Washington must more closely evaluate China’s military buildup and trade policies deemed to be against competition, a congressionally appointed commission tasked with monitoring the rising Asian power said in an annual report released Wednesday.
The U.S. China Economic and Security Review Commission (USCC) also recommended that President Barack Obama’s administration and Congress better prepare for a potential attack from China’s military wing, the People’s Liberation Army.
USCC chairman William Reinsch said that while all nations have the right to develop the means to defend themselves, the commission is concerned with the “opacity” of China’s military development and intentions in 2011, which “invites misunderstanding.”
Beijing averaged 12 percent growth in its annual defense budget over the past 10 years and achieved several breakthroughs for its military in the past year, including the first flight of a stealth fighter, a sea trial of its first aircraft carrier, and significant progress toward deploying the world’s first anti-ship ballistic missile.
"The PLA's military strategy is designed to provide the army with the means to defeat a technologically superior opponent, such as the U.S. military … [by] degrading an opponent's technological advantages and striking first in order to gain surprise," the commission said.
China’s development of its cyber capabilities in 2011 showed increasing evidence that Beijing “sponsors or condones” hacker attacks against foreign commercial and government targets, the USCC report said, adding that suspected Chinese cyber-intrusions may have interfered with the operations of at least two U.S. space satellites.
“When combined with the military’s excessive focus on other disruptive military capabilities, such as counterspace operations, it presents an image of Chinese intentions that diverges significantly from Beijing’s official policy of peaceful development,” Reinsch said.
In January 2007, China destroyed an obsolete weather satellite with a ballistic missile, which forced astronauts to evacuate the International Space Station last April due to fears of a collision with debris left from the blast, the report said.
The report tied China’s increasingly assertive nature on the global stage, including its recent belligerence over claims in the South China Sea, to the country’s rapidly growing economic and military strength.
China claims the vast South China Sea in its entirety, saying that its "historical sovereignty" over the area supersedes the claims of other countries, including Southeast Asian nations the Philippines, Vietnam, Malaysia, and Brunei.
The congressional report pointed to Beijing’s policy of requiring other claimants in the South China Sea to negotiate on a bilateral basis, rather than entering into multilateral discussions, as well as the use of its newly developed naval might to harass fishing and oil exploration vessels in the area.
“Despite intermittent statements of cooperation, Chinese assertiveness in the South China Sea indicates that China is unlikely to concede its sovereignty claims,” the commission said.
The report accused China of placing its own national interests ahead of regional and global stability, citing Beijing’s close links to nuclear renegades North Korea and Iran, which have come under U.N. sanctions.
Anticompetitive trade policies
The commission also suggested strengthening federal laws to better implement "effective remedies against the anticompetitive actions of Chinese state-owned or state-invested enterprises."
Reinsch said China’s integration into the international community is “lagging” 10 years after its accession to the World Trade Organization (WTO), with Beijing focusing more on “short term gains rather than long term systemic benefits.”
“While China has made progress in several areas, such as lowering tariffs and eliminating some import barriers, the Commission finds that more work remains to be done,” Reinsch said.
The U.S. trade deficit with China increased nine percent this year over the same period in 2010, and the imbalance with Beijing accounts for more than half of America's entire trade gap. President Obama and American lawmakers have criticized Beijing for keeping its currency undervalued for trade gains.
The USCC listed a number of commitments China had failed to uphold after its WTO accession.
In particular, the commission faulted China for failing to implement a system which effectively protects intellectual property—an obligation required of all WTO member states.
“U.S. business software companies still report that China is the world’s largest source of pirated software,” Reinsch said. “About eight of 10 computers in China still run counterfeit operating system software.”
The report also condemned China for reneging on its promise to lower trade barriers and to treat foreign goods and services fairly—instead adopting a series of policies banning those goods and services from government procurement contracts beginning in 2009.
“These policies, known as ‘indigenous innovation,’ are intended to discriminate against foreign goods and services and to substitute domestic goods, apparently as a device to force the transfer of technology to Chinese firms,” Reinsch said.
The USCC said the Chinese government had also returned to a system of state ownership and control of major sectors of its economy in the past several years, directing subsidies to favored industries and seeking to nurture technologies behind protective barriers.
“This is contrary to the spirit, and in many cases the letter, of China’s WTO commitments,” Reinsch said.
Reported by Joshua Lipes.