2021 Annual Report to Congress

1 2021 Report TO CONGRESSof ECONOMIC ANDSECURITY REVIEW COMMISSIONONE HUNDRED SEVENTEENTH CONGRESSFIRST SESSIONNOVEMBER 2021 Printed for the use of the Economic and Security Review Commission Available online at: TO CONGRESSof ECONOMIC ANDSECURITY REVIEW COMMISSIONONE HUNDRED SEVENTEENTH CONGRESSFIRST SESSIONNOVEMBER 2021 Printed for the use of the Economic and Security Review Commission Available online at: government publishing officewashington : 2021 For sale by the Superintendent of Documents, Government Publishing OfficeInternet: Phone: toll free (866) 512 1800; DC area (202) 512 1800 Fax: (202) 512 2104 Mail: Stop IDCC, Washington, DC 20402 ECONOMIC AND SECURITY REVIEW COMMISSIONCAROLYN BARTHOLOMEW, ChairmanROBIN CLEVELAND, Vice ChairmanCOMMISSIONERS BOB BOROCHOFF JEFFREY FIEDLER KIMBERLY T.

2 GLAS Hon. CARTE P. GOODWIN ROY D. KAMPHAUSEN DEREK SCISSORS Hon. JAMES M. TALENT MICHAEL R. WESSEL ALEX WONG Daniel w. peck, Executive DirectorThe Commission was created on October 30, 2000 by the Floyd D. Spence National Defense Authorization Act of 2001, Pub. L. No. 106 398 (codified at 22 7002), as amended by: The Treasury and General Govern-ment Appropriations Act, 2002, Pub. L. No. 107 67 (Nov. 12, 2001) (regard-ing employment status of staff and changing Annual Report due date from March to June); The Consolidated Appropriations Resolution, 2003, Pub. L. No. 108 7 (Feb. 20, 2003) (regarding Commission name change, terms of Commissioners, and responsibilities of the Commission); The Science, State, Justice, Commerce, and Related Agencies Appropriations Act, 2006, Pub.

3 L. No. 109 108 (Nov. 22, 2005) (regarding responsibilities of the Commission and applicability of FACA); The Consolidated Appropriations Act, 2008, Pub. L. No. 110 161 (Dec. 26, 2007) (regarding submission of accounting reports; printing and binding; compensation for the executive director; changing Annual Report due date from June to December; and travel by members of the Commission and its staff); The Carl Levin and Howard P. Buck McKeon National Defense Authorization Act for Fiscal Year 2015, Pub. L. No. 113 291 (Dec. 19, 2014) (regarding responsibilities of the Commission).The Commission s full charter and statutory mandate are available online at: (ii) .-china economic anD security review commissionnovember 17, 2021 The Honorable Patrick LeahyPresident Pro Tempore of the Senate, Washington, DC 20510 The Honorable Nancy PelosiSpeaker of the House of Representatives, Washington, DC 20510 Dear senator leahy anD speaker pelosi:On behalf of the Economic and Security Review Com-mission, we are pleased to transmit the Commission s 2021 Annual Report to Congress .

4 This Report responds to our mandate to moni-tor, investigate, and Report to Congress on the national security im-plications of the bilateral trade and economic relationship between the united States and the People s Republic of China. The Commis-sion reached a broad and bipartisan consensus on the contents of this Report , with all 11 members (one appointment remains vacant) voting unanimously to approve and submit it to accordance with our mandate, this Report , which is current as of October 8, includes the results and recommendations of our hear-ings, research, and review of the areas identified by Congress in our mandate, as defined in Public Law No. 106 398 (October 30, 2000) and amended by Public Laws No.

5 107 67 (November 12, 2001), No. 108 7 (February 20, 2003), 109 108 (November 22, 2005), No. 110 161 (December 26, 2007), and No. 113 291 (December 19, 2014). The Commission s charter, which includes the 11 directed research areas of our mandate, is included as Appendix I of the Commission conducted seven public hearings, taking testimo-ny from 75 expert witnesses from government, the private sector, ac-ademia, think tanks, research institutions, and other backgrounds. For each of these hearings, the Commission produced a transcript (posted on our website at ). This year s hearings in-cluded: Relations at the Chinese Communist Party s Cen-tennial; Deterring PRC Aggression toward Taiwan; Investment in China s Capital Markets and Military-Indus-trial Complex; An Assessment of the CCP s Economic Ambitions, Plans, and Metrics of Success; China in Latin America and the Caribbean; China s Nuclear Forces.

6 And Relations in 2021: Emerging Commission received a number of briefings by executive branch agencies and the intelligence community, including both un-classified and classified briefings on net assessments of and Chinese military capabilities, the cross-Strait military balance, Chi-na s nuclear forces, the effects of China s termination of Hong Kong s autonomous status, responses to the growth of China s mili-ivtary power, and developments in China s biotechnology sector. The Commission also received briefings by foreign diplomatic officials as well as and foreign nongovernmental experts. The Commission includes key insights gained through these briefings either in its unclassified Annual Report or, as appropriate, in a classified annex to that Commission was unable to conduct official travel this year due to the COVID-19 pandemic.

7 We adapted and increased our vir-tual discussions with interlocutors to ensure the continued diversity of perspectives heard by the Commission. The Commission also re-lied substantially on the work of our excellent professional staff and supported outside research (see Appendix IV) in accordance with our mandate (see Appendix I).The Report includes 32 recommendations for congressional con-sideration. The Commissioners agreed that ten of these recommen-dations, which appear on page 21, are the most important for congressional action. The complete list of recommendations appears on page 491 at the conclusion of the offer this Report to Congress in the hope that it will be useful for assessing progress and challenges in relations.

8 Thank you for the opportunity to serve. We look forward to continuing to work with Members of Congress in the upcoming year to address issues of concern in the truly,Carolyn Bartholomew Robin ClevelandChairman Vice ChairmanvCommissioners Approving the 2021 Report Carolyn Bartholomew, Chairman Robin Cleveland, Vice Chairman Bob Borochoff, Commissioner Jeffrey Fiedler, Commissioner Kimberly T. Glas, Commissioner Carte P. Goodwin, Commissioner Roy D. Kamphausen, Commissioner Derek Scissors, Commissioner James M. Talent, Commissioner Michael R. Wessel, Commissioner Alex Wong, Commissioner (VII)CONTENTSP agetransmittal letter to the Congress .. iiicommissioners approving the Report .

9 Vexecutive summary .. 1key recommenDations .. 21introDuction .. 252021 Report TO Congress Of THE ECONOMIC AND SECURITY REVIEW COMMISSIONC hapter 1: Global Competition .. 27 Section 1: The Chinese Communist Party s Ambitions and Challenges at Its Centennial .. 27 Key Findings .. 27 Recommendations .. 28 Introduction .. 28 Centennial Drives a Triumphalist Narrative .. 30 Challenges to the CCP s Triumphalist Narrative .. 34 Implications for the united States .. 55 Section 2: China s Influence in Latin America and the Caribbean .. 69 Key Findings .. 69 Recommendations .. 70 Introduction .. 71 China Pursues an Integrated Strategy .. 72 China s Economic Strategy.

10 80 China s Military and Security Engagement .. 96 Implications for the united States .. 100 Chapter 2: Economic and Trade Relations .. 119 Section 1: Year in Review: Economics and Trade .. 119 Key Findings .. 119 Introduction .. 120 China s Domestic Recovery Slows as Economy Confronts Long-Term Imbalances .. 121 China s Government Strengthens Control over Technology and Data .. 133 China Expands Lawfare to Respond to Foreign Sanctions .. Commercial Ties Deepen despite Continued Friction .. 140 Coercion in China s Global Economic Relations .. 149 Section 2: The Chinese Communist Party s Economic and Technological Ambitions: Synthetic Biology, New Mobility, Cloud Computing, and Digital Currency.