The China Challenge With Holly Hart Mike Wessel Roy Houseman
One Slide to Understand the Problem
How Did We Get Here? Modern History of US-China Trade Relations in One Slide 1971 Ping-Pong Diplomacy U.S. recognizes Mainland China as a Country in 1979 and a bilateral trade agreement was completed Tiananmen Square protests of 1989 led to cooling of trade relations. Congress passed and the President signed Permanent Trade Normal Trade Relations Oct 10, 2000.
Understanding the Chinese Economy
Understanding China s Economy 101 on the Chinese Government and 5 year plans All power within the government of the People's Republic of China is divided among several bodies all run by the Communist party of China. 5 Year Plans 13th five-year plan since the Communist Party took charge of China. Current plan is from 2016 to 2020
Results of Overcapacity Count of AD and CVD orders by Country Country AD CVD Grand Total China 98 32 130 India 15 8 23 Taiwan 21 1 22 Korea 15 3 18 Japan 15 15 Vietnam 9 3 12 Indonesia 8 3 11 Turkey 5 5 10 Mexico 10 10 Brazil 7 2 9 Thailand 7 1 8 Italy 6 1 7 Russia 6 6 Ukraine 5 5 South Africa 3 1 4 Germany 4 4 Malaysia 4 4 Iran 1 2 3 Spain 3 3 United Arab Emirates 2 2
Issues in China China Recession Rapid Growth has led to Overcapacity issues (Zombie Factories) and Ghost Cities Yuan devaluation (aka Currency Manipulation) Kyle Bass, a US hedge fund manager who predicted the 2008 subprime mortgage crisis. The problems China faces have no precedent They are so large that it will take every ounce of commitment by the Chinese government to rectify the imbalances.
Issues in China Environmental Issues Losing 6.5 percent of GDP to pollution-rated costs. More than 1.6 million people per year die in China from breathing toxic air. About 29% of San Francisco s pollution comes from China.
Issues in China Worker Rights Workers cannot freely choose their collective bargaining representatives and lack laws requiring employers to collectively bargain with employees. Government Run Unions The right to strike was removed from the Constitution in 1982. Strikes have been organically increasing though in China.
Issues With China: Hacking Recent Cyber Intrusions from China Year Target Source of Attack PLA Espionage 2014 Six U.S. entities involved in nuclear power, metals, and solar power USPS Espionage 2014 Personal data of 800,000 employees of the U.S. Postal Service, including Social Security numbers and addresses. Anthem Hack 2015 Social Security numbers and health information of 80 million Anthem users The Great Cannon Attack 2015 Chinese cyber weapon executed distributed denial of service (DDoS) attacks against U.S. websites GitHub and GreatFire Mysterious Eagle Attack 2015 Journalists, dissidents, economic data, and military organizations that have a relation to China OPM Hack 2015 Millions of sensitive and classified documents, as well as personally identifiable information of over 22 million Americans Engineering Universities Hacks 2015 Penn State University s engineering school, along with the school s 500 research partners. Other U.S. engineering schools hacked include Johns Hopkins University, Carnegie Mellon University, the University of California-Berkeley, and the Massachusetts Institute of Technology United Airlines Hack 2015 Personal and flight information of United Airlines passengers Five PLA officers indicted in May 2014 China Deep Panda (according to CrowdStrike s analysis) Chinese government (according to University of Toronto s Citizen Lab) Chinese government (according to FireEye report) China is officially the leading suspect Chinese hackers (according to FireEye s analysis) Same group as the OPM hack
Issues With China National Security Each aircraft carrier requires 50,000 tons of steel plate Every Abrams tank needs 22 tons of steel plate Bay Bridge Infrastructure
The Future U.S. China Bilateral Investment Treaty US-China Bilateral Investment Treaty the US-China BIT will allow Chinese investors to be treated the same as US investors and will allow investors access to investor-state dispute settlement. 24th Round of Negotiations. Close to agreement U.S. companies had invested nearly $77.5 billion in China, and China had invested $46.6 billion in the U.S. by the end of 2015. Bilateral investment increased by 0.6 percent year-on-year, reaching $558.39 billion last year.
The Future China Non-Market Economy Status China when it became a member of the World Trade Organization (WTO) agreed to certain restrictions regarding anti-dumping and countervailing duty laws because so much of the country is state controlled. One Provision in China s Protocol of Accession to the WTO is set to expire. WTO members are still allowed to base antidumping comparisons involving Chinese products on something other than Chinese prices or costs unless individual Chinese producers can show that they operate under market economy conditions. 75,000 SOEs in strategic sectors e.g. telecom, oil, power, aviation and banking from private competition. Another 80,000 SOEs operating in unprotected sectors like hotels and real estate also benefit from easy access to cheap loans and land.