization before they actually test it. I think they may
be underestimating how long it is going to take to really make
that work. They may say it is done, but they may not really
have matured as a force. But I think when that is done, I
agree, I think they will attempt something probably with one of
their neighbors. I do not think Xi Jinping--I mean, he talks
about having a world-class military in 2035. He is going to be
in his 80s. I do not think even if he thinks he is going to be
in power, that he wants to wait that long. So I think they will
be patient until they work their way through that. They could
continue to be patient, as long as they feel they are winning
by the salami slicing, but they could also move.
And I will just add this. One of the dangers of the United
States moving as you all and the executive branch have moved in
the last few years to rebuild the tools, to come up with a
relevant doctrine, to build new institutions is the more
effectively they see us doing this and, in particular, if we
are successful in some local kinds of confrontation, the
greater danger that they may decide to express their intentions
and their ambitions militarily.
And there is a parallel for that, of course, in the late
1930s, early 1940s when we used economic tools very effectively
against another rising Asian power, and they decided that they
would try and take us out. Now, I do not think that they are
planning that. I do not think they want that, but I do not
think it is impossible either.
The Chairman. Thank you, Senator Rubio.
Senator Coons.
Senator Coons. Thank you, Chairman Risch, Ranking Member
Menendez, for organizing this briefing, for your compelling
opening statements.
And thank you, Senator Talent, Dr. Mastro, for sharing your
expertise with us today.
It is hard to think of any challenge more consequential to
the world we live in today and the world we will live in
tomorrow than an ascendant China. If politics is to stop at the
water's edge, then surely this committee can and should work
together with our administration to develop a sustained and
bipartisan strategy for dealing with China. And I look forward
to working with members of this committee to shape legislation
that will form our country's response to China's challenge.
Last year, I worked closely with a number of members of
this committee to pass the BUILD Act, which will create a 21st
century Development Finance Corporation that will guarantee
roughly $60 billion a year in private sector investment. It has
revamped tools with our private sector to be more effective.
That finance corporation will be up and running by October, and
I look forward to working with the administration and members
of this committee to ensure it provides a transparent
alternative to China's Belt and Road Initiative through
American investments consistent with best international
practices in labor, environment, and social standards.
China will be holding a major Belt and Road conference in
April. I think international participants should know there are
alternatives to China's much larger Belt and Road Initiative.
Dr. Mastro, if I could, how should we ensure that
international officials who attend that conference understand
the risks of Chinese investment and that the United States has
new tools available to facilitate investment in developing
countries?
Dr. Mastro. Sir, thank you for that question.
I think the first issue--and it is a very difficult issue,
and I do not mean to suggest that this is the case for all
leaders, but in some cases in the Belt and Road Initiative, it
is not that the leaders of places do not know, but in some
cases they are being bribed by the Chinese to accept the
Chinese money over other sources of money that might be better
for their country. I think the bigger issue here is a good
governance issue that is going to be difficult for the United
States to compete in some countries where leaders would prefer
to take whatever the Chinese are giving them over what the
United States gives them.
But there are many that want higher quality, even
infrastructure. I spent a couple weeks driving through Central
Asia, and just anecdotally people would say, ``The Chinese
built this road. It will last us 4 or 5 years. We wished
someone else was willing to build it.''
So in terms of getting the word out about what the United
States is doing, especially partnerships with the private
sector to encourage more private investment abroad, I think a
lot of that is going to fall on the State Department in terms
of our relationships with these countries. We could even think
about holding our own types of fora to bring different
countries together or an institution that could bring countries
together to focus on good governance, good practices in terms
of infrastructure.
Also, I think there is an aspect of that in which the
United States has to ensure that it has its own house in order
in terms of infrastructure to provide that positive example to
other countries around the world.
Senator Coons. Dr. Mastro, I agree with the response you
gave to an earlier question that sort of posited should we be
investing more in infrastructure or sustaining our humanitarian
work around the world. And I think the answer is to do both and
do them better and make sure that our programs are efficient
and targeted. But the good will that we have earned, the close
alliances and values-based partnerships we have earned through
effective humanitarian relief around the world we have to also
complement by showing up. Most African heads of state I have
met with in the last 8 years would prefer American investment,
American technology, American partnership, but we have gotten
out of that work. I think we need to reengage and compete.
Senator Talent, thank you for your service on the
commission that you described. Your 2018 report includes ten
key recommendations, including requiring a number of reports
from different parts of our government to ensure that every
major U.S. Government department and agency is appropriately
preparing for the challenges that China presents. I will give
just quick examples.
The report recommends the DNI conduct an assessment of
China's access and basing facilities along the Belt and Road
Initiative, and it directs the Department of Defense and
Homeland Security to examine the implications of changes to the
Chinese coast guard's command structure.
Given this robust reach and range of recommendations, would
you recommend that Congress take up debate and pass a statute
directing that these recommendations be implemented to ensure
that they are heard and followed in the executive branch?
Senator Talent. Yes. I fully supported the recommendations,
and you could do it, I think, in appropriations or by statute,
whatever would be a good way of doing it. I do think that we
have to be aware and assess constantly what the intentions of
the Chinese are in a number of different areas. And we are
developing that capability now. Again, we are in a time of
transition, but we have to be able to make those assessments.
If I may just comment on your earlier question very
briefly, I think there is a real opportunity for us here with
the BUILD Act because, as the committee knows, the Chinese
narrative regarding One Belt One Road is in some trouble. There
are a number of different countries--you mentioned Africa, Sri
Lanka, a whole lot of places--where people are having a
hangover after doing these deals and realizing what it means in
terms of their debt. They see Chinese companies bringing in
Chinese workers. They see environmental standards degraded.
And so I think in terms of the competition and the policy,
we could do a lot with a little if we could amplify the
narrative while we were doing it. And I hope in implementing
and overseeing the implementation of the BUILD Act, you pay
real attention to using what we are doing. And it is a very
legitimate narrative that we are doing it the right way and
helping people.
And I would not underestimate the impact on Beijing of even
small investments in strategic places. They are really throwing
their weight around in Southeast Asia now, and if we go in
there with some investments in a different model, the lights
would go on in Beijing at night and they are going to have to
figure out what we are doing. It is a way of countering and
occupying them and taking the initiative.
Senator Coons. The new structure of this new development
and finance institution literally encourages and allows us to
do things in a multilateral way with the Australians, with the
Japanese, with the New Zealanders, with the Scandinavian
countries. And so I think it allows us to reengage with some of
our critical allies in exactly that work.
I am looking for cosponsors for a bill that would implement
the recommendations of your report, and I hope to be
introducing that legislation soon.
Thank you both for your testimony.
Thank you, Mr. Chairman.
The Chairman. Thank you.
Senator Gardner.
Senator Gardner. Thank you, Mr. Chairman.
Thank you both for your testimony today.
Chairman, thank you very much for holding this hearing, and
thanks again for the work this committee is doing and has done
on China. We are at a true inflexion point in the relationship
between the United States and China. The questions we have to
ask: what tradeoffs will be made? What costs are we willing to
endure with those tradeoffs? Whose values will determine and
shape the future of trade, diplomacy, human rights, rule of
law?
As stated in our National Security Strategy, for decades
U.S. policy was rooted in the belief that support for China's
rise and for its integration into the post-war international
order would liberalize China. Contrary to our hopes, China
expanded its power at the expense of the sovereignty of others.
The challenge before us now is identifying what policy
tools the United States has at its disposal and how we shape
and execute a comprehensive and effective strategy to deal with
Beijing and to chart a new course for U.S.-China relations.
This is why in the 115th Congress, Senator Markey and I
held four hearings in our subcommittee dedicated to China,
including a three-part series of hearings titled ``The China
Challenge,'' which examined how the United States should
respond to the challenge of a China that seeks to upend and
supplant the U.S.-led liberal world order. The hearings
examined security, economic, and human rights implications of a
less than peaceful rise by China.
At one of our hearings, Dr. Graham Allison of Harvard
University astutely observed as realistic students of history,
Chinese leaders recognize that the role the United States has
played since World War II as the architect and underwriter of
regional stability and security has been essential to the rise
of Asia, including China itself. But they believe that as the
tide that brought the United States to Asia recedes, America
must leave with it. Much as Britain's role in the western
hemisphere faded in the beginning of the 20th century, so must
America's role in Asia as the region's historic super power
resumes its place.
That is why Senator Markey and I led the passage of the
Asia Reassurance Initiative Act, which was signed into law on
December 31st, 2018. We will not simply allow America to recede
with the tide.
In order to deal with an assertive China, we first and
foremost need a stronger network of allies and partners in the
Indo-Pacific, as you have stated. That is exactly the intent of
the Asia Reassurance Initiative. And I hope the administration
will fully fund and fully implement the strategy and the
funding that is mandated by the legislation.
We have talked in this hearing about the needs for
security. It authorizes dollars for an Asia-Pacific security
initiative, counterterrorism, maritime domain awareness, South
China Sea freedom of navigation operations. It authorizes
legislation to address intellectual property theft in China,
legislation dealing with cyber initiatives, legislation that
could create a cyber league of the Indo-Pacific states to
counter China's behavior when it comes to their approach to the
Internet and the cyber field.
This is an opportunity for this Congress to build out on
that. China has no qualms or doubt about the direction that it
is headed, the leadership that it seeks, the dominance that it
pursues. Many of our values are and will be in direct conflict
with China, but we must build on the strategy of the Asia
Reassurance Initiative, be ever present throughout the region,
and never forget the long-term interests of the United States
will be met and delivered or denied in Asia. A great power
competition defined American exceptionalism. We will not let it
write the last chapter of U.S. power.
The question I want to start with is this. If we simply
want China to be a less concerning business environment to do
business in--we talked about this yesterday, Dr. Mastro. If we
simply want China to be a less concerning place to do business
in, to deal with, and yet we want more trade, we want more
opportunity there, we are simply tying ourselves to a nation
whose human rights and governance is at odds with our own,
making it more difficult to extract ourselves later on or to
influence future behavior when they do not change their
behavior. Can we do both? Senator Talent, Dr. Mastro?
Senator Talent. How do we influence their behavior in terms
of their economic----
Senator Gardner. If our interest is simply to make more
trade deals with them, to invest more with them, are we simply
making a deal with a country whose human rights are at odds
with ours, whose beliefs and rule of law are at odds with ours,
or can we use that to change their behavior in a significant--
--
Senator Talent. Oh, I think we can use economic tools to
change their behavior. I think the problem--and the
administration is exploring doing that. I mean, it is doing
that. It is using the leverage and the tools that it has
available. And I think we have a lot of clout in that
standpoint because we have a big trade deficit with China. We
are a big customer. In other words, to the extent that trade
becomes an issue, they have more to lose than we do, and I
think that they view it that way.
I think the problem we are going to have with this is that
they know that that economy needs to grow not only so that they
can get the resources they need to support the objects of the
state, to fund the military buildup and the others, but also
because the Chinese leaders are very well aware they need a
measure of legitimacy with the people. They cannot do it all
through repression. And as you know, the deal is the Chinese
Communist Party continues to rule the country, and they deliver
a better quality of life to the Chinese people.
Now, they are not going to engage in the economic
liberalization that would mean giving up control of vital parts
of the economy by the Chinese Communist Party. So they have got
to get that wealth somehow. And what I have said very often--I
have written this in additional views on commission reports--I
think they are going to be moving in the direction of more of
the same kind of illicit activity we have seen in the past
because they have to figure out ways to get growth.
I think the economy is slowing more than they admit. I
think the imbalances are a big problem. They have a lot of
weaknesses. I think their currency is in some trouble.
I do not think deals with them are the way to go, and I do
not think it is going to change behavior. I do not think they
have much choice but to continue trying to do what they are
going to do because they are not going to take the next step to
have a truly liberal market economy.
Senator Gardner. Dr. Mastro.
Dr. Mastro. Sir, I think one of the difficulties of the
United States leveraging economic power is like economic
sanctions. One country doing it alone does not have a great
impact because China can substitute its trade by going
somewhere else. And I do not think they are going to make some
of the structural reforms that we want because primarily the
party wants to stay in power, and there is no amount of
threatening we can do that would cause them to make changes to
human rights or to the economy domestically if they think it
will undermine their power.
So I really think this is an area where coalitions matter
because China will only stop its behavior when it does not
work. And so today they are able to engage in the theft of IPR
or to force foreign companies to give them technologies and
information because all countries are allowing it. And so I
think the focus of our efforts should be less on China and more
on ensuring that we are on the same page with private business
and companies. I think in the United States we now are, though
that was not always the case. But private businesses are not on
the same page with their governments elsewhere in other
countries, in some cases with our allies and partners.
So if the international community somehow could come
together and say just because China is only targeting the
Philippines today or only targeting South Korea today or only
targeting the U.K. today, we do not want to take the economic
cost associated with that. So we all turn a blind eye. And the
bottom line is unless the United States, the most powerful
country in the world, stands up to China in these areas, no
other country is willing to do so.
I think it is a step in the right direction for the United
States to be willing to absorb some costs itself economically
to signal to China that this behavior will not be tolerated.
But in the end, we really do need to think about the
international system and building more pressure globally on
China to stop, whether it is cyber-enabled espionage or the
stealing of intellectual property.
Senator Gardner. Thank you both.
Thank you, Mr. Chairman.
The Chairman. Thank you.
Senator Romney.
Senator Romney. Thank you, Mr. Chairman and Ranking Member,
for calling this hearing. Most instructive and informative.
And I appreciate very much both of you being here and
testifying today and the work that you are doing on an ongoing
basis.
It is said, obviously, that demographics are destiny, and
they have what? Approaching 1.4 billion people. And so they are
going to be about four times our size. What that means is that
ultimately their economy will be larger than ours. At some
point, it will be substantially larger than ours, and their
investment in the military could be greater. Their investment
in technology could be greater, education, and so forth.
So in a setting like that, in my view, the only way that
one is able to succeed and prevent that from occurring would be
for us to link arms in a very strong way with our allies around
the world that share our values, economic values, human rights,
and so forth. And that allows us to have the same economic and,
if you will, demographic clout that it will have.
I am concerned that there is a perception that somehow
China will be dissuaded from action by virtue of shame or by
being called cheaters or the people who thieve intellectual
property. My perception is the things that we consider to be
shameful, they consider to be praiseworthy and laudable and
they celebrate. And they only will respond to things which they
believe are in their self-interest.
In changing the perception of self-interest, I believe it
is essential for us, as you both indicated, to have a much
stronger series of actions to strengthen our relationship with
allies. We have all said that, but I am interested in your
perceptions as to what things we can do in the region and
globally to specifically strengthen our associations with our
allies militarily and economically and diplomatically such that
we present a much stronger face to China, such that they
recalculate what is in their self-interest. They decide that
instead of fighting and pushing that they are better off to
work together with us. So I would appreciate your thoughts
about specifically the sense we have now.
Some of us celebrate that the EU is trouble. I do not
celebrate that. I want the EU to be stronger. We tell nations,
hey, you go off and do your own thing. No, no. We need to all
come together because what is in the best interest of the
United States of America is also in the best interests of these
other countries, and combining with them is essential for us
long-term.
So how do we strengthen those ties? What should be our
priorities? What actions should we take to be stronger with our
alliances as opposed to more atomized?
Dr. Mastro. Well, sir, I will answer your question.
First, I just want to highlight I completely agree about
the economic power issue. China's economy might be bigger than
that of the United States, but that of the United States and
the EU, it will not be. So thinking in terms of these
coalitions is very important.
And going back to the cyber-enabled espionage, this is a
perfect example of what I highlighted of how they exploit
weaknesses in the system. This was something that countries did
not really do before until China started doing it on such a
grand scale. So we have to find our weak spots before the
Chinese do in a lot of cases.
In terms of improving our relationships with allies and
partners, my concern is I do not think we are really trying to
do that right now. In a lot of cases, it really just requires
good diplomacy, and especially with the EU. One of the issues
is that our European partners would say that they do not really
have any security concerns with China. You know, China is an
economic partner to them, and the security concerns lie in the
region and they lie between China and the United States and no
one else.
So I think what we need is less a China strategy and more a
new type of U.S. foreign policy that with it highlights how
U.S. leadership in the world is beneficial for everyone and
how, if China undermines that leadership in Asia, for example,
that will have great impact on what the United States and the
European Union can do in regions that are potentially more
important to our European allies.
I argue that we need to be more entrepreneurial in our
approaches, but I do not have something amazingly innovative
for you besides the fact that I think we need to show up. We
need to invest more in our diplomatic efforts in the region,
invest more in economic investment in Europe, and try to
convince them that the security issues that are existent in
Asia impact them as well.
Senator Romney. Thank you.
Senator Talent. I think the most effective immediate
reassurance of our allies in the region and potential partners
and the thing that would cause them to want to work with us
comes down to something pretty simple, Senator, which is
rebuilding the armed forces to the point where we can increase
our forward presence in the region. In other words, that will
be a sign of our commitment. That will assure them that we are
capable of deterring actual Chinese aggression, which Senator
Rubio asked about, and it is really the indispensable attribute
of a world leader.
I think it can have a similar impact that Reagan's rebuild
did in the 1980s. The armed forces both perform a really
important function, but also send a really important and
reassuring message and will suggest to other countries like the
ASEAN countries that the wind is still blowing in America's
direction. They do not need to and should not cut a deal with
China.
Now, one specific economic tool the commission recommended
is instituting with other countries what is called--and I had
to get it to read it because this is not my area of expertise--
a non-violation, nullification, or impairment case against
China. There is a provision in the WTO that permits countries
to bring a sort of global case against a country, not based on
any specific violation but saying that a number of different
actions taken together--Mr. Portman probably could give you
chapter and verse on this given his experience--is nullifying
the benefits of WTO membership to a number of other countries.
Dr. Mastro mentioned the fact that we have not updated or
worked on new institutions that are appropriate for 21st
century challenges like this one, and I really think--I know
this is part of your remit and also I guess the Finance
Committee--to look at the tools of the WTO. And it is going to
be much easier--it is still hard, but much easier to use the
existing institution in innovative ways than it will be to try
and come up with some new institution for controlling illicit
economic activity. And this is what the commission recommended.
Senator Romney. Thank you.
The Chairman. Thank you.
Senator Cardin.
Senator Cardin. Well, let me thank both of our witnesses.
Clearly, as the chairman and ranking member stated in their
opening statements, there are multiple issues and challenges in
regards to our relationship with China.
But I want to follow up first, if I might, on the trade
front. We had a hearing yesterday in the Finance Committee on
WTO and how it has evolved over the last 25 years and the fact
that when we entered WTO, we had a lot of hope that it would
deal with non-market economies in a way that we would have a
more level playing field as these economies emerged.
And then shortly after we established WTO, we had the
discussion about China's accession to the WTO. And it was a
controversial issue here in Congress, and we recognized that we
had to deal with China. We wanted to use international norms to
deal with China, and we were hopeful that by joining the WTO,
it would evolve over time to deal with the challenges of non-
market economies. At the ministerial meetings over the last
decade, there has virtually been no progress made on dealing
with these issues.
So I sort of want to get at least your views as to what
should be our agenda, the bilateral discussions between the
United States and China, the multilateral discussions. There
will be a ministerial meeting in 2020 with the WTO. But we have
allowed China to emerge as a major economic power without
having to comply with normal standard trade rules. I would
argue its number one objective is to be a world dominant
economic power and then to use that for its influences
globally. But it is focused on becoming a world economic power,
and we are allowing that to take place without having a fair,
level playing field.
I applaud the President's efforts in the bilateral
discussions to do this. It is going to be challenging to see
that happen if we do not have multilateral support for our
discussions with China. And of course, the United States is not
part of TPP, which would have given us a broader bargaining
unit in order to deal with the challenges of China.
I give you one example that has come to my attention of an
immediate problem is that China uses Mongolia's cashmere as a
way to get value for export, and Mongolia does not have the
right to directly use the general system of preferences to get
their cashmere here in the United States. It is an issue we are
going to work with a separate bill. But it just shows how
strategic they are in every industry to try to get an economic
advantage and control that through its central government
rather than through market forces.
How can we be strong with our trading partners to change
the international trading rules so non-market economies do not
have the type of advantages they have today as witnessed by
China's growth?
Dr. Mastro. Well, sir, I think this really highlights a
point from the previous question about what the United States
can do to reassure, and while I think obviously I believe in
the effectiveness of the military as a tool of national power,
a lot of countries in the world and many of our allies and our
partners do not face the military threat of China. They are
primarily concerned about trade and economic issues, and they
want to see leadership from the United States in this area.
But China is the number one trading partner of many of our
allies. I think China is one trade agreement away from having
more formal trade agreements in Asia than the United States.
Senator Cardin. Are we making a mistake by doing it alone,
bilateral without multilateral discussions?
Dr. Mastro. Well, sir, there are many free trade agreements
that we could do bilaterally in the region that we have not
signed. We also need to move forward. Maybe TPP was not the
best answer, but we do need to take seriously the economic
arrangements that we have with countries around the world. And
that is difficult given that the United States has to be
serious about free trade and there are some protectionist
tendencies----
Senator Cardin. And how do we deal with the local pressures
of commerce, the light, inexpensive products? So they will take
the short-term gains of having inexpensive products enter our
market when we lose the long-term capacity of economic growth.
Dr. Mastro. Well, sir, I would just say that is a very
difficult question. And one of the big issues, for example, in
terms of pressuring China to make market reforms like not
requiring joint ventures, for example, is if the United States
is the only one doing it, U.S. businesses are going to be
harmed and less competitive compared to businesses from other
countries. And so in this back and forth between China and the
United States, we really have to push other countries as well
to take as much of a stance on these issues or else we will be
more at a disadvantage if we are the only ones doing it.
Senator Cardin. I would just conclude on this. I agree with
that. But it seems to me the way this has been set up with just
the bilateral discussions, while we are having trade
disagreements with our traditional trading partners on other
issues such as aluminum and steel and auto parts, that it puts
us in a weaker position in trying to get the type of good
governance concessions in the trade discussions with China that
we desperately need to have.
One of the good things about TPP was that we had a good
governance section in that bill to deal with non-market
economies because there were non-market economies in TPP. It is
going to be challenging for the United States alone to be able
to negotiate those types of terms in a bilateral discussion.
Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Cardin.
Senator Talent. Mr. Chairman, can I just say a couple
things in response to Senator Cardin, and I promise I will be
very brief.
The Chairman. Senator, that is always a risk, but I am
going to take it.
Senator Talent. Multilaterally, I mentioned to Senator
Romney there are tools available at the WTO. They have not been
used very extensively for a number of countries to bring a case
based on global kinds of illicit activities, a range of illicit
activities. I would do that.
Bilaterally, I think we ought to set an example around the
world by enforcing our own laws. You are probably aware that
Chinese companies listed on an American stock exchange do not
comply with the rules of the SEC and the auditing requirements
because we are not permitted to audit the Chinese auditing
firms, and yet we continue to allow them to be listed. When I
saw that, I thought why in the world.
And the other thing is I think you should consider
developing tools as we get into this back and forth trade,
whether multilateral or bilateral. There are going to be
sectors of our economy that get hurt. You addressed--the farm
issue is one. But consider other kinds of tools to assist
companies that are taking damage when the Chinese react. I
think it would be an interesting tool that would empower
administrations.
The Chairman. Thank you, Senator Cardin.
I am next going to call on Senator Portman, but before I
do, I want to note that in this hearing we really have not
touched at all on the type of infusion that the Chinese have
done in our institutions, be they national labs, be they the
education system, or as you just referred to, Senator Talent,
our stock markets and that sort of thing. And that is probably
an item for a hearing in and of itself because it is so broad.
But I do want to include in the record the 93-page report
that was issued February 22nd, 2019 by the Permanent
Subcommittee on Investigations, which is a subcommittee of the
Committee on Homeland Security and Governmental Affairs,
entitled ``China's Impact on the U.S. Education System.'' It
deals with the Confucius Institutes and those kinds of things,
all of which was chaired by our own Senator Rob Portman. So I
am going to put that in the record.
The Staff Report referred to was appended to a subcommittee
hearing held on February 28, 2019 (S. Hrg. 116-30/Jacket 36158,
pp. 80-175)
[The material referred to above can be accessed at the
following url:]
https://www.govinfo.gov/content/pkg/CHRG-116shrg36158/pdf/CHRG-
116shrg36158.pdf
The Chairman. And with that, I will yield to Senator
Portman.
Senator Portman. Thank you, Mr. Chairman. I appreciate your
holding this hearing. It is another good opportunity for us to
take a broader view here. We have talked about military, soft
power, trade tools, so much to do with regard to China.
I will, if it is okay, ask a question in a moment about the
Confucius Institutes. And the chairman is right. We had an 8-
month investigation, and we found some disturbing things about
lack of reciprocity and lack of transparency that I want to
touch on with you, Mr. Talent.
Thanks to both of you and, Jim, for your service on the
commission over the years.
Just quickly on the trade issues at the WTO, a lot of good
points made this morning by Senator Romney, Senator Cardin, and
others. China has wanted to get out of non-market status for a
long time. As you know, we have been the ones that have pushed
back. We have to continue to push back. They are a non-market
economy. Unfortunately, under this new administration in China,
they have been even more focused on their state-owned
enterprises.
And we also have to deal with this issue of China self-
certifying their developing status. Because of this growing
economy that they have, they are taking advantage of what
developing countries, truly developing countries, are able to
use in the WTO system.
And so there are things that can be done, as you say,
within the system. Nullification would require us to get the EU
and Japan strongly on board. They have reason to do that. And I
agree with you that we need to be more multilateral in how we
approach it.
But I will say this administration has done the right thing
in my view with regard to the 301 case, as tough as it is for
some of my Ohio farmers and manufacturers and others. And I
hope--we all have to hope--that by the next few weeks we will
have some good news coming out of those negotiations. If so, we
will for the first time have dealt with some of the structural
issues.
You are right. We need to use our own tools more. We have a
269 percent tariff in place on rolled steel from China right
now, as an example, because we did pass legislation here 3
years ago, which we are now using much more aggressively to go
after dumping and subsidization. But it is way broader than
that, and intellectual property obviously is the focus of the
301.
On the Confucius Institutes just quickly, what we found out
was $158 million has gone from the Chinese Government into
these Confucius Institutes over the last half dozen years. And
it is amazing to me that we do not hear more from the academy
on this because you got about 100 colleges and universities
that have Confucius Institutes now. And they come with strings
attached, and I think those strings can compromise academic
freedom.
I do not know if you have looked into this much, but any
thoughts you had on that, Jim, would be appreciated. The
Chinese Government vets and approves all the Chinese directors,
the teachers, the events themselves, the research proposals,
the speakers at Confucius Institutes. Chinese teachers also
sign contracts with the Chinese Government saying that they
will follow Chinese law and conscientiously safeguard China's
national interests. Any thoughts on the Confucius Institutes?
Senator Talent. Yes. The influence goes beyond just the
Confucius Institutes because the influence of the money, the
participation--it is causing scholars in the field in some
cases to self-censor, to be very careful about what they say
because they will not have access to grants, they will not be
able to travel to China as they need to. It is a real problem.
I would encourage you even to broaden the approach and look
at the work of the United Front Work Department, which is in
charge of the Confucius Institutes. It is, I think, one of the
oldest organs created by the Chinese Communist Party. They have
hired tens of thousands of new cadres or employees under Xi
Jinping. This whole concept of sharp power--you know, we are
used to soft power, smart power, hard power. Sharp power is
gray war tactics that they use extremely effectively to
disrupt, confuse the narrative in other countries, and they are
doing it through higher ed.
I do think we should not view the Higher Academy as like
our enemy in this. I mean, they did not know what was going on
any more than many other people did.
But, yes, there is a broader narrative, and I think it is
important that the committee become aware of the facts. And
again, this is an area where we have to develop tools for
countering effectively.
Senator Portman. One of the tools--Dr. Mastro, I want to
hear from you--that we tried to develop is to have our own
ability to have a presence in Chinese universities, colleges,
educational system. We have failed in that because we have been
blocked from doing that. That is the reciprocity concern that
while you have a growth of Confucius Institutes--by the way,
there are also about 1,000 K through 12 institutions that have
Confucius Institutes primarily focused on Chinese language, as
I understand it. We focus more on the colleges and
universities, but it also is K through 12. We cannot do that in
China. In fact, we are pulling back. As of this summer, we will
have no U.S. State Department presence in terms of our own
American values and history being taught in China. Dr. Mastro?
Dr. Mastro. So I think these Confucius Institutes and in
general the department that was previously mentioned is
extremely entrepreneurial in that China combined covert
operations with public diplomacy, which is something that the
United States does not do. And this is why they have been able
to really have such influence on academic discussion to a
degree and also instruction because the main goal of this
funding is to shape the conversation about China to ensure that
people are not saying things about China in the United States
and other countries. This is a big issue about political
interference that goes against what the party wants people to
say.
I do not think, bottom line, it is bad to take any money
from the PRC, to tell universities that there might be a big
funder that comes from China and so you should not engage with
them. That might not be the right approach. But there needs to
be serious constraints on the amount of influence that China
can have so it does not restrict academic freedom. For example,
universities should be able to choose their own instructors for
these institutes. If they then, like with other donors, want to
say and we thank the People's Republic of China for their
donation, that is fine.
But this level of control and the lack of reciprocity is a
real issue. I myself have spent time in Beijing studying, and
the amount to which the foreigners have to be kept separately
from the Chinese students at that time--I cannot confirm now,
but at that time, it was illegal for me to enter a dormitory to
engage with Chinese students. So I think the United States
needs to demand much more of this reciprocity.
Senator Portman. And Chinese monitors at all those
institutions.
My time has expired, and I apologize.
On the transparency issue, just so you know, it is not so
much the fact that these schools are accepting the funding. It
is that they are not reporting it. And in fact, we think that
about 70 percent of the schools are out of compliance with our
own U.S. Department of Education rules on that. So at a
minimum, we should have reciprocity and transparency so people
know what is going on.
Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Portman.
Senator Markey.
Senator Markey. Thank you, Mr. Chairman.
Senator Gardner and I were able to pass the Asia
Reassurance Initiative that was signed by President Trump in
December. And just more and more reports coming out of China
makes it clear why we need that legislation and why we have to
work on a bipartisan basis to continue to deal with this China
threat.
This morning, the Wall Street Journal detailed an internal
Navy report stating that the United States Navy and its
industry partners are, quote, ``under cyber siege.'' This
follows an earlier report that a known Chinese hacking group is
behind a series of cyber attacks on American universities as
part of an elaborate scheme to steal research about maritime
technology.
In fact, this morning's Wall Street Journal article
references letters I sent this week to the Departments of
Defense and Homeland Security asking how they are ensuring that
sensitive and classified military information at research
institutions and universities are protected. After all, in this
age of great power competition, it should come as no surprise
that Chinese hackers are targeting academic institutions with
valuable information about U.S. military capabilities.
Dr. Mastro, as someone who has worked in academia, in think
tanks, and for the U.S. military, how well do you think our
government is doing in ensuring that sensitive and classified
material is protected at research institutions and defense
contractors and what more should we be doing to ensure that
that information is being protected?
Dr. Mastro. Sir, thank you for that question. It gives me
an opportunity to really highlight what I think is one of the
main issues, which is that many people who do not focus on
China or the China challenge are relatively naive about some of
the security challenges that come with it, whether it is having
sensitive information or research at universities in which the
main goal is the creation of knowledge for knowledge's sake or
allowing Confucius Institutes to be funded. In many cases,
people who are outside of this field do not understand those
risks. And so it is less I think that the government is not
protecting that information, but more that a lot of those
protections are not necessarily in place in some of these
places that the Chinese are able to find certain weak spots
whether it is in the networks----
Senator Markey. But bottom line, that just means we are not
doing the job. If they can find weak spots, then we are not
doing the job.
Dr. Mastro. Yes, sir. I agree. I was trying to say it more
diplomatically. But, yes, I think we are not doing the job, and
we are not having a whole-of-government approach in which
people in the business community, in academia, and all fields
and sectors understand the challenge of China.
Senator Markey. I appreciate that.
Now, last week, Eric Rosenbach, who has extensive
experience in national security, testified that it was not fair
to leave security up to universities and that DOD should do
more to help protect information. Do you agree with that?
Dr. Mastro. I do agree with that, but to be a bit
pessimistic, the DOD has its own issues with ensuring that its
own networks are protected from hacking and has its own
vulnerabilities vis-a-vis China.
Senator Markey. Good. You are becoming less diplomatic as
this question is going on. Excellent.
[Laughter.]
Senator Markey. The words just have to be said. It just has
to be said they are not doing the job, and it exposes the whole
system from top to bottom. And the Chinese are attacking and
here are the words. The U.S. Navy is under cyber siege right
now.
So I would like now to stay on the topic of China and
cybersecurity. CNN reported on Monday that rural American
telecom companies have installed equipment from the Chinese
firm Huawei within their cellular networks operating in close
proximity to a field of intercontinental ballistic missiles
outside of Malmstrom Air Force Base in Montana. According to
James Lewis, a cybersecurity expert at CSIS, the Chinese
Government, quote, ``could decide to interfere with ICBM
command and control or with ICBM personnel,'' the people
manning the missile silos.
Dr. Mastro, with the recognition that we should be cautious
about generalizing too much about the nature of the threats,
what level of threat could foreign telecommunications
technologies pose to U.S. ballistic missiles and their
associated command and control networks?
Dr. Mastro. Sir, it is my understanding from cyber experts
that the degree to which this presents a threat depends on the
exact technology, the system it is a part of, and what it is
networked into. And therefore, I think this really highlights
the need not only for the DOD to be focusing on cyber efforts
but for there to be more efforts for Silicon Valley and DOD to
work together so that we have the technical expertise necessary
to be able to adequately answer that question.
Senator Markey. So can we have a high degree of confidence
that our existing nuclear command and control networks, given
the advent of and deployment of Chinese advanced technology in
close proximity to the most deadly weapons on the planet, in
fact may be vulnerable? How high a level of confidence can we
have? What state of knowledge do we have?
Dr. Mastro. So, sir, I would say I am not equipped to say
whether those towers themselves present a risk, but I would
say, given Chinese capabilities, the risks are there and their
ability----
Senator Markey. Do you think it makes sense for us
temporarily to bring in outside cyber experts to help the
Department of Defense? Would that make sense to you?
Dr. Mastro. Yes, sir.
Senator Markey. Yes. And I thank you for that
recommendation.
Would you agree with that, Commissioner?
Senator Talent. Yes, I would. You know, they looted our
defense contractors 3 years ago. They are continuing to do it,
and it is going to get worse as 5G rolls out, Senator.
Senator Markey. No, I agree.
Senator Talent. Because the number of devices that are
going to be extant is going to go up by a factor of something
like 10, and the Chinese are engaged in a major competition to
control 5G. If they do that and produce those devices, we are
not going to be able to trust anything that happens. And I will
say I have a fair degree of confidence in the cyber defenses of
the Department itself. But I would agree I think this is
something we have to act on.
Senator Markey. Again, you are being diplomatic. You are
saying I have a fair degree of confidence.
Senator Talent. You know what? You are right. And I will
put it this way. I have very little confidence in actors
outside of the Department certainly, and I am concerned about
that. We have to assume that they are going to be situationally
aware about the capabilities of our systems and our platforms
in the event that there is a conflict because they have
reconnoitered it through cyber. You have raised an outstanding
point.
Senator Markey. My feeling about the Chinese is very
simple. They are not 10 feet tall, but they have a plan. What
is our plan? Who is our cyber leader in the Federal Government?
Who is the person whose name we all know that you would call
and say what do they know about this potential threat? We do
not know that person. And we can beat China in anything they
do, but you need a plan. They have one. What is our plan? And
you cannot just have a fairly high level of confidence. You
just cannot wonder whether or not these agencies are providing
extra help to the universities in order to protect the secrets
that they have as well. We have to have a plan, and somebody
has to be able to articulate to this committee what that plan
is otherwise they will exploit these secrets to their advantage
and our disadvantage and our allies'.
Thank you, Mr. Chairman.
The Chairman. Well said, Senator Markey. Thank you.
Senator Young.
Senator Young. Thank you, Dr. Mastro and Senator Talent,
for being here today. Your testimony has been thoughtful, and
it is very much related to a topic that we have been exploring
in a subcommittee that I have chaired over the last couple of
years.
We focused in my Multilateral Institutions and
International Economic Policy Subcommittee on China's predatory
economic practices. We have been inattentive as a country now
for a couple of years with respect to trying to address China's
practices through a multilateral mechanism. I do see that
improving somewhat, but it is kind of a drum that I keep on
beating. And the question was just asked by one of my
colleagues, what is the plan? That question is being asked in
committee after committee, hearing after hearing.
Now, in 2017, Senator Talent, the commission that you serve
on called for a plan. It called for a plan to identify gaps in
U.S. technological development vis-a-vis China and following
this assessment, develop and update biennially a comprehensive
strategic plan to enhance U.S. competitiveness and advance
science and technology. That is a plan.
I have related legislation calling for a national economic
security strategy to be created out of the National Economic
Council. You know, this is similar to what we do. We develop a
National Security Strategy and then a National Defense Strategy
and a National Diplomacy and Development Strategy. Why do we
not have a national economic security strategy? And I may
complement, frankly, my legislation with the gaps in our
technological development per the commission's recommendations.
But this is just a huge gap.
China has a plan. It is on the website, you know, Made in
China 2025. Anyone can google it. We at least know
strategically where they are headed. And it is hard to even
know strategically what our plan is. So we need to get our
bearings on that front. So I am very glad each of you has
underscored that.
Is there a particular mechanism through which we ought to
be working multilaterally that just comes to mind, an optimal
mechanism? I would have thought the Trans-Pacific Partnership
agreement would have been helpful, but in a bipartisan way,
there was sort of a decision to abandon that approach. And I
accept where we are on that, though there may be a way back in.
We could work with a coalition of the willing, you know, G7
or ASEAN partners perhaps. It would be a variant of a
collective security arrangement where we would collectively
agree--those participating countries--to engage in a form of
reciprocity. When any one country has been injured through
theft of intellectual property, all the other countries would
bring to bear their economic weight against China, and suddenly
we would have a lot more leverage, something, Dr. Mastro, you
indicated we need to have. We cannot do this alone. We need the
international community behind us if we are really going to
deal with the deeper issue of intellectual property theft and
forced technology transfers and all the things the commission
has identified here in your toolkit.
So give me your thoughts on, A) should Congress legislate
the creation of some sort of strategy? Should we mandate that
not just this administration, but each successive
administration produces one? And then, B) do you have in mind a
particular sort of construct where the U.S. can use our
convening power to develop those sorts of institutions that
were developed in the post-World War II time frame updated to
this new environment where we are dealing with a state
capitalist model?
Senator Talent. Yes. I like the idea of an economic
strategic plan. I think what you might want to do is rather
than--the danger with this is trying to boil the sea, in other
words, trying to cover too much. I would take it step by step.
I would identify, for example, skills and technologies that are
going to be necessary in the national security workforce, and I
would target assistance and aid in those areas. So, for
example, we need--and I think the plan is there to modernize
nuclear infrastructure, the strategic arsenal, but our skilled
workforce has aged out or is aging out rapidly. So I would try
and walk a little bit before you run. I would pick some things.
I like the idea of operating multilaterally to try and
recruit smaller countries and to get them working together to
deal with Chinese abuses. Now, what I would do is approach our
allies in the region who are already working together much more
than they were before, I mean, like with the Quadrilateral
group with the Japanese, the Australians. And what you are
going to need to do is to provide reassurances to the smaller
countries, because the Chinese are going to react, and they are
going to be concerned about how they could be hit. So I think
they are going to need reassurance, and I think it needs to
come from a group of countries that if they cooperate and help
us, that we will protect them from any kind of reprisals.
You are thinking along the right lines. I like the way you
are updating the strategy and the doctrine. I think if we bring
a committed economic power of the United States to bear, I
think a lot of these things are possible going forward.
Senator Young. Thank you.
Doctor, did you have any thoughts?
Dr. Mastro. I just wanted to also agree with the convening
power of the United States. I think it would be best to think
about these new institutions, for example, if you had one that
you were focused largely on protection of technologies and IPR,
of trying to make it a new institution versus tacking it onto
one of the existing institutions largely because institutions
are meant to be sticky. They are meant to be difficult to
change. And so a lot of the issues that we have with our
current institutional structure is that it is outdated to deal
with contemporary issues. If we went in that direction, which I
think is a positive direction, I would think about starting a
whole new institution versus tacking it onto the WTO or
something like that.
The Chairman. Thank you, Senator Young.
We have got a couple minutes before we have a vote
starting. I know both Senator Cruz and Senator Shaheen want to
get in on this. So, Senator Shaheen, you are next.
Senator Shaheen. Thank you. Thank you both for being here.
I am sorry that I missed the discussion. I understand that
tariffs have come up. But in response to the initial round of
tariffs that have been imposed by this administration, China
has leveled retaliatory duties on a number of U.S. products
that have really affected particularly small businesses. New
Hampshire, which I represent, is a small business State, and we
have seen a real impact on dairy products, on seafood, on a
number of our small businesses that do business in China. And
while I appreciate the need to get tough with those countries
who cheat--and I certainly would agree that China has abused
the rules--I wonder if there are other ways that we can do it
that do not put our American businesses at a competitive
disadvantage. And I wonder if either of you can speak to that.
Senator Talent. Senator, yes. I think as we develop these
tools and refine how we are going to use them effectively
against China, one of the things we have to consider is what is
the down side because they are not going to sit there and do
nothing when we put 10 or 25 percent tariffs on broad ranges of
their products.
Now, I think there is a lot of precedent for the Congress
providing assistance in a targeted way to particular businesses
or segments of the economy that get hurt by the fallout in an
economic back and forth. I would encourage you to think in that
direction.
Senator Shaheen. I do not want to interrupt, Senator, but
with all due respect, you have been a Member of this body. You
know how hard it is to get something like that done. And I
would argue that that would be very difficult under the current
circumstances.
So I guess what I am really hoping you might suggest is are
there other incentives, disincentives, sticks or carrots that
we have with China itself that we could use in order to
address----
Senator Talent. Oh, other than tariffs or other than this
economic--yes, but I think the problem is that anything we do
that is going to be effective is going to provoke a response on
their part. And they will try to analyze what we see as our
particular vulnerabilities and leverage points, and they will
try to hit those. So I do not know that, going forward, we are
going to be able to use economic tools without them responding
in a way that will cause some damage.
I totally agree with you about the difficulty, although I
would suggest, if I might, Senator, that going forward there
may be opportunities and potential, as the whole government
adjusts to this new era we are entering, to do things that
might have been considered very difficult. But, no, obviously,
getting anything done here--I get it. It is hard.
Senator Shaheen. Dr. Mastro, do you want to----
Dr. Mastro. Ma'am, I think in general this idea of
confronting China directly and alone, whether it is in the
economic sphere, other spheres, is not the best strategy. To be
competitive in the international system, it is not about
undermining China. It is about being a better global partner.
China can target us because we are acting alone. They cannot
put tariffs on the whole world. And so I think we need to do a
better job at multilateralism and our diplomacy in that arena
to get countries on board. But many countries, including our
allies and partners, are afraid of Chinese retaliation, and
that is why to date it is hard to get them on board with U.S.
policies. I think some of our own diplomatic efforts under the
Trump administration have not helped. So I would say we need to
think less about doing this alone in a bilateral trading
environment and think more about how we can bring to bear
pressure from many different avenues.
Senator Shaheen. The budget document that was just sent
over to the Congress emphasizes the importance of great power
competition and our need to be competitive with Russia and
China. At the same time, the budget calls for a 24 percent
decrease in the State Department in diplomatic initiatives.
While we are doing that, what we have seen from the Chinese is
that they have increased their budget by almost an equal amount
for foreign affairs.
Can you just talk about the priorities of suggesting that
the only way we can deal with China and the great power
competition is through military might as opposed to soft power
and the importance of diplomacy?
Dr. Mastro. One of the big issues, when you look at the
history of rising powers, is that rising powers always build
power in a different way than the predecessor. That is what
makes them competitive. So just like the United States did not
build colonies, China is not going to build a system similar to
the United States.
Historically, the United States has relied a lot on its
military power projection and foreign military intervention as
key tools of foreign policy. So moving forward, that
consistently is what the United States focuses on. But China
has recognized the fact of that is how the United States does
business, and so it has focused most of its efforts--now, in my
testimony, I talk about some of the regional challenges with
the military--on political and economic power. And they have
been largely successful in those areas.
The bottom line is, of course, the United States needs to
maintain its military edge. We need to be able to deter China
and protect our allies and partners in the region. But the
majority of countries are not focused on the military threat
from China most of the time. They are focused on the political
and economic aspects of this issue. So we should be investing
much more in the State Department, USAID, and other tools of
U.S. power. Doubling down and doing more of the same is not
innovative and is not going to work given how competitive China
has been.
Senator Talent. We are going to need a range of tools, and
they need all to be robust, Senator.
Senator Shaheen. Thank you.
The Chairman. Thank you.
Senator Cruz.
Senator Cruz. Thank you, Mr. Chairman.
Welcome to the both of you. Thank you for your testimony
today.
China is in my judgment the greatest long-term geopolitical
rival to the United States. Presidents in both parties have
believed for decades that America could turn China from a foe
into a friend through trade and diplomacy or that allowing
China into rules-based institutions would turn China into a
rules-based country. Instead, sadly, the opposite has happened.
America cannot sever commerce with our largest trading
partner, nor should we. But we must recognize China for the
threat it poses to our national security.
There are three urgent matters before America and our
allies: number one, to insulate our vulnerability to Chinese
espionage and interference; number two, to deconflict our
commerce from enabling the party's human rights abuses; and
number three, to compete to secure our interests. Let me focus
principally on the first.
Many of us are increasingly concerned that China is gaining
access to American secrets by using non-traditional, all-of-
government or even all-of-nation approaches to espionage
against us and our allies. Huawei is a Communist Party-
controlled surveillance agency veiled as a telecommunications
company. It has maneuvered itself into a dominant position
providing infrastructure across the globe, including to
partners within the Five Eyes intelligence network of Great
Britain, Canada, Australia, and New Zealand.
Can you assess the risks presented by Huawei's commercial
participation in the 5G build-out within these countries?
Dr. Mastro. Sir, at the very least--now, I do not have the
ability to independently assess the degree to which Huawei is
controlled by the party and whether or not there are back doors
that could lead to vulnerabilities in civilian or critical
infrastructure, as well as impacts on military infrastructure.
But what I can say is at the very least, a Chinese company
like Huawei has to do what the Communist Party asks them to do
even if Huawei is 100 percent private. I am not an economist
but based on some of my studies, even private corporations have
very close government ties--even if they are 100 percent
private, even if their leadership has no love lost for the
Communist Party, in the end if you are going to operate in
China and if it is critical enough for Chinese national
security and core interests that the party asks you to do
something, you have to do it. And so given those connections I
think between companies in China and the government, we have to
be very careful on the national security front.
However, I think we have to be careful also not to--this is
not for Huawei, but other examples--use national security
issues for protectionist goals because that really undermines
the areas in which national security is really threatened.
And I think we need to think differently about
counterintelligence. We are in a different age of an intel
threat that is very different than before. The insider threat
is no longer someone that just wants money or something like
that. We have China who is very proactive at getting
information through cyber means but also just mass. They are
not very good at it, but they have so much effort going at it.
So there really does have to be a broader effort in the
counterintelligence sphere, to your first point.
Senator Talent. We should plan on the assumption that for
the purposes of the national security goals of the Chinese
state, private companies, companies that are technically
private, are not private. And as a matter of fact, they have
been pretty explicit recently in increasing the presence and
visibility of the Chinese Communist Party committees which are
attached to every company, even private companies.
And so I agree with Dr. Mastro, and we have said this in
the commission for a number of years. There are, obviously,
differences between state-owned enterprises and private
companies for certain economic purposes, but you have to assume
they are all going to do the will of the state.
And you mentioned 5G. This is a competition that the United
States must win, and the Chinese understand this and they are
pushing very, very hard. They are going to control the
standards if we are not careful, and they are going to control
the devices. And if they do that, then espionage is going to be
very easy for them.
Senator Cruz. Last year, I authored and passed an amendment
in the National Defense Authorization Act to prohibit DOD from
funding Confucius Institutes, which are one of the tools the
Chinese use to penetrate American higher education.
I have also introduced the Stop Higher Education Espionage
and Theft Act to require the FBI to designate foreign actors
conducting espionage in our colleges and universities.
In your judgment, what further steps can Congress take to
insulate our universities and research institutions from
Chinese espionage?
Dr. Mastro. Sir, I do not mean to pivot, but can I add one
more concern from the point of higher education?
Senator Cruz. Absolutely.
Dr. Mastro. Which is to elevate the cases of scholars who
are punished or retaliated against based on their research or
their writing or even U.S.-based companies that will censor
some scholar's work overseas. I myself have just canceled a
trip in two weeks to China because I am concerned about my own
safety, and that is the first time. I love going to China. I
spend a lot of time there. But I am concerned that this would
not be a priority back at home if, in retaliation for what is
happening in the Huawei situation, China started harassing or
detaining U.S. citizens. And so the intel aspect is very
important.
But we also have to recognize that individuals are being
retaliated against that work in these institutions, whether it
is to deny them access, visas, or what have you. And so I think
that also has to be part of the national discussion.
Senator Talent. And reciprocity ought to be the theme
there. For example, in the commission, we have looked--for
years they will deny--and this is a little outside higher ed.
They will deny or hold up visas to foreign reporters wanting to
come into China, and of course, we are letting Chinese
reporters in the United States all the time. When Senator
Dorgan was on the commission, he and I used to talk about why
do we not respond in kind in those kinds of situations. And why
should they not keep doing it from their point of view? We do
not react.
Senator Cruz. Thank you.
The Chairman. Thank you, Senator Cruz.
Senator Menendez.
Senator Menendez. Very brief, Mr. Chairman, because I know
we have to go to vote.
This has been very instructive and I personally would like
to follow up with both of you at different times on some of the
elements I have not been able to get to.
But there used to be a cyber coordinator at State. The
administration got rid of it, and we have been working with
offices on both sides of the aisle to try to bring it back. I
hope we can do that. I think that type of action speaks to the
disconnect between a confrontational approach and a real policy
and strategy to be competitive at the end of the day.
And I just want to follow up, Dr. Mastro. In your very
opening statement, you said we have to start competing again.
One of the concerns I have is that every time we retreat from a
leadership role in the international context, we let China
ultimately expand its role on the global stage, whether that is
the Paris climate agreement, whether that is the Trans-Pacific
Partnership, UNESCO, just to mention some.
The impact of these moves has been twofold. It led some of
the country's closest allies to begin hedging their bets and
they are decreasing the weight they give to U.S. preferences in
their own decision-making because they view the United States
as unreliable.
And secondly, when we withdraw from agreements such as TPP,
it shifts economic attention to other vehicles, in this case
the regional comprehensive economic partnership, a TPP-11 deal
in which the U.S. is not included. The result is the U.S. is at
a disadvantage because it is unable to influence the content of
either of these agreements, thereby missing out on both the
potential benefits of increased access to these markets and the
opportunity to mitigate any potentially negative effects on the
U.S. economy and other vulnerable societies.
When we say we have to compete, we need to be in the game
in all of these things in order to be able to affect the
outcome because otherwise our preferences, which we used to
lead the world in, are largely going to be sidelined, and when
we are sidelined, then China takes advantage.
Is that a fair statement?
Dr. Mastro. Yes, sir. I think one of the big issues is not
so much that China violates international norms, which is an
issue, but the problem is that there are a lot of areas in
which those norms have not been significantly set yet and they
are ambiguous and they are nonexistent.
And so we were just talking about 5G. I learned yesterday,
in terms of the Telecommunications Union, China sends very high
level representatives to ensure that standards are set in a way
that is competitive for their companies, and we do not.
And so it seems kind of on the softer side--in my written
testimony, I focus a lot on military power because I think that
is an important part of U.S. power, but this competition is
everywhere. And setting the norms, rules of behavior are very
important. The international system is not all-encompassing.
There are many areas where there continue to be gaps, and so
that needs to be a focus of U.S. efforts. I firmly agree with
that.
Senator Menendez. Thank you.
Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Menendez.
Well, thank you sincerely to both of our witnesses. This is
an incredibly important issue to the United States of America,
and we need to continue to focus on it and bring attention to
all the many issues we discussed today and many more that we
did not quite get to. So we will be doing some work in this
area. But anyway, thank you, both of you, for your testimony.
For the information of the members, the record will remain
open until close of business Friday. We would ask that if you
do get some questions for the record, that you give us as
prompt an answer as possible, understanding you are a
volunteer, but we need it to complete the record. So thank you
so much.
And with that, the committee is adjourned.
[Whereupon, at 12:14 p.m., the hearing was adjourned.]
----------
Additional Material Submitted for the Record
Response of Hon. James Talent to Question Submitted
by Senator Johnny Isakson
Question. Personally, I believe the name of this hearing should
have been ``A New Strategy for an Era of U.S.-China Competition'',
because that's that we need--a robust strategy to proactively address
an increasingly competitive China from a holistic perspective.
As you mention in your testimony, the Chinese Communist Party (CCP)
has built up its armed forces over the past 25 years, investing in the
research of advanced weapons and creating a navy that is now larger
than our own.
The CCP is also using China's growing economy to expand its
influence. As you say, the CCP is seeking to ``leverage its economic
strength to capture markets [and] secure unfettered access to critical
resources.''
Mr. Talent, what steps can we take to address Chinese competition
from both a security and economic standpoint? Particularly in Africa,
where I consistently hear concerns over China's growing influence.
Answer. Thanks for the question. Here is my response. Senator
Isakson has asked the most important question. What is our strategy?
Strategic thinking requires choosing the highest order ends and the
highest order means by which the ends will be achieved. It has to come
from the top levels of political authority--the President and Congress.
Once strategic clarity is achieved, the middle and lower levels of
government know what they are trying to achieve and can effectively
harmonize their efforts, nurture the tools by which they will
accomplish the strategic goals, and plan and execute particular
operations. Importantly, these tools and operations must be fully
resourced to ensure the rhetoric of strategy is manifested through
concrete action.
I'll offer these as strategic goals in the competition with China.
Protecting the United States and its allies from aggression;
Protecting America's right to trade and travel in the international
``commons'' (sea, air, space, and cyberspace), and in the international
economic system, freely and on the same terms as other countries;
Preserving an international system where nations relate to each
other according to norms, rather than by size and power;
Preventing all armed conflict if possible, but in any event
preventing escalating armed conflict.
The highest order means to accomplish the goals should include the
following.
Armed forces of sufficient strength, and sufficient presence in
Asia, to decisively deter China from attempting to achieve its goals
through armed aggression;
Strong alliances and partnerships that validate American leadership
and share the burden of the competition;
The use of economic power to impose costs on China for any
systematic violation or subversion of the global trading system;
Effectively contesting China's narrative about its intentions and
actions so as to preserve unity at home and among allies, and impose
reputational costs on the Chinese government for aggression,
provocation, or violation of norms.
Choosing the right strategy is not enough by itself for success,
but without it the risk of failure goes way up. Conversely, a strategy
without resourcing and action is not credible. I believe that Committee
members, either in a formal hearing or in informal discussions, should
work to try to identify a common strategy and the means to implement
it. What I've outlined above is a first cut for the Committee's
consideration.
As regards a plan for Africa and other places where the Chinese are
making investments: Congress should make certain that the appropriate
Executive branch agency has clear responsibility for monitoring those
investments and assessing any concrete national security implications.
The United States should be fully prepared to exact reputational damage
on China when it invests, as it often does, in a manner that corrupts
local officials or rides roughshod over local labor, business, or
environmental interests. We should robustly fund our own development
programs and administer them with the strategic goals of the
competition in mind.
Having said that, I don't think the United States should get in a
``whack a mole'' game everywhere on the planet where China makes
investments. We need to identify areas of real concern based on the
broader implications for the strategy. I will say that I am
particularly concerned about China's ownership and influence in ports
around the world and China's investment in digital infrastructure.
Those trends have serious economic and security implications for the
United States and need to be the subject of a focused and well-
resourced Executive plan. The Committee could do good work by
overseeing vigorously in those areas.
Let me add a point about corruption, which will be particularly
relevant in Africa, where many governments struggle with weak
institutions and poor governance. According to Transparency
International, in 2018, China ranked 87th among 180 countries
surveyed--a fall of 10 places from its rank last year. Chinese
companies operating abroad take their corrupt practices with them,
which is detrimental to both host government and economies, and U.S.
businesses trying to do honest business in these countries. For that
reason, I would like to draw your attention to the ``China Initiative''
recently announced by the U.S. Department of Justice. Among other
aspects, the Initiative's goal is to examine how the Foreign Corrupt
Practices Act (FCPA) can be used to address behavior of Chinese
companies unfairly competing against American businesses. The
Initiative is still in its infancy, but I would encourage the Committee
to examine its structure and implementation.
Finally, the U.S.-China Commission, on which I serve, made 26
recommendations in its 2018 Annual Report to Congress to help bolster
U.S. economic, security, and diplomatic capabilities. In my view, the
strategy should focus on making better use of existing U.S.
institutions and tools, and bolstering the capacity of smaller
countries to manage pressure from China.
Excerpted below are some of the recommendations I think particular
relevant to your inquiry.
Protecting freedom of navigation.
Congress require the Director of National Intelligence to produce a
National Intelligence Estimate (NIE), with a classified annex, that
details the impact of existing and potential Chinese access and basing
facilities along the Belt and Road on freedom of navigation and sea
control, both in peacetime and during a conflict. The NIE should cover
the impact on U.S., allied, and regional political and security
interests.
Capacity building in allies and partners.
Congress create a fund to provide additional bilateral assistance
for countries that are a target of or vulnerable to Chinese economic or
diplomatic pressure, especially in the Indo-Pacific region. The fund
should be used to promote digital connectivity, infrastructure, and
energy access. The fund could also be used to promote sustainable
development, combat corruption, promote transparency, improve rule of
law, respond to humanitarian crises, and build the capacity of civil
society and the media.
Congress direct the administration to strengthen cooperation
between the United States and its allies and partners in Europe and the
Indo-Pacific on shared economic and security interests and policies
pertaining to China, including through the following measures.
Urge the administration to engage in regular information sharing
and joint monitoring of Chinese investment activities and to share best
practices regarding screening of foreign investments with national
security implications, including development of common standards for
screening mechanisms.
Enhance consultations on mitigating the export of dual-use
technology to China and identifying other foundational technologies
essential for national security.
Congress consider raising the threshold of congressional
notification on sales of defense articles and services to Taiwan to
those set for major U.S. allies, and terminating any requirement to
provide notification of maintenance and sustainment of Taiwan's
existing capabilities.
Protecting freedom of information and contesting China's narrative.
Congress require the U.S. Department of State to prepare a report
to Congress on the actions it is taking to provide an alternative,
fact-based narrative to counter Chinese messaging on the Belt and Road
Initiative (BRI). Such a report should also examine where BRI projects
fail to meet international standards and highlight the links between
BRI and China's attempts to suppress information about and misrepresent
reporting of its human rights abuses of Uyghurs in Xinjiang.
Congress direct the National Counterintelligence and Security
Center to produce an unclassified annual report, with a classified
annex, on the Chinese Communist Party's influence and propaganda
activities in the United States.
Protecting U.S. critical infrastructure.
Congress require the Office of Management and Budget's Federal
Chief Information Security Officer Council to prepare an annual report
to Congress to ensure supply chain vulnerabilities from China are
adequately addressed. This report should collect and assess.
Each agency's plans for supply chain risk management and
assessments;
Existing departmental procurement and security policies and
guidance on cybersecurity, operations security, physical security,
information security and data security that may affect information and
communications technology, 5G networks, and Internet of Things devices;
and
Areas where new policies and guidance may be needed--including for
specific information and communications technology, 5G networks, and
Internet of Things devices, applications, or procedures--and where
existing security policies and guidance can be updated to address
supply chain, cyber, operations, physical, information, and data
security vulnerabilities.
Congress direct the National Telecommunications and Information
Administration and Federal Communications Commission to identify (1)
steps to ensure the rapid and secure deployment of a 5G network, with a
particular focus on the threat posed by equipment and services designed
or manufactured in China; and (2) whether any new statutory authorities
are required to ensure the security of domestic 5G networks.
[all]