[Senate Hearing 114-816]
[From the U.S. Government Publishing Office]


                                                   S. Hrg. 114-816

      THE CHANGING LANDSCAPE OF U.S.-CHINA RELATIONS: WHAT'S NEXT?

=======================================================================

                                HEARING

                               BEFORE THE

              SUBCOMMITTEE ON EAST ASIA, THE PACIFIC, AND
                   INTERNATIONAL CYBERSECURITY POLICY

                                 OF THE

                     COMMITTEE ON FOREIGN RELATIONS
                          UNITED STATES SENATE

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                           SEPTEMBER 29, 2015

                               __________

       Printed for the use of the Committee on Foreign Relations

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        Available via the World Wide Web: http://www.govinfo.gov

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                    U.S. GOVERNMENT PUBLISHING OFFICE                    
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                COMMITTEE ON FOREIGN RELATIONS         

                BOB CORKER, TENNESSEE, Chairman        
JAMES E. RISCH, Idaho                BENJAMIN L. CARDIN, Maryland
MARCO RUBIO, Florida                 BARBARA BOXER, California
RON JOHNSON, Wisconsin               ROBERT MENENDEZ, New Jersey
JEFF FLAKE, Arizona                  JEANNE SHAHEEN, New Hampshire
CORY GARDNER, Colorado               CHRISTOPHER A. COONS, Delaware
DAVID PERDUE, Georgia                TOM UDALL, New Mexico
JOHNNY ISAKSON, Georgia              CHRISTOPHER MURPHY, Connecticut
RAND PAUL, Kentucky                  TIM KAINE, Virginia
JOHN BARRASSO, Wyoming               EDWARD J. MARKEY, Massachusetts

                 Lester Munson, Staff Director        
           Jodi B. Herman, Democratic Staff Director        
                    John Dutton, Chief Clerk        

                         ------------          

          SUBCOMMITTEE ON EAST ASIA, THE PACIFIC, AND        
               INTERNATIONAL CYBERSECURITY POLICY        

                CORY GARDNER, Colorado, Chairman        

MARCO RUBIO, Florida                 BENJAMIN L. CARDIN, Maryland
RON JOHNSON, Wisconsin               BARBARA BOXER, California
JOHNNY ISAKSON, Georgia              CHRISTOPHER A. COONS, Delaware
JEFF FLAKE, Arizona                  TOM UDALL, New Mexico

                              (ii)        

  
                          C O N T E N T S

                              ----------                              
                                                                   Page

Hon. Cory Gardner, U.S. Senator From Colorado....................     1
Hon. Benjamin L. Cardin, U.S. Senator From Maryland..............     3
Christopher Johnson, Senior Advisor and Freeman Chair in China 
  Studies, Center for Strategic and International Studies, 
  Washington, DC.................................................     5
    Prepared Statement...........................................     7
Dr. Melanie Hart, Director of China Policy, Center for American 
  Progress, Washington, DC.......................................    10
    Prepared Statement...........................................    12

              Additional Material Submitted for the Record

Response of Dr. Melanie Hart to Question Submitted by Senator 
  Isakson........................................................    24

                                 (iii)

  

 
      THE CHANGING LANDSCAPE OF U.S.-CHINA RELATIONS: WHAT'S NEXT?

                              ----------                              


                      TUESDAY, SEPTEMBER 29, 2015

                           U.S. Senate,    
Subcommittee on East Asia, The Pacific, and
                International Cybersecurity Policy,
                            Committee on Foreign Relations,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 2:35 p.m., in 
room SD-419, Dirksen Senate Office Building, Hon. Cory Gardner 
(chairman of the subcommittee) presiding.
    Present: Senators Gardner, Isakson, Cardin, and Markey.

            OPENING STATEMENT OF HON. CORY GARDNER, 
                   U.S. SENATOR FROM COLORADO

    Senator Gardner. Good afternoon. Thank you very much. This 
hearing will come to order.
    Let me welcome you all to the third hearing for the Senate 
Foreign Relations Subcommittee on East Asia, The Pacific, and 
International Cybersecurity Policy in the 114th Congress.
    I want to thank Senator Cardin for his cooperation and 
support for holding this important hearing.
    Today's hearing comes at an opportune time with the 
President of the Republic of China, Xi Jinping, having just 
concluded his state visit to the United States.
    Prior to this visit, I sent a letter to President Obama 
with three of my colleagues on this committee urging the 
President to demonstrate leadership and deliver a strong 
message of United States concern to President Xi regarding the 
troubling trajectory of China's foreign and domestic policies. 
I urged the President to reiterate that China's recent 
destabilizing activities in East China Sea and South China Sea, 
behavior in cyberspace, and human right abuses are actions 
fundamentally at odds with a country that wants to be 
considered a peacefully rising global power.
    China has declared an illegitimate air defense 
identification zone in the East China Sea and has dramatically 
expanded its land reclamation activities in the South China 
Sea. According to the Pentagon, China has created about 3,000 
acres of new land over the past 18 months and has deployed 
artillery, built aircraft runways and buildings, and positioned 
radars and other equipment.
    While on a visit to Beijing last month, I had an 
opportunity to engage a top official from the People's 
Liberation Army on this issue and came out convinced that only 
tough resolve from the United States and our partners can 
impact Beijing's actions and calculus. I am convinced that 
China's actions mean that we must urgently pursue enhanced 
security measures with our traditional and emerging allies in 
the Asia-Pacific region to ensure future peace and stability.
    First and foremost, we must enhance the capabilities of 
likeminded partners in the region with regard to maritime 
security, starting with the effort recently announced by 
Secretary of Defense Ash Carter called the Southeast Asia 
Maritime Initiative. And we should never miss an opportunity to 
reiterate our policy as stated by Secretary Carter at the 
Shangri-La Dialogue in Singapore on May 30, 2015, and I quote. 
``The United States will fly, sail, and operate wherever 
international law allows, as U.S. Forces do all over the world. 
America, alongside its allies and partners in the regional 
architecture, will not be deterred from exercising these 
rights, the rights of all nations.''
    China's behavior in cyberspace has also emerged as a 
serious threat to U.S. national and economic security. 
Regrettably, well documented state-sponsored or state-endorsed 
Chinese activities have not been met with an appropriate 
response from the United States. Although last year the 
administration announced criminal charges against five 
officials of the PLA, clearly that has not been enough to deter 
further bad behavior from happening.
    I am deeply disappointed that despite new Executive orders 
issued on January 2 and April 1 of this year, this 
administration has not penalized a single entity responsible 
for national security threats or commercial cyber-enabled 
activities directed against our Nation and emanating from 
China.
    On my trip to Beijing, I met with China's Cybersecurity 
Minister Lu Wei and had a frank conversation about these 
issues. We agreed that China and the United States must 
continue to talk about building international norms in 
cyberspace, and we have seen very modest progress on this issue 
with the cyber agreement announced last Friday.
    But given the grave threat that China's activities 
represent to U.S. national and economic security interests, the 
administration and future administrations must never hesitate 
to use the punitive tools at their disposal such as criminal 
charges and sanctions to punish any and all sponsored cyber 
crime.
    We also urgently need U.S. leadership to reverse China's 
deplorable human rights record which recently included illegal 
detention and harassment of more than 100 lawyers in China. The 
United States must have consistent and asserted diplomatic 
engagement with China to reinforce that all of these behaviors 
fall outside of accepted international norms. We should build a 
strong trilateral partnership between United States, Japan, and 
South Korea in the hopes that it will put the right kind of 
pressure on Beijing to play by established international rules. 
I believe that a mature, productive and peaceful relationship 
with Beijing is in the national security and economic interests 
of the United States.
    This relationship will also help us further our 
relationship with China in regards to North Korea. For 
instance, if we continue to engage China on the threat of North 
Korea, I believe that we can actually make a difference in 
North Korea's behavior. It is Beijing that holds the key to 
survival of the North Korean regime, and it is a message that I 
reiterated to Foreign Minister Wang Yi in Beijing during our 
meeting last month.
    But the actions by China that have been outlined that I 
talked about today jeopardize our bilateral relations befitting 
of a peaceful, rising global power that China claims to be. And 
that is what this hearing is about today. What did the state 
visit accomplish this past week to change the state of affairs 
in United States-China relations? Can Beijing turn from a path 
of confrontation to cooperation? What should U.S. policy be to 
effect positive change and behavior? I look forward to our 
witnesses addressing these and other questions today.
    And, Senator Cardin, again thank you, and I turn to you for 
your opening statement.

         OPENING STATEMENT OF HON. BENJAMIN L. CARDIN, 
                   U.S. SENATOR FROM MARYLAND

    Senator Cardin. Chairman Gardner, first of all, thank you 
for convening this hearing of our subcommittee to look at the 
relationship between the United States and China, and the 
changing landscape of the United States-China relationship. It 
is absolutely accurate.
    And Dr. Hart and Mr. Johnson, thank you for joining us in 
this discussion.
    As the chairman pointed out, this has been an incredible 
few days with President Xi here in the United States. We have 
had an opportunity to be with him at a State Department lunch 
where we had a chance to hear his vision for the Chinese-
American relations, along with Vice President Biden and 
Secretary of State Kerry. I was encouraged by the comments that 
President Xi made at that lunch.
    Later in the day, we had a chance in a meeting in the 
Capitol to have an exchange in which we could drill down to a 
little bit more specific issues. I thought that was also very 
helpful. And of course, I have listened with a great deal of 
care to the comments that the President of China made with 
President Obama. So it was a chance to explore firsthand some 
of the issues.
    Look, the rebalance to Asia is critically important to the 
United States. We have had hearings on this. We understand the 
importance of that region to us economically, from a security 
point of view, and from an environmental point of view. Our 
rebalance to China depends upon a more constructive 
relationship with China.
    And there is reason to be optimistic. What we saw with 
China's engagement with the P5+1 on the Iranian negotiations 
was a positive step, China joining the international community 
on a geopolitical issue was incredibly important for the 
civility of the Middle East. This is a positive sign.
    We also have a common agenda with China in regards to North 
Korea and seeing the Korean Peninsula nuclear weapon-free. So 
we should be able to figure out a way to engage China more 
effectively in the safety of the Korean Peninsula.
    There were some very positive steps taken in regards to 
climate change and, environmental issues with the announcements 
that have been made, and the leadership demonstrated by China 
and the United States. Any of us who have visited China 
understand the political mandate. I do not know, Mr. Chairman, 
if your experience was the same during your visit. But when I 
was there, I think for 3 or 4 days or 3 days, I never saw the 
sun and there was not a cloud in the sky. So there is quite an 
imperative for China to deal with the problems of pollution, 
and it looks like they are, indeed, taking some strong 
leadership as we lead up to the Paris international meetings.
    All of that is very positive. And as you mentioned, there 
is now a protocol that is trying to be established between 
China and the United States dealing with cybersecurity issues. 
That is also a positive step, but let me remind everyone here 
of the strong evidence that we have seen to date of China's 
cyber attack against the personnel records of our Federal 
workforce. That is an issue that will not go without action. I 
can assure you of that. That was a very serious breach of our 
security, and it put a lot of individuals at risk. And we will 
certainly want to be able to follow up and hold accountable 
those responsible for those actions.
    And as the chairman pointed out, the provocative actions in 
the China Seas. This is a very dangerous situation. It is very 
explosive. And China has been very provocative in its 
activities, reclaiming land, doing construction on the lands, 
building oil rigs, and almost encouraging a confrontation with 
its neighbors. That is very dangerous. And I appreciate 
Secretary Carter's comments at the Shangri-La security 
conference. I strongly agree with those comments. And the 
United States has to make it very clear--although we take no 
position on the claims as to who the territories belong to, we 
do strongly oppose provocative actions. We want a peaceful 
solution and we want it done based upon rule of law not based 
upon unilateral action of any one country.
    I do want to underscore that we will not have as 
constructive a relationship with China as we should if they do 
not take steps in a positive direction to deal with their human 
rights problems. We saw maybe 10 years ago, 12 years ago, a 
pathway that we thought was positive in opening up some of the 
rights for their citizens, and we were encouraged because we 
understand it will take time. But in recent years, it looks 
like they are backtracking on their human rights commitments. 
When you look at the laws they are proposing that would 
restrict NGOs, when you look at what they have done with 
journalists, when you look at the imprisonment of human rights 
activists, all of that, religious freedom issues, what is 
happening in Tibet, and what is happening in Hong Kong, they 
all raise major flags as to whether we are seeing a 
retrenchment in China on the commitment to human rights.
    So I took advantage of the opportunity last Friday during 
the afternoon meeting with President Xi to make sure that those 
issues were raised. Vice President Biden mentioned it in his 
talks. And I know that this is an issue that we are going to 
put a major focus in regards to the relationship between China 
and the United States.
    My last point is on the economic front. There is some good 
news, and some bad news. But bottom line is we still have a 
China that is not protecting United States intellectual 
property rights. We have a China that is manipulating currency. 
It is China that has a huge interest in the United States 
market. We need to be better in our economic relationships with 
China to understand that there is going to be a level playing 
field, and we expect that they will protect the rights of 
American producers, farmers, and manufacturers. And to date, we 
have not gotten as much protection as we should for a level 
playing field, and we need to continue to stress those points.
    So, Mr. Chairman, I look forward to hearing from our two 
witnesses. Obviously, this is a complicated relationship. There 
are many issues, but it is critically important we get it right 
and that we build a stronger, more productive relationship with 
China.
    Senator Gardner. Thank you, Senator Cardin. And thank you 
as well. Senator Cardin serves, as everybody knows, as the 
ranking member of the full committee. So to continue to spend 
time with this committee, we truly appreciate it as ranking 
member here. So you are pulling double duty. So thank you.
    Senator Cardin. Well, do not tell the other regions, but 
this is the most important region. [Laughter.]
    Senator Gardner. Thank you for reinforcement. So I really 
do appreciate Senator Cardin's continued engagement.
    And thank you to the witnesses. Thank you to Chris Johnson 
and to Dr. Hart for being here this afternoon.
    Our first witness this afternoon is Chris Johnson, senior 
advisor, holding the Freeman Chair in China Studies, at the 
Center for Strategic and International Studies. An accomplished 
Asian affairs specialist, Mr. Johnson spent nearly two decades 
serving in the U.S. Government's intelligence and foreign 
affairs communities and has extensive experience analyzing and 
working in Asia. Mr. Johnson worked as a senior China analyst 
at the Central Intelligence Agency and has served as an 
intelligence liaison to two Secretaries of State and their 
deputies on worldwide security issues. In 2011, he was awarded 
the U.S. Department of State's Superior Honor Award for 
outstanding support to the Secretary of State. Welcome, Mr. 
Johnson. Thank you very much for being here and looking forward 
to your testimony.

 STATEMENT OF CHRISTOPHER JOHNSON, SENIOR ADVISOR AND FREEMAN 
CHAIR IN CHINA STUDIES, CENTER FOR STRATEGIC AND INTERNATIONAL 
                    STUDIES, WASHINGTON, DC

    Mr. Johnson. Thank you very much and thank you for this 
opportunity to discuss this very important issue.
    Distinguished members of the subcommittee, good afternoon 
and thank you again for this opportunity to come before you 
today for such an important hearing.
    I have been asked here today to provide my assessment of 
United States-China ties in the wake of last week's summit 
between President Obama and Chinese President Xi Jinping and to 
give my view on where the relationship is likely headed going 
forward. In evaluating the summit's outcomes, I would like to 
focus my opening remarks on the degree to which they have 
helped narrow the gap between two narratives, one official and 
one unofficial, circulating in Washington in recent months with 
regard to bilateral ties.
    In the official view, there are certainly tensions, areas 
of discord and tension with Beijing, but there remains a belief 
that the disagreements are manageable and that given the 
substantial complexity of United States-China ties and the many 
cooperative dimensions of the interactions between the two 
countries, overall the relationship is stable and being managed 
well.
    In the unofficial view held by analysts, pundits, 
journalists, the strategic competition between the United 
States and China is the dominant theme. And left unchecked, 
that competition is driving Washington and Beijing toward a so-
called tipping point in the race for global or regional 
hegemony. This view also holds that the disagreements between 
the two sides are not under policy control within either the 
Chinese or the U.S. bureaucracies, suggesting that the 
potential for accidental conflict is high and growing steadily.
    So against that backdrop, let me turn to a quick analysis 
of the summit's achievements and also look at some areas where 
a little headway was made.
    Given the serious tension between our two countries over 
cybersecurity this year, I think it is safe to say that the 
most unexpected outcome of the summit was the agreement between 
the two sides on this contentious issue. Within the agreement, 
the most significant component is clearly the declaration that 
neither government will, ``conduct or knowingly support,'' 
cyber-enabled economic espionage. As President Obama noted in 
his joint press conference with President Xi, the focus of the 
U.S. side must now be on ensuring China's actions comport with 
its words, or trust but verify. In fact, we can and should 
expect that the next time the United States side has releasable 
evidence of this type of activity by the Chinese emanating from 
China, the administration will present such evidence to the 
Chinese at a very high level with the full expectation that the 
responsible parties will be prosecuted to the full extent of 
Chinese law. And if that does not occur, then we should expect 
the United States to levy the type of sanctions against the 
offending Chinese individual or entity that were hinted at 
before President Xi arrived for his visit.
    President Xi's visit also welcomed some progress on the 
bilateral economic relationship. One key commitment was both 
sides' acknowledgement that they have a shared interest in 
promoting a stable global economy supported by the multilateral 
economic institutions founded at the end of World War II that 
have benefited, obviously, the people of both nations. This 
recognition is a helpful step toward addressing some of the 
concerns that China seeks either to undermine those 
institutions or to short circuit their effectiveness through 
the development of parallel institutions such as the Asian 
Infrastructure Bank and other institutions. As with the 
cybersecurity agreement, however it remains to be seen whether 
China's actions will match its words. Commitments from the 
United States side to implement the 2010 IMF quota reforms as 
soon as possible and to endorse with the appropriate caveats 
the inclusion of the renminbi in the IMF's SDR basket of 
reserve currencies presumably will serve as positive 
inducements to China to remain committed to working within 
these established global financial structures.
    President Xi also made an effort, primarily through his 
interactions with senior U.S. business executives in Seattle, 
to reassure the U.S. business community on issues of market 
access and the promotion of a level playing field, as you 
mentioned in your opening remarks. Here, there was less reason 
for optimism. Xi certainly acknowledged all the contentious 
issues, but he also seemed to put the blame on the U.S. side to 
some degree for some of these issues or to simply suggest that 
there is no room for U.S. opinion on some of these areas such 
as pending legislation before the Chinese legislature that has 
been of deep concern to U.S. business.
    Moreover, aside from the agreement on cybersecurity, there 
was very little progress on the several security issues 
currently complicating United States-China ties. President Xi 
showed almost no willingness to address U.S. concerns on 
maritime security, and the fact that maritime security and the 
South China Sea were not mentioned at all in the released fact 
sheet tells us that the two sides are very much at loggerheads 
on this issue.
    So taking what seems to be a very mixed picture into 
account, can we divine with any greater clarity whether the 
official or unofficial narrative on United States-China ties 
has more explanatory power? As with all complex analytic 
problems, the truth probably lies somewhere in between, as we 
see elements of both narratives operating in the context of the 
summit's negotiations and its results. And those same features 
are likely to be manifest in the relationship going forward.
    With that in mind, let me just close briefly by 
highlighting three trends in the relationship that do seem to 
point toward growing strategic divergence between the United 
States and China.
    The first is the challenge faced by the United States 
reluctance to acknowledge China's great power ambitions 
exacerbating tensions. We have seen this in the U.S. approach 
to AIIB and some other areas. And I use the term acknowledge'' 
China's great ambitions, not ``accept,'' because we do not want 
to be showing our acceptance of these ambitions of theirs, but 
we certainly need to acknowledge them because it is causing 
bilateral problems.
    The second is the situation where a more capable Chinese 
military is meeting an underfunded U.S. defense establishment 
due to the burdens of sequestration and what we have seen there 
and a more capable defense posture from China.
    And the third, as was mentioned in opening remarks, is a 
balkanized U.S. business community that is less supportive of 
stable bilateral ties. For a long time, certainly the bedrock, 
China's key asset in the United States, has been the U.S. 
business community, and now because of Chinese industrial 
policies in particular, we see the U.S. business community 
being less willing to advocate for those smooth and stable 
ties. And I expect that to continue unless we see actions from 
the Chinese side to move toward a more level economic playing 
field.
    Let me end there and thank you very much for this 
opportunity.
    [The prepared statement of Mr. Johnson follows:]

              Prepared Statement of Christopher K. Johnson

    Distinguished members of the subcommittee, good afternoon, and 
thank you for this opportunity to come before you for this important 
hearing. I have been asked here today to provide my assessment of U.S.-
China ties in the wake of last week's summit between President Obama 
and Chinese President Xi Jinping and to give my view on where the 
relationship is likely headed going forward. In evaluating the summit's 
outcomes, I would like to focus my opening remarks on the degree to 
which they have helped narrow the gap between two narratives--one 
``official'' and one ``unofficial''--circulating in Washington in 
recent months with regard to bilateral ties. In the ``official'' view, 
there are substantial areas of discord and tension with Beijing, but 
there remains a belief that these disagreements are manageable and 
that, given the significant complexity of U.S.-China ties and the many 
cooperative dimensions of the interactions between the two countries, 
overall, the relationship is stable and being managed well. In the 
``unofficial'' view, the strategic competition between the United 
States and China is the dominant theme and, left unchecked, that 
competition is driving Washington and Beijing toward a ``tipping 
point'' in the race for global hegemony. This view also holds that the 
disagreements are not under policy control within either the Chinese or 
the U.S. bureaucracies, suggesting that the potential for accidental 
conflict is high and growing steadily. Against that backdrop, let me 
turn to a quick analysis of the summit's achievements, as well a look 
at areas where little headway was made.
               evaluating the obama-xi summit's outcomes
    Given the serious tensions between our two countries over 
cybersecurity this year, it is safe to say that the most unexpected 
outcome of the summit was the agreement between the two sides on this 
contentious topic. Within the agreement, the most significant component 
is the declaration that neither government will ``conduct or knowingly 
support'' cyber-enabled economic espionage. As President Obama noted in 
his joint press conference with President Xi, the focus of the U.S. 
side must now be on ensuring China's actions comport with its words. In 
fact, we can and should expect that, the next time the U.S. side has 
releasable evidence of this type of activity emanating from China, the 
administration will present such evidence to the Chinese, with the 
expectation that the responsible parties will be prosecuted to the full 
extent of Chinese law. If this does not occur, then we should expect 
the United States to levy the type of financial sanctions against the 
offending Chinese individual or entity that were hinted at before 
President Xi arrived for his visit.
    President Xi's visit also witnessed some progress in the bilateral 
economic relationship. One key commitment was both sides' 
acknowledgement that they have a shared interest in promoting a stable 
global economy ``supported by the multilateral economic institutions 
founded at the end of World War II that have benefited the people of 
both nations.'' This recognition is a helpful step toward addressing 
some of the concerns that China seeks either to undermine those 
institutions or to short circuit their effectiveness through the 
development of parallel institutions such as the Asian Infrastructure 
Investment Bank (AIIB). As with the cybersecurity agreement, however, 
it remains to be seen whether China's actions will match its words. 
Commitments from the U.S. side to implement the 2010 IMF quota and 
governance reforms ``as soon as possible'' and to endorse, with the 
appropriate caveats, the inclusion of the Chinese currency, the 
renminbi, in the IMF's SDR basket of reserve currencies presumably will 
serve as positive inducements to China to remain committed to working 
within these established global financial structures.
    President Xi also made an effort, primarily through his 
interactions with senior U.S. business executives in several events in 
Seattle, to reassure the U.S. business community on issues of market 
access and the promotion of a level playing field in China. Here, there 
was less reason for optimism. Although Xi in his public and private 
remarks acknowledged the various concerns U.S. business has raised, he 
offered little in the way of concrete solutions. In fact, in several 
instances, Xi seemed to intimate that the ball was in the U.S. court in 
these areas, or that there simply was no role for U.S. opinion, such as 
in the case of several pending laws in the Chinese legislature that 
have sparked controversy among foreign business. The two leaders' 
commitment to continuing the negotiations toward a bilateral investment 
treaty is encouraging, as the high standards envisioned would address 
many of these problems, but there was no clear vision laid out by 
either side for how to expedite those discussions.
    Moreover, aside from the agreement on cybersecurity, there was very 
little progress on the several security issues currently complicating 
U.S.-China ties. For example, President Xi showed almost no willingness 
to address U.S. concerns on maritime security, especially as it 
pertains to brewing tensions in the South China Sea. In fact, the 
absence of any reference to maritime security in the fact sheet 
released by the White House represents a glaring omission and suggests 
the two sides are fundamentally at loggerheads, with the United States 
calling for Chinese restraint with their island building and the 
militarization of reclaimed islands and the Chinese reiterating their 
sovereignty claims. Similarly, while there was agreement to continue 
bilateral human rights talks, the Chinese made no concessions on what 
might be called ``nontraditional'' human rights concerns, such as the 
worries over the provisions of China's draft law promising major--and 
potentially worrisome--changes to the way the Chinese Government 
manages nongovernmental organizations operating there.
    So, taking what seems to be a very mixed picture into account, can 
we divine with any greater clarity whether the ``official'' or 
``unofficial'' narrative on U.S.-China ties has more explanatory power? 
As with all complex analytic problems, the truth probably lies 
somewhere in between, as we see elements of both narratives operating 
in the context of the summit's negotiations and its results, and those 
same features are likely to be manifest in the relationship going 
forward. With that in mind, let me close my remarks by highlighting 
three trends in the relationship that do seem to point toward growing 
strategic divergence between the United States and China.
          u.s. reluctance to acknowledge china's great power 
                   ambitions is exacerbating tensions
    Many in the U.S. policy community choose to ascribe the Xi 
administration's seeming intransigence on sensitive bilateral issues to 
a developing sense of Chinese arrogance. However, the Chinese, in fact, 
are fundamentally looking for a basic U.S. recognition of Beijing's 
growing global stature and influence. They want the United States to 
formally recognize that the cadence and the mechanics of U.S.-China 
relations must change to reflect the shifting power dynamics in a 
rapidly changing global order. The U.S. policy establishment has yet to 
craft an approach that offers concrete measures for signaling U.S. 
recognition of Chinese thinking in this regard without judging it is 
compromising on U.S. strategic interests in the region, whether real or 
perceived.
    This shortcoming results in several practical policy effects. The 
feckless attempt by the United States to block China's establishment of 
the AIIB offers a poignant example. Misguided concerns that the AIIB 
somehow represented a dagger pointed at the heart of the Bretton Woods 
system prompted a U.S. policy response that resulted in unnecessary 
awkwardness--and even tensions--with key U.S. allies such as Australia, 
the United Kingdom, and South Korea while emboldening a victorious 
China to view such institutions as desirable workarounds to the glacial 
pace of change in established institutions. Similarly, seeming U.S. 
discomfort with accepting China's growing power and prestige may lead 
to unfounded confidence in the inevitability of Chinese policy failure. 
Talk of China ``scoring own goals'' with its regional diplomacy, 
military posture, and economic statecraft seems accurate given that 
China's behavior has resulted in a counterproductive demand signal from 
its neighbors for greater U.S. security presence in the region. That 
said, a kneejerk assumption concerning the likelihood of Chinese 
failure is an excuse for intellectual and policy laziness in the U.S. 
diplomatic, economic, and security establishments, especially since the 
evidence to date in several of these areas points to mixed conclusions 
at best.
         a more capable chinese military meets an underfunded 
                       u.s. defense establishment
    In many ways, China's burgeoning ambitions are a reflection of the 
staggering success of its robust military modernization program over 
the last two decades. Beijing's desire for advanced military 
capabilities stems from its general assessment of the pillars of U.S. 
military power projection and the recognition that these capabilities 
amounted to an insurmountable obstacle for the People's Liberation Army 
(PLA). It is intuitively obvious that Chinese planners, with the 
assurance of sustained, targeted funding, have responded to these 
shortcomings by developing a suite of capabilities designed to counter 
each U.S. pillar: aircraft carriers; air superiority and long-range 
precision strike; regional bases and alliances; and space and 
information dominance.
    At the same time, however, senior U.S. military officers presumably 
are concerned over the risk of degradation in U.S. combat effectiveness 
resulting from the sustained tight budgetary and fiscal environment 
imposed by sequestration. The impact on operations and maintenance 
accounts--to say nothing of the substantial drawdown in key investment 
accounts for future modernization of the force--makes responding to the 
challenge of China's rise more daunting. As such, a growing chorus of 
U.S. military voices appears to be advocating for pushing back on the 
PLA's expansion of its military operational activities while U.S. 
forces are still in a position to do so. Changes in Chinese defense 
strategy and priorities strongly suggest, however, that U.S. and 
Chinese forces will be coming into contact more often rather than not 
going forward. As such, the risk is rising that the potential for 
miscalculation is increasing faster than the two countries' national 
security establishments can keep those tensions under policy control.
        a balkanized u.s. business community is less supportive 
                        of stable bilateral ties
    Finally, one of the immediate consequences of President Xi's 
apparent turn to the left on the state's role in the economy is the 
effective Balkanization of the foreign business community into 
something akin to ``haves'' and ``have nots.'' In this construct, the 
``haves'' include firms that produce products--especially high-
technology items--that Chinese domestic firms are either completely 
incapable of producing on their own or can only do so with very poor 
quality. As to the ``have nots,'' these are firms where a domestic 
Chinese competitor is already close to producing products on par with 
those produced by the foreign firm, or where the foreign firm is 
directly competing with a Chinese counterpart in an industry where the 
government has clearly signaled its intent to favor an indigenous 
capability.
    Regardless of which category various U.S. firms happen to fit into, 
the net result is a business community less capable of--and less 
willing to--come together in using its lobbying power to stress the 
maintenance of sustained healthy U.S.-China ties. In fact, it is likely 
that the business community will turn toward greater pressure on the 
relevant government agencies to push back on the more blatant 
manifestations of Chinese industrial policy. Given the fundamental role 
of the economic relationship historically in stabilizing U.S.-China 
ties in times of security or political tension, the deterioration of 
that influence provides the potential for a more conflictual 
relationship going forward.
    In conclusion, the summit between President Obama and President Xi 
succeeded in highlighting the challenges in the U.S.-China relationship 
but offered little in terms of providing concrete policy solutions or 
strategies. Each of the three trends I have laid out pointing to 
increased strategic divergence between the United States and China is 
entirely manageable with the application of creative thinking and 
strong leadership on both sides. The alternative is to allow these and 
other negative trends in the relationship to conspire to effect a 
steady worsening of ties. Moreover, the risk of that happening is 
amplified by the fact that the Obama administration will soon enter its 
final year in office, making a disposition toward maintaining the 
status quo its likely default setting. Given that the U.S.-China 
relationship arguably should be the chief strategic preoccupation of 
U.S. foreign policy thinkers in the 21st century, allowing such policy 
malaise to enter the equation is something both of our nations--and 
arguably the world--can ill afford.

    Senator Gardner. Thank you, Mr. Johnson.
    Dr. Hart, our second witness, Director of China Policy at 
the Center for American Progress. Dr. Hart has worked on China 
issues for more than a decade. Before joining the Center for 
American Progress, she worked as a project consultant for the 
Aspen Institute International Digital Economy Accords Project. 
She also worked in the private sector where she provided 
technology market and regulatory analysis to guide operations 
in China, and has served as China advisor for the Scowcroft 
Group and others and the University of California Institute on 
Global Conflict and Cooperation.
    Welcome, Dr. Hart. Thank you for being with us today, and 
please proceed.

STATEMENT OF DR. MELANIE HART, DIRECTOR OF CHINA POLICY, CENTER 
             FOR AMERICAN PROGRESS, WASHINGTON, DC

    Dr. Hart. Chairman Gardner, Ranking Member Cardin, thank 
you very much for this opportunity to speak today on United 
States-China relations. I will focus my opening remarks on 
three key points.
    First, in the runup to this recent summit, there has been a 
rising debate on whether we need a course correction in U.S. 
foreign policy toward China. The United States is pursuing a 
multitrack engagement strategy toward China. It is an eyes wide 
open engagement strategy. Engagement need not be predicated on 
the assumption that China will not seek to undermine U.S. 
interests in some areas. The United States can work 
constructively with China while also accepting that we have 
different principles in some issues. We can work along multiple 
tracks at the same time, expanding cooperation in some tracks, 
while also confronting differences and exchanging threats in 
other tracks.
    This current strategy is largely effective, but there is a 
need for tactical adjustments in some areas. We are doing much 
better on the cooperative side of the strategy than we are at 
confronting differences and managing differences and addressing 
differences in the United States-China relationship. When it 
comes to cybersecurity, market access barriers, and maritime 
issues, progress has been incremental at best. That is because 
China is deploying new tactics that evade our current 
enforcement strategies. Going forward, the United States should 
maintain the current good momentum on cooperative issues like 
climate change, but we also need to expand our toolkit for 
addressing difficult issues like cyber and the South China Sea.
    Second, many experts view the lack of concrete progress on 
regional maritime issues as evidence that the U.S. should 
abandon our engagement strategy and shift toward some form of 
neocontainment. Those assessments are misguided. Our problem in 
the South China Sea is not a strategy problem. It is a tactical 
problem. China is taking actions in that region that violate 
international laws and norms, namely the U.N. Convention on the 
Law of the Sea. The United States has not ratified that treaty. 
We do not have a seat at the table when U.N. tribunals weigh in 
on Chinese actions or claims. The only levers we have are 
public statements, military actions, and our ability to create 
space for smaller claimants to assert their claims. 
Unfortunately, those levers have not proven particularly 
effective at changing Chinese behavior.
    This is an area where the U.S. Senate can significantly 
improve American influence and American capabilities abroad. 
Asian maritime maps will not be determined by military might 
alone. They will also be determined by law. And we and the rest 
of the world need the United States to be in the room when 
those legal decisions are made. Ratifying the U.N. Convention 
on the Law of the Sea would change the game in the South China 
Sea. It would enable the United States to play a leading role 
in setting norms that will shape the region for decades to 
come.
    Ratification would also improve our strategic capabilities 
in the Arctic where the United States is sitting on the 
sidelines and watching Russia and other Arctic nations make new 
claims that dramatically expand their territorial boundaries in 
the Arctic Ocean.
    Third, the climate track has become a groundbreaking action 
track in United States-China relations, and progress on climate 
change justifies a continuation of the engagement approach that 
we are currently pursuing. Last November, the Obama 
administration secured Chinese commitments to peak carbon 
emissions by 2030 and double the nonfossil portion of their 
energy mix by 2030. These were groundbreaking commitments.
    In addition, the peaking commitment was a bottom line 
commitment. China also promised to make best efforts to peak 
even earlier. In the runup to this most recent summit, the 
administration secured a new round of climate peaking 
commitments from 11 Chinese cities who were willing to step 
forward and make commitments to peak well before their nation's 
2030 deadline. Three of those cities pledged to peak in 2020, 
which is only a few years away and a decade ahead of the 
commitment we achieved last November.
    This summit also produced groundbreaking progress on 
climate finance. China pledged $3.1 billion in climate aid to 
developing nations, an amount that actually exceeds what the 
United States has pledged thus far under the Green Climate 
Fund.
    It is important to remember that climate change was not 
always a positive area of United States-China relations. As 
recently as 2009, this was an area of staunch divide. The 
United States wanted China to step up and play a leadership 
role in line with its growing emissions, but China refused to 
do so. That put our nations on opposite sides in global climate 
negotiations.
    However, since then, the United States has used smart 
diplomacy to turn this dynamic around. Now China is not only 
doing more at home, they are also working in concert with the 
United States to drive all other developing countries to do 
more. We could not have achieved that without working through 
the U.S.-China Partnership.
    The climate arena can serve as a model for other areas of 
the relationship. It also serves as a reminder that when the 
United States has the right tools for the job and employs the 
right tactics, engagement can be very successful even on 
particularly difficult issues.
    Thank you very much.
    [The prepared statement of Dr. Hart follows:]

                 Prepared Statement of Dr. Melanie Hart

    Chairman Corker, Ranking Member Cardin, Subcommittee Chairman 
Risch, Subcommittee Ranking Member Murphy, Senator Gardner, and members 
of the committee, thank you for this opportunity to discuss U.S.-China 
relations.
    We are witnessing a period of great change within China and in 
China's behavior abroad. Under President Xi Jinping's leadership, the 
Chinese Communist Party is launching a wave of policy reforms that aim 
to fundamentally restructure China's economy and move the nation away 
from the ``hide your strength, bide your time'' foreign policy strategy 
it has adhered to since the Deng Xiaoping era.\1\ Beijing is 
demonstrating a new assertiveness across multiple policy fronts. That 
assertiveness creates new opportunities and new challenges for the 
United States.
    The United States has pursued an engagement strategy toward China 
for almost four decades. Regardless of party affiliation, every U.S. 
President since Nixon has aimed to integrate China into the 
international system. That decision has been, and continues to be, one 
of the greatest American foreign policy successes of the post-World War 
II era. The U.S. engagement strategy toward China and alliance 
relationships in the Asia-Pacific region made it possible for Asia-
Pacific nations to focus on economic development at home instead of 
strategic competition abroad.
    Now, nearly 37 years after U.S.-China normalization, China is an 
upper-middle-income nation. China's economic growth is allowing it to 
expand its military capabilities and foreign policy ambitions. That is 
a natural expansion. Beijing is increasingly unwilling to sit on the 
sidelines and watch other nations shape international norms. Today, 
instead of biding their time, Chinese leaders are experimenting with 
new ways to use their nation's growing strengths to shape the 
international environment in China's favor. On some issues, those 
efforts dovetail with U.S. interests, so China's new assertiveness is 
opening up new opportunities for cooperation. Where U.S.-China 
interests are not aligned, however, Chinese actions are reheating old 
frictions and creating new ones. Those frictions--most notably in the 
South China Sea--are triggering new debates in the United States about 
overall foreign policy strategy toward China. Some U.S. observers 
discount the new opportunities for cooperation and argue that because 
some challenges in the U.S.-China relationship appear difficult to 
navigate, the United States should scrap the entire engagement strategy 
and begin treating China as a strategic rival. Those arguments are 
misguided.
    The fundamentals of the U.S.-China relationship are the same today 
as they were in the 1970s when the United States first reached out to 
turn this former rival into a strategic partner. Chinese leaders still 
prioritize domestic economic growth and stability above all other 
policy goals; they still view the U.S.-China bilateral as China's most 
important foreign policy relationship and want that relationship to be 
peaceful and cooperative. The Chinese military still focuses first and 
foremost on defending the Chinese Communist Party's right to govern the 
Chinese mainland and its territories. These fundamentals have not 
changed. What has changed in recent years is China's capabilities and 
the tools Beijing is using to further its domestic and foreign policy 
interests. Those changes call for some tactical adjustments on the U.S. 
side. Those changes do not warrant an abandonment of the engagement 
strategy that has brought, and can continue to bring, decades of 
enduring peace and economic growth for all Asia-Pacific nations, 
including the United States.
    My testimony will cover four main points:
    1. Economic and political challenges within China are still 
Beijing's top priority, and those challenges trigger a new 
assertiveness from Beijing.
    2. China's new assertiveness is constructive in some areas of U.S.-
China relations and problematic in others.
    3. The current U.S. engagement strategy excels at expanding 
cooperation in constructive areas and is achieving incremental progress 
in problematic areas.
    4. The United States should maintain this engagement strategy but 
expand its tactical toolkit for addressing problematic Chinese 
behavior.
                         beijing's perspective
    The Chinese economy has reached an inflection point. It is not yet 
clear whether the Chinese Communist Party can successfully traverse 
these changing circumstances and maintain its hold on power. The growth 
model that pulled more than 400 million Chinese citizens out of poverty 
over the past three decades is running out of steam. Chinese wages are 
rising and eliminating China's prior price advantages in global export 
markets. Fixed infrastructure investments are producing diminishing 
returns. Chinese citizens no longer accept the pollution costs 
associated with heavy industry, and even if they did, the global market 
cannot continue to absorb more Chinese steel and cement at double-digit 
annual growth rates. In order to keep the economy growing and maintain 
ruling legitimacy, Chinese leaders must downshift from the old growth 
model and foster new industries based on technological innovation, 
domestic consumption, and services.
    This will be a difficult transition to execute. Chinese leaders 
must eliminate benefits flowing to state-owned enterprises and other 
vested interest groups that have supported the party for decades. 
Growth will slow, and businesses will close their doors. In theory, new 
businesses and new political supporters will emerge to take their 
place. However, it is uncertain how long it will take for growth to 
pick up and create new pillars of support--for example, business and 
local government leaders that thrive under the new model--for the 
Chinese Communist Party. As China undergoes this transition there is a 
risk that disenfranchised groups will challenge the ruling regime and 
push for political change. To guard against those risks, Chinese 
leaders are strengthening defenses against forces that have triggered 
political change in other nations--namely, domestic and foreign 
nongovernmental organizations, journalists, and networked 
communication.
    Chinese leaders are behaving more assertively at home because they 
view a more forward-leaning policy stance as the only way to successful 
traverse difficult waters. Policy stasis would likely lead to a massive 
political crisis. The only way forward is massive change, and that 
depends on the leadership's ability to overcome powerful vested 
interest groups--some within the party itself--that either oppose 
economic rebalancing or believe it should proceed at a more gradual 
pace. From a U.S. perspective, Chinese leaders should pursue and 
achieve aggressive market economic reform, and in that respect, 
Beijing's new assertiveness can be a positive development not only for 
China but also for the United States.
    Chinese leaders are also demonstrating a new assertiveness on 
foreign policy issues.\2\ That is partly because they recognize that 
their upper-middle-income status and overall economic strength bring 
new capabilities; it is also because Beijing wants to use foreign 
policy to shore up political support at home and support the nation's 
economic transition. For example, Beijing's new Belt and Road 
initiative is primarily an economic growth strategy.\3\ Chinese leaders 
hope to improve regional economic integration and create new markets 
for Chinese products, thus giving the Chinese economy new legs to stand 
on as it move through the transition phase. On regional maritime 
issues, many Chinese scholars argue that their nation has too long 
bided its time and watched other nations make territorial gains at 
China's expense. They believe that since China now has the capabilities 
to push back and assert its territorial claims, Beijing has a 
responsibility to do so.
        the u.s. challenge: dealing with a more assertive china
    China's new assertiveness creates new opportunities and new 
challenges for the United States. On the positive side, China is 
showing an increasing willingness to play a leadership role among 
nations outside the highly industrialized democratic block. China 
played a key role in the Iran nuclear negotiations, helping the process 
through shaky moments, and Chinese nuclear experts helped Iranian 
officials redesign the Arak plutonium reactor so that it will never 
produce nuclear fuel.\4\ On climate change, China's willingness to 
issue bold climate targets with the United States last November 
challenged other developing nations to follow suit and knocked down a 
firewall that has hindered global climate negotiations for decades.\5\ 
China also appears to be leaning harder on North Korea.\6\ China 
supported the U.N. Security Council effort to sanction North Korea in 
response to that nation's February 2013 nuclear test. Earlier this 
month, after North Korean officials announced plans to launch another 
long-range rocket, China's Foreign Minister warned against ``taking new 
actions that could lead to tensions'' on the Korean Peninsula and 
called for all nations to take a ``responsible attitude.'' \7\ On all 
of these issues, Beijing's ability to speak to a different audience and 
from a different angle than the United States has made China a valuable 
diplomatic partner.
    On the commercial front, Chinese companies are venturing outward, 
which creates new partnership opportunities, most notably in China-to-
U.S. direct investment.\8\ For many Americans, China-to-U.S. foreign 
direct investment, or FDI, projects provide their first opportunity to 
directly engage in and benefit from the U.S.-China economic 
partnership. A recent survey conducted by the Rhodium Group reveals 
that 340 of the 435 American congressional districts have at least one 
China FDI project.\9\ Many of those projects are providing jobs for 
American workers: More than 80,000 Americans are now directly employed 
through a Chinese investment project in the United States.\10\ Economic 
competitiveness has always been an issue in the relationship, including 
U.S. concern that American jobs will migrate to China. Now the reverse 
is happening: Chinese companies are finally creating jobs in this 
Nation--a trend that leaders in both countries should support.
    On the other side of the Pacific, if Chinese leaders successfully 
rebalance their economy, it should, in theory, create new overseas 
commercial opportunities for American businesses. China is already the 
United States fastest growing export market: U.S. exports to China have 
grown nearly 300 percent over the past decade.\11\ Beijing's new reform 
program aims to boost consumer buying power and expand the nation's 
dependence on high-tech products, two trends that should boost Chinese 
consumption of U.S. goods and services.
    Unfortunately, Chinese leaders are also moving forward with 
initiatives that undermine U.S. interests via tactics that evade 
current international governance mechanisms and U.S. attempts to 
counteract and deter these actions. Problematic areas include:

   Cybersecurity: Recent cyberspace intrusions at health 
        insurer Anthem and the U.S. Office of Personnel Management are 
        reported to be Chinese intelligence-gathering operations.\12\ 
        Those two incidents affected an estimated 100 million 
        Americans, and they follow a string of commercial cyber thefts 
        targeting American businesses. It is difficult to quantify with 
        precision the costs to the United States from a steady drain of 
        U.S. commercial secrets and other private information--
        including federal government information--but those costs are 
        likely to be significant, both in terms of U.S. economic 
        competitiveness and U.S. national security. In the absence of 
        an international cyber-governance mechanism or common 
        cyberspace norms, it is difficult for U.S. leaders to craft an 
        effective response. That problem is particularly acute with 
        commercial cyber espionage because many American businesses 
        prefer to keep cyber thefts private to avoid undermining 
        investor confidence.
   Commercial concerns: Trade complaints have plagued the U.S.-
        China economic relationship for decades. U.S. companies have 
        confronted intellectual property theft, export subsidies that 
        appear to violate World Trade Organization regulations, and 
        overt market access barriers in China. More recently, Chinese 
        regulators are applying antimonopoly legislation in a biased 
        manner against American firms to force those firms to surrender 
        market share to Chinese competitors and license or sell their 
        intellectual property at submarket rates.\13\ The underlying 
        legitimacy of the antimonopoly rules that Beijing is 
        manipulating for protectionist purposes makes it very difficult 
        to counter these actions.
   Infrastructure construction in the South China Sea: China is 
        building new outposts on disputed reefs and rocks in the South 
        China Sea to strengthen its hand in ongoing maritime 
        territorial disputes.\14\ This activity raises new questions 
        about China's intentions toward its neighbors and willingness 
        to abide by both the letter and spirit of international law. Of 
        particular concern for the United States, the Chinese military 
        has ordered U.S. and Philippine aircraft to stay away from some 
        of these new outposts. Those actions indicate that China may be 
        aiming to block foreign military navigation in the seas 
        surrounding these new infrastructure projects, a move that 
        would violate the U.N. Convention on the Law of the Sea.
   National security regulations: China's ongoing internal 
        political tightening is directly affecting American businesses 
        and other interest groups with a presence in mainland China. 
        Chinese regulators are drafting a new banking security law that 
        would force banks to utilize more Chinese technology products 
        and force U.S. technology vendors to share sensitive source 
        code with Chinese regulators.\15\ In the academic realm, 
        Chinese legislators are drafting a new law that if implemented 
        in current draft form, would impose new administrative 
        restrictions on American universities and think tanks that send 
        scholars to conduct policy research in China.
                     multitrack engagement strategy
    Under the Obama administration, the United States is conducting the 
U.S.-China relationship along multiple parallel tracks. The 
administration formulates China policy on an issue-by-issue basis. 
Where interests converge, the administration seeks to expand concrete 
cooperation. Where interests diverge and China pursues actions that 
impose direct or indirect costs on the United States, the 
administration seeks to counter and deter those actions. This 
multitrack approach enables the United States to push back against 
problematic actions as needed without curtailing overall U.S.-China 
cooperation. This is a realpolitik, eyes-wide-open approach to 
engagement. Engagement need not be predicated on the assumption that 
China will not seek to undermine U.S. interests in some areas. The 
United States can work constructively with China while accepting that 
we have different principles, that we are not perfectly aligned. We can 
work along multiple tracks at the same time: expanding cooperation in 
one area while confronting differences and exchanging threats in 
another. That dynamic was on display through the most recent U.S.-China 
Presidential summit, which aimed to achieve three distinct goals.
    First, where interests converge, aim to work constructively on 
concrete initiatives that provide tangible benefits for both nations 
and lay groundwork for even bigger and more beneficial cooperation in 
the future. Successes from the recent summit include:

   Securing a $3.1 billion climate finance commitment from 
        China that exceeds what the United States has pledged thus far 
        via the Green Climate Fund, or GCF.\16\ In addition, prior to 
        the official Presidential meeting, U.S. and Chinese climate 
        negotiators convened a climate leadership summit during which 
        11 Chinese city- and provincial-level governments formed an 
        Alliance of Peaking Pioneer Cities, or APPC, under which all 
        are committing to peak carbon emissions earlier than the 
        nationwide 2030 target announced last November.\17\ Since China 
        issued its commitment to peak in 2030 and to make its ``best 
        efforts'' to peak earlier, new economic data have opened the 
        possibility that China could peak well before the current 
        deadline and possibility as early as 2025. All of the APPC 
        cities believe that with the right policy mix, they can beat 
        the 2030 target and serve as models for the rest of the nation. 
        Early-peak targets vary by location based on individual 
        capabilities. Beijing, Guangzhou, and Zhenjiang have committed 
        to peak around 2020, 10 years ahead of China's official 
        national target.
   Working collaboratively with China to expand the 
        international reconstruction effort in Afghanistan. 
        Afghanistan's peace and stability are critical to both U.S. and 
        Chinese national security objectives. The United States and 
        China cochaired a high-level U.N. General Assembly meeting on 
        Afghan reconstruction during which Chinese Foreign Minister 
        Wang Yi called on other nations to join the United States and 
        China in supporting Afghan peace, development, and integration 
        into the global community.\18\ The United States and China are 
        already partnering on capacity-building programs in 
        Afghanistan, and China has committed to provide $150 million in 
        development assistance. Such collaborative efforts are bringing 
        China forward on the diplomatic and development stage at a time 
        when U.S. funding is diverted to other pressing crises. 
        Furthermore, such collaboration should become the foundation 
        for greater Chinese development assistance to Afghanistan's 
        long-term development.

    Second, where interests diverge, take actions that decrease the 
risk of inadvertent conflict with China and increase the costs China 
pays for problematic behavior. Successes from the recent summit 
include:

   Establishing new annexes on air-to-air safety and crisis 
        communication under the military-to-military confidence-
        building measure, or CBM, framework launched in November 
        2014.\19\ The 2001 collision of a U.S. EP-3 and a Chinese J-8 
        aircraft and recent incidents between U.S. and Chinese aircraft 
        underscore the need to establish better operational standards 
        and best practices for military aircraft and military vessels 
        operating in close proximity in the Asia-Pacific region.
   Launching a new high-level dialogue on cybercrime and 
        securing what appears to be a new Presidential-level commitment 
        on commercial cyber espionage. The new high-level dialogue will 
        hold its first meeting before the end of 2015 and, if the 
        mechanism works as intended, will give U.S. officials new tools 
        for investigating and prosecuting cyber attacks and intrusions 
        attributed to Chinese actors. In addition, according to the 
        U.S. fact sheet on the recent summit meetings, the two 
        Presidents agreed that neither the United States nor China 
        ``will conduct or knowingly support cyber-enabled theft of 
        intellectual property, including trade secrets or other 
        confidential business information, with the intent of providing 
        competitive advantages to companies or commercial sectors.'' 
        \20\ This agreement is not likely to completely eliminate those 
        activities on the Chinese side, but if the White House did 
        secure a personal commitment from President Xi on this issue, 
        that will increase the reputational damage Chinese leaders will 
        face if their nation continues to engage in commercial cyber 
        theft and those activities are reported by the United States. 
        Within China, a Presidential-level commitment of this nature 
        would likely add new administrative restrictions on these 
        activities. Chinese leaders will have an incentive to improve 
        their awareness of and control over what is happening at the 
        operational level. They may apply new restrictions and require 
        higher level approvals for cyberspace intrusions targeting U.S. 
        commercial entities. If so, those controls may reduce the scope 
        of this activity and therefore reduce the associated harm to 
        U.S. commercial interests.

    Third, when Chinese behavior poses a direct and serious threat to 
American interests, take actions, as necessary, to signal that the 
United States will not withhold punitive action in one issue area to 
pursue promising opportunities in another. When pursuing U.S.-China 
relations among multiple tracks, there is a risk that China will assume 
that if there are good cooperative opportunities on the table, the 
United States will not risk losing those opportunities by taking 
punitive action on more-controversial issues. Clear U.S.-China 
communication is necessary to avoid this dangerous misperception, which 
could lead Beijing to underestimate the probability the United States 
will take punitive actions in response to provocative behavior. In the 
runup to the most recent summit, the Obama administration utilized 
public and private channels to signal that the United States was 
seriously considering levying cyber sanctions against China and that 
the White House was willing to issue those sanctions right before the 
September Presidential summit regardless of the impact that would have 
on President Xi's state visit. Beijing took those threats seriously and 
dispatched a high-level delegation to Washington to discuss cyber 
issues 2 weeks before the official Presidential visit.\21\ This 
presummit communication likely played a role in the new U.S.-China 
cybercrime mechanism and new commercial espionage commitment mentioned 
above.
                     expanding the tactical toolkit
    The current U.S. engagement strategy is achieving breakthrough 
cooperation on issues of common interest ranging from climate change to 
development cooperation. Where interests diverge, however, progress is 
more incremental. Going forward, the United States should maintain 
current momentum on the cooperative side and simultaneously seek to 
expand its toolkit for addressing problematic areas of U.S.-China 
relations. If progress on difficult issues does not become more 
concrete, those problems are likely to fester and undermine positive 
cooperation. For example, if China does not take steps to substantially 
reduce the scope and frequency of its commercial cyber-espionage 
activities, those activities will likely reduce U.S. willingness to 
engage in joint technology development projects that benefit both 
nations but also give Chinese companies more knowledge about and access 
to U.S. technology development projects.
    U.S. experience with prior difficult issues in U.S.-China relations 
suggests that three approaches can be particularly effective at 
deterring problematic behavior.
1. Using smart statecraft and institution-building to expand common 
        interests and turn a difficult area of the relationship into a 
        new pillar of cooperation
    The climate arena provides an excellent model to follow. Climate 
change started out as an area of U.S.-China contention rather than 
cooperation. When U.S. and Chinese leaders met to discuss climate 
change during the first round of the Kyoto Protocol negotiations in the 
mid-1990s, the United States was on one side of a global divide, China 
was on the other side, and the two nations struggled to figure out how 
to work in concert. That dynamic persisted through the Copenhagen 
climate negotiations in 2009. However, since then, U.S. and Chinese 
leaders have worked proactively to change that dynamic. Leaders on both 
sides made a critical observation: Although the two nations were always 
on opposite sides of a developed versus developing country divide in 
multilateral negotiations, the United States and China had many common 
interests on energy and climate issues at the bilateral level. U.S. and 
Chinese leaders decided to nurture and expand those common interests by 
identifying a set of common goals in this space and launching a new 
framework of bilateral mechanisms designed to rally U.S. and Chinese 
officials, businesses, and nongovernmental experts to work together to 
achieve those goals. That effort has been enormously successful. Over 
the past few years, bilateral energy and climate projects have helped 
both nations expand clean energy deployment and reduce climate 
pollution. Progress at the bilateral level has also made it possible 
for the two nations to redefine their roles in multilateral 
negotiations and work together to shape a new global climate regime. 
The increasingly positive U.S.-China energy and climate dynamic 
reflects a natural interest alignment between the two nations. However, 
careful diplomacy was required to identify those commonalities and lay 
the groundwork for joint action. The United States should apply this 
model in other areas of the U.S.-China relationship.
2. Working multilaterally with other nations and, where available, 
        through international institutions to address issues that 
        affect not only the United States but also a broader array of 
        international interest groups
    The United States should not rely on the bilateral U.S.-China 
relationship to solve problems that are multilateral in nature. Where 
Chinese behavior is a common concern for multiple nations, the best way 
to address that behavior is to make the issue a broader multilateral 
discussion. In the past, it has been much easier to change Chinese 
behavior on issues relating to international norms rather than a U.S.-
specific complaints. When the United States is the only party 
challenging a particular action, Chinese officials often suspect that 
the United States is doing so as a tactic to block or contain China's 
rise. That can lead China to harden its positioning rather than 
accommodate American interests. When the United States works in concert 
with other nations, the dynamic changes, and Beijing can view the issue 
as a wide-ranging problem rather than a U.S. containment strategy. For 
example, on the commercial front, engaging partners in Europe and the 
United Kingdom played a critical role in convincing China to table a 
controversial cyber-banking law earlier this year. To be clear, this is 
not about the United States furthering its own interests through third 
parties; rather, this is about recognizing that when an issue affects 
multiple parties, it is generally not helpful to frame that issue as a 
U.S.-China problem.
    In the maritime domain, ratifying the U.N. Convention on the Law of 
the Sea would better enable the United States to work with other 
countries to push back against China's unlawful actions in the South 
China Sea.\22\ Until the United States does so, we stand outside the 
international system and have a limited capacity to leverage 
international law to counter Chinese actions.
3. Shoring up defenses and strengthening capacity at home to reduce 
        U.S. vulnerabilities to, and costs from, problematic Chinese 
        actions
    Cybersecurity is now a high-priority issue in U.S.-China relations. 
It is important to do what is possible to reduce the frequency and 
scope of Chinese intrusions, and the U.S.-China relationship appears to 
be making progress in that direction. However, if hackers are breaking 
into U.S. networks on a regular basis, then better security is 
necessary. Improving security should be a top priority for federal 
government systems, as well as for the private sector. Americans should 
not be receiving multiple notices every year telling them that their 
information has been stolen. This is a problem. It is a U.S. problem 
and a global problem. This is not just a sticky issue in the U.S.-China 
relationship. The U.S. Federal Government needs to do a better job at 
driving progress in this area at home. China and Russia are hacking 
into U.S. Federal Government networks, and that is a concern, but what 
happens if a group such as the Islamic State of Iraq and al-Sham, or 
ISIS, develops those capabilities? If policymakers do not close these 
loopholes, then they leave the nation open to unacceptable security 
risks.
    One of the most important steps the U.S. Congress could take to 
strengthen U.S. cyber-response capabilities is to pass cybersecurity 
legislation that facilitates information sharing between the American 
companies targeted in these attacks and the U.S. Government agencies 
with the expertise and capacity to assist. Closing current security 
loopholes should be the first priority. Figuring out how to respond to 
these attacks should be the next priority, and that is where this 
becomes a U.S.-China issue.

----------------
End Notes

    \1\ For a good overview of Chinese military strategy under previous 
administrations in Beijing, see U.S. Department of Defense, Military 
Power of the People's Republic of China (2009).
    \2\ Michael D. Swaine, ``Xi Jinping's Address to the Central 
Conference on Work Relating to Foreign Affairs: Assessing and Advancing 
Major-Power Diplomacy with Chinese Characteristic,'' China Leadership 
Monitor, March 19, 2015.
    \3\ Ariella Viehe, Aarthi Gunasekaran, and Hanna Downing, 
``Understanding China's Belt and Road Initiative'' (Washington: Center 
for American Progress, 2015).
    \4\ Xinhua, ``China to Play a Key Role in Modification of Iran's 
Arak Heavy Water Reactor: Chinese FM,'' China Daily, July 15, 2015; 
William J. Broad, ``Plutonium Is Unsung Concession in Iran Nuclear 
Deal,'' The New York Times, September 7, 2015.
    \5\ The White House, ``U.S.-China Joint Announcement on Climate 
Change,'' Press release, November 11, 2014.
    \6\ Rick Gladstone and David E. Sangermarch, ``New Sanctions on 
North Korea Pass in Unified U.N. Vote,'' The New York Times, March 7, 
2013.
    \7\ Ministry of Foreign Affairs of the People's Republic of China, 
``Wang Yi: Jian Chi 9.19 Gong Tong Sheng Ming Jing Shen'' (Wang Yi: 
Uphold Sprit of 9.19 Common Statement), September 19, 2015.
    \8\ Melanie Hart, ``Mapping Chinese Direct Investment in the U.S. 
Energy Economy'' (Washington: Center for American Progress, 2015).
    \9\ Thilo Hanemann and Daniel Rosen, ``New Neighbors: Chinese 
Investment in the U.S. by Congressional District'' (New York: Rhodium 
Group and the National Committee on U.S.-China Relations, 2015).
    \10\ Ibid.
    \11\ Wayne M. Morison, ``China-U.S. Trade Issues'' (Washington: 
Congressional Research Service, 2015).
    \12\ U.S. Office of Personnel Management, ``OPM Announces Steps to 
Protect Federal Workers and Others From Cyber Threats,'' Press release, 
July 9, 2015; Reed Abelson and Matthew Goldstein, ``Millions of Anthem 
Customers Targeted in Cyberattack,'' The New York Times, February 5, 
2015.
    \13\ 13 U.S. Chamber of Commerce, ``Competing Interests in China's 
Competition Law Enforcement: China's Anti-Monopoly Law Application and 
the Role of Industrial Policy'' (2014).
    \14\ Derek Watkins, ``What China has been Building in the South 
China Sea,'' The New York Times, September 23, 2015.
    \15\ Christian Oliver and Tom Mitchell, ``E.U. and U.S. Groups 
Sound Alarm on China Cyber Security Rules,'' The Financial Times.
    \16\ The White House, ``U.S.-China Joint Presidential Statement on 
Climate Change,'' Press release, September 25, 2015.
    \17\ The White House, ``U.S.-China Climate Leaders' Declaration'' 
(2015).
    \18\ Xinhua, ``China Urges International Support for Afghanistan's 
Reconstruction,'' September 27, 2015.
    \19\ The White House, ``Fact Sheet: President Xi Jinping's State 
Visit to the United States,'' Press release, September 25, 2015.
    \20\ Ibid.
    \21\ The White House, ``Readout of Senior Administration Officials' 
Meeting with Secretary of the Central Political and Legal Affairs 
Commission of the Communist Party of China Meng Jianzhu,'' Press 
release, September 12, 2015.
    \22\ Nina Hachigian, ``China's Rise Is A Big Reason to Ratify the 
Law of the Sea Convention: Treaty Gives Us a Stronger Hand in the 
Region,'' Center for American Progress, June 12, 2012.

    Senator Gardner. Thank you, Dr. Hart, for your testimony.
    And I will begin with the questions.
    To both of you, Dr. Hart and Mr. Johnson, as you were 
building up and looking up to the meeting, the summit, the 
visit, what was the one or two things, the takeaways that you 
had hoped this would result in--the meeting between President 
Obama and President Xi would result in? And did we get there? 
Where did we fall short? And how do we continue the 
conversation going forward? Mr. Johnson, Dr. Hart, feel free.
    Mr. Johnson. I will take it first.
    I would say there were two areas that did not materialize 
that I had hoped we would see. One was despite what we achieved 
on cyber, I found it striking that there was no agreement, as 
was much rumored, on a nonfirst use agreement, especially on 
critical areas with regard to non-mutual targeting of critical 
infrastructure, these sort of areas. This seems like something 
that is a bit of a no-brainer actually from my perspective, and 
the fact that we cannot seem to come to agreement on such a 
core issue is quite striking.
    I think the second area where we did see some but not 
enough was the two leaders coming out on the margins of their 
meetings and even in President Xi's speeches and so on to talk 
about how the two countries, as they did after the global 
financial crisis, are working together to calm volatility in 
global equity markets in particular. With President Xi, I think 
we could have and would have like to see more explanation about 
what has been happening in China in their own equity market, 
the move to devalue the currency, things of this area. He 
provided some explanation but certainly not enough to be able 
to counter the worries that people have about what is actually 
happening in the Chinese economy. And from our own side, 
insufficient sort of forward-looking approach on this to 
indicate how we intend to work with China to manage this 
problem because when the countries of the two largest economies 
are meeting--when the leaders are meeting--the whole world 
looks to them for guidance on how to think about this issue. 
And the fact that that did not come up was disappointing.
    Thank you.
    Senator Gardner. Dr. Hart.
    Dr. Hart. I was really watching for three issues in the 
summit. One was positive. Two were fairly positive.
    So, first, on climate, I was hoping to see the language 
that we did receive from the Chinese on moving forward to look 
at tightening standards for overseas investment. China is 
leading a cumulative $200 billion in new overseas investment 
aid. And we need to make sure that aid goes in positive 
directions that support rather than undermine U.S. interests. 
For example, we do not want China building dirty coal plants 
all over Asia with some of that overseas aid. And there was 
some language within the climate deal that points toward some 
increased agreement and progress on that issue and is basically 
code language for more cooperation with AIIB investment 
standards. And I see that as a stepping stone to possibly more 
progress on this when China hosts the G20 next year.
    On cybersecurity, I think this was an inflection point on 
United States-China cyber relations. For quite a long time, it 
seems that Beijing did not fully understand how seriously the 
United States is taking this issue, and it seems that Beijing 
did not fully understand that the United States is not going to 
withhold punitive action on cyber in order to protect and save 
good things on the agenda like climate change and other forms 
of cooperation. And it seems that the United States succeeded 
in getting that message across.
    The fact that Beijing dispatched a special envoy and 
negotiation team 2 weeks before the summit to tee up a 
conversation on cybersecurity indicates that they were taking 
the rising U.S. concern and messaging very seriously. My own 
conversations with Chinese counterparts also indicate that 
there was a shift in understanding of how the United States was 
viewing the cyber issue around August of this year.
    So it seems that we definitely succeeded in improving 
communication on that issue. We do have a new high-level 
dialogue for confronting cyber crime which could be very 
influential, but we need to see how that will go.
    We do have what appears to be a new commitment from the 
Chinese to not engage in cyber espionage for commercial gain. 
That commitment, if it was indeed from President Xi personally 
and if that information is distributed within the Chinese 
bureaucracy, that should change China's administrative controls 
for doing commercial espionage. You know, if President Xi has 
personally made a promise that the nation will not do that, 
then there will be an incentive to at least restrict the amount 
of agencies and actors that are allowed to do that within China 
so that they can keep better track of those activities. We will 
have to monitor those issues going forward to see if we have 
had progress. We will see if our verbal progress turns into 
progress on actions.
    The third issue I had hoped for but do not really see much 
progress as yet is the issue of what role U.S. companies will 
have in the Chinese market as it moves toward a new normal. 
China's economic growth is slowing. They are rebalancing the 
economy. There seems to be a changing mindset in Beijing about 
what role American businesses will play in that process. In 
China's first three decades of economic reform, there was a 
very clear demand for American companies to be there, that they 
needed American technology and actual American boots on the 
ground, and they needed to give a certain amount of market 
access in exchange for that. With this new round, with this new 
normal, there seems to be a growing sentiment on the Chinese 
side that Chinese companies are strong enough now to do a lot 
of their technology development on their own, and they may not 
need an American presence any more. And they may, therefore, 
feel more latitude to drive forward some market access barriers 
that would be very damaging to American interests. I was hoping 
to see President Xi deliver a clearer message to American 
companies about the type of regulatory treatment that they can 
expect within the Chinese market and how they view new laws 
such as the banking cyber law, the national security law, the 
antimonopoly law as tools for, hopefully, fair treatment of 
domestic and foreign companies. We did not see as much progress 
on that area as one would hope.
    Senator Gardner. Thank you, Dr. Hart.
    Chris Johnson, you mentioned the issue of critical 
infrastructure. And the agreement that we entered into--excuse 
me--that was announced last Friday said the United States and 
China agree that neither country's government will conduct or 
knowingly support cyber-enabled theft of intellectual property, 
including trade secrets or other confidential business 
information with the intent to providing competitive advantages 
to companies or commercial sectors. As Dr. hart just pointed 
out, I mean, this obviously goes to the commercial espionage 
issue.
    Why did we hear only or enter an agreement or see an 
agreement only about commercial espionage? Why did it not go 
further? Why was there no discussion about OPM or any kind of 
agreement of what happened at OPM?
    Mr. Johnson. I think that is actually the part of both the 
special envoy's visit that sort of failed and the part of the 
negotiations for the summit itself that failed in that, you 
know, the Chinese--their approach to the situation had been 
largely to suggest that the OPM hack was something of a normal 
cyber crime opportunity and to be very reluctant to, certainly 
not to admit any role on the Chinese Government's behalf.
    The challenge with negotiating things outside the economic 
espionage piece is that in some ways the administration 
unwittingly and for all the right reasons trapped itself when 
it initially defined the breakpoint, if you will, between 
traditional espionage, which would be aimed at gaining military 
or diplomatic or intelligence secrets, and economic espionage. 
And so in some ways, by our own definition, the Chinese 
certainly would see the OPM hack as legitimate under those 
definitions.
    Senator Gardner. Thank you, Mr. Johnson.
    Senator Cardin.
    Senator Cardin. Well, once again, thank you all for your 
participation here.
    I find historically our relationships with large countries 
where we have many, many issues such as China, that human 
rights concerns are always a struggle to get on the agenda. And 
it is always difficult to make progress. I saw virtually no 
progress made during this summit on the human rights front. 
There was almost the obligatory comments made by our leaders 
just to say that we did not forget the subject, although you 
question how aggressively it was raised in the bilaterals. It 
is not unusual. My criticisms would be with both Democratic and 
Republican administrations and with the State Department that 
when you are dealing with the regional secretaries or you are 
dealing with the missions, the human rights issues do not get 
the same attention as the so-called security basket or the 
economic basket or the other areas which are more visible.
    It cries out for congressional action. We have done that. 
We have initiated human rights actions against major countries, 
and it has been pretty effective. We have gotten a lot of 
publicity on this and we are really encouraging the human 
rights activists in countries by the actions that Congress has 
initiated.
    So my question to you, what is the most effective way for 
us to advance the good governance, human rights agenda with 
China? Does it require the Congress to take some pretty 
aggressive actions, or do you think this can be one that we can 
advance through the diplomacy within the executive branch?
    Dr. Hart. I think it is important to distinguish between 
effectiveness and noise. With China, sometimes the most 
effective actions are quiet actions. And I would argue that one 
of the most impactful things the United States has done over 
the past decade is install an air quality monitoring device on 
the U.S. Embassy in Beijing and put the data on Twitter. That 
information was a ripple effect. Once the people who had a VPN 
and could access Twitter started paying attention to that 
information----
    Senator Cardin. You are absolutely right, but they almost 
had to do that because American personnel working there 
demanded it. And then they realized the value. I do not know if 
they understood. I agree with you. It was a very visible 
opening of the society to facts.
    Would you disagree that we have seen a backtracking of the 
commitment on human rights in China?
    Dr. Hart. It is hard to say because if you look at NGO 
freedoms, press freedoms, Internet freedoms, they go up and 
down. They went down in 2008 when there were issues around 
Tibet. You know, they go up and down. They went down in the 
runup to the Olympics in Beijing. There is a trajectory over 
the time. And there is rising concern right now that we might 
be in a downward trajectory and there is concern that with the 
current leadership, it might be that it is only down and not 
about to come up again. It is too soon to say. A lot of these 
issues will be determined by the Chinese people.
    One thing that is new is that the regulations are--there 
are proposals to extend some of these restrictions to touch 
Americans, American universities, American think tanks, 
American associations.
    Senator Cardin. Should we sit back and do nothing? What 
should we do?
    Dr. Hart. We should accept the facts that does have a 
legislative process on some of these issues and, while they are 
in the middle of a process, engage in that as much as possible. 
You know, we have to commend them with the fact that with some 
of these new laws, they sent us a draft copy before they were 
actually implemented and asked our opinion. They asked us to 
submit our comments. They asked for NGO, you know, media 
comments on these documents. And so that indicates a type of 
progress that we would not have seen 10 years ago. And on some 
of these issues, we need to wait a little bit and let the 
legislative process play out, view that process as legitimate.
    Senator Cardin. Meanwhile, people are in prison, and 
meanwhile people cannot practice their religion. Meanwhile, 
journalists are being denied access. Meanwhile, the Internet 
freedoms are being taken away. Meanwhile, meanwhile, meanwhile. 
And I do not know how much patience we should have on this.
    Dr. Hart. The most important patience indicator is the 
indicator of the patience of the Chinese people. I think we 
need to look to them as our guide on what is best for their 
nation.
    Senator Cardin. So when they get upset like Tiananmen 
Square, we see violence and we see rights taken away. Protests 
do not work in China. If you try to go to a religious service, 
they will close down the doors. How do you organize in China? 
If you are a religious minority--and that could be 
Protestants--and you are trying to set up a church and you 
cannot set up a church, how do you protest that?
    Dr. Hart. These are important issues. I think our best 
leadership model is leading by example, showing that the United 
States is a nation where we can have freedom of religion, we 
can have freedom of expression, freedom of communication, and 
be the strongest nation in the world. But on a lot of these 
issues, we do need to watch the Chinese people and let the 
Chinese people lead and see where are they pressing most 
against the boundaries of freedom. And we see that when they 
all press hard together, they enact change. There has been a 
radical change in the amount of information available on air 
pollution in China because the Chinese people drew a line in 
the sand.
    Senator Cardin. Look, I agree with you. Environmental 
rights or human rights--I do not disagree with that, and it 
relates to health and it relates to a lot of other things. I 
would tell you that I think it had very little to do with the 
people from the point of view of protests. It had to do with 
the visibility. It was something they could not hide. When you 
cannot see the sky, you know you have a problem. So it was the 
reputation of the government not so much the protests of the 
people that brought about a change in attitude in China. Yes, 
we facilitated some of that because we had to take care of the 
safety of our own personnel at our embassies. So I am still not 
convinced that China will allow their people to speak.
    And I must tell you we have taken the same attitude in a 
lot of countries around the world only to be on the wrong side 
of history. And the one thing about America--I want it actively 
engaged around the world, but we have got to stand up for what 
we believe in. And this country brings the perspective of 
universal rights and human rights for all the citizens. And 
when we leave that out of the discussion, we will end up 
getting in trouble for U.S. interests.
    And I was disappointed in this summit that there was no 
visibility on the human rights front. I think it was a major 
failure, and I think every time you do that, world leaders in 
countries where they are not allowing their citizens to 
exercise their human rights think that they can get away with 
this in their relationship with the United States. And I think 
that is not the right policy for us. You have got to be 
aggressively involved in these issues because no one else will 
stand up for it. The United States is the only country that is 
going to lead on this. And if we do not lead, the rest of the 
world will not.
    Thank you, Mr. Chairman.
    Senator Gardner. Senator Isakson.
    Senator Isakson. Chairman Gardner, Senator Cardin, thank 
you for this hearing.
    Dr. Hart, 3 or 4 years ago in this committee, we had an 
extensive debate and investigation on the Law of the Sea Treaty 
with the United Nations. And in the end, the final conclusion 
was we did nothing out of fear of loss of sovereignty. So I 
want to ask you a couple of questions.
    Are there any international maritime interests in the South 
China Sea or the Pacific Rim that are not members of the Law of 
the Sea Treaty other than ourselves?
    Dr. Hart. To my knowledge, there are not, but I would be 
happy to check that and submit it for the record.
    Senator Isakson. Would you check that out?
    Dr. Hart. Yes, absolutely.
    [The written response to the above requested information 
for the record follows:]

    The United States, North Korea, and Cambodia are the only Asia-
Pacific nations that have not signed and ratified the United Nations 
Convention on the Law of the Sea (UNCLOS). All other Asia-Pacific 
nations have signed and ratified the Convention. While those nations 
participate in critical U.N. tribunal decisions regarding the validity 
of China's territorial claims in the South China Sea, the United States 
stands on the sidelines with North Korea and Cambodia. Asian maritime 
maps will not be determined by military might alone. They will also be 
determined by law. The United States needs to be in the room and at the 
table when those legal decisions are made.

    Senator Isakson. Secondly--and I came in somewhat late on 
your testimony, Mr. Johnson. I am sorry. I heard a couple of 
yours. But I think the reference was we were actually getting 
weaker in that part of the world and the Chinese are getting 
stronger. Is that right? Militarily?
    Mr. Johnson. I would just say this. We are still number 
one. The challenge is that what is happening in the South China 
Sea is part and parcel of a broader maritime strategy that we 
see from China where the message is to the regional partners 
primarily, regional neighbors, but also to the United States 
that Chinese forces intend to operate at times of their 
choosing, perhaps even with impunity, out to the so-called 
second island chain, so out to Guam and that region, and that 
the rest of us have to accept it. And this is a challenge for 
the United States in several ways.
    One, while our interests in the South China Sea primarily 
are related to supporting our treaty allies in the Philippines 
and the freedom of navigation that we all support. You can 
argue that the straight strategic interests of the United 
States are not directly affected by what is happening in the 
South China Sea, but by allowing any sort of show of weakness 
or that we are not going to maintain freedom of navigation and 
its importance, there are worries then that extend to other 
areas where our vital strategic interests are involved such as 
the Strait of Malacca and other maritime areas.
    Secondly, the issue that relates to this is how will the 
United States sort of maintain the redlines that it is 
developing with the Chinese on this activity going forward. You 
know, if you say, such as Secretary Carter did during the 
Shangri-La Dialogue, we asked the Chinese not to militarize 
these islands and so on, what are we going to do when they do 
it because they are already sort of moving in this direction, 
as we see from commercial imagery and other----
    Senator Isakson. Well, they are in the process of doing 
it----
    Mr. Johnson. Correct.
    Senator Isakson [continuing]. From a standpoint of both 
runways, as well as what appear to be support technology if not 
actual technology for intelligence.
    Mr. Johnson. Exactly.
    Senator Isakson. Is being a signatory to the Law of the Sea 
Treaty any help whatsoever? Is not being a signatory in any way 
hurting our military or our freedom of travel in the South 
China Sea?
    Mr. Johnson. I do not know if it is hurting our military's 
ability to operate. But I agree with Dr. Hart's earlier 
testimony that it certainly damages our credibility in terms of 
seat at the table when these issues are being discussed, 
especially on the legal side.
    Senator Isakson. As well as claims into the seabed for rare 
earth minerals and things of that nature. Is that not correct? 
Because I think that is where that territory is decided.
    Mr. Johnson. Correct.
    Senator Isakson. I want to follow up on something that 
Senator Gardner talked about a minute ago, and you talked about 
the OPM breach. We talked about business espionage and the 
agreement between us and the Chinese. But I do not consider the 
OPM breach--and I do not think we have officially stated 
publicly that China was the one that hacked into OPM, but I 
think everybody believes it came out of that part of the world.
    Was there any discussion in the meetings between our 
President and the Chinese President last week in Washington 
about the use of hacking into our military assets or our 
personnel assets in the United States, not just commercial 
espionage but specifically our Government assets?
    Mr. Johnson. I do not have any direct knowledge of what was 
discussed, but I would be shocked if the issue was not very 
clearly communicated to the Chinese side.
    Senator Isakson. But from a public knowledge standpoint, 
nothing was said about any agreement being----
    Mr. Johnson. Not that I am aware.
    Senator Isakson. And last comment. In Atlanta next week, 
Ambassador Froman will be there negotiating what they think may 
be the last round of TPP or certainly next-to-the-last round. 
We are talking about a bilateral trade agreement with the 
Chinese. Is that correct?
    Mr. Johnson. Yes.
    Senator Isakson. What is TPP doing to have an effect on 
that? Is it helping us to get the Chinese to come to the table 
on a bilateral agreement?
    Dr. Hart. Absolutely. What the TPP process is demonstrating 
is that in the Asia-Pacific region, there are still more strong 
economies than not that are interested and willing and 
demanding to join the United States in a high standards 
agreement. So it is demonstrating if there is a choice between 
high trading standards that protect commercial interests and 
provide a level playing field and the lack of those standards, 
most countries are going to follow the United States and the 
high standards structure. And that puts pressure on China to 
seek to move in that direction as well, and that is something 
they will have to do in order to sign a bilateral investment 
treaty with the United States. So it is putting pressure on the 
Chinese to move in the direction they would need to move to 
meet the criteria needed to sign a bilateral investment treaty 
with us.
    Senator Isakson. To that point, you made three points at 
the end of your remarks. You talked about climate. You talked 
about cyber, and you talked about the role of U.S. companies in 
the Chinese economy. Going to that third point, having a 
bilateral agreement will that help us to get a role for U.S. 
companies in terms of the Chinese economy in the future if we 
have that agreement?
    Dr. Hart. It should help with addressing some of the 
policies that are of deep concern in the Chinese market. A lot 
of China's market access barriers--they are not issues that you 
can fix through the WTO.
    Senator Isakson. Right.
    Dr. Hart. So if you have a bilateral investment treaty, you 
can drill down on some of those more specific market access 
issues. And also, it should provide some new dispute settlement 
mechanisms. Right now, if American companies have a problem in 
China, if you bring that problem to Chinese courts or Chinese 
regulators, the deck is stacked against you. So to the effect 
that we can help balance out that process and provide a new 
place to go with company concerns, that would be to our good.
    Senator Isakson. Well, the goal is a more level playing 
field for American competition.
    Mr. Johnson. Absolutely.
    Senator Isakson. Thank you both for your testimony.
    Mr. Johnson. Thank you, sir.
    Senator Gardner. Thank you.
    I see Senator Markey has arrived. I guess in the order of 
things, you would be next, but you also just got here. Do you 
want to jump in asking questions or do you want us to stall a 
little bit? Recognizing that you just walked in, if you need 
some time to----
    Senator Markey. I think I am okay.
    Senator Gardner. Okay, very good. Please. Senator Markey.
    Senator Markey. Thank you.
    Dr. Hart, I appreciate your focus on areas that we have 
been able to work with China in recent years. And I would like 
to drill down on the energy and climate policy arena. If we 
were having this hearing a decade ago, we would be focused on 
an issue involving oil drilling. China's national offshore oil 
corporations attempted to buy an American oil company, Unocal. 
That was the big debate.
    That attempt brought the national security implications of 
oil consumption for both countries into sharp focus, and of 
course, as the world's two biggest importers of oil, it still 
is. We both import about 5 million barrels a day. We are the 
two countries that drive the international market for that 
discretionary barrel of oil.
    But a decade later, instead of potential hostility on 
energy issues, President Obama and President Xi announced on 
Friday domestic policy steps each country is taking to advance 
energy efficiency and clean energy, as well as programs to 
enhance collaboration and cooperation between our nations.
    Can you tell us a little bit more about the lessons that 
you take away from the United States-China climate in energy 
collaboration and what that could mean for areas of tension 
between our two countries right now?
    Dr. Hart. So two things. One is that in the climate sphere, 
we have seen that we can find a small common interest between 
our two nations and build that out to bring other areas into 
alignment. In climate, we did that by focusing first on clean 
energy because, as you say, Senator, both the United States and 
China were big and growing oil importers, and so both nations 
had a common interest in working together to develop 
alternatives to oil. You know, from a Chinese perspective, 
homegrown energy is the only homegrown energy they have other 
than coal, and they cannot continue to use coal in the future 
because of the environmental implications. So we both have a 
very common security interest in working to develop new energy 
technologies that do not depend on foreign import markets.
    And through that process, we have been able to build out a 
common understanding on the need to do more on global climate 
change at large. Through cooperation on clean energy, we have 
helped China see how it can step up and take more 
responsibilities in the global battle to combat climate change 
and do so in a way that boosts the economy. It is not a drain 
on the economy. It is a major new driver of Chinese economic 
growth.
    So our challenge going forward is figuring out how we can 
further build on that area and use it to leverage new 
cooperation in other areas of the relationship that are still 
not quite as aligned. One that I believe has a huge potential 
is overseas investment standards. China is leading the 
formulation of the Asia Infrastructure Investment Bank, the new 
development bank. They have a South-South cooperation fund and 
also a Silk Road fund. And those four mechanisms together will 
be directing over $200 billion in overseas investment to build 
new projects in Asia and beyond, and we want to make sure those 
projects adhere to strong environmental and social standards. 
We have seen the preliminary draft of the AIIB standards, and 
they are not ideal. There is no ban on funding for coal plants, 
and every environmental guideline they have has a pretty big 
loophole in it.
    Senator Markey. On the other hand, can I say this? And I 
agree with you. We have to police that very closely.
    But on the other hand, the Chinese President announced that 
they are going to build 1 gigawatt of renewable electricity by 
the year 2030. Renewables, 1 gigawatt. Now, people do not know 
what a gigawatts is. So a gigawatt is 1,000 megawatt, 
equivalent to a nuclear power plant. So if you think of a big, 
big, big nuclear power plant, that is about 1,000 megawatts of 
electricity. So this would be 1,000 nuclear power plants at 
1,000 megawatts. They are going to build that equivalent in 
renewables between now and 2030 in China, and moreover, that is 
the equivalent of all of the electricity from all sources in 
America right now, all coal, oil, all hydro, wind, solar, all 
of it. So that is unbelievable.
    So talk a little bit about that and what that revolution 
means in China and what it means ultimately for the price of 
solar, for the price of wind, and the global installation of 
that much lower price of sources of energy that otherwise would 
not see that price pressure downward.
    Dr. Hart. Absolutely. You know, their 2030 commitment is 
really impressive. They are basically going to roll out a clean 
energy expansion equivalent to our entire U.S. electricity 
generation. That is the world's biggest clean energy laboratory 
experiment because we have never seen that much clean energy 
technology deployed at such a large scale. So they are going to 
be driving new advancements in how electric grids can 
incorporate clean power and move those supplies around the 
country across the grid.
    One of the advancements in the new announcement that is 
particularly interesting is China's new commitment to a green 
dispatch program. Previously their old strategy was that they 
built a lot of green energy but they built a lot of dirty 
energy too. Now they are starting to shift so that they phase 
down and phase out primarily coal and other sources of dirty 
energy and prioritize clean energy and give it the first spot 
on the grid. So their new green dispatch program will be 
eliminating the special access that coal had to the electric 
grid and fast tracking renewable sources around the nation.
    Senator Markey. So back in 1993, I was the chairman of the 
Telecommunications Committee over in the House of 
Representatives. So I worked with my friends on the committee, 
Mike Oxley and Jack Fields, Republicans. And so we passed out a 
bill that moved over 200 megahertz of spectrum to create cell 
phones that could be accessible for ordinary families. So at 
that point the cell phone was about the size of a brick. It 
cost 50 cents a minute, and you did not own one. I mean, that 
was just Gordon Gekko stuff. This was the wealthiest 
businessman in the world. Well, within 3 years, everyone had 
one of these in their pocket. It was under 10 cents a minute. 
It got miniaturized. It was analog and everybody was happy.
    Senator Gardner. Most of us do not have a flip phone still. 
[Laughter.]
    Senator Markey. And so this was great. And you know, it 
worked. We moved to digital. It was great. It was more 
encrypted. Digital is much more encrypted than analog. So this 
was it by 1996, 1997, 1998, 1999, 2000. Everybody was kind of 
happy.
    And then Steve Jobs comes along and he does an iPhone. Oh, 
my God. It is like a computer, a size that is miniature and 
with the power of a Univac computer just 30 years before. And 
moreover, it is moving so fast that in Africa we now have 600 
million people with wireless devices in their pockets. Who had 
that on the books 10 years ago, 12 years ago?
    So that is what this revolution really means now in solar 
and wind. There is a real virtuous competition going on now. 
No, we are going to have even more than you have, but every 
time you do it, the price drops more, the capacity of the 
devices continues to increase. So just 5 years ago, 1 percent 
of electricity in America was renewable, just 5 years ago. Now 
it is 5 percent of electricity is renewables. That is how fast 
it is moving here. China takes note of that. So does not 
Germany. So do not other countries. In other words, it is 
moving like this. It is the same pace. You got a brick. You got 
a clam phone. You got an iPhone. So once you get that 
competition going, the free market is wide open, Darwinian, 
paranoia-inducing, at a national level competition.
    So I thank you for coming because I think that this dynamic 
energy sector is something that we have to really pay attention 
to in China, but at the same time, we know that we got to keep 
our eye on China on cybersecurity. We know we have to keep our 
eye on them in the compromise of the copyright inventions of 
people in the United States. And we are going to have to keep 
our eye on them in terms of pollution, in terms of what they 
are doing. But at large, there is something big that is 
happening here in terms of the switch over to lower carbon 
sources of energy, and I think it is actually kind of where we 
want to be with China, competing on the good stuff that can 
transform the way we generate electricity and as a result 
endanger the planet.
    I thank you, Mr. Chairman.
    Senator Gardner. Thank you, Senator Markey. And are you 
still using the clam phone or is that just Lindsey Graham's 
that you borrowed for a little bit? [Laughter.]
    Senator Markey. Well, when I have something to do, I 
actually do use this phone. It is very simple. When I just want 
to sit up here and Google something and make it look like I am 
really working, then I use this phone. And I think everybody 
understands what I am talking about. [Laughter.]
    My goal--can I tell you my goal?
    Senator Gardner. Please.
    Senator Markey. Because I could see how many people were 
looking down while I was speaking, especially the staff in the 
back. And my goal is that we reach a day when no one ever looks 
up again. There is never again--there is no human contact 
whatsoever. [Laughter.]
    Everyone is always just looking down at their devices. And 
we would have not--this was not booked 10 years ago. Right? But 
it changed everything and the same thing is going to happen in 
energy.
    Thank you, Mr. Chairman.
    Senator Gardner. Thanks, Senator Markey.
    We will go another round. If you wanted to stay a little 
bit longer, we can continue this back and forth, Senator 
Markey, if you want.
    I wanted to go back to the issue of cybersecurity, where we 
kind of left off. I mentioned the high-level visit that we had 
from a Chinese official leading up to the summit regarding 
cyber in response to some of the conversations that were going 
to be held at the meeting between President Xi and President 
Obama. And this issue of sanctions came up.
    What sanctions do you believe were dangled? What scared 
them the most into action? And is the thought or the 
possibility of sanction or further action, OPM done? Mr. 
Johnson?
    Mr. Johnson. I think the sanctions that were suggested that 
were the most effective were those that relate to the 
sanctioned entity or individual, but primarily entity's ability 
to engage in financial transactions in the United States. And 
obviously, that has serious implications for a firm that is 
especially operating internationally like most of the Chinese 
firms are these days for their ability to execute financial 
transactions internationally. This can paralyze a business' 
operations and I think that was certainly very effective in 
this regard.
    The challenge with sanctions in the same manner that there 
is a challenge with indictments, which we had earlier and you 
mentioned in your opening remarks, Mr. Chairman, is that while 
more effective than indictments, it still falls into that broad 
category of sort of naming and shaming approach to dealing with 
this problem. It can be effective from a sort of getting the 
message out there point of view. But the challenge is that what 
happens in that instance is that because it is so public, it 
immediately puts the Chinese on the defensive and gives them 
very little room to actually be able to react, which is what we 
want. We want them to change their behavior.
    So in my own view, while sanctions can be an important tool 
and should be relied on going forward because it clearly has 
effect, we also have to think about what we can do in other 
spaces in the non-public space to respond to this challenge 
from China.
    Senator Gardner. In terms of the national laws that we have 
discussed here today and the issue of cybersecurity and the 
agreement that was announced, how does the issue of national 
laws, the issue of national security interact with the 
cybersecurity agreement? Are the two going to be mutually 
exclusive? Are they going to turn around and say, I am sorry, 
this is national security, therefore the cyber agreement does 
not apply here?
    Mr. Johnson. Well, the risk is that they will take, as they 
often do, a broad definition of national security, and so that 
is the challenge. And it really is somewhat unique to their 
system, if you will, in that they see economic development as 
critical to national security. They also have a tendency to see 
sort of the advancement of state-owned enterprises in 
particular but their economic development at large as part and 
parcel of the national security that keeps the Chinese 
Communist Party in power, which is, of course, the number one 
goal. So we do have to monitor this issue for blurring.
    But as I mentioned in my opening remarks, I think what we 
have with this agreement is a real opportunity for the United 
States to be able to now create some parameters around Chinese 
behavior in this space and to be able to then present them with 
evidence, when we have it, where there is clear attribution and 
that can be determined, and to expect them to take action, and 
if they do not, then we will turn to these methods.
    I think the most effective thing that happened in the run-
up to the summit was the administration at all levels 
communicating very clearly to the Chinese side this is not 
going to happen anymore. It needs to stop. And that message was 
received I think by the Chinese, and that produced the 
agreement. Was it received enough to balance off the clear gain 
that they seem to get from engaging in this activity.
    Senator Gardner. What if there is a Sony-like incident 
directed from China to the United States? That episode was not 
deemed a cyber attack. It was deemed cyber vandalism. How does 
this agreement function in the case where something is defined 
like Sony--say the same kind of thing happens again but it is 
cyber vandalism--what happens under the terms of this 
agreement?
    Mr. Johnson. I think the interesting thing about that is 
that to some degree I think the Sony attack actually helped 
facilitate the agreement we just signed for a couple of 
reasons. One, the Chinese recognized that U.S. attribution has 
clearly improved. The ability to determine where these attacks 
are coming from has improved. Secondly, I think both the very 
strong public and private messages of how we intended to 
respond in this case prevented them from further behavior. So, 
for example, in the same way they were able to shut down Sony's 
Web site they very easily could have done denial of service 
attacks on the servers that then showed the movie when they 
decided to release it online. They did not do that, and I think 
primarily the reason they did not is because they saw our 
response and our resolve in this case. How this agreement 
applies to something like that--fortunately, we really have not 
seen Chinese behavior in this aspect, you know, sort of cyber 
vandalism, if you will. Their behavior has been about two 
categories, the traditional espionage and the economic cyber-
enabled economic espionage.
    Senator Gardner. There have been discussions about North 
Korea and how they have used either portals or directly through 
China to conduct attacks against the United States. How will 
this agreement deal with those situations?
    Mr. Johnson. I do not think the agreement directly applies, 
but this is certainly a new pathway and area for us to be 
working with the Chinese on the North Korea problem. In so many 
ways, our discussions with them about other areas related to 
North Korea, especially with regard to the nuclear situation--
it is the same movie over and over again. You know, we are not 
making a lot of progress. Here is an area where I think we can 
work cooperatively and where the Chinese understand 
fundamentally that North Korea is creating a problem for them, 
and that is very important.
    Senator Gardner. And I wanted to focus a little bit more on 
North Korea as well in a broader context. We know in just 
another week or 2, the 70th anniversary of the party, and we 
expect or anticipate some kind of North Korea action to observe 
the date. What happened at the summit with President Xi and 
President Obama in relation to North Korea? What takeaways and 
where did we actually move forward in terms of China dealing 
with North Korea and the United States together?
    Mr. Johnson. My sense--and I welcome Dr. Hart's view on 
this. My sense is that obviously the issue would have been 
thoroughly discussed between the two leaders. I was 
disappointed that there was not more public sort of release as 
to what we were going to do together.
    I would say this. I think it is very clear that the China 
and North Korea relationship is probably the worst it has ever 
been or certainly in competition for the worst it has ever 
been. There is opportunity for our two sides to be able to 
engage on this, especially on the issue of regime implosion 
scenarios and things like this. I think we have increasingly 
softened the Chinese side, a greater willingness to recognize 
this as a problem especially as the North Koreans, for example, 
continue to conduct nuclear tests again and again in the same 
area, which is right on the border with China. China has 
concerns about the seismic ramifications of that behavior. 
Maybe we are going to see another one here at the 70th 
anniversary, as you suggested. So there really is some fresh 
opportunities for us to be able to engage in this. It does not 
seem that the two sides were able to agree on anything 
necessarily, but I think it is an issue for us to work on 
collaboratively going forward.
    Senator Gardner. Dr. Hart.
    Dr. Hart. I fully agree. You know, the redline that limits 
China's forward-leaning on North Korea is the fear of regime 
collapse because they worry about what would happen. So they 
are applying more sanctions, but China's northeast provinces 
are also deepening their economic connections with North Korea. 
And part of the reason they are doing that is because they want 
to pursue economic growth at home, but also they see 
maintaining at least some economic ties as critical to avoiding 
regime collapse. So to the extent that the United States can 
seek to address those fears and do some strategic planning and 
clarify what steps might be taken in that situation, make some 
kind of commitments to the Chinese on that issue, we could 
hopefully start to reassure those fears and therefore open up a 
new willingness to lean even harder than they are doing now.
    Senator Gardner. Thank you.
    Talking a little bit more about the antiterrorism law and 
the foreign NGO law in China, they are in the third reading, I 
believe, at the National People's Congress. Under the terrorism 
law, it would allow China to--and I quote--``access and examine 
any private data transmitted through the domestic Internet 
without prior notice or court order so long as it were deemed 
necessary to facilitate the investigation into potential 
terrorist activities.'' The law basically means that U.S. 
companies must turn over sensitive cyber data to the Chinese 
Government. And if that is not the case, we would love to hear 
a countervailing view.
    According to Human Rights Watch, under the NGO law, if 
adopted as currently drafted, the law will severely and 
arbitrarily restrict the ability of civil society organizations 
in China to access resources from and cooperate with 
international organizations. In addition, it would place vague 
and overly broad restrictions on foreign organizations, 
including business associations, universities, and museums that 
wish to carry out valuable activities in China. That again from 
Human Rights Watch.
    How were these addressed during the state visit? And what 
are the prospects for China actually falling back or stepping 
back away from the conversations that they had or moving 
forward without any changes? Mr. Johnson, Dr. Hart.
    Dr. Hart. On the cyber regulatory issues, I think it is 
important that we separate out two separate issues here. One of 
them is how do nations address national security concerns, 
conduct needed national security information gathering 
activities within their own domestic networks. That is a 
contentious issue in the United States. That is a contentious 
issue in China. You have to balance national security needs 
with personal privacy needs. That could be a very interesting 
avenue of United States-China dialogue. We have not yet opened 
up an honest, frank dialogue on what are some best practices in 
that area. Is there any area of agreement between the United 
States and China on that issue? That is just as contentious 
here as it is in China.
    The other piece is using national security legislation as a 
lever to force U.S. companies to hand over source code and back 
out of Chinese markets. That is a commercial issue. It should 
be treated completely differently than the national security 
side of it. I believe those two issues are being conflated in a 
nonproductive way in the Chinese legislative process, and if we 
can pull them apart and address the valid legislative concern, 
valid regulatory concern in one channel and the market access 
concern in another, I think that is the best way to make 
progress. I did not see that there was any public progress on 
those issues. They could have been more conversations behind 
closed doors.
    On the NGO law, that is something--as a think tank scholar 
who goes to China to conduct research activities, I would be 
directly impacted by that law when it comes down. It is 
something we are watching very closely. I am heartened by the 
fact that we have been able to review the law before it was 
implemented. Chris and I were in Beijing a few weeks ago and 
were brought to meet a Chinese congressional representative so 
that we could personally exchange views with Chinese 
legislators, voice our concerns, and ask questions. That 
openness gives me hope that this could go in a positive 
direction and we should engage as much as possible and take 
that openness and willingness to engage at face value. If it 
does not go in a positive direction, then every American 
university and think tank will have some decisions to make 
about how they might need to reshape their operations in China, 
and that is an issue that should be special in the human rights 
category because it is one that is regulating Americans 
directly. And so I would hope that American leaders would keep 
paying special attention to that particular law, but yet 
engaging and respecting and appreciating the openness that has 
been shown so far.
    Senator Gardner. You talk about separating the two out, I 
believe, when we were talking about the national security 
legislation or at least the need for national security 
separated from market access to privacy issues. You also used 
the term ``personal privacy needs.'' What is the view that the 
Chinese Government has as it relates to personal privacy needs?
    Dr. Hart. That is a much hotter issue in the United States 
than it is in China. You know, that is a key issue in our 
debates. In China, that is not a principle that is held quite 
as much as it is in the United States. But it would be a very 
interesting area for a United States-China discussion.
    Senator Gardner. But I think the answer is there is no 
personal privacy needs viewed by the Chinese Government to the 
people, and that is why we see this law. So how would this law, 
when it comes to national security, be changed for market 
access?
    Dr. Hart. Well, there are voices in the United States that 
would also argue that some of our intelligence agencies are 
overlooking some of the personal privacy needs or not 
adequately balancing those in the national security equation.
    We lose nothing by recognizing that every nation has a 
responsibility to secure its Internet networks and to make sure 
that there are no dangerous technology back doors that could be 
used for cyber attacks. I think that is something that we can 
agree on with China. And based on that agreement, we could 
hopefully move forward on some bilateral or hopefully even 
multilateral mechanisms that would provide a set of rules that 
could perhaps fill some of the regulatory need that these 
processes in China are trying to fill in an apparently less 
helpful direction.
    And it is important to mention that this law--when you 
speak to people in Beijing, they say this law was a direct 
response to the Snowden revelations. So we cannot claim that 
China has no legitimate reason to be concerned about network 
security.
    I think the most positive place to start is to recognize 
that every nation in the world has a legitimate reason to be 
concerned about network security. We do have that in common, 
and if we can use that as a building block for something that 
will guarantee everyone some degree of security, perhaps that 
would reduce the need for some of these problematic regulatory 
rules that are not just a China issue. It is an international 
issue.
    Senator Gardner. Mr. Johnson.
    Mr. Johnson. I would just add that I think the challenge 
with this is the way in which Chinese law is increasingly being 
used as another tool of industrial policy. I think that is the 
real challenge that we face with these laws, the national 
security law itself, the antiterror law, even the human rights 
law.
    In some ways China has understood the problem from the 
earlier period where they promoted a policy of so-called 
indigenous innovation. One of the challenges of indigenous 
innovation was that it created a lightning rod term around 
which people could rally. What we see under the Xi Jinping 
administration in this area is a series of different tools, 
whether it is use of the antimonopoly law, use of pricing 
investigations, use of these so-called law fair approaches. 
They are using different tools so that nothing at any one time 
gets too much attention, but the goal is the same, which is to 
promote and advantage Chinese companies.
    I agree with Dr. Hart that in many ways the Snowden issue 
is the gift that keeps on giving for Chinese security agencies 
and those inside the system who have wanted for some time to be 
able to prove, if you will, this is dangerous, you know, having 
these U.S. firms be so involved in our critical infrastructure.
    So my point is that my own sense is that no sort of amount 
of negotiation or discussion with the Chinese is fundamentally 
going to change their views on how they are thinking about 
their infrastructure.
    Senator Gardner. So the visit is over. The summit is over. 
Some agreements going forward. The BIT negotiations continue. 
What are the next steps and the next big steps for the Asia 
pivot out of this summit going forward? What do you anticipate 
seeing in terms of the overall rebalance strategy?
    Mr. Johnson. I think the main piece and the piece that has 
been lacking in the rebalance strategy so far is this economic 
and trade piece, and the key piece there is getting TPP done. 
That is the fundamental piece because what we have seen has had 
the greatest effect--and Dr. Hart referenced this in her 
earlier comments--you know, why is it that China is even really 
talking about a BIT with us because they fundamentally 
understand that in a BIT, they are going to have to give a lot 
more than we will to get compliant with an agreement? It is 
because they watched Japan get into TPP, and they understand 
fundamentally that that decision by Tokyo was much more a 
geostrategic decision than an economic one. It puts pressure on 
the Chinese. And as Dr. Hart said earlier, the best way to 
encourage the Chinese to move toward these high-standard 
agreements and so on is to conduct our own negotiations with 
partners who are ready from that point of view to be able to 
encourage the Chinese to move in that direction because they 
will be economically disadvantaged if they do not.
    Senator Gardner. Dr. Hart.
    Dr. Hart. I agree with that.
    One of our biggest problems with the rebalance is that it 
has been viewed as a primarily military shift because when the 
President called for rebalance, the Pentagon was ready to go.
    Senator Gardner. Do you think that has been viewed 
primarily military here or----
    Dr. Hart. In the region.
    Senator Gardner. Over in the region.
    Dr. Hart. In the Asia-Pacific region, they see that the 
U.S. military is there and the economic piece is lagging. And 
so many nations view this as a military shift and an effort to 
contain China's rise. There is growing concern that the United 
States and China are engaged in some strategic rivalry in the 
region and that there is a spiraling security conflict. So if 
we can catch up the economic side to the military side by 
finalizing the TPP, then that will hopefully demonstrate and 
improve the credibility that America rebalance is not just 
about strategic competition with China, it is about recognizing 
that this is the most economic dynamic region in the world and 
we want to be there.
    Senator Gardner. Thank you.
    What China has accomplished over the past several years is 
truly remarkable, I mean, lifting 500 million people out of 
poverty, the changes that we have seen from an economic 
standpoint. It is remarkable. And I think there is not a person 
here who would disagree with the desire for this nation to 
become a great nation in a way that allows both the United 
States and China and our relationship to not only flourish 
together but to benefit the world because the world will 
benefit from a strong China. The world will benefit from a 
strong United States. And so I think sometimes the U.S. 
attitude or policies toward China can come across as either 
finger-wagging or perhaps telling people what they can and 
cannot do. As Dr. Hart talks about, the national interests, the 
national security needs of the nation determine where they 
believe they need to go.
    But I think to have two global powers, to have a rising 
China that is a responsible rising nation to meet these needs 
and concerns that we have expressed today, concerns over 
activities in the seas, concerns over activities in the 
economy, concerns over NGO laws and human rights and cyber 
issues and how we can deal with aggressive neighbors or regimes 
like North Korea together in a successful global economy really 
does determine whether China can reach the full potential of a 
great nation. And I think we all hope that they can. And that 
is where this relationship needs to go I believe.
    And so I appreciate your thoughts today, your testimony 
today. And obviously, we will continue working on this very 
important issue and the most important region in terms of our 
relationship going forward. So thank you very much.
    I got to read a few final requirements today about keeping 
the record open.
    So I truly do appreciate both of you for your time and 
testimony today.
    And for the information of members, the record will remain 
open until the close of business this Friday, including for 
members to submit questions for the record. And we ask the 
witnesses to respond as promptly as possible. Responses will be 
made part of the record.
    And with the thanks of the committee, this hearing is now 
adjourned. Thank you.
    [Whereupon, at 3:52 p.m., the hearing was adjourned.]