Disclaimer
The research papers in this section were prepared at the request of the Commission to support its deliberations. They are posted to the Commission’s website in order to promote greater public understanding of the issues addressed by the Commission in its ongoing assessment of U.S.-China economic relations and their implications for U.S. security, as mandated by P.L. 106-398 and P.L. 108-7. Their posting to the Commission’s website does not imply an endorsement by the Commission or any individual Commissioner of the views or conclusions expressed in them.
Research Archive
Here are the highlights of this month’s edition:
• Bilateral trade: October monthly deficit declines 3.2 percent on the strength of U.S. exports to China, but overall trade deficit on track for another record in 2014.
• Bilateral policy issues: China pushes FTAAP, meets with Japan, signs South Korea FTA at APEC meetings; U.S.-China summit produces deals on climate, visas, and ITA; G20 members agree to combat tax evasion and money laundering; China-Australia FTA opens services sector and raises threshold for screening of Chinese investments.
• Policy trends in China’s economy: China announces deposit insurance scheme; “guarantee chains” plague China’s banking sector and risk spreading contagion.
• Sector spotlight – Illegal Wildlife Products: China makes international pledges to ban trading but poaching and illegal trading still incentivized by rising income levels in China, partial legalization, and skyrocketing prices.
12/05/2014
Highlights of this edition: Former People’s Liberation Army Air Force Pilot Cites Improved Radar Capabilities in Dismissing F-22 Superiority over J-11; PLA Daily Lauds Disaster Relief Cooperation between People’s Liberation Army and People’s Armed Police; Phoenix Weekly Reveals Scale of Xu Caihou’s Corruption Only to Be Censored; Female University Student Compensated in Landmark Gender Discrimination Case; Progress Report from Ministry of Finance Proposes No Bailouts for Local Governments; China’s Response to the “Low Oil Price” Era; Difficulties Persist in Resuming Six-Party Talks despite North Korea’s Signal
12/04/2014
This report examines the context and implications of satellite imagery of an IL-78/MIDAS air refueling tanker at a Chinese military airbase.
11/18/2014
As the number of civil aviation users increases and the aviation industry continues to mature in China, Beijing seeks to strike a balance between liberalizing its airspace to respond to growing commercial demands and retaining a strict military hold on airspace for the purpose of national security. This report explores China's efforts to reform air traffic control and airspace management, as well as challenges China may face as it seeks further reform.
11/12/2014
Highlights of this edition: President Xi’s Plenum Speech Emphasizes the Law; Chinese Scholars Debate Rule of Law and the Economy; Chinese Journalist Imprisoned for Corporate Slander; People’s Daily Analyzes Party Legitimacy and China-Russia Relations; People’s Daily Comments on International Infrastructure Financing; Professor Sees EMBA Program as Tarnished by State-Run Economy
11/10/2014
Highlights of this month’s edition: Bilateral trade: U.S.-China goods deficit reaches $251.8 billion through September on strength of imports from China; U.S.-China trade surplus in services hits record $6.81 billion in Q2, as U.S. exports grow and China services sector lags; The Fourth Plenum Decision: Government promises to improve fairness and accountability in the legal system, but the Party is not loosening grip on power; Bilateral policy issues: Renminbi “significantly undervalued” but Administration stops short of accusing China of currency cheating; United States requests China submit missing subsidies notifications to WTO; Quarterly review of China’s economy: Slowest GDP growth in over a decade; key indicators underperform (freight, real estate, consumption); exports strong but data unreliable; global investors in limbo as Shanghai-Hong Kong stock trading link missed projected start date amid ongoing protests in Hong Kong; Sector spotlight – Asian Infrastructure Investment Bank: The AIIB heralded as a much needed addition to address the region’s infrastructure funding shortfall; concerns remain on lending standards and its potential challenge to the World Bank and IMF.
This edition of the monthly trade bulletin, originally released November 4, was revised on November 5 to highlight the United States’ record monthly goods deficit with China. The original version included an inaccurate subheading, which stated that the deficit was up but growing more slowly.
11/04/2014
Highlights of this month’s edition:
Bilateral trade: Monthly U.S. trade deficit with China declines 2.2 percent but year-to-date deficit up 4.1 percent; U.S. exports to China continue to rise, while imports slow; Bilateral policy issues: Inflows and outflows of FDI in China decline amid anticorruption and antimonopoly crackdowns; Policy trends in China’s economy: The People’s Bank of China, the central bank, is injecting RMB 500 billion into China’s five largest banks on concerns over economic slowdown; the State Council introduced new measures to boost small companies; and Sector spotlight – China-India-U.S. Economic Relations: In mid-September, President Xi Jinping made his inaugural visit to New Delhi as China’s head of state. Two weeks later, India’s Prime Minister Narendra Modi traveled to Washington for the first time since taking office in May. The two visits mark an important step in the development of triangular relationship between the United States, China and India.
10/03/2014
Key Points:
Since its last overhaul in 1994, China’s flawed fiscal system has muddled through. Local debt, slowing revenue, and greater spending obligations are now spurring a new round of reform under President Xi Jinping;
By eliminating the so-called “business tax,” Beijing is allowing services companies to enjoy the same tax deductions and rebates manufacturers do. The government may also establish a price-based tax on coal and a recurring tax on property;
The government ultimately seeks to rebalance the economy. Fiscal reform could boost services, prevent housing bubbles, redistribute income, and reduce pollution. But it will be difficult to implement in China’s segmented economy and authoritarian system;
The central government has a clear vision for improving budget flexibility and transparency. Yet it remains ambivalent about how to share revenue, spending responsibilities, and borrowing authority with local governments.
09/30/2014
Key Points
• Chinese authorities have used Hong Kong’s position as a global financial center to promote the use of the RMB abroad. Hong Kong is the oldest and largest market for offshore RMB transactions, and will remain so despite the emergence of several other offshore contenders.
• To date, RMB internationalization efforts have involved three main channels: offshore RMB deposit accounts and bonds, use of the RMB for cross-border trade settlement, and establishment of RMB swap lines between the People’s Bank of China and other central banks.
• Despite growth in onshore and offshore use, the RMB cannot become a true international currency until Chinese authorities liberalize China’s capital account, allowing for unrestrained movement of financial flows.
09/22/2014
In May 2014, Alibaba, China’s leading e-commerce website, filed for a U.S.-based initial public offering (IPO) in what is expected to be one of the largest in U.S. history. The highly anticipated IPO will be just one in a recent wave of Chinese Internet companies launching IPOs in the United States. The trend has raised some misgivings among U.S. regulators about the corporate structures of these companies. To bypass Chinese government restrictions on foreign investment in the Internet sector, Chinese Internet companies use a complex and highly risky mechanism known as a Variable Interest Entity (VIE).
An addendum was added to this paper on September 12, 2014.
09/12/2014
