[Senate Hearing 115-735]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 115-735

                         THE CHINA CHALLENGE

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

                                HEARINGS

                               BEFORE THE

                     SUBCOMMITTEE ON EAST ASIA, THE
                       PACIFIC, AND INTERNATIONAL
                         CYBER SECURITY POLICY

                                 OF THE

                     COMMITTEE ON FOREIGN RELATIONS
                          UNITED STATES SENATE

                     ONE HUNDRED FIFTEENTH CONGRESS

                             SECOND SESSION
                               __________

             JULY 24, SEPTEMBER 5, AND DECEMBER 4, 2018
                               __________

       Printed for the use of the Committee on Foreign Relations

              
                 [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
                                   
                                   
                   Available via the World Wide Web:
                        http://www.fdsys.gpo.gov
                        
                        
                              ___________

                    U.S. GOVERNMENT PUBLISHING OFFICE
                    
38-989 PDF                 WASHINGTON : 2020




                 COMMITTEE ON FOREIGN RELATIONS        

                BOB CORKER, Tennessee, Chairman        
JAMES E. RISCH, Idaho                ROBERT MENENDEZ, New Jersey
MARCO RUBIO, Florida                 BENJAMIN L. CARDIN, Maryland
RON JOHNSON, Wisconsin               JEANNE SHAHEEN, New Hampshire
JEFF FLAKE, Arizona                  CHRISTOPHER A. COONS, Delaware
CORY GARDNER, Colorado               TOM UDALL, New Mexico
TODD, YOUNG, Indiana                 CHRISTOPHER MURPHY, Connecticut
JOHN BARRASSO, Wyoming               TIM KAINE, Virginia
JOHNNY ISAKSON, Georgia              EDWARD J. MARKEY, Massachusetts
ROB PORTMAN, Ohio                    JEFF MERKLEY, Oregon
RAND PAUL, Kentucky                  CORY A. BOOKER, New Jersey

                  Todd Womack, Staff Director        
            Jessica Lewis, Democratic Staff Director        
                    John Dutton, Chief Clerk        




                              (ii)        

  


                            C O N T E N T S

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                                                                   Page

                          THE CHINA CHALLENGE

Part 1: Economic Coercion as Statecraft --

  July 24, 2018

Gardner, Hon. Cory, U.S. Senator From Colorado...................     1

Markey, Hon. Edward J., U.S. Senator From Massachusetts..........    16

Blumenthal, Dan, Director of Asian Studies and Resident Fellow, 
  American Enterprise Institute, Washington, DC..................     3
    Prepared statement...........................................     5

Ratner, Ely, Vice President and Director of Studies, Center for A 
  New American Security, Washington, DC..........................     9
    Prepared statement...........................................    11

              Additional Material Submitted for the Record

``China's Military Escalation: Mattis and Congress Push Back 
  Against Beijing's South China Sea Deployments,'' The Wall 
  Street Journal (Editorial), June 4, 2018.......................    33

Letter Sent to Senator Cory Gardner of Colorado from Secretary of 
  Defense James Mattis and Secretary of State Mike Pompeo, 
  Regarding Support for S. 2736, The Asia Reassurance Initiative 
  Act (ARIA).....................................................    35



                              ----------                              



Part 2: Security and Military Development --

  September 5, 2018

Gardner, Hon. Cory, U.S. Senator from Colorado...................    37

Markey, Hon. Edward J., U.S. Senator from Massachusetts..........    38

Mastro, Dr. Oriana Skylar, Jeane Kirkpatrick Visiting Scholar, 
  American Enterprise Institute, Washington, DC..................    41
    Prepared statement...........................................    43

Denmark, Abraham M., Director, Asia Program, Woodrow Wilson 
  International Center for Scholars, Washington, DC..............    49
    Prepared statement...........................................    51

              Additional Material Submitted for the Record

Responses to Additional Questions for the Record Submitted to Dr. 
  Oriana Skylar Mastro by Senator Cory Gardner...................    78

Responses to Additional Questions for the Record Submitted to 
  Abraham M. Denmark by Senator Cory Gardner.....................    79



                              ----------                              





                                 (iii)

Part 3: Democracy, Human Rights, and The Rule of Law --

  December 4, 2018

Gardner, Hon. Cory, Senator from Colorado........................    81

Markey, Hon. Edward J., Senator from Massachusetts...............    83

Busby, Scott, Deputy Assistant Secretary, Human Rights and Labor, 
  U.S. Department of State, Washington, DC.......................    85
    Prepared statement...........................................    87

Stone, Laura, Acting Deputy Assistant Secretary of State, Bureau 
  of East Asian and Pacific Affairs, U.S. Department of State, 
  Washington, DC.................................................    91
    Prepared statement...........................................    93
Steele, Gloria, Acting Assistant Administrator, Bureau For Asia, 
  United States Agency for International Development, Washington, 
  DC.............................................................    96
    Prepared statement...........................................    97

              Additional Material Submitted for the Record

Responses to Additional Questions for the Record Submitted to 
  Laura Stone by Senator Cory Gardner............................   114

Letter Sent by Senator Tim Kaine to Mike Pompeo, U.S. Secretary 
  of State, Regarding China's Retaliation Against the Families of 
  Radio Free Asia Journalists....................................   117

U.S. Department of State's Response to Senator Tim Kaine's Letter 
  Regarding China's Retaliation Against the Families of Radio 
  Free Asia Journalists..........................................   119

 
                          THE CHINA CHALLENGE



                PART 1: ECONOMIC COERCION AS STATECRAFT

                              ----------                              


                         TUESDAY, JULY 24, 2018

                               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 2:47 p.m. in 
Room SD-419, Dirksen Senate Office Building, Hon. Cory Gardner, 
chairman of the subcommittee, presiding.
    Present: Senators Gardner [presiding], Risch, Young, 
Markey, Merkley, Murphy, and Kaine.

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

    Senator Gardner. This hearing will come to order.
    I want to apologize to the witnesses for the vote that is 
kind of making this a little bit discombobulated right now. I 
will be starting, making my comments, then asking you for your 
testimony. Senator Markey is voting on the second vote now. He 
will be joining us, making his statements, coming back after 
that. And then I will leave and go make the second vote. But we 
do not want to delay the hearing any further. Thank you very 
much for your understanding and starting this a little bit late 
to begin with.
    Let me welcome you all to the eighth hearing for the Senate 
Foreign Relations Subcommittee on East Asia, The Pacific, and 
International Cybersecurity Policy in the 115th Congress.
    This hearing will be the first hearing in a three-part 
series of hearings titled ``The China Challenge,'' and it will 
examine how the United States should respond to the challenge 
of a rising China that seeks to upend and supplant the U.S.-led 
liberal world order.
    The Trump administration has been clear on the scope of the 
problem and gravity of the challenge before us. According to 
the National Security Strategy, for decades U.S. policy was 
rooted in the belief that support for China's rise and for its 
integration into the post-war international order would 
liberalize China. Contrary to our hopes, China expanded its 
power at the expense of the sovereignty of others.
    According to the National Defense Strategy, the central 
challenge to U.S. prosperity and security is the reemergence of 
long-term strategic competition by what the National Security 
Strategy classifies as revisionist powers. It is increasingly 
clear that China and Russia want to shape a world consistent 
with their authoritarian model, gaining veto authority over 
other nations' economic, diplomatic, and security decisions.
    An opinion editorial in ``The Wall Street Journal'' last 
week noted the following. Xi Jinping has proclaimed that China 
has both the intent and capability to reshape the international 
order. Yet, much of what passes for Chinese global leadership 
to date is simply the pursuit of China's own narrow interests. 
He has yet to demonstrate the key attributes of true global 
leadership: the willingness to align and in some cases 
subordinate Beijing's immediate interests to the great global 
good and the ability to forge a significant agreement around a 
global challenge.
    The question before us now is identifying the tools the 
United States has at its disposal to counter the disturbing 
developments posed by China's less than peaceful rise.
    This is why Senator Markey and I and a bipartisan group of 
cosponsors in the Senate joined in introducing the Asia 
Reassurance Initiative Act, or ARIA, on April 24th. The 
legislation sets a comprehensive policy framework to 
demonstrate U.S. commitment to a free and open Indo-Pacific 
region and the rules-based international order. ARIA provides a 
comprehensive set of national security and economic policies to 
advance U.S. interests and goals in the Indo-Pacific region, 
including providing substantive U.S. resource commitments for 
these goals. I am joined in this legislation on the committee 
by Senator Kaine, Senator Coons, Senator Cardin, Senator 
Markey, by Senator Rubio and Senator Young, as well as Senators 
Sullivan and Perdue and Graham.
    This legislation has broad unanimous support. On June 4th, 
``The Wall Street Journal'' editorial board endorsed ARIA, 
stating Congress is trying to help with the bipartisan Asia 
Reassurance Initiative Act. The Senate bill affirms core 
American alliances with Australia, Japan, and South Korea, 
while calling for deeper military and economic ties with India 
and Taiwan. It notably encourages regular weapon sales to 
Taipei.
    The Chamber of Commerce has also endorsed ARIA, stating the 
U.S. Chamber of Commerce supports the Asia Reassurance 
Initiative Act of 2018 and thanks Senator Gardner for his 
efforts to strengthen U.S. strategic and economic relationships 
across the Indo-Pacific region. Particularly with regard to the 
legislation's economic goals, we appreciate the bill's focus on 
closer trade ties, stronger protections for intellectual 
property, and a renewed focus on trade facilitation. We look 
forward to working with Senator Gardner and the Congress to 
advance these important objectives.
    On June 21st, we received a joint letter from the State 
Department and the Department of Defense formally endorsing 
ARIA. The letter, which is signed by Secretary Pompeo and 
Secretary Mattis, states: ``We value the ARIA legislation's 
reaffirmation of the United States' security commitments to our 
Indo-Pacific allies and partners. Furthermore, ARIA's focus on 
promoting stronger regional economic engagement and its support 
for democracy, the rule of law, and the development of civil 
society is especially welcome as part of a diplomatically led, 
whole-of-government approach to the Indo-Pacific region.''
    I ask unanimous consent--I am going to ask myself. 
[Laughter.]
    Senator Gardner. We will put this in the record, both the 
letter, as well as the editorial.


    [The information referred to above is located at the end of 
this hearing transcript.]


    Senator Gardner. I expect the full committee to mark this 
critical legislation up in the coming days, I hope, and hope 
for its quick passage by the full Senate in the near future.
    When Senator Markey joins us, we will turn to him for his 
opening comments.
    But I want to welcome both of our witnesses here today.
    Our first witness is Senator--is Dan Blumenthal--I almost 
gave you a demotion there, Dan--who serves as Director of Asian 
Studies and Resident Fellow at the American Enterprise 
Institute. Mr. Blumenthal has both served in and advised the 
U.S. Government on China issues for nearly 2 decades. From 2001 
to 2004, he served as Senior Director for China, Taiwan, and 
Mongolia at the Department of Defense. Additionally from 2006 
to 2012, he served as a commissioner on the U.S.-China Economic 
and Security Review Commission, including holding the position 
of vice chair in 2007. Welcome, Mr. Blumenthal, and thank you 
for your time and testimony and being with us today.
    I am going to go ahead and go to the next witness and stall 
just a little bit more, if we can, for Senator Markey.
    Our second witness today is Ely Ratner, who serves as the 
Vice President and Director of Studies at the Center for a New 
American Security. Mr. Ratner served from 2015 to 2017 as the 
Deputy National Security Advisor to Vice President Joe Biden 
and from 2011 to 2012 in the Office of Chinese and Mongolian 
Affairs at the State Department. He also previously worked in 
the U.S. Senate as a professional staff member on the Senate 
Foreign Relations Committee and in the office of Senator Joe 
Biden. Welcome, Mr. Ratner. Welcome back to the committee. 
Thank you for being here.
    And, Mr. Blumenthal, we will go ahead with your opening 
statement.

  STATEMENT OF DAN BLUMENTHAL, DIRECTOR OF ASIAN STUDIES AND 
 RESIDENT FELLOW, AMERICAN ENTERPRISE INSTITUTE, WASHINGTON, DC

    Mr. Blumenthal. Thank you very much, Senator Gardner, and 
thank you very much for your leadership on these issues and 
with the bill that you have been working with your colleagues 
so fastidiously on, and I am so glad that it is getting the 
press it deserves and hopefully the support within the Senate 
that it deserves as well.
    What I want to do in my short time--and I am sure there 
will be a lot of questions--is first, put in context the 
Chinese course of practices and its grand strategy, then focus 
on some of the most targeted countries of the Chinese course of 
practices, including the United States, and then turn to some 
actions that we might take both to defend ourselves, but also 
to be a little bit more proactive against the Chinese Communist 
Party and its coercive economic practices. And I do think we 
have a lot of leverage there.
    So no surprise to anyone who has been following the 
subject: The party Secretary-General of the Communist Party and 
President Xi Jinping are following a very robust grand strategy 
of the China dream of national rejuvenation, rejuvenating the 
nation to become again the Middle Kingdom, the center of 
international politics, and perhaps international economics as 
well.
    And he is doing things to effectuate this China dream. 
Building up a world-class military, of course, is known to 
everybody who follows this topic, which has proceeded to 
advance its unlawful claims in the South China Sea, in the East 
China Sea, and increasingly now does operations in India and 
further afield in the Gulf. And that military is a big part of 
its economic course of strategies as well.
    So the military is one tool. Economic coercion is another 
tool of this grand strategy. We are waking up slowly to 
political warfare, political influence operations that seeks to 
build support and target nations for Chinese policies, or at 
least defend Chinese policies, united front tactics, the 
Confucian institutes, part of the things your colleagues have 
focused on as well.
    So, economic coercion is the topic of the day. I have to 
state that the era of reform and opening in China is over. It 
has been long over. It has been over probably for 10 years. And 
China is back to being run by state-owned enterprises that are 
related to the party. The private sector is diminishing. That 
provides the Chinese state with a lot more control over 
economic coercive policies.
    Some of the economic policies we do not like here in the 
United States are not necessarily coercive--they are predatory. 
It has to do with the mass subsidization of Chinese state-owned 
enterprises that make it uncompetitive for U.S. or other firms 
to compete with. It has caused great dislocations inside the 
U.S.'s and other countries' labor markets. It has to do with 
the outright theft, of course, of intellectual property and 
trade secrets. That is theft.
    The coercive aspect, I think, when you talk about the 
United States, is the targeting of specific businessmen and 
businesses to get them to do Chinese bidding. So, for example, 
in the latest round of tariffs with respect to what we have 
levied on China, the first thing someone like Xi Jinping does 
is call on U.S. business friends to get them to go back home 
and lobby against any policies, whether you like them or not, 
that he does not see in Chinese interests. And if you do abide 
by them as a U.S. corporation or European corporation, you will 
probably get favorable market access. If you do not abide by 
them, then you will not. So, the specific targeting of U.S. 
businesses that China thinks can have influence in the U.S. 
political system is a major tool.
    China uses that same tool very much against Taiwan, which 
is kind of ground zero for Chinese economic coercion. And here 
I would say it is military and economic coercion. So the 
military is used to demonstrate to Taiwan that the Chinese, if 
they want to, can cut off Taiwan completely, its economic 
lifelines. Taiwan is an island nation and completely dependent 
on seaborne trade. The Chinese constantly exercise the ability 
to cut off their ability to exercise that seaborne trade. They 
also target Taiwanese businessmen to go vote for parties in 
Taiwan that they think will be more favorable to China and are 
constantly cyber attacking, even just harassing Taiwanese 
businesses, as well as attracting talent away from the top 
Taiwanese tech companies.
    I am running out of time in my opening statement. So let me 
just go through.
    Japan is another big target. Again, it is military and 
economic. We famously woke up to this in 2010 when there was a 
fishing dispute, and China decided that it was going to ban the 
exports of rare earth materials that were key to the Japanese 
economy. That woke up the markets, and there was a market 
response to that. But China has shown that it will continue to 
do so.
    It did similar activities with respect to the Philippines 
in a dispute over the Scarborough Shoal. Not only does it use 
its military and quasi-military to cut off Filipino and 
Vietnamese fishermen from using fishing zones that they had 
lawfully allowed to use but also started to ban imports of 
important agricultural products from those two countries as 
well. And they are very dependent on those exports.
    They have cut cables of exploration ships. They have 
announced unilateral fishing bans, and they just continue to 
put overt military and economic pressure on countries' 
exclusive economic zones.
    Since I am out of time, let me quickly just offer a few 
ideas about how to fight back against this.
    I think we have to be more directive against what the CCP, 
the Chinese Communist Party, cares about the most and use more 
scalpels rather than big jackhammers. So the Chinese Communist 
Party has favored state-owned enterprises that are part of 
patronage networks. We could certainly ban some of those from 
accessing the U.S. market and the European market. Those are 
the two markets that matter the most. The U.S. consumer still 
fuels the Chinese economy. Ban the ones that are the worst 
offenders in intellectual property theft. Ban the ones that 
have benefited the most. Ban the ones that are closest to the 
party.
    Certainly we should consider, in terms of escalation, how 
much party elites want their kids to come here to study. And I 
am not saying ban all Chinese students. I am saying if you want 
the party to stop acting in certain ways, go after what they 
care the most about. So if we identify party elites' children 
and so forth and they want to come into the United States, we 
can certainly take a second and third look at their visas.
    [Mr. Blumenthal's prepared statement follows:]


                  Prepared Statement of Dan Blumenthal

    Mr. Chairman and Mr. Ranking Member, thank you for the opportunity 
to testify before you today.
    We are slowly waking up to a set of strategies by the Chinese 
Communist Party (CCP) meant to enhance Party power internally and 
globally at our expense. The CCP has adopted a number of strategies to 
strengthen the Party's grip on the country so that it can lead China 
back to ``Middle Kingdom Centrality.'' These strategies have been in 
place for a while, but have been accelerated by Communist Party 
Secretary General Xi Jinping.
    The broad strategic context for Chinese economic statecraft 
includes:


    China's Grand Strategy of the China Dream of Grand Rejuvenation, 
which requires:


   Building a world class military to challenge the United States and 
        Allied military primacy;

   Strengthening political warfare and propaganda campaigns that 
        interfere in target nations' politics to both block activities 
        that the CCP does not like and to build more favorable support 
        for China abroad.

   Advancing unlawful claims in the South China Sea and militarizing 
        the seas to gain control of them.

   Challenging Japan's lawful claims in the East China Sea

   Building ports and facilities throughout the Indian Ocean

   Attempting to make certain countries dependent on China's loans and 
        construction projects as part of the ``One Belt One Road'' 
        initiative


    I am not including more benign diplomatic initiatives that are also 
a tool in the CCP's broader strategy. And, as you can see, when I say 
``China's policies,'' I mean those of the Chinese Communist Party. We 
do not know what ``China's policies'' would be in a more pluralistic 
society that is not completely dominated by a Leninist regime. I 
imagine we would get along very well with a China that is not under the 
CCP's grip.
Economic Coercion as a tool of the China Dream
    Here is some more context. The era of reform and opening is over. 
Now, state banks, state-owned enterprises (SOEs), and their associated 
links with Party officials are what drive the Chinese economy. The CCP 
is willing to accept slowing economic growth in exchange for a tighter 
grip on the Chinese economy.
    Thus, China's economic coercion cannot be thought of as absent the 
needs of the CCP's grip on China, or its strategies for growth and 
influence--which as we now know include massive technology theft, the 
blocking of market access in key sectors, the control of capital 
flight, efforts to make exports cheaper (through subsidies and consumer 
repression), and other related measures.
    The CCP has extensively targeted the United States and its key 
allies in the region with this economic coercion. Let's go through the 
CCP's tactics in each of these countries:
1. The United States
    The CCP's unfair and illegal economic practices, such as mass 
subsidization of SOEs, gives China an unfair competitive advantage. 
This, coupled with the widespread theft of US intellectual property 
(IP), hurts the US economy. We are slowly challenging them on these 
fronts, and while these practices are the most harmful, they can be 
separated analytically from direct economic coercion. Instead, direct 
coercion includes:


        Forced technology transfers. As U.S. Ambassador Dennis Shea 
        highlighted at the World Trade Organization (WTO) in June 2018, 
        China's ``forced technology transfers'' remain an implicit 
        requirement for overseas companies hoping to access China's 
        domestic market, especially through partnerships with SOEs.

        Pressuring U.S. business executives. That same month, Xi 
        Jinping also spoke with a number of top American business 
        executives at the Global CEO Council in Beijing in an attempt 
        to pressure U.S. executives to convince the U.S. government to 
        ease trade tensions. A major form of coercion against the U.S. 
        has been the attempts to force U.S. businessmen to lobby the 
        U.S. government to adopt more favorable policies from China's 
        perspective. This practice has been ongoing for decades. The 
        CCP will split Americans into ``friends of China'' who might 
        lobby on their behalf and others who refuse to do so will not 
        be granted access to China's massive market.
2. Taiwan
    Taiwan stands as ``ground zero'' for China's coercive economic 
activities.


   There is a longstanding practice by China of pressuring Taiwanese 
        business people to vote for Taiwan political parties that are 
        perceived to be more pro-China or else lose market access or 
        face economic harassment, and to pressure the Taiwanese 
        government to accept terms that are unacceptable to the vast 
        majority of the Taiwanese people.

   As we have seen recently, the CCP is also pressuring international 
        companies to not identify Taiwan by name in an attempt to erase 
        Taiwan as a separate entity from the global ``mental map.'' 
        Examples of these include the incited apologies from Marriot 
        and Delta for including ``Taiwan'' on the list of countries in 
        which they operate.

   Chinese People's Liberation Army (PLA) military exercises in 
        Taiwan's surrounding waters are meant to remind the people of 
        Taiwan that the CCP can cut Taiwan off from international trade 
        altogether.

   China consistently targets and lures away top Taiwanese talent from 
        its information and communications technologies (ICT) 
        industries in an attempt to hollow out and dominate these 
        industries.
3. Japan
    The CCP has used its military might and the blocking of exports and 
imports to pressure Japan on political disputes.


   China's combined military-economic coercive tools caught the 
        world's attention in 2010, when a Chinese ship collided with 
        two Japanese coast guard vessels during a standard fishing trip 
        near the disputed Senkaku islands. The Japanese coast guard 
        arrested the Chinese fishing trawler, which lead to combative 
        rhetoric on both sides and China halting rare earth mineral 
        exports to Japan. At the time, China produced 93% of the 
        world's rare earth minerals, and essentially had a monopoly on 
        these materials. By halting these exports to Japan, Japanese 
        products such as hybrid cars, wind turbines, and guided 
        missiles were under threat.

   The CCP also incites the Chinese public into action after 
        controversial events that paint China in a bad light. Given 
        China's anti-Japanese sentiment that can be traced back 
        throughout history, the Chinese population has served as an 
        effective proxy that the CCP uses to indirectly pressure the 
        Japanese government into making concessions.
          For example, in 2012 as tensions between China and Japan 
        became heated over the disputed islands, Japanese firms in 
        China such as Toyota and Honda had to shut down their 
        facilities after demonstrations and violent protests against 
        Japanese businesses broke out across China. Such demonstrations 
        reveal broader Chinese government attempts to ``hold foreign 
        businesses hostage to its political agenda.''
4. Philippines
    The CCP has done the same thing towards the Philippines, 
demonstrating a pattern in squeezing neighboring countries to achieve 
aims favorable to Chinese interests across the region.


   After the Philippines began challenging Chinese claims in the South 
        China Sea in 2012, China restricted banana imports from the 
        Philippines and abruptly cancelled several Chinese tour groups 
        that were going to the Philippines.

   After the Philippines brought a case against China to the Permanent 
        Court of Arbitration challenging China's expanding territorial 
        claims in the South China Sea, China continued to squeeze the 
        Philippines economically by tightening controls on Philippine 
        fruit and continuing to cut the number of Chinese tourist 
        visits to the Philippines. As the third-biggest export market 
        for the Philippines and the fourth in foreign tourists, such 
        cuts have a severe impact on the Philippine economy. In 
        response to this, the Philippines was forced to ``intensify 
        [its] efforts to diversify [its] trade with other countries.''
5. South Korea
    The pressure on South Korea after the deployment of the Terminal 
High Altitude Area Defense (THAAD) anti-ballistic missile defense 
system reveals not only Beijing's pressure tactics, but also some of 
the organizations involved and more specific practices used by the CCP.


   For example, when the CCP decided to limit tourists to South Korea 
        after announcements of the deployment, the China National 
        Tourism Administration became a key organization in 
        implementing the CCP's policies. Semi-private corporations such 
        as Chinese airlines also limited the number of plane tickets 
        sold or flights to and from the targeted country.

   When the CCP attempts to rally its citizens to boycott or protest 
        foreign businesses, as it did against South Korean supermarket 
        Lotte, Chinese state media will actively encourage it.

   As the CCP limits certain imports of foreign goods, the Chinese 
        Customs agency will not approve shipments, while Chinese ports 
        will wrap merchant ships up in new regulations delaying their 
        shipment.

   Local governments and actors have also gotten involved in Chinese 
        economic coercion efforts.
          When the CCP targeted Korean supermarkets in China during a 
        particularly strained period of Sino-ROK relations, it was up 
        to the local governments to conduct ``inspections'' and shut 
        down Lotte for ``fire safety violations.'' Or, ``lone actors'' 
        in China conducted ``patriotic hacks'' against South Korean 
        company databases to steal data from Samsung.
6. Vietnam and the South China Sea
    Lastly, there is the troubling category of combined military-
economic coercive tactics that China employs particularly against 
smaller countries in the region. For example, the CCP has used its 
military and economic might against Vietnam and other nations that have 
ongoing disputed claims to the South China Sea areas. China has engaged 
in operations such as:


   Cutting the cables of oil exploration ships in the South China Sea. 
        In 2012, two Chinese fishing vessels cut cables of a Vietnamese 
        vessel doing seismic oil exploration work in the South China 
        Sea.

   Announcing and enforcing unilateral fishing bans. In May 2018, 
        China unilaterally announced a fishing ban in the South China 
        Sea for two months, directly affecting the livelihoods of 
        Vietnamese, Bruneian, Malaysian, and Filipino fishermen.

   Or even directly threatening countries with overt military 
        pressure, as was the case when China placed an oil rig in 
        Vietnam's exclusive economic zone in May 2014 and surrounded it 
        with an armada.
Fighting Back
    Thus, China holds meaningful sway over most of the countries it 
targets and the scale of China's economy and resources is its biggest 
strength. Many countries--particularly smaller countries in Asia that 
China actively targets--still hope for access to the China market or 
seek to receive investment from the PRC.
    However, there are limitations to China's economic coercion, 
particularly with respect to the United States. For one thing, China's 
economy is more dependent on the U.S. economy than vice versa. 
Moreover, ``good money'' is leaving China to be invested here or other 
Western safe havens. In fact, one of the biggest complaints by Chinese 
elites is that the Xi administration is making it harder for them to 
get their money out of China.
    Since the U.S. is not dependent on China for as much as we think, 
we should have plans for an economic coercion strategy of our own. Some 
of these measures would include:


   Limits on the children of party elite's student visas;

   Bans on market access in accord with European actors on the worst-
        offending SOEs (for example, those that consistently engage in 
        forced technology transfers);

   Targeted information campaigns within China in Chinese that 
        advertise the corrupt patronage networks that exist between the 
        CCP and key SOEs;

   Global armadas that convoy fisherman and oil exploration vessels to 
        areas they are lawfully allowed to conduct their economic 
        activities;

   Enhancing economic ties including the quick signing of a Bilateral 
        Investment Treaty and cyber-cooperation with Taiwan.


    But our approach to CCP economic coercion needs to be more 
comprehensive. Besides some of the defensive actions we could take 
listed above, the United States should consider a more proactive trade 
agenda that targets the countries that will become increasingly 
important to the U.S. in the future--Vietnam, Indonesia and the 
Philippines--as well programs to help strengthen the rule of law in 
these countries so that they are not as susceptible to outright Chinese 
bribery. The greatest economic coercion strategy we can place on China 
is helping to build free-market trade agreements and free-market 
economies in Asia whose standards are so high that a statist CCP will 
not be able to join.


    Senator Markey [presiding]. Let me just stop you right 
there, if I may, Mr. Blumenthal. I think you can probably get 
into more detail when we get into the question and answer 
period. So let me just stop you right there so we can begin 
with Mr. Ratner.
    Again, Mr. Ely Ratner is Vice President and Director of 
Studies, Center for a New American Security. We welcome you, 
sir. Whenever you are ready, please begin.

    STATEMENT OF ELY RATNER, VICE PRESIDENT AND DIRECTOR OF 
  STUDIES, CENTER FOR A NEW AMERICAN SECURITY, WASHINGTON, DC

    Mr. Ratner. Great. Senator Markey, Senator Kaine, thank you 
for the opportunity to testify today.
    Let me start by thanking Chairman Gardner and the other 
members of the committee for your efforts to reinforce 
America's enduring commitment to Asia. I am encouraged to hear 
that the bipartisan Asia Reassurance Initiative Act will be 
marked up by the full committee. It is an important piece of 
legislation, and I share Senator Gardner's hope for quick 
passage by the full Senate.
    For the purposes of my opening statement today, I am going 
to focus on the increasingly common and consequential 
phenomenon of Chinese economic coercion whereby China is using 
economic punishments against governments and firms or threats 
thereof to advance its foreign policy and domestic political 
goals.
    My home institution, the Center for a New American 
Security, CNAS, released a report in June that represents the 
most detailed and comprehensive study to date on this 
phenomenon. I would encourage interested members and staff to 
read the report in its entirety.
    The report examines how Beijing is using economic coercion 
to advance its illiberal, authoritarian, and revisionist aims 
by employing a vast array of coercive economic tools, including 
import restrictions, popular boycotts, pressure on specific 
companies, export restrictions, limits on Chinese tourism, 
investment restrictions, and targeted financial measures. 
Beyond the immediate economic costs, these actions are having a 
damaging, chilling effect on the world. Facing the specter of 
Chinese retaliation, countries are less willing to stand up to 
China, and U.S. allies and partners are increasingly reluctant 
to work with the United States on certain diplomatic, economic, 
and military issues.
    In terms of how best to respond, my written testimony 
provides a dozen specific policy recommendations for Congress. 
Here are a few highlights.
    First, the Senate Foreign Relations Committee should hold 
hearings on the costs and benefits of rejoining the Trans-
Pacific Partnership. Rejoining TPP is among the most important 
things we can do to advance our economic position in Asia and 
erode the effectiveness of China's economic coercion.
    By contrast, U.S. withdrawal has done substantial damage to 
our standing in the region and is facilitating the development 
of a Chinese sphere of influence in Asia and beyond. Rejoining 
TPP would renew confidence in the credibility and commitment of 
the United States, help to reroute supply chains in the region, 
open new markets for U.S. companies, and ultimately reduce 
China's economic leverage. It would also provide a mechanism 
for coordinating with allies and partners to combat China's 
predatory policies.
    Second, Congress should pass legislation to constrain 
President Trump's ability to levy tariffs against U.S. allies 
and partners on specious national security grounds. The United 
States will be far less successful if we attempt to address 
China's coercive actions on our own. Instead, we should be 
working closely with allies and partners, sharing information 
on Chinese activities, coordinating on trade and investment 
restrictions, and rerouting global supply chains. 
Unfortunately, the Trump administration's tariffs against some 
of our closest allies and partners have diluted attention away 
from China's predatory practices and made it far more difficult 
to coordinate on the China challenge.
    Third, we have to engender the focus and political will to 
enhance U.S. competitiveness. Bolstering our own national 
strength and staying at the cutting edge of technology and 
innovation are essential to reducing China's coercive capacity. 
This will mean continuing to support increases in basic 
research, investing in education, pursuing responsible fiscal 
policies, developing strategic visa and immigration policies, 
and generating a bipartisan consensus on the importance of 
rising to this occasion. Succeeding in the China challenge is 
ultimately about us, about our own national competitiveness, 
not just taking defensive measures to deal with China's 
predatory practices.
    In this context, I also support bipartisan legislation 
cosponsored by members of this committee that mandates the 
administration to publish a national economic strategy.
    Fourth, the effectiveness of China's economic coercion is 
based in large part on perceptions and often misperceptions of 
China's ascension and American decline. This leaves a vital 
role for greater U.S. public diplomacy, information operations, 
and strategic messaging to expound the strengths of the United 
States and to cast a more skeptical shadow on certain elements 
of China's leadership, government, and economy.
    My written testimony includes several recommendations for 
Congress in this area, including reconstituting a 21st century 
version of the U.S. Information Agency, augmenting resources to 
the Broadcasting Board of Governors to bolster China-related 
content, carrying out Congress' essential role in publicly 
criticizing China's economic coercion, and providing resources 
and directing the Department of Defense to develop means to 
circumvent China's great firewall and to make it easier for 
Chinese citizens to access the global Internet.
    Fifth and finally, we need to develop a stronger toolkit of 
our own to blunt and deter Chinese economic coercion. Congress 
can play a leadership role in limiting China's leverage over 
key nodes in the world economy, by developing regulations and 
export controls that build diversity and redundancy into 
critical supply chains. Moreover, Congress should call upon 
relevant U.S. departments and agencies to develop sharper 
retaliatory tools to deter and impose costs on Chinese 
companies and the interests of relevant Chinese Government 
officials. In short, as China deploys more sophisticated, 
nimble, and offensive tools of economic statecraft, so too 
should we.
    Senator Markey, I will stop there and look forward to your 
questions. Thank you again for the opportunity to be here 
today.
    [Mr. Ratner's prepared statement follows:]


                    Prepared Statement of Ely Ratner

I. Overall Assessment
    Chairman Gardner, Ranking Member Markey, distinguished members of 
the committee, thank you for the opportunity to discuss a topic of 
vital importance to the United States. Before delving into the 
specifics of Chinese economic coercion, I want to begin with four 
topline observations on the current state of the U.S.-China 
competition:


 1. The United States and China are now locked in a high-stakes 
        geopolitical competition. How this competition evolves will 
        determine the rules, norms, and institutions that govern 
        international relations in the coming decades, as well as the 
        level of peace and prosperity for the United States. There is 
        no more consequential issue today in U.S. foreign policy.

 2. The United States, on balance, is losing this competition in ways 
        that increase the likelihood not just of the erosion of U.S. 
        power, but also the rise of an illiberal Chinese sphere of 
        influence in Asia and beyond. If current trends continue, Asia 
        will see a future that is less democratic, less open to U.S. 
        trade and investment, more hostile to U.S. alliances and 
        military presence, and more often dictated by raw Chinese power 
        rather than mutually-agreed upon standards of behavior. To 
        avoid these outcomes, the central aims of U.S. strategy in the 
        near-term should be to enhance U.S. competitiveness and prevent 
        China from consolidating an illiberal sphere of influence.

 3. The U.S. government has failed to approach this competition with 
        anything approximating its importance for the country's future. 
        Much of Washington remains distracted and unfocused on the 
        China challenge. The Trump administration sounded some of the 
        right notes in its first National Security Strategy and 
        National Defense Strategy, but many of its foreign and domestic 
        policies do not reflect a government committed to projecting or 
        sustaining power and leadership in Asia and the world. On 
        balance, I would characterize the Trump administration's China 
        policy as confrontational without being competitive.

 4. Despite current trends, the United States can still prevent the 
        growth of an illiberal order in Asia and internationally. 
        Washington's ability to muster the necessary strategy, 
        attention, and resources will go a long way in determining the 
        character of international politics in the 21st century. The 
        foundations of American power are strong, and the United States 
        can successfully defend and advance its interests if only 
        Washington can manage to pursue the right set of policies.

II. The Phenomenon of Chinese Economic Coercion
    Mr. Chairman, I look forward to a broader discussion this afternoon 
on the wide-ranging question of China's economic statecraft-including 
its Belt and Road strategy, its ambitious industrial policy, and its 
continued use of unfair and illegal trade and investment practices-but 
for the purposes of my opening statement today, I'm going to focus on 
the increasingly common and consequential phenomenon of Chinese 
economic coercion.
    Economic coercion has become a fundamental part of Chinese economic 
statecraft and has had a chilling demonstration effect on the world. If 
left unchecked and unanswered, the shadow of Chinese coercion will 
continue to undermine U.S. interests not just in terms of immediate 
economic costs and changes in behavior, but more profoundly through a 
future deterrent effect. Facing the specter of economic punishments 
from Beijing, countries and companies are increasingly wary of standing 
up to Chinese illiberalism and revisionism, and several U.S. allies and 
partners are less willing to cooperate with the United States on 
certain diplomatic, economic, and security matters. We already see 
these damaging effects in a variety of regions and forums-in the South 
China Sea and ASEAN; on human rights, including in Europe; and even in 
the United States with U.S.companies, universities, think tanks, and 
state and local officials reluctant to speak truth to Chinese power. If 
the United States is going to rise to the China challenge, Washington 
will have to find a way to blunt this particularly pernicious element 
of China's toolkit.
    In June of this year, a team at the Center for a New American 
Security, the bipartisan national security-focused think tank where I 
work, published a landmark study on China's use of economic 
coercion.\1\ I would encourage Members and their staff to read the 
report in full. The report defined economic coercion as the use, or 
threatened or latent use, of economic punishment for foreign policy and 
domestic political ends. To achieve such aims, China has used a vast 
array of coercive economic tools, including import restrictions, 
popular boycotts, pressure on specific companies, export restrictions, 
limits on Chinese tourism, investment restrictions, and targeted 
financial measures.
---------------------------------------------------------------------------
    \1\ Peter Harrell, Elizabeth Rosenberg, and Edoardo Saravalle, 
``China's Use of Coercive Economic Measures,'' Center for a New 
American Security, June 2018, https://www.cnas.org/publications/
reports/chinas-use-ofcoercive-economic-measures.
---------------------------------------------------------------------------
    Although Beijing has employed these tactics primarily over 
sovereignty disputes and other particularly sensitive areas for the 
Communist Party, the set of issues that evoke Chinese coercion is 
growing and the tools are being deployed more frequently. This reflects 
China's expanding economic and security interests around the world, 
greater coercive power enabled by its burgeoning economic clout, and 
Communist Party Chairman Xi Jinping's more assertive, ideological, and 
revisionist approach to international affairs. At times, this 
international bullying is intended primarily for China's domestic 
audiences, seeking to demonstrate the power and nationalism of the 
Communist Party.
    A series of incidents over the last decade have illuminated the 
manner and circumstances in which Beijing uses economic coercion: 
Banning the export of rare earth minerals to Japan in 2010 during a 
clash over the disputed Senkaku Islands; freezing imports of Norwegian 
salmon after Chinese dissident Liu Xiaobo received the Nobel Peace 
Prize in 2010; restricting imports from and tourists to the Philippines 
during a standoff over Scarborough Reef in the South China Sea in 2012; 
initiating popular boycotts and placing import and tourism restrictions 
against South Korea following the deployment of a U.S. missile defense 
system in 2016 and 2017; and imposing restrictions on imports from 
Mongolia after a visit by the Dalai Lama in 2016. The message has been 
clear: Don't oppose Chinese revisionism in Asia, and don't question the 
Communist Party's worsening authoritarianism.
    Over the last year, China has also attempted to coerce large 
Western companies into toeing Beijing's line on Taiwan and Tibet. For 
example, China has been pressing international airlines to stop listing 
Taiwan as a separate country on their websites. And in February of this 
year, Mercedes Benz was compelled to apologize to China for quoting the 
Dalai Lama on a corporate social media account.
    Chinese economic coercion differs in notable ways from U.S. 
economic coercion. Beijing has largely used informal and extra-legal 
measures, providing deniability and the flexibility to escalate and 
deescalate at will. Moreover, as should be clear from the examples 
above, China is often using its newfound power and influence to advance 
narrow national and regime ``core'' interests, rather than to uphold 
and enforce international rules and norms. Beijing was content to sit 
quietly when Russia invaded Crimea, but has lashed out with economic 
punishments when foreign leaders met with certain internationally-
recognized religious leaders or Nobel Prize laureates.
    It can be difficult to gauge the relative success of these actions. 
On the one hand, China's bullying does have negative repercussions: 
publics resent the pressure and economic hardship, and governments have 
at times sought ways to reduce future vulnerabilities. It is my firm 
belief, however, that we should not overstate the downsides for China. 
Beijing is making steady progress at building a sphere of influence in 
Asia, even if in a manner that is two steps forward, one step back. 
Indeed, even when an individual Chinese coercive action has little 
immediate effect, Beijing can still succeed in sending a powerful 
deterrent message to other countries making clear that they could be 
next. It would be a considerable mistake to sit back and allow these 
practices to go unchecked under the assumption that they will 
eventually backfire for Beijing.
III. Guiding Principles
    Blunting China's economic coercion is a strategic imperative for 
the United States. As the United States embarks on addressing this 
problem, it should do so with the following tenets:


 1. The foundations of American power are strong: We should be 
        approaching the China challenge from a position of confidence. 
        Despite all the pessimism about American decline, the United 
        States continues to possess the attributes that have sustained 
        its international power and leadership for decades. Our people, 
        demography, geography, abundant energy resources, dynamic 
        private sector, powerful alliances and partnerships, leading 
        universities, democratic values, and innovative spirit give us 
        everything we need to succeed if only we're willing to get in 
        the game.

 2. Rising to the China challenge is ultimately about us, not them: 
        Since the end of the Cold War, U.S. policy toward China has 
        sought to open its society and economy, while also encouraging 
        it to become a responsible member of the international 
        community. Instead, we find ourselves today confronting an 
        increasingly illiberal, authoritarian, and revisionist 
        power,\2\ and we should expect that China will continue heading 
        in this direction (at least) as long as Xi Jinping is in 
        charge. It is therefore no longer viable for the United States 
        to predicate its strategy on changing China. Rather, how the 
        United States fares in its strategic competition with China 
        will ultimately depend on our own competitiveness, and we 
        should be bolstering our own national strength and influence to 
        gear up for this challenge.\3\ In short, even as we strengthen 
        our defenses against China's predatory economic practices, our 
        China strategy should be focused on enhancing American 
        competitiveness.
---------------------------------------------------------------------------
    \2\ Kurt M. Campbell and Ely Ratner, ``The China Reckoning,'' 
Foreign Affairs, March/April 2018, https://www.foreignaffairs.com/
articles/united-states/2018-02-13/china-reckoning.
    \3\ Daniel Kliman, Elizabeth Rosenberg, and Ely Ratner, ``The China 
Challenge,'' 2018 CNAS Annual Conference, June 21, 2018, https://
www.cnas.org/publications/commentary/the-china-challenge.

 3. Tariffs should not be the principal economic policy tool against 
        China: U.S. tariffs raise prices on American consumers and 
        businesses, invite retaliation, and are unlikely to lead to 
        significant changes in China's economic policies. Although 
        limited tariffs are appropriate under certain circumstances, a 
        better strategy would put more weight on a combination of 
        highstandard multilateral rulemaking, investment restrictions, 
        export controls, targeted public diplomacy, sanctions against 
        Chinese companies guilty of stealing U.S. technology, 
        investments in U.S. domestic competitiveness, regulations that 
        encourage supply chain resilience and diversification, and 
---------------------------------------------------------------------------
        closer coordination with allies and partners.

 4. We need a comprehensive China strategy across all domains of the 
        competition: Regardless of the specific topic-Chinese economic 
        coercion, human rights, or the South China Sea-the United 
        States needs a comprehensive strategy that enhances U.S. 
        competitiveness across all domains of the competition, 
        including military, economics, diplomacy, ideology, technology, 
        and information.\4\ It would be a mistake to approach our China 
        policy as siloed and tactical responses to particular problems. 
        Succeeding on any individual issue will require strength and 
        skill across all areas of the competition.
---------------------------------------------------------------------------
    \4\ Ely Ratner, ``Rising to the China Challenge,'' Testimony before 
the House Armed Services Committee, February 15, 2018, https://
www.cfr.org/report/rising-china-challenge.
---------------------------------------------------------------------------
Recommendations for Congress
 1. Congress should hold hearings to re-examine the costs and benefits 
        of rejoining the Trans-Pacific Partnership (TPP).

          Rejoining TPP (now the Comprehensive and Progressive 
        Agreement for Trans-Pacific Partnership or CPTPP) is the single 
        most important thing the United States can do to advance its 
        economic position in Asia, and to erode the effectiveness of 
        China's economic coercion. Joining a high-standard trade and 
        investment regime will incentivize companies, including in the 
        United States, to diversify their supply chains away from 
        China, thereby lowering their dependence on and vulnerability 
        to Beijing. Returning to a multilateral trade mechanism will 
        also renew confidence in the credibility and commitment of the 
        United States, while leaving China as an outlier as long as it 
        pursues a state-led mercantilist model. The politics of this 
        are obviously difficult right now in the United States, but 
        both political parties need to find a way back to the deal. By 
        not joining and stewarding an agreement with strong U.S. buy-in 
        and protections, the United States is inviting continued 
        Chinese economic coercion and, ultimately, Chinese dominance of 
        Asia.


 2. Congress should constrain the ability of the Trump administration 
        to levy tariffs against U.S. allies and partners on national 
        security grounds.

          The United States should be working with-not alienating-
        allies and partners to address the China challenge, including 
        sharing information on Chinese activities, coordinating on 
        trade and investment restrictions, and rerouting global supply 
        chains. It will be exceedingly difficult to address China's 
        coercive, unfair, and illegal trade and investment practices on 
        our own. It was a mistake to lead with Section 232 tariffs on 
        some of our closest allies, and similarly misguided to threaten 
        auto tariffs against the European Union or withdrawal from 
        NAFTA or KORUS. Instead, the United States needs an 
        international economic strategy that differentiates between 
        allies and strategic competitors. Congress should therefore set 
        limits on the Trump administration's ability to levy damaging 
        tariffs on close U.S. allies and partners on specious national 
        security grounds.\5\
---------------------------------------------------------------------------
    \5\ Peter Harrell, ``Congress must rein in White House economic 
national security powers,'' The Hill, June 7, 2018, http://thehill.com/
opinion/national-security/390958-congress-must-rein-in-white-house-
economicnational-security-powers.


 3. Congress should play an active oversight role on U.S. economic 
        policy toward China by mandating that the administration 
---------------------------------------------------------------------------
        produce a National Economic Security Strategy.

          The U.S. government is not institutionally configured to deal 
        with the China economic challenge. The issue of economic 
        coercion, in particular, lacks a natural institutional home in 
        the U.S. government. This dearth of U.S. government 
        coordination invites further Chinese coercion and increases the 
        likelihood that U.S. companies will buckle to China's demands. 
        Congress should use its oversight authority to urge the U.S. 
        government to organize institutionally for the China economic 
        challenge, including by passing proposed bipartisan legislation 
        requiring the administration to publish a National Economic 
        Security Strategy.


 4. Congress should focus on enhancing American competitiveness by 
        continuing to support increases in funding for basic research, 
        formulating strategic immigration and visa policies, and 
        investing in education, among other priorities.

          Ensuring America's continued economic strength and 
        technological leadership is vital to reducing U.S. 
        vulnerability to Chinese economic coercion.\6\ The U.S. 
        government should therefore continue its long tradition of 
        providing seed funding for critical technological 
        breakthroughs. Additional domestic policies focused on 
        enhancing American competitiveness will be critical to the 
        strategic competition with China, including responsible fiscal 
        policies, strategic immigration and visa policies, skills 
        retraining for workers adversely affected by China's predatory 
        economic policies, emphasis on improving STEM education, and 
        efforts to build a bipartisan consensus on the China challenge.
---------------------------------------------------------------------------
    \6\ Elsa Kania, ``China's Threat to American Government and Private 
Sector Research and Innovation Leadership,'' Testimony before the House 
Permanent Select Committee on Intelligence, July 19, 2018, https://
www.cnas.org/publications/congressional-testimony/testimony-before-the-
house-permanent-selectcommittee-on-intelligence.


 5. Congress should explore reconstituting a 21st-century version of 
---------------------------------------------------------------------------
        the U.S. Information Agency.

          The United States should revive its ability to engage in 
        information operations and strategic messaging, which have not 
        featured prominently in U.S. China policy for decades. The goal 
        should be to provide a counterpoint to the billions of dollars 
        China spends each year in propaganda to sell a vision of its 
        own ascendancy and benevolence, alongside U.S. decline and 
        depravity. The resulting perceptions of the inevitability of 
        China's rise and of future dependence on China have reinforced 
        Beijing's coercive toolkit. More U.S. media and information 
        platforms could provide a degree of level setting about the 
        facts and fictions of China's power, expound the strengths of 
        the United States, and cast a more skeptical shadow on certain 
        expressions of Chinese influence, including its governing 
        model, its ideological assertions, and the overall strength of 
        its economy. U.S. information operations could also highlight 
        Xi Jinping's deep unpopularity around the world, as well as his 
        mismanagement of China's economy and failure to deliver on 
        much-needed economic reforms.\7\ If creating a new institution 
        like the U.S. Information Agency is not feasible, the U.S. 
        government will still need more modern and sophisticated 
        information dissemination tools.
---------------------------------------------------------------------------
    \7\ This would not require the use of disinformation. For example, 
a recent Pew Research Center poll found that only 28 percent of 
respondents around the world had confidence in Xi ``to do the right 
thing regarding world affairs.'' (http://www.pewglobal.org/2017/06/26/
u-s-image-suffers-as-publics-around-worldquestion-trumps-leadership/
#trump-putin-and-xi-all-unpopular-merkel-gets-highest-marks.) 
Similarly, recent analysis by the Rhodium Group and Asia Society Policy 
Institute on the pace of Chinese economic reforms found that, ``fourth 
quarter 2017 indicators continued to diverge from official reports: 
fundamental reforms are lagging while stated growth never seems to 
change. This does not make good sense, statistically or logically. We 
see eight of our ten policy assessments in neutral or negative 
territory.'' (https://aspi.gistapp.com/china-dashboard/.)


 6. Congress should increase funding for the Broadcasting Board of 
---------------------------------------------------------------------------
        Governors to augment China-related content in Asia and beyond.

          Current efforts to enhance U.S. government broadcasting and 
        information operations in response to Russian disinformation 
        campaigns should be expanded to develop more Chinarelated 
        content in strategically significant countries. A larger budget 
        would allow Radio Free Asia to bolster its regional offices and 
        employ more journalists throughout Asia to report on China's 
        activities of concern, including those related to the Belt and 
        Road strategy. More resources for U.S. strategic messaging 
        could also help U.S. entities to operate with greater 
        sophistication on China's own social media platforms, such as 
        WeChat. Alternatively, failing to augment U.S. resources in the 
        information space will make it much more difficult to succeed 
        in other areas of the competition.


 7. Congress should provide resources and direct the Defense Department 
        to develop the means to circumvent China's ``Great Firewall'' 
        and make it easier for Chinese citizens to access the global 
        Internet.

          It will be important at times for the United States to be 
        able to communicate directly with the Chinese people. The U.S. 
        government should therefore invest in developing and deploying 
        the technologies necessary to circumvent authoritarian 
        firewalls, including in China. This would involve both 
        developing cyber capabilities to disrupt China's censorship 
        tools, as well as finding new ways for citizens inside China to 
        access a free and open Internet.


 8. Congress should reinforce the Trump administration's public 
        reproach of China's economic coercion by passing sense of the 
        Senate resolutions criticizing China's actions.

          It is critical for the U.S. government to publicize and 
        criticize Chinese economic coercion. If the United States 
        remains silent during incidents of Chinese economic coercion, 
        it is unlikely that others will be brave enough to stand up. 
        Public statements by the Trump administration that highlight 
        and diminish China's actions in this area-including labeling 
        China's bullying ``Orwellian nonsense''--is good policy. 
        Official U.S. statements should also show support for targets 
        of Chinese coercion. Congress has a role to play in naming and 
        shaming acts of Chinese coercion, supporting U.S. allies and 
        partners, while also holding private companies publicly 
        accountable if they are compromising U.S. values and interests 
        for commercial gain.


 9. Congress should task the Congressional Research Service with 
        publishing a regular report on Chinese economic coercion that 
        outlines the incidents, costs, and policy tools used by 
        Beijing.

          As part of a broader public diplomacy campaign, the United 
        States government should make available data on Beijing's 
        coercive measures to highlight the tools, methods, and 
        consequences of Chinese economic coercion, limit Beijing's 
        plausible deniability, and facilitate further study by outside 
        experts.


10. Congress should support the economic pillars of the Trump 
        administration's IndoPacific strategy by passing the BUILD Act, 
        reviving the Export-Import Bank, and increasing foreign 
        assistance in strategically significant sub-regions.

          Bolstering U.S. economic competitiveness in the Indo-Pacific 
        will require additional resources. Beyond simply criticizing 
        China's predatory policies, it is vital for the United States 
        to offer concrete alternatives to China's economic statecraft. 
        Although the Trump administration has been slow to develop its 
        strategy for a ``free and open Indo-Pacific,'' certain elements 
        of the policy are now coming into view. It will not be 
        necessary (or possible) to match China dollar for dollar. 
        Instead the Trump administration should-in concert with allies 
        if possible-pursue discrete development projects that showcase 
        attributes of transparency, good governance, skills transfer, 
        debt sustainability, and environmental protections, all in 
        contrast to China's way of doing business. Trump administration 
        officials at the working level should be commended for 
        beginning to advance an economic agenda for Asia despite strong 
        headwinds. The upcoming ``Indo-Pacific Business Forum'' on July 
        30 is a good start, and Members from both parties should attend 
        and participate if possible.


11. Congress should pursue measures to support supply chain 
        diversification and redundancy and consider a counter-coercion 
        fund to compensate targets of Chinese economic coercion.

          The United States can take proactive steps to reduce the 
        salience of China's coercive economic power. Building diversity 
        and redundancy in critical supply chains, for instance, could 
        help to limit China's leverage over key nodes in the world 
        economy. Congress can assist by considering regulatory changes 
        that reduce incentives for companies to source critical inputs 
        from China. The U.S. government should also study the 
        feasibility of creating a funding vehicle-possibly in 
        cooperation with other developed economies-to compensate, in 
        real time, targets of Chinese economic coercion.


12. Congress should call upon Commerce, Treasury, and other departments 
        and agencies to develop tools to retaliate against Chinese 
        firms and the interests of relevant government officials.

          The United States government needs more tools to retaliate 
        against acts of Chinese economic coercion, thereby helping to 
        deter and, if necessary, impose costs on Chinese companies and 
        the political interests of relevant Chinese officials. As a 
        result, Congress should call upon departments and agencies to 
        come forward with proposals for additional retaliatory economic 
        measures. Otherwise, there is little reason why Beijing will 
        hesitate from bullying American firms. Areas for consideration 
        should include U.S. anti-trust statutes, export controls, 
        licensing requirements, and investment restrictions. When 
        appropriate, Congress should also urge the Trump administration 
        to employ Executive Order 13694, which provides authorities for 
        sanctions against companies that have stolen intellectual 
        property for commercial gain.


    Senator Markey. Great. We thank both of you for your 
testimony.
    And because of the roll calls, I was not able to make my 
opening statement, which I will do here for a few minutes 
awaiting the return of the chairman. And then we will begin the 
question and answer period.

              STATEMENT OF HON. EDWARD J. MARKEY, 
                U.S. SENATOR FROM MASSACHUSETTS

    Senator Markey. For good reason, Congress has spent 
considerable time working on the threats from North Korea 
lately. But for those who follow the Asia Pacific region 
closely and increasingly for those who do not, China has become 
a significant strategic challenge that demands our attention.
    We are witnessing a growing Chinese willingness to bend and 
break longstanding rules, rules that the United States helped 
create in an effort to spread peace and stability across the 
globe in the wake of devastating world wars, rules that created 
a level playing field and allowed the ingenuity and 
productivity of American workers to flourish, creating high-
paying jobs and expanding our economy.
    Unfortunately, the Chinese Government is undertaking 
coercive activities across the board, economically, militarily, 
and politically that threaten to alter this playing field in 
China's favor.
    So as Chairman Gardner mentioned, we intend to hold a 
series of hearings on what these developments mean for the 
United States. And today we are focusing on the Chinese 
Government's coercive activities in the economic realm.
    There are good reasons why we should be closely following 
these issues. The Chinese Government has used this economic 
coercion against our allies and partners undermining U.S. 
foreign policy, and it has targeted American companies directly 
threatening the livelihoods of American workers and 
expropriating American innovation and ingenuity. Taken 
together, these actions are eroding the principles of the 
international rules-based system in an unprecedented way.
    For example, the Chinese Communist Party is directing 
targeted economic pressure against smaller countries to achieve 
specific diplomatic goals. It has even been bold enough to 
target American allies. In response to an alliance effort to 
defend South Korea from North Korean missiles, China began an 
economic pressure campaign targeting the South Korean 
Government and people. This month's long, high profile campaign 
reportedly caused the country more than $15 billion in damage. 
Dollar figures like that tend to change minds. And this blatant 
coercion should concern us all.
    And this is not an isolated incident. China has used 
similar measures against other U.S. allies like Japan and the 
Philippines, and I fear that we will only see more of this 
activity in the future.
    It also is using economic pressure to persuade countries to 
isolate Taiwan diplomatically and attempting to compel 
companies to refer to Taiwan as a part of China. According to 
media reports this morning, U.S. airlines are expected to cave 
to the Chinese Communist Party's demands for them to refer on 
their websites to Taiwan as a part of China. Many foreign 
airlines have already capitulated.
    And through its Belt and Road Initiative, or BRI, China is 
burdening countries receiving infrastructure loans with debts 
so extreme that they begin to undermine their own very 
sovereignty. According to a recent ``New York Times'' report, 
this Belt and Road Initiative amounts to a debt trap for 
vulnerable countries around the world, fueling corruption and 
autocratic behavior in struggling democracies.
    The Chinese Government also is targeting U.S. and other 
foreign companies in its bid to acquire technology that China 
deems strategically important for its economic development. The 
list of American companies on the receiving end of China's 
ever-more aggressive economic coercion is long and growing.
    In one example, American Superconductor, an energy 
technology company from my home State of Massachusetts that 
produces chips for wind turbines, partnered with a Chinese 
company partially owned by the Chinese Government, which then 
stole its intellectual property and used it against them.
    These practices have victimized numerous other companies in 
Massachusetts and across the country, including many that do 
not want to be named for fear of retribution by the Chinese 
Government.
    This must stop. And the American Government must help 
protect American businesses from being bullied by China. And 
while the administration has sought to counter some of China's 
efforts through tariffs, there are broader strategic objectives 
that we need to keep in mind. Across the board, these coercive 
measures hurt companies and their workers, damage our 
international relations, and create vulnerabilities, and they 
damage the international system that keeps peace and stability.
    This is not about making China out to be the enemy, and it 
is not, as China likes to complain, about constraining China's 
rise. But rather, it is about all countries following the rules 
of the road because these rules give every country, including 
China, a chance to prosper and compete from an equitable 
playing field.
    So it is of the utmost importance that we stand up for the 
interests, principles, and values that we care about. There is 
no place in the modern world for powerful countries coercing 
others, whether they be smaller neighbors or companies trying 
to provide for their workers. There simply is no room for the 
old ways of might makes right. We must ensure that we protect 
U.S. economic and security interests, as well as the broader 
international system that has helped provide peace and 
stability across the globe. The United States cannot afford to 
cede leadership on this issue.
    So I thank you, Mr. Chairman. The witnesses have completed 
their testimony, and we are ready to begin a round of 
questions.
    Senator Gardner [presiding]. Thank you, Senator Markey.
    Again, thank you both for your time and testimony today, 
and I thank the members for their time in participating in the 
committee.
    Mr. Blumenthal, you mentioned in your opening statement--
you talked about the economic opening in China being over. 
Could you go into a little bit more detail of what you mean by 
that?
    Mr. Blumenthal. So the period of reform and opening, which 
Deng Xiaoping began in 1978 and allowed for the great growth of 
China, the great growth of the private sector, private sector 
entrepreneurs and brought so many Chinese out of poverty and 
benefited the world, ended probably 10 years ago. We now know 
the Chinese have gone back to the state sector dominating, 
taking out room for entrepreneurs to grow. They have gone back 
to things like price controls. They have gone back to things 
like lending on the basis of non-market, non-profitable 
lending, but rather through patronage from the party to state-
owned enterprises. They certainly have not moved any further 
than they were 10-12 years ago on market access, things that we 
have been pressing for. They have not stopped subsidizing. In 
fact, they have doubled down on subsidizing their state-owned 
enterprises, which is probably the single biggest cause of 
probably the WTO stalling as much as it has. And Xi Jinping is 
certainly not taking China down the road of another round of 
market reforms. Quite the contrary, he is statist and favoring 
state-owned enterprises and the subsidization of state-owned 
enteprises over the private sector.
    Senator Gardner. It was the first opportunity I had through 
the committee to visit China I think in 2015, and while I was 
there, I met with a number of U.S. businesses. In those 
conversations, these U.S. businesses said just give China more 
time. There is just a little bit more time than now to see if 
the reforms will work. And I think you have said it has been 
about 10 years now where those reforms quit and then they kind 
of went back. They have gone back to some of the bad actions of 
the past.
    I do not hear the same thing from American businesses 
today. I do not hear give them time, just wait a little bit 
longer. What I hear now is that the U.S. needs to act on the 
predatory economics.
    You have also talked about coercion. Could you explain the 
difference between sort of coercion and predatory economics?
    Mr. Blumenthal. Sure. So the Chinese economic system in 
many ways is set up to be predatory without necessarily trying 
to fulfill a geopolitical imperative. So when I talk about 
coercion specifically, I am talking, for example, about trying 
to stop U.S. tariffs to take an example right now. So call on 
U.S. businesses--Xi Jinping calls on CEOs of U.S. businesses 
and says, if you do not get the Trump administration to stop 
these tariffs, your businesses will pay. They cannot do 
business here. We will squeeze them out. That is coercion.
    The same thing with Taiwan. If you, Taiwan CEO, do not go 
back to Taiwan and vote for a more pro-Beijing party, you 
cannot do business here. That is coercion. That is trying to 
obtain a geopolitical objective.
    The predatory nature of the Chinese economy is just 
inherent and structurally in the system. The state-owned 
enterprises and the state banks lend on a predatory nature and 
a non-profitable nature. And the subsidization that they rely 
so heavily upon in China in order to export is causing 
structural stresses in the world trade system. So that is how I 
divide it up analytically.
    Senator Gardner. Supports in something like Sri Lanka would 
be predatory economics.
    Mr. Blumenthal. In that case, it could be both. So if you 
are setting up--it is predatory in the sense that Sri Lanka 
needs the funding for the port, and they will get favorable 
terms at first from the Chinese. But then the Chinese will come 
back and call for something in return like access to a port. It 
can be coercive if the Sri Lankans do not actually deliver that 
port, and they could more and more pressure on the Sri Lankans 
politically to deliver. A lot of the BRI cases are cases of 
both, a confluence of both those strategies.
    Senator Gardner. And I mentioned before that I do not hear 
from U.S. businesses just wait a little bit longer to see if 
those reforms take effect. But yet, as Senator Markey mentioned 
in his opening dialogue, we do see coercive efforts by China on 
U.S. airline companies trying to get them to change their 
websites, a word on a website, as it relates to Taiwan. And so 
that is a coercion tactic. Is that correct?
    Mr. Blumenthal. That is absolutely correct. The target 
there is isolation of Taiwan using U.S. businesses as a proxy 
to get at Taiwan.
    Senator Gardner. And what is the ultimate consequence if 
U.S. businesses, like U.S. airlines, start capitulating to 
China and their demands over changing their website? That is 
not the end of it. Right? It continues. There is something 
else. There is something more.
    Mr. Blumenthal. On Taiwan, there is a multifaceted coercive 
strategy. It involves military coercion that constantly 
exercises to demonstrate to Taiwan that if they want to, they 
can cut their economic lifelines off from ports and 
increasingly in the airspace. They are trying to wipe Taiwan 
off the mental map of all of us, and that is what they are 
doing with airlines and other types of companies, as well as 
websites. They are trying to get the State Department and 
others--they are constantly fighting with them over how to 
mention Taiwan, the Olympics. What they want to do is wipe 
Taiwan off the map as a separate entity.
    Senator Gardner. I know in both of your statements, you 
make recommendations for policies that we could put in place 
that would help the United States address the rise of China. 
And as Senator Markey said, the goal is not to try to make 
people choose between friends but to have multiple friends to 
have in a system that actually abides by international norms 
and rules of the road that we all agree to. And so I look 
forward to getting into those recommendations a little bit 
more.
    Senator Markey?
    Senator Markey. Thank you, Mr. Chairman, very much.
    Mr. Ratner, where are we in this trade war? Just help us to 
step back and get a perspective as to where this is likely to 
lead.
    The U.S. Department of Agriculture today announced they are 
planning to announce $12 billion in emergency aid for farmers 
that were hurt by President Trump's escalating trade war. And 
obviously, there is going to be a line of other industries' 
employees who are going to be showing up looking for aid as 
well as part of this war. We might as well call it kind of a 
trade defense budget. You need a whole defense budget here. It 
is not just going to be for the ag sector. It is going to be 
for every other sector, steel, aluminum, you name it. All the 
way down the line are industries affected by those industries 
who are all going to be looking for some help.
    So can you talk a little bit, Mr. Ratner, where you see 
this going and what the end game is from your perspective?
    Mr. Ratner. Sure, Senator Markey. The direct answer is I 
think we are about 20 years into this trade war. So this is not 
something that Donald Trump started. This is something that 
China started decades ago. And I do not agree with all the ways 
that the Trump administration is going about dealing with this 
problem, but I do think they should be commended for 
highlighting it, and business as usual was not going to work. 
So it is important I think.
    And one of my critiques of the Trump administration is that 
it was a serious mistake for them to lead with the section 232 
tariffs against our allies and partners because it muddied the 
message of Chinese predatory practices, and that is what we 
should be focused on as a country in terms of our economic 
strategy as we are thinking forward. That is what the Trump 
administration should have been talking about from day one. And 
I worry now that the message is very confused with both the 
American people and the international community in terms of 
where the China economic challenge and China's predatory 
practices----
    Senator Markey. So you are saying instead of imposing 
tariffs on Canadian steel and aluminum that actually hurts many 
sectors of our economy, that instead the President should have 
been focusing on China right from the very beginning. Is that 
your point?
    Mr. Ratner. That is absolutely right. The term that I used 
to describe the Trump administration's China policy is that it 
is confrontational without being competitive. Tariffs are quite 
confrontational, but there is a better basket of tools that we 
could be using associated with high standard rulemaking, 
investment restrictions, export controls, public diplomacy, 
sanctions against particularly bad actors, investing at home, 
rerouting supply chains, coordinating with allies and partners. 
There is a whole suite of economic policies we should be making 
here to be more competitive with China. That is what we should 
be focused on.
    Senator Markey. Okay.
    Now, do you see any threat that this economic trade war 
could spill over into national security areas as well?
    Mr. Ratner. It depends what you mean by that, sir. I think 
part of what the Trump administration----
    Senator Markey. We need the Chinese for cooperation on many 
national security issues. Do you think this could reduce the 
likelihood that there would be cooperation where the United 
States is looking for it most ardently?
    Mr. Ratner. I think we may see issue linkage. Certainly 
both President Xi and President Trump have drawn such issue 
linkage.
    I think one of the questions is what is the goal of the 
Trump administration here, and they have not articulated that. 
There are folks inside and the President himself who talk about 
trade deficits. There are others who talk about restoring 
American manufacturing, and there are others who talk about 
tech transfer and intellectual theft. And then there are others 
who talk about that the goal here is not actually to get a deal 
that makes our economies more interdependent but one that leads 
to less dependence between us that sees interdependence as the 
problem.
    So I think one of the reasons why I like the idea that 
Senator Young and others have talked about about a national 
economic security strategy is that it would force the 
administration to be clear about what its aims are and then put 
forward a strategy to achieve those aims because we have not 
heard that yet clearly from the Trump administration.
    Senator Markey. So, again, do you think that in the absence 
of that, that we could just wind up with a never-ending cycle 
of increased tariffs on both sides that ultimately harm the 
global economy perhaps while not, in fact, achieving the 
result, which the President says that he is aiming to achieve?
    Mr. Ratner. Well, again, I do not think we know what the 
result is exactly, but certainly tariffs are a blunt 
instrument. They raise prices for consumers and businesses, and 
they invite retaliation. And I do not think they are 
necessarily going to achieve the types of concessions from the 
Chinese on their industrial policies or their economic model 
that some are talking about. So to me, they may be a small part 
of a broader economic policy, but they should not be the 
central tool of our economic approach to China, which should be 
predicated on a more competitive strategy by the United States.
    Senator Markey. So in terms of what the Chinese did to the 
South Korean economy after the deployment of the THAAD system, 
hitting it to the tune of $15 billion, what does that teach us 
about China and its relationship with national security issues 
from their perspective in terms of linking economic sanctions 
as a response to those national security issues?
    Mr. Ratner. Well, I think what it teaches us, Senator, is 
that China is going to use its economic clout to try to achieve 
its geopolitical aims, which include dividing American 
alliances and eroding the influence of the United States in the 
region. So I think that was a very important episode. It was 
very revealing.
    I think we can talk about trying to incorporate China into 
a rules-based order. I do not think that is where we are going 
to be in the next several years. I think what we have to do is 
pull up our socks, get more competitive, slow down Chinese 
momentum in its efforts to develop the sphere of influence. 
That is a much more urgent task than a long-term goal of 
developing a rules-based order.
    Senator Markey. Looking at what happened in the Singapore 
summit, there were reports before Singapore that the Chinese 
had already increased trade with North Korea, and then there 
were comments coming out of leadership inside of China that 
they could now increase trade because of the, quote/unquote, 
success of the Singapore summit. How do you view that? How do 
you view the Chinese in terms of their use of trade or 
withdrawal of it as a tool in their relationship with the 
United States, South Korea, but with the North Koreans?
    Mr. Ratner. Well, to link this question with the earlier 
one, I tend to believe that China's behavior vis-a-vis North 
Korea is predicated on its own narrow interests as it relates 
to the peninsula and its geopolitical interests. I do not think 
they are going to be more or less cooperative on North Korea as 
a result of U.S. trade policy. In general, they may share the 
hope in the long term of denuclearization of the Korean 
Peninsula, but I do not think they are particularly interested 
in any kind of instability that might come along with that. So 
I tend to think they have been looking for any opening to get 
where we are today, and they are going to push in that 
direction and essentially support the United States and the 
Trump administration when it is in their interests and oppose 
it when it is not.
    Senator Markey. Thank you, Mr. Chairman.
    Senator Gardner. Thank you, Senator Markey.
    Senator Young?
    Senator Young. Well, I thank our witnesses for being here 
today.
    Mr. Ratner, thanks for your testimony. As I reviewed your 
written statement, you seemed to be making a pretty simple 
argument with very serious implications. In short, you seem to 
be saying we are in a high stakes competition with China, that 
China does not accept this rules-based international order we 
had hoped to welcome them into back in 2000. The legitimacy of 
that order and the institutions that were stood up to oversee 
that order are not respected by China. China instead respects 
power. And we as a nation have insufficient leverage, it seems, 
to be able to effect the sort of change we want with respect to 
intellectual property theft, joint licensing requirements, 
dumping, and so many other things. What we lack--and this is 
language you employed--is a comprehensive strategy.
    Is that a fair summary of your viewpoint, Mr. Ratner?
    Mr. Ratner. Yes, Senator.
    Senator Young. Well, I appreciate your reference in your 
prepared statement to my legislation, and I, of course, would 
welcome my cosponsorship. I already know that Senator Gardner 
has signed on to the national economic security strategy. You 
have called on Congress to pass this legislation.
    Why specifically do you believe Congress should pass this 
legislation? And why do you believe the administration should 
produce a national economic security strategy?
    Mr. Ratner. Senator, my answer would be twofold.
    First, clearly the economic dimensions of the geopolitical 
competition are only becoming more important. You know, it is 
common to say now that we are seeing the return of great power 
politics. The role of economics in the strategic competition 
will be greater I think than they were in the past for a 
variety of reasons, in no small part because that is at the 
leading edge of Chinese power and influence. So that is where 
the United States needs, among other areas, to rise to this 
challenge. So the economic component is very important and it 
is a particular area where our government is not well 
configured institutionally and where this particular 
administration is not coordinating particularly well. And if we 
are going to get serious about this, we are going to need the 
government with a coordinated strategy where the different 
elements are working together toward the same purposes.
    Senator Young. So is it fair to say that you believe that 
this legislation and the requirement that this and future 
administrations produce a national economic security strategy 
would catalyze critical thinking across different departments 
of government? They would synthesize their different priorities 
and objectives, and that would lead to a coherent and cohesive 
whole-of-government economic strategy that would advance our 
national interests.
    Mr. Ratner. I think it could certainly help, Senator. I 
will say to your last point, I am at times disappointed when 
the Trump administration is taking actions that do not 
represent its National Security Strategy or its National 
Defense Strategy, which I think are actually quite good 
documents. So it does not solve the problem in and of itself, 
but having served in the White House and worked closely with 
the National Security Council, these planning processes are 
incredibly important for the kind of coordinating mechanisms 
you are describing.
    Senator Young. But any infirmities that might exist in the 
strategy would then be exposed for lawmakers, academics, and 
critics alike to remedy in a classified setting where a 
classified annex would be required for the security strategy. 
Is that how you see this?
    Mr. Ratner. Yes. And frankly, I think there are new tools 
that the United States is going to need. So this is not just 
the process of digging up and putting together, cobbling 
together old parts of our strategy. I think we need these 
processes to bring together the foreign policy and security 
dimensions of our foreign policy apparatus with the economic 
and finance dimensions, and that is not something that we do 
well. I will say again at my time at the White House in my role 
as Deputy National Security Advisor to the Vice President, I 
attended the deputies' committee meetings. There was an 
economics pillar to those that were run by an entirely 
different group of people than the normal national security 
process, and it led to relatively incoherent policies at times. 
And those worlds need to be brought together, and this type of 
strategy process is one way to do that.
    Senator Young. What I find coherent in, say, the National 
Security Strategy is how they have been able to, through an 
established process, look across the State Department, 
Treasury, Department of Defense, and other agencies of 
government. Their handiwork is synthesized within the National 
Security Council. And that is what we envision working hand in 
glove with the National Security Council and the National 
Economic Council doing a similar sort of thing on the economic 
front.
    Would there be a signaling function by production of a 
national economic security strategy, that is, a signaling to 
our adversaries about what precisely our policy is and to the 
American public who I find consistently asking back in Indiana, 
whether they are farmers or manufacturers or others, what is 
the plan?
    Mr. Ratner. I think that is right. And just to inverse your 
question to make the same point, I think the lack of 
coordination, as I say in my testimony, I think invites Chinese 
economic coercion because they see those divisions. And I think 
it makes it harder for companies that are under the duress of 
Chinese economic coercion to stand up for themselves because 
when they look back, they are not sure anyone is behind them 
standing firm either. So both for our folks and for our 
competitors, I think it would send an important signal.
    Senator Young. Thank you.
    Mr. Ratner, in your prepared statement, you write, quote, 
the United States should be working with not alienating allies 
and partners to address the China challenge.
    Now, look, I acknowledge that our trading partners could 
give some with respect to their policies related to trade, 
other economic policies, regulatory policies. But our 
differences are marginal in comparison to the state capitalist 
model that, say, China has adopted.
    So why do you believe we need international partners like 
the Europeans, like the Canadians, for example, in addressing 
China's economic coercion despite the fact that we may have 
some differences with those partners?
    Mr. Ratner. Well, there are multiple functions that we can 
do to address Chinese coercion and some of these predatory 
practices with our partners. One, of course, is sharing 
information and intelligence, which is a key part of this 
effort, and then coordinating on things like investment 
restrictions. For instance, if there were a company from 
Indiana, whether it was a high tech company that was trying to 
be bought by a Chinese company and CFIUS or its successor were 
to block that, if the Chinese could then just go to the 
Europeans and buy a similar technology or a similar company, 
then your company in Indiana would lose out from that. So I 
think to maintain our competitiveness and protect our IP is 
going to be a team effort with our allies and partners. It is 
not something we can do on our own.
    Senator Young. And there is additional leverage as well, 
which is a related point to yours. As we try and bring China 
closer to what we would consider good behavior or a fair trade 
model, enhancing our leverage by joining together with the 
Europeans or our Asian friends and trading partners might make 
sense. Would you agree with that assessment?
    Mr. Ratner. I would agree with that, and when it looked 
like the United States was going to join the Trans-Pacific 
Partnership and that agreement was going to pass, the Chinese 
were starting to ask questions quietly at senior levels with 
American officials about what they would need to do down the 
road to improve their practices to join that agreement, and 
obviously, those conversations are no longer happening today.
    Senator Young. So lastly, Mr. Chairman, if I could just 
follow up on that. I noted that one of your recommendations, 
Mr. Ratner, in your testimony was rejoining TPP or finding a 
way into the Trans-Pacific Partnership. And I commend the 
President of the United States for having indicated that he was 
open to that prospect in the last State of the Union Address.
    When I was in the House of Representatives, I co-chaired 
the TTIP Caucus, the Transatlantic Trade and Investment 
Partnership Caucus. And I wonder. Should the United States to 
gain more leverage, in addition to the economic benefits, also 
be vigorously pursuing TTIP negotiations in parallel with some 
of these other efforts?
    Mr. Ratner. Yes, Senator. I think if we were part of the 
Trans-Pacific Partnership and we knitted that together with 
TTIP, we would be in an extremely strong position in terms of 
our economic competitive position toward China, and we would 
not be having these discussions today.
    Senator Young. Thank you, sir.
    Senator Gardner. Senator Merkley?
    Thank you, Senator Young.
    Senator Merkley. Thank you, Mr. Chairman.
    Mr. Ratner, under WTO, is China allowed to offer subsidies 
to its businesses?
    Mr. Ratner. Senator, I am not a trade lawyer, so I cannot 
get into the weeds of WTO law. But I think the answer is no, 
and there are several other dimensions in which they are not in 
compliance with the agreement.
    Senator Merkley. Under the WTO, China is required to do an 
annual report of all of its subsidies to different enterprises. 
Does it do that report?
    Mr. Ratner. I believe not, Senator.
    Senator Merkley. So when it fails to do the report, we are, 
under the WTO, allowed to do a report on their subsidies. I did 
an amendment a few years ago that said if China does not 
produce a report, our trade representative will be directed to 
produce our report. And before that amendment--the ink could 
dry on it, our trade rep under President Obama produced a list 
of 200 Chinese subsidies, subsidies we are well aware of but 
rarely kind of articulated. So we certainly have an 
understanding of massive Chinese subsidies that are not allowed 
under WTO.
    How about to offer loans at non-market rates?
    Mr. Ratner. I believe not, sir.
    Senator Merkley. Or to provide land for free as a form of 
subsidy?
    Mr. Ratner. I think that is right as well as forced 
technology transfer and number of other practices.
    Senator Merkley. And how about being required--for our 
companies to be required--to locate in a particular part of 
China where the infrastructure is inferior to other locations?
    Mr. Ratner. Correct.
    Senator Merkley. A couple of years ago when I was part of a 
delegation to China, we were at a meeting of the U.S. Chamber 
of Commerce in which many of these practices were highlighted. 
But one company in particular stood up and said--and I will not 
name the exact company because they probably did not want it 
too much publicized at the time. But they said they were 
basically told we have to put our manufacturing center in this 
far western city, far from the port infrastructure. We are told 
we cannot build any size of item that is in direct competition 
with the Chinese items. They were told they only could build 
larger versions that the Chinese were not yet building or they 
would be shut down and shut out of the country.
    Is that type of activity by the Chinese legal under the 
WTO?
    Mr. Ratner. No, sir.
    Senator Merkley. And what about requiring American 
companies to do joint venture arrangements in order to be able 
to locate in China?
    Mr. Ratner. Also not part of the agreement.
    Senator Merkley. And you are familiar with how these joint 
venture agreements are often used as a way to drain U.S. 
technology.
    Mr. Ratner. Yes, sir.
    Senator Merkley. So what does one say to the American 
citizen who says China is violating all of these rules, and the 
WTO has no mechanism by which we appear to be able to hold them 
accountable? Why should we not work intensely to create an 
ability to hold China accountable to the structure of the WTO?
    Mr. Ratner. I think that was the intention of the Trans-
Pacific Partnership. The WTO was written at a different time. 
It was never designed for this type of state-led mercantilist 
power, and it was not designed around investment issues and 
other e-commerce issues and IP issues that we are facing today. 
So certainly, a need for an updating. But, again, I think the 
TPP, the Trans-Pacific Partnership, was the institutional 
answer to many of these shortcomings.
    Senator Merkley. Well, perhaps we can have that debate 
another day because I do not share your opinion on that.
    But turning back to the flaws in the WTO, what is the 
average Chinese tariff on our manufactured goods?
    Mr. Ratner. I do not know that off the top of my head, 
Senator.
    Senator Merkley. Are you familiar, in general, that their 
tariffs are significantly more on average on our manufactured 
goods than our tariffs on theirs?
    Mr. Ratner. They are absolutely much, much higher. I think 
the fact that again this is not well known among the American 
people or in the international community is a shortcoming of 
our public diplomacy and communications on this issue, and I 
think we need to think about how we can do a better job of 
telling this story domestically and internationally. But 
absolutely, there is clear data on this particular finding.
    Senator Merkley. And the Chinese are continuing to use a 
lot of state-owned enterprises as a strategy to provide 
subsidies that are rather hidden.
    So under the WTO, if China engages in these practices and 
says to our companies, you have to be part of a joint venture, 
why do we not say, well, China, you want to locate in the U.S., 
you have to be part of a joint venture. Why should we give them 
such easy access when they are putting up such fierce obstacles 
to our investments in China?
    Mr. Ratner. I do not think we should, and I think these 
types of reciprocal rules would be fair and would likely cause 
them to change their practices in certain ways. I think the 
fact that they have been able to get away with these kinds of 
practices for so long and take advantage of our open markets is 
what all of us collectively are trying to solve here. But I 
think a principle of reciprocity is a great one to apply to 
this problem.
    Senator Merkley. In my various trips to China, I have seen 
China with bicycles. I have seen China with cars, and now I 
have seen China with bullet trains, massive new metro systems 
being built across the country, roads, bridges. Meanwhile, they 
are investing massively in defense. They are proceeding to buy 
up strategic minerals around the world. They are proceeding to 
buy into a lot of companies in the United States.
    Is China eating our lunch?
    Mr. Ratner. I do not think they are eating our lunch. You 
know, one of the things that I like to remind folks--and I know 
you all share this confidence and I put it in my statement--is 
that we ought to keep reminding ourselves that the foundations 
of American power are strong. And the reason why, if they are 
eating our lunch, I think we are losing this strategic 
competition among almost every parameter, whether it is 
economic or military or informational or ideological, is 
primarily because we are not competing. I think if we got our 
act together, we would be doing just fine.
    Senator Merkley. As long as our market is very open to the 
Chinese, and as long as they can pay wages that are much lower 
than ours and have environmental laws that are virtually 
nonexistent or non-enforced, is it not always going to be 
pretty much cheaper for manufacturers to move their 
manufacturing to China or to other states that have similar 
low-wage, low enforcement, low environmental standards?
    Mr. Ratner. I think that is right, which is again--it 
sounds like we have differences about the Trans-Pacific 
Partnership. But one aspect of that was to increase labor 
standards and environmental standards and otherwise so as to 
prevent countries from being able to race to the bottom and to 
level the playing field for American workers.
    Senator Merkley. Well, just as a reminder, we were giving 
Malaysia access, which has some of the worst labor standards in 
the world, but that is a conversation for another day. Thank 
you.
    Senator Gardner. Thank you, Senator Merkley.
    And this discussion on the TTIP and TPP I think is very 
important because I think we have laid out a lot of concerns we 
have with Chinese predatory economics, Chinese coercion, state-
owned enterprises, market access requirements. There were 
reports several months ago about requiring certain people to be 
in the chain of command of a business that is located in China. 
Obviously, technology transfers are a part of it.
    And that is how the administration responded through--that 
is why the administration responded through, at least in part, 
the tariffs that it has. But I believe a more appropriate 
action would have been to get global communities, likeminded 
interests, allies together through the Trans-Pacific 
Partnership and other trade agreements to put pressure and 
isolate China. Do you agree, Mr. Ratner?
    Mr. Ratner. Absolutely, Senator Gardner. I think that is 
the path forward. I think from a strategic perspective, it is 
the obvious solution. From a political perspective, it is more 
difficult. But this one is a no-brainer.
    Senator Gardner. Mr. Blumenthal?
    Mr. Blumenthal. I just have to correct a few things on the 
Trans-Pacific Partnership. Free trade is mostly to the good, 
but it would do nothing on Chinese coercive practices. We have 
a free trade agreement with South Korea, and yet it was the 
target of some of the harshest coercive practices in Asia. The 
TPP is gone, and it is becoming kind of an excuse to do nothing 
else. We have to take on Chinese coercive practices directly in 
ways that hurt the Chinese Communist Party, and we know how to 
do that. We have enormous leverage over China. China is 
stagnating as an economy. China is dependent on the U.S. 
consumer. I hope we do not go full bore into a tariff war, but 
they will lose because they export more than we do.
    So the answer to everything nowadays seems to be the TPP 
that, again, may be an intrinsic good in and of itself. It may 
or may not. That is debatable. But it is not the answer to 
Chinese coercive practices.
    Senator Gardner. I think it is important to point out too 
that when it comes to South Korea, I believe at least in the 
Korean National Assembly--conversations I had with members of 
that legislative body--that the retaliation for THAAD cost 
around $12 billion to South Korea's economy, including----
    Mr. Blumenthal. Right, right.
    Senator Gardner. So I think you make an interesting point.
    I do want to get into, though, remedies. And, Mr. Ratner, 
when you say the foundations of U.S. leadership are strong, I 
think that is incredibly important. We should not be walking 
around with our heads down on this. That is why I want to get 
into remedies.
    So, Mr. Blumenthal, then followed by Mr. Ratner, if you 
would like to talk about some remedies that we should be 
pursuing. How should we be responding to denials of market 
access? How should we be responding to theft and forced 
transfer of intellectual property? A lot of talk goes into 
reciprocity. Is there an understanding of what reciprocity 
would look like and what effect it would have, or would the 
message be lost?
    Mr. Blumenthal. Well, first of all, I disagree that there 
is no strategy. For the first time, the National Security 
Strategy mentioned China as a strategic competitor. It had a 
big part of it that is protecting the national innovation base. 
These tariffs are coming out of a section 301 investigation 
that took a year and a half that was getting bipartisan 
acclaim. And then next week, we are unveiling a big free and 
open Indo-Pacific strategy, part of which is building 
resiliency in the countries that are most targeted.
    So there is nothing you can do if, in Indonesia, for 
example, they are open to bribery except to build the rule of 
law in Indonesia. The Trans-Pacific Partnership cannot do 
anything about that. That is the work that the State Department 
is going to roll out next week.
    What you can do remedy-wise is, again, go out----
    Senator Gardner. But I do think strong standards, though, 
in agreements like TPP will help force people to abide by those 
standards.
    Mr. Blumenthal. It could. It could. It could. But it is 
also the work of the State Department, USAID, and things that 
you will see rolled out next week in terms of resiliency 
within. Any other strategies on top of that are obviously 
welcome.
    But, again, if we want to--you know, the era, to a certain 
extent, of strategies--the Chinese broke the WTO. The Trans-
Pacific Partnership was a response to a broken WTO. The era of 
more documentation is over. It is time to go after CCP entities 
that are benefiting.
    Senator Gardner. What should we do in the case of denial of 
market access?
    Mr. Blumenthal. So we should pick some of the companies 
that have benefited the most from IP theft or forced technology 
transfer and through the enhanced CFIUS process that is already 
passing its way through the Congress and working with the 
Treasury deny them access to the U.S. market in coordination 
with the European market. That is how you get results from Xi 
Jinping. You target things that he cares about.
    Senator Gardner. Mr. Ratner?
    Mr. Ratner. Senator, I guess one thing I would say, another 
thing that I mentioned in my written testimony, is that I do 
think it is important that as we think about any discrete China 
challenge, whether it is their predatory practices, the South 
China Sea, human rights, et cetera, what we need is a 
comprehensive strategy across the board. And that is what we 
need rather than simply sort of specific targeted responses 
only to these problems. So we need to be thinking about the 
entire pie here.
    Again, you stepped out of the room, but thank you for the 
legislation that you are leading on this, and it is important. 
And the fact that it is comprehensive across military and 
economic and human rights and governance is exactly what we 
need to be doing. So I would be thinking of these in terms of a 
comprehensive package.
    But as it relates the targeted piece, I completely agree 
with Dan. TPP is not the complete answer. It should be part of 
a broader answer set. I would start with investment 
restrictions. As you know, the 301 decision was meant to 
include potentially both tariffs, as well as investment 
restrictions, and the Treasury Department--Secretary Mnuchin 
came back with nothing on the investment restriction side. And 
I think that is quite disappointing, particularly as the new 
CFIUS reforms will take time to get implemented. So I would 
start with investment restrictions and whether it is related to 
reciprocal areas or areas that we are worried about for 
economic security or military security reasons, I think we 
ought to tighten up, as I know Congress is doing our export 
control laws so that American companies actually cannot 
transfer their technology even if they want to.
    I agree with Dan. We need to think about sanctions against 
companies that have benefited from IP theft. There is an 
executive order on the books that was put in place during 
Obama's second term that has not been used against Chinese 
companies, even though Treasury has packages ready to go. And I 
think it is unacceptable that we have not employed that 
executive order yet.
    And I think we need to think about regulations to diversify 
supply chains and, again, coordinating with our allies and 
partners. It is going to take a whole suite of policies.
    But I do agree with Dan that the retaliatory tools are ones 
that we need to think about, and if China is threatening 
American airlines, our U.S. airlines, then we ought to have 
tools in our back pocket, again, whether it is sanctions or 
antitrust statutes or licensing agreements that we can say 
quietly to the Chinese, if you do that, we are going to do 
this. And until they see, what incentive do they have not to 
keep going down this road? So we need to be able to strike back 
in a way that is nimble and offensive.
    Senator Gardner. Senator Markey?
    Senator Markey. Thank you, Mr. Chairman, very much.
    ZTE. President Trump says he wants to be tough on China, 
call them into account, but then he tweets out, Commerce 
Department should find a way to give ZTE, quote, a way to get 
back into business fast. And that is despite the serious 
security issues that were raised by Trump national security 
officials themselves, that there were violations of American 
sanctions, widespread bribery committed by the company to 
expand its footprint.
    For both of you, do you believe that China is going to, in 
fact, receive the wrong message by not imposing tough measures 
on ZTE because of its allegedly close relationship with 
President Xi and as a result, it is going to escape the types 
of sanctions that would have sent a strong message to the 
Chinese economic sector that no games are going to be allowed 
to be played in the future? Mr. Ratner or Mr. Blumenthal?
    Mr. Blumenthal. ZTE is a big mistake. It is a violator of 
sanctions and also a threat to U.S. national security.
    But I think right now we are focusing a lot on the U.S. 
reverberations from the tariffs, not focusing enough on how 
much China is suffering and how much of a panic they are in 
about these tariffs. So I do not think Xi in any way views 
Trump as a partner on economics. I think they idiosyncratically 
got a pass on ZTE, but I think Xi very much views Trump as 
somebody who is going to harm the Chinese economy if they 
cannot export these goods. That is what their economy is based 
on.
    Senator Markey. Mr. Ratner, Mr. Blumenthal thinks it is a 
mistake. Do you think it is a mistake?
    Mr. Ratner. I think it was a mistake. I think it is 
important to send the message that we are going to implement 
our laws and hold these companies accountable. I will say there 
are experts who have told me privately that when it comes to 
ZTE, if we had taken that action, they would have reconstituted 
the company under another name, over which we would have no 
penalties and no control and that it is actually better--the 
devil you know is better than the devil that you do not know. I 
do not know if that is a correct argument or not. I think it is 
worthy of consideration.
    But separate from that detail, I do think we should be 
approaching this as a law enforcement matter. They violated 
export control laws, and they ought to face punishment for it. 
The idea that they can somehow buy their way out of these 
violations sends a really disturbing signal.
    Senator Markey. So what are the implications of this, 
though? We are seeing this erosion of response from the West, 
including airlines which are now all going to be forced to 
change the way in which they designate landing in Taiwan. So 
what does that mean in terms of this never-ending inexorable 
pressure which China is applying in the private sector in order 
to enhance its overall leverage and its relationship with 
everyone, including us?
    Mr. Ratner. I think the question of what does it mean for 
the future is the right question because often in these 
instances the specific, near-term economic consequence is not 
what matters. What matters is that down the road countries or 
companies are going to be self-deterred from standing up to 
China, and that is what I worry about. And I think we see that 
every day of the week now in the South China Sea. It is what we 
see on human rights, even in countries in Europe that should 
know better. I think, as I said, there has been a chilling 
effect from this type of intimidation, and I think if the 
United States does not lead the way on standing up to it, then 
we are only going to see it get worse and worse as time goes 
on.
    Senator Markey. All right.
    For you, Mr. Blumenthal, China's Belt and Road Initiative, 
which aims to position China as the, quote, uncontested leading 
power in Asia, may further coerce its neighbors through loans 
that they cannot repay. So, for example, in a highly publicized 
example, Sri Lanka's government struggled to make payments on 
the debt it had taken on as a part of a deal with China under 
heavy pressure, and after months of negotiations with the 
Chinese, the government handed over Hambantota Port and 15,000 
acres of land around it to a Chinese company partially owned by 
the Chinese Government for 99 years. Transferring this land 
gives China control of territory near India and a strategically 
important commercial and military waterway. And this is but one 
example of what appears to be a growing trend around the world 
with regard to a Chinese leveraging of their economic might as 
a way of then extracting concessions that have longer-term 
profound implications.
    So what are the risks of increased debt burden amongst 
companies and countries receiving loans from the Chinese, Mr. 
Blumenthal?
    Mr. Blumenthal. It is very high. I would also point out, 
though, that the BRI is a mixed bag for China. So China is 
incredibly indebted, probably 270, something like that, percent 
of GDP. And a lot of what BRI is is forcing debt burdened 
Chinese state-owned enterprise is to go and invest or do 
construction in places that otherwise other countries would not 
do and draw down their foreign reserves to do so. So there are 
certain cases where we should just ignore and tell the Chinese, 
please, go ahead, do construction in Pakistan as much as you 
would like.
    When it comes to strategically placed countries like Sri 
Lanka or Bangladesh or certain countries in the Gulf, that is a 
different story because they are, indeed, trading investment on 
bad terms for those countries--well, first for good terms but 
then with a cost for strategic access and for geostrategic 
space.
    Senator Markey. Mr. Ratner?
    Mr. Ratner. I would agree with most of that. Again, the 
Chinese are making progress with BRI in part as a 
communications strategy and a public relations win, and it is 
incumbent upon us to do some level setting about the facts on 
the ground.
    That being said, I think it is important also that the 
United States put forward its own positive vision. I think the 
Trump administration, as I understand, is thinking about ways 
to do that with the BUILD Act and strategic use of foreign 
assistance. And I am hopeful that they will come forward with 
some demonstration projects that put forward what U.S. and 
Western development looks like in terms of being 
environmentally safe and anti-corruption and skills transfer 
and good governance and all these issues. So we need to put 
something forward in comparison. We cannot just spend our time 
criticizing what they are doing out there.
    Senator Markey. Okay, great.
    We thank both of the witnesses.
    I want to thank you again, Mr. Chairman, for your great 
work on the Asia Reassurance Initiative Act. I think it is 
something that hopefully can bring our committee and the 
Congress together and backing before the end of the year. Thank 
you.
    Senator Gardner. Thank you, Senator Markey.
    Thank you to the witnesses. I think, as we wrap this up, do 
you have----
    Senator Markey. No, no.
    Senator Gardner. I think just to leave the concern that we 
started with, and that is, what we can do to show U.S. 
leadership to make sure that we do not fall behind. In recent 
writings in ``The Wall Street Journal,'' quotes from President 
Xi, China has its own ideas about how the world should be run 
and, as he put it, to lead in the reform of global governance.
    Another statement. In at least eight African countries, as 
well as some Southeast Asia, Chinese officials are training 
their counterparts in how to manage political stability through 
propaganda and how to control media and the Internet and that 
the China model provides a new option for other countries who 
want to speed up their development while preserving their 
independence.
    And finally this. China has committed to train 10,000 
political elites in Latin America by 2020.
    All of this speaks to the need for what you have described, 
Mr. Ratner, what you have described, Mr. Blumenthal, is U.S. 
leadership and U.S. response, whether it is the BUILD Act, 
whether it is legislation that Senator Young has described, the 
legislation that we have cosponsored together, the Asia 
Reassurance Initiative Act, this is a time for U.S. leadership. 
And it is a time to stand boldly for our values that have 
empowered the world to be a better place, that has lifted up 
hundreds of millions of people around the globe up and out of 
poverty through a system of rules and standards that do not 
favor one country over another, but that give people a chance 
to participate in global governance and that global rise. So 
now is the time for U.S. leadership.
    I thank both of you for your time and testimony today. And 
I have a homework assignment here today somewhere, if I can 
find my closing script here. Basically we will keep the record 
on till the end of the week. I think I am screwing it up here. 
We are going to hold the record open till Thursday afternoon. 
If members have questions for the records, they will submit 
them. I would ask for your prompt response. They will be made a 
part of the record.
    And with that and the thanks of this committee, this 
hearing is adjourned.


    [Whereupon, at 4:02 p.m., the hearing was adjourned.]



                              ----------                              



              Additional Material Submitted for the Record


         China's Military Escalation: Mattis and Congress Push 
           Back Against Beijing's South China Sea Deployments

              Wall Street Journal Editorial, June 4, 2018

    While President Trump focuses on trade and North Korea, China is 
aggressively building military outposts beyond its borders in the South 
China Sea. Beijing wants to push Washington out of the Indo-Paci?c, and 
the Trump Administration and Congress may ?nally be developing a 
serious strategy to respond.
    Trillions of dollars of trade annually float through the Indo-
Pacific, which stretches from East Africa through East Asia. In recent 
years China has built military bases on artificial islands hundreds of 
miles from its shores, ignoring international law and a 2016 ruling by 
a United Nations tribunal.
    The buildup has accelerated in recent weeks, as China has deployed 
antiship missiles, surface-to-air missiles and electronic jammers on 
the Spratly islands and even nuclear-capable bombers on nearby Woody 
Island. This violates an explicit promise that Chinese President Xi 
Jinping made to Barack Obama in 2015 that ``China does not intend to 
pursue militarization'' on the Spratlys.
    The next step could be deployed forces. At that point ``China will 
be able to extend its influence thousands of miles to the south and 
project power deep into Oceania,'' Admiral Philip Davidson, who leads 
the U.S. Indo-Pacific Command, said in April.
    In the face of China's buildup, the U.S. has shown uneven 
commitment. Mr. Obama limited freedom-of-navigation patrols to avoid a 
confrontation and never committed the resources to make his ``pivot to 
Asia'' a reality. China saw Mr. Obama's hesitation and kept advancing. 
The growing concern is that China will begin to dictate the terms of 
navigation to the world and coerce weaker neighboring countries to 
agree to its foreign policy and trading goals.
    Defense Secretary Jim Mattis lately has been putting this concern 
front and center. He recently rescinded an invitation to the Chinese 
navy to participate in the multinational Rimpac exercises off Hawaii 
this summer. And at the annual Shangri-La security dialogue in 
Singapore this weekend, Mr. Mattis said that ``the placement of these 
weapons systems is tied directly to military use for the purposes of 
intimidation and coercion.''
    He pointed to the Rimpac cancellation as a ``small consequence'' of 
this behavior and said there could be ``larger consequences,'' albeit 
unspecified, in the future.
    One such consequence could be more frequent and regular freedom-of-
navigation operations inside the 12-mile territorial waters claimed by 
China. Joint operations with allies would have an even greater 
deterrent effect, and the U.S. should encourage others to join. Beijing 
will try to punish any country that sails with the U.S., but that will 
underscore the coercive nature of its plans.
    Believe it or not, Congress is also trying to help with the 
bipartisan Asia Reassurance Initiative Act (ARIA). The Senate bill 
affqirms core American alliances with Australia, Japan and South Korea, 
while calling for deeper military and economic ties with India and 
Taiwan. It notably encourages regular weapons sales to Taipei.
    The bill authorizes $1.5 billion a year over five years to fund 
regular military exercises and improve defenses throughout the region. 
It also funds the fight against Southeast Asian terror groups, 
including Islamic State. This will help, but more will be needed. This 
year's $61 billion military spending increase was more backfill than 
buildup, and China recently boosted its defense budget 8.1%.
    ARIA also tries to address Mr. Trump's major strategic blunder of 
withdrawing from the Trans-Pacific Partnership trade deal, which didn't 
include China. The Senate bill grants the President power to negotiate 
new bilateral and multilateral trade deals.
    It also calls for the export of liquefied natural gas to the Indo-
Pacific and authorizes the U.S. Trade Representative to negotiate a 
deal with the Association of Southeast Asian Nations (Asean). If the 
U.S. had a trade rep who believed in trade, this could strengthen the 
U.S. relationship with Vietnam and the Philippines--countries at odds 
with China over its territorial claims and militarism.
    The bill is backed by Republicans Cory Gardner and Marco Rubio and 
Democrats Ben Cardin and Ed Markey, which is a wide ideological net. 
China's rise, and Mr. Xi's determination to make China the dominant 
power in the Indo-Pacific, is a generational challenge that will 
require an enduring, bipartisan strategy and commitment. A firmer stand 
to deter Chinese military expansionism is an essential start.


    Appeared in the June 4, 2018, print edition as ``The Other China 
Challenge.''

   Letter Sent to Senator Cory Gardner of Colorado from Secretary of 
  Defense James Mattis and Secretary of State Mike Pompeo, Regarding 
    Support for S. 2736, The Asia Reassurance Initiative Act (ARIA)

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



                          THE CHINA CHALLENGE



               PART 2: SECURITY AND MILITARY DEVELOPMENTS

                              ----------                              


                      WEDNESDAY, SEPTEMBER 5, 2018

                               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 2:34 p.m. in 
Room SD-419, Dirksen Senate Office Building, Hon. Cory Gardner, 
chairman of the subcommittee, presiding.
    Present: Senators Gardner, Risch, Markey, and Kaine.

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

    Senator Gardner. This hearing will come to order.
    I welcome all of you to the ninth hearing of the Senate 
Foreign Relations Subcommittee on East Asia, The Pacific, and 
International Cybersecurity Policy in the 115th Congress.
    This hearing is the second hearing in a three-part series 
of hearings titled ``The China Challenge,'' which will examine 
how the United States should respond to the challenge of a 
rising China that seeks to upend and supplant the U.S.-led 
liberal world order.
    During our first hearing on July 24th, dedicated to Chinese 
economic coercion, one of our distinguished witnesses testified 
that we are slowly waking up to a set of strategies by the 
Chinese Communist Party meant to enhance party power internally 
and globally at our expense. The CCP has adopted a number of 
strategies to strengthen the party's grip on the country so 
that it can lead China back to middle kingdom centrality. These 
strategies have been in place for a while but have been 
accelerated by Communist Party Secretary-General Xi Jinping.
    The Trump administration has come to see the same 
conclusion regarding the China threat. According to the 
National Security Strategy released in December of 2017, for 
decades U.S. policy was rooted in the belief that support for 
China's rise and for its integration into the post-war 
international world order would liberalize China. Contrary to 
our hopes, China has expanded its power at the expense of the 
sovereignty of others.
    According to the National Defense Strategy released in 
January, it is increasingly clear that China and Russia want to 
shape a world consistent with their authoritarian model, 
gaining veto authority over other nations' economic, 
diplomatic, and security decisions.
    And according to the most recent Department of Defense 
report on Chinese military power released in August, in support 
of the goal to establish a powerful and prosperous China, the 
China Dream includes a commitment to developing military power 
commensurate with that of a great power. Chinese military 
strategy documents highlight the requirements for a People's 
Liberation Army able to secure Chinese national interests 
overseas, including a growing emphasis on the importance of the 
maritime and information domains, offensive air operations, 
long-distance mobility operations, and space and cyber 
operations.
    So today's hearing will examine these security and military 
developments and the U.S. policy options to prevent China's 
coercion from undermining peace and stability in the Indo-
Pacific and beyond.
    Countering China's less than peaceful rise represents a 
grave challenge for the United States' national security. I am 
pleased that both the administration and Congress are now 
recognizing this reality and taking steps to rebuild our 
military to meet the challenges of tomorrow, including those 
emanating from Beijing.
    In the Senate, Senator Markey and I are leading a 
bipartisan effort--Senator Kaine is also a cosponsor of the 
legislation--called the Asia Reassurance Initiative Act, or 
ARIA, which will set a new course for U.S. policy toward the 
Indo-Pacific, including significantly boosting U.S. security 
presence in the region and enhancing partnerships to resource 
and meet the administration's goal of a free and open Indo-
Pacific.
    We are expecting the full committee to consider the 
legislation in the coming weeks and passage through the Senate 
soon thereafter.
    When signed into law, ARIA will become a generational 
approach that will put American interests first by reassuring 
our allies, deterring our adversaries, and securing U.S. 
leadership in the region for future generations.
    Now I will turn it over to Senator Markey, the ranking 
member, for his comments.

              STATEMENT OF HON. EDWARD J. MARKEY, 
                U.S. SENATOR FROM MASSACHUSETTS

    Senator Markey. Thank you, Mr. Chairman, very much, and 
thank you for convening another very timely and important 
hearing.
    And I want to thank our excellent witnesses today as well 
for your willingness to participate in this very important 
conversation that you are running, Mr. Chairman. While both of 
them are here as outside experts, both have served in 
government throughout their careers and have worked to further 
U.S. foreign policy and national security interests.
    As you have stated, Mr. Chairman, this is the second in our 
series of subcommittee hearings on the evolving challenge China 
poses to the United States, to our allies and partners, and to 
the international system we built together to ensure stability, 
prosperity, and equality of all.
    For those who follow the Indo-Pacific region closely and 
increasingly for those who do not, China's concerted efforts to 
institute economic security and domestic policies that advance 
its interests alone are significant and demand our attention. 
And I think our shared goal for these hearings, Mr. Chairman, 
is to increasingly shine a light, a bright light, on China's 
efforts in this regard and to try to understand their 
implications for the security and wellbeing of us all.
    In our last hearing, we investigated China's efforts to use 
economic coercion across the board to advance its interests. We 
discussed how predatory loans contained within its Belt and 
Road Initiative threatened to bury countries in debt and 
undermine their sovereign decision-making. We explored how 
China uses access to its vast markets to pressure American 
companies into sharing sensitive intellectual property or even 
changing the way they refer to Taiwan on websites and maps. And 
in its most blatant form, we discussed the pure economic 
retaliation Beijing is now willing to openly impose against 
countries whose policies it does not like.
    In the future, we will address China's human rights record 
and several recent and concerning developments in that arena, 
but today we are exploring China's extensive military 
modernization and expansion, as well as its implications which, 
given China's size and influence, are potentially quite large.
    Beijing is no longer content just to exert its influence 
behind closed doors. Instead, it is building an evermore 
capable military increasingly able to undermine the 
international rules and norms that, thanks to American 
leadership, have governed the Indo-Pacific since the end of 
World War II.
    According to the recently released Defense Department 
report on Chinese military and security developments, ``in 
support of the goal to establish a powerful and prosperous 
China, the China dream includes a commitment to developing 
military power commensurate with that of a great power.'' And 
as a result, the People's Liberation Army is, ``undergoing the 
most comprehensive restructure in its history.'' As part of 
these efforts, China is building a blue water navy. It is 
streamlining and modernizing its ground forces. It is updating 
its nuclear arsenal and developing hypersonic weapons, and it 
has built military bases on artificial islands in contravention 
of international law in the South China Sea.
    These developments, taken together, are significant. In 
some cases, the United States should continue to proactively 
build its economic and diplomatic toolkit to ensure that no one 
military advancement upends the established order.
    In other cases, we must respond, but we need to start by 
better understanding what these Chinese developments mean so we 
can ensure that they do not undermine peace and stability so 
that countries throughout Asia and beyond are not physically 
bullied and coerced, and that Americans can continue to uphold 
and support the fundamental right to which we believe all 
people are entitled.
    At the same time, however, we need to maintain a realistic 
view of the challenges. We are not heading to war with China 
tomorrow, nor should we be. Conflict is in no one's interest. 
So we should be sober in our assessments and resist the urge to 
err too far towards alarmism.
    But as the values we hold dear come under increasing threat 
from an ever larger and more assertive Chinese military, it is 
incumbent upon us to consider thoughtfully how best to ensure 
no effort, military or otherwise, undermines the values we and 
so many other Indo-Pacific countries hold dear.
    To do this, we must invest time, yes; resources, yes; and 
above all, leadership. No other country can bring to bear on 
this challenge the breadth of resources that we can.
    But an America-alone strategy will not lead to the peaceful 
outcomes that we seek. Now more than ever, we must work even 
more closely with the allies and partners who share our values 
throughout the region and around the world. We must show them 
that they are not fighting for these values on their own. And 
we must do it through more than military might.
    It is equally important that we adequately fund the State 
Department, USAID, and others so that our diplomats and our 
foreign assistance advisors can provide a better, more durable 
alternative to quick Chinese inducements.
    Only such a multifaceted approach will truly help us meet 
the growing challenge that China poses. We simply cannot afford 
to cede leadership on this. Doing so risks being confronted 
with a situation where defending our values, our interests, and 
our allies raises the risk of conflict to unacceptably high 
levels. Understanding and then solving these challenges are 
upfront investments that will pay immeasurable dividends in the 
end.
    So I thank you, Mr. Chairman. I look forward to exploring 
these issues with our witnesses today. And again, I thank you 
for your willingness to participate.
    Senator Gardner. Thank you, Senator Markey, and thank you 
to Senators Risch and Kaine as well for your participation.
    I will introduce our witnesses. I greatly appreciate your 
willingness to be here today.
    Our first witness is Dr. Oriana Skylar Mastro, who is the 
Jeane Kirkpatrick Visiting Scholar at the American Enterprise 
Institute, where she focuses on Chinese military and security 
policy in the Asia-Pacific. She is also an Assistant Professor 
of Security Studies at the Edmund A. Walsh School of Foreign 
Service at Georgetown University and serves in the United 
States Air Force Reserve as a political military affairs 
strategist at Pacific Air Forces. Previously, Dr. Mastro was a 
fellow in the Asia-Pacific Security Program at the Center for a 
New American Security. Welcome, Dr. Mastro. Thank you very much 
for your service and for being here today.
    Also joined on the panel by Abraham Denmark, who is 
Director of the Asia Program at the Woodrow Wilson 
International Center for Scholars. Prior to joining the Wilson 
Center, Mr. Denmark served as Deputy Assistant Secretary of 
Defense for East Asia where he supported the Secretary of 
Defense and other U.S. senior government leaders in the 
formulation and implementation of national security strategies 
and defense policies toward the region. Mr. Denmark also 
previously worked as Senior Vice President for Political and 
Security Affairs at the National Bureau of Asian Research, a 
fellow at the Center for a New American Security, and held 
several positions in the U.S. intelligence community. But most 
importantly he is from Fort Collins, Colorado, home of the 
great Colorado State University, welcome Mr. Denmark. Thank you 
for your service.
    And Dr. Mastro, if you would like to begin.

   STATEMENT OF DR. ORIANA SKYLAR MASTRO, JEANE KIRKPATRICK 
VISITING SCHOLAR, AMERICAN ENTERPRISE INSTITUTE, WASHINGTON, DC

    Dr. Mastro. Thank you. Thank you, gentlemen, for giving me 
the opportunity to provide testimony today, and the views I am 
about to present are my own and do not represent any of those 
institutions which you mentioned in your introduction.
    The annual report to Congress that the Defense Department 
put out is a crucial tool for putting together information and 
maintaining awareness about China's growing military 
capabilities. And in the questions and answers, I am happy to 
answer any questions about specific platforms and developments 
and what they mean for the United States' ability to operate 
militarily in the East China Sea, South China Sea, and Taiwan.
    But today I want to talk about something I think that the 
United States Government is less adept at doing, and that is 
assessing the implications of these military developments, what 
they bode for the future, and the best way for the United 
States to respond. Specifically, I want to talk about two issue 
areas: cooperation and then competition.
    The term ``cooperate'' and its various derivations are used 
three times more often than ``competition'' in the 2018 annual 
report. And I think this is indicative of the underlying logic 
of U.S. military strategy and national security strategy, which 
highlights the importance of pursuing cooperation with China, 
and in my written testimony, I speak specifically about the 
military-to-military exchanges we have with the PRC.
    However, I think there is a number of misconceptions that 
make it so the United States is failing to effectively leverage 
cooperation as a tool of our national strategy. And in my 
written testimony, I list five of these misconceptions, though 
given time I will highlight two of them here.
    The first is that there is a common belief that cooperation 
in some areas will lead to a reduction in tensions and perhaps 
increase cooperation in other areas. Specifically, there is 
this underlying belief that if we cooperate with China on less 
contentious issues, for example, humanitarian aid and disaster 
relief, perhaps global endemics, for example, that this will 
build goodwill and help us move forward in other issue areas 
that have more tension like the South China Sea and East China 
Sea.
    This might be the case of the primary driver of the tension 
between the two countries with strategic mistrust, but 
unfortunately, it is actually conflicting interests. And so 
this dynamic in which we are hoping to build cooperation by 
building good will does not work.
    So in the written testimony, I recommend that we should not 
think about cooperating militarily with China for the sake of 
generating this good will or momentum for cooperation in other 
areas. If we are hoping China is going to give us something in 
return for a concession we make, we need to make that explicit 
because those implicit issue linkages never really work with 
the PRC.
    There is another problematic assumption, which is that 
cooperation, and the benefits of cooperation, are going to 
outweigh the costs. Now, many people have probably talked about 
the costs of cooperation, but not enough people have questioned 
the actual benefits. I think there is a lack of consideration 
for what Chinese capabilities, tactics, and preferences might 
do in certain issue areas. Specifically, there are areas like 
counterterrorism, for example, in which I think the lack of 
Chinese capabilities, a weakening of those capabilities could 
actually hurt U.S. efforts if we invite Chinese cooperation. 
And so in the cases in which Chinese interests clash with those 
of the United States or where China lacks any relevant 
capabilities, I think it is fine for the United States to 
continue to encourage Chinese free-riding in these areas.
    The other problematic assumptions I lay out in my written 
testimony have to do with the global nature of the threat. And 
the basic bottom line is, I think, that the United States 
should be cooperating more with other militaries outside of the 
region to help us confront and provide a united front to China 
on the global stage, as well as enhance our contacts with China 
outside of the Indo-Pacific Command to other theater commands.
    The second area I want to talk about is competition. And 
specifically, my main concern is that even though in the annual 
report to Congress and in general we are recognizing the 
Chinese global influences increasing, we fail to understand 
what this increase in influence means. We have a tendency to 
mirror image, which means we misinterpret Chinese behavior. And 
specifically, I want to talk about something which I label 
entrepreneurial actions.
    In every case of a rising power over the course of history, 
the United States included, Great Britain before that, and the 
Mongolian empire--in every case, the rising power will try to 
accumulate power in a new way, in a different way and tap new 
sources of power to delay a reaction on the part of the great 
power. And they do this by creating uncertainty in two ways. 
The first is that the United States might not recognize what 
China is doing because it is new, and the second is that the 
United States might think that the payoffs of that strategy are 
going to be low.
    I think the Belt and Road Initiative is a good example of 
this, and I list other examples in my written testimony. But 
when it was first announced, the bottom line of commentators 
was ``this was going to be a failed strategy because it was not 
economically viable.'' Also, even though now the United States 
is paying close attention to economic coercion, this has been a 
part of Chinese strategy for over 2 decades, and it was 
mentioned for the first time in 2015.
    So the fact of the matter is that China is pursuing power 
in a new, different way. So even if BRI did not turn out to 
have strong military dimensions, it does not mean it is not 
designed to limit U.S. power.
    So I list a number of recommendations that I think could 
help us deal with this.
    The first is that we need a whole-of-government approach. 
We need a USAID report on foreign aid. We need a State 
Department report on Chinese diplomatic efforts in addition to 
the DOD annual report.
    We need a new type of red-teaming, in which we not only 
look at things from China's perspective, but we also look at 
how they might be trying to create this uncertainty. We are too 
quick to assume the U.S. way is the best way and that China 
will follow suit if it can, which makes us blind to new ways 
China is seeking to overtake the United States.
    The last two recommendations, since I am out of time.
    The first is just that the United States needs to be 
entrepreneurial in its own right. We cannot just do more of the 
same, doubling down on building capability with allies and 
partners. We need to think more about building our 
relationships with other countries in new ways.
    And lastly, I think we need a China tsar of sorts. We need 
a point person on this great power competition to ensure the 
United States is taking appropriate matching actions.
    So the bottom line is that we find ourselves in an 
unprecedented situation. China is rising and it has primarily 
accumulated and exercising political and economic power for 
now. And it is facing the United States, which is more 
constrained than any leading power before it. So what we need 
is new approaches, new institutions, and new processes to 
ensure that this rise does not come at the expense of the 
United States.
    I welcome any questions. Thank you.
    [Dr. Mastro's prepared statement follows:]


             Prepared Statement of Dr. Oriana Skylar Mastro

    On August 18, 2018, the Department of Defense released its 
seventeenth Annual Report to Congress on Military and Security 
Developments Involving the People's Republic of China. Since 2002, the 
annual reports have addressed the current and probable future course of 
the military-technological development of the People's Liberation Army 
(PLA), as well as the development of Chinese grand strategy, security 
strategy, military strategy, military organizations, and operational 
concepts through the next quarter-century.\1\ Since 2012, the reports 
have tripled in length to incorporate more information on China's force 
modernization and special topics. This year's report includes five 
special topics: China's expanding global influence, China's approach to 
North Korea and its diplomatic history and objectives, the PLA's 
progress in becoming a joint force, overwater bomber operations, and 
Xi's innovation-driven development strategy and the push to turn China 
into a science and technology powerhouse by 2050.
---------------------------------------------------------------------------
    \1\ ``S. 1059--106th Congress: National Defense Authorization Act 
for Fiscal Year 2000,'' 1999.
---------------------------------------------------------------------------
    The annual report to Congress is a crucial tool for collating 
information and maintaining awareness of China's growing military 
capabilities. Its systematic collection of data is a useful resource 
for scholars like me, and in this testimony I do not challenge the 
facts or assessments it presents. However, the U.S. government 
generally is less adept at understanding the implications of these 
developments, what they bode for the future, and the best way to 
respond. Therefore, in this testimony, I will discuss several 
misconceptions about cooperation and competition with China that may 
hinder U.S. attempts to deter Chinese aggression and compete 
effectively with China regionally and globally. I will also present 
recommendations about what Congress should do to improve the U.S.'s 
ability to interpret and respond to China's challenge. The bottom line 
is that great power competition requires expanding U.S. efforts beyond 
traditional friends and allies, and the U.S. needs a whole-government 
approach to identifying and responding to the China challenge.
Cooperation with China
    The term ``cooperate'' and its various derivations are used three 
times more often than ``competition'' in the 2018 annual report. This 
highlights the central role of cooperation as a longstanding part of 
U.S. strategy in navigating the potential challenges of a rising China. 
As the report states: ``The United States seeks a constructive and 
results oriented relationship with China. U.S. Defense contacts and 
exchanges conducted in 2017 were designed to support overall U.S. 
Policy and strategy toward China. They are carefully tailored to 
clarify and develop areas of cooperation where it is in our mutual 
interest and to manage and reduce risk.'' \2\
---------------------------------------------------------------------------
    \2\ Office of the Secretary of Defense, ``Annual Report to 
Congress: Military and Security Developments Involving the People's 
Republic of China 2018,'' U.S. Department of Defense, iii. Hereafter 
cited as Annual Report to Congress 2018.
---------------------------------------------------------------------------
    One way the United States seeks to enhance cooperation with China 
is through military exchanges. The annual report to Congress describes 
three goals of developing military-to-military contacts with China: 
``(1) building sustained and substantive dialogue; (2) promoting risk 
reduction and risk management efforts that diminish the potential for 
misunderstanding or miscalculation; and (3) building concrete, 
practical cooperation in areas of mutual interest.'' \3\ Overall, 
military-to-military contacts between the two nations are meant to be a 
``stabilizing element'' for the U.S.-China relationship.\4\ In 2017, 
these contacts ``focused on risk reduction'' and ``developing the 
capacity to cooperate in multilateral settings.'' \5\
---------------------------------------------------------------------------
    \3\ Annual Report to Congress 2018, 105.
    \4\ Annual Report to Congress 2018, 105.
    \5\ Annual Report to Congress 2018, 106.
---------------------------------------------------------------------------
    In furtherance of these aims, the U.S. and China engaged in high-
level military contacts to facilitate the ``exchange [of] views, 
identify common interest areas, manage differences, and facilitate 
common approaches to shared challenges. \6\ In addition, the U.S. and 
China have engaged in recurring military exchanges through forums such 
as the Defense Policy Coordination Talks, the Army-to-Army Dialogue 
Mechanism, the Joint Staff Dialogue Mechanism, and the Asia-Pacific 
Security Dialogue.\7\ The U.S. and China also maintain functional and 
academic exchanges that ``focus on advancing risk reduction, 
understanding, and communication channels to promote deconfliction and 
coordination,'' in addition to conducting ship visits and exercises to 
``promote trust between the two sides and improve the ability to 
interact and coordinate in providing international public goods in 
areas of mutual interest.'' \8\
---------------------------------------------------------------------------
    \6\ Annual Report to Congress 2018, 106.
    \7\ Annual Report to Congress 2018, 108.
    \8\ Annual Report to Congress 2018, 108-09.
---------------------------------------------------------------------------
    While cooperation is thus a critical pillar of U.S. strategy, in 
practice it comes with at least five key assumptions that must be 
recognized and moderated.
    First, there is the common belief that cooperation in some areas 
will lead to reduced tensions in others. Specifically, this is the 
belief that the two countries should establish greater cooperation in 
less contentious (but also less important) areas, and that this will 
facilitate cooperation in more contentious areas that are currently 
driving the tense relationship. This would be the case if the source of 
tension were strategic distrust; then greater dialogue and interaction 
could mitigate this obstacle. But my view is that the problems in the 
U.S.-China relationship are primarily the result of conflicting 
fundamental interests, not misunderstandings. Therefore, cooperation in 
areas such as global health or humanitarian assistance is unlikely to 
lead to breakthroughs in dealing with the critical security challenges 
in the South China Sea, East China Sea, Taiwan, and North Korea. This 
does not mean, however, that the two sides should not pursue 
cooperation when possible, but rather that we need to adjust our 
expectations and strategies. In other words, cooperation is not a good 
for its own sake, but a means to accomplish specific policy goals.


        Recommendation 1: The United States should consider working 
        more closely with China only when Chinese involvement decreases 
        the costs and/or increases the likelihood of success of a 
        particular U.S. policy. We should not cooperate simply for the 
        sake of generating goodwill or momentum for cooperation in 
        another area.


    The second problematic assumption is that there are more benefits 
than downsides to cooperation when it can be obtained. In fact, there 
are situations in which the benefits of cooperation outweigh the costs. 
Currently, the goal of cooperation seems to be greater Chinese 
involvement with insufficient consideration of Chinese capabilities, 
tactics, and preferences. In some spaces, like global health, Chinese 
involvement is crucial because of the transnational nature of the 
threat. But in other spaces, like counterterrorism, Chinese involvement 
depends largely on Chinese capabilities and preferences. There are two 
situations in which it would be better to discourage Chinese 
involvement. First, when China has the capability to contribute but has 
goals that conflict with those of the United States. Second, when China 
shares the same goals as the United States but possesses limited 
capability. This is because in the security realm, operational missteps 
can worsen a situation on the ground.


        Recommendation 2: If China's interests clash with the U.S.'s, 
        or if China lacks relevant capabilities, the United States 
        should encourage Chinese `free-riding' on certain security 
        issues. Only when Chinese preferences and capabilities 
        contribute to U.S. policy goals should the United States 
        actively seek cooperation with China. An exception to this is 
        when China is already involved, in which case the United States 
        may pursue cooperation as a means to shape the nature and 
        degree of its involvement.


    The third problematic assumption is that the U.S.-China 
relationship can improve only with active cooperation. Here I define 
cooperation as the process of working together for greater benefits, 
even if each side has somewhat differing interests. But another 
mechanism for improving bilateral military relations is coordination, a 
situation in which states may be agnostic about which policy to adopt, 
but would be better off if they did the same thing (for example, it 
does not matter which side of the road we drive on, only that we all 
choose the same side). And then there is deconfliction, a situation in 
which each side simply ensures that its independent policies have no 
negative impact on the other side. We unnecessarily narrow the 
prospects for U.S.-China relations when we focus only on cooperation.


        Recommendation 3: The U.S. should welcome the use of use of 
        deconfliction and coordination with the PLA, rather than always 
        seeking only active cooperation on security issues.


    Deconfliction, for example, is desirable for military operations to 
ensure that our forces do not unnecessarily come into contact with each 
other in the South China Sea or the East China Sea, or in the event of 
a crisis on the Korean Peninsula. Notification of operations and 
exercises, coupled with military dialogues and exchanges about the 
nature of both sides' military operations, could reduce the likelihood 
of an accident. With coordination, there is a lower likelihood of 
operational risk if China is operating separately from the United 
States. The Gulf of Aden operation is a good example of coordination: 
China coordinates with the international community to ensure that its 
participation contributes to the broader goals, but its navy does not 
conduct operations with other navies.
    A fourth troublesome assumption is that there are generally laws or 
norms against which we can measure Chinese behavior and hold China 
accountable. According to the annual report, ``the military-to military 
relationship seeks to encourage China to act in a manner consistent 
with international law and norms.'' \9\ But in reality, certain aspects 
of the international order are nonexistent, weak, unstable, ambiguous, 
or incomplete. Cybersecurity norms are one example. And China will 
exploit this uncertainty to its benefit. In such cases, the U.S. must 
work hard to forge an informal consensus among countries and present 
that united front to China on the global stage.
---------------------------------------------------------------------------
    \9\ Annual Report to Congress 2018, 105.


        Recommendation 4: In addition to documenting the bilateral 
        U.S.-China exchanges, the Defense Department should report on 
        military contacts with other countries and the ways they are 
        being used to establish broader consensus on contentious issues 
---------------------------------------------------------------------------
        in the U.S.-China relationship.


    In the past year, the United States has had high-level military-to-
military exchanges in which China would invariably have been a central 
topic of discussion - but the outcomes of such exchanges are not 
systematically collated with reference to China. Chairman of the Joint 
Chiefs of Staff Gen. Joseph Dunford visited his Thai military 
counterparts in February to discuss ``opportunities to strengthen the 
alliance and interoperability between the two militaries,'' and with 
Australian military officials in April to discuss ``the global threat 
of terrorism and security in the Pacific region.'' \10\ Dunford also 
visited South Korea in October 2017 to discuss the North Korean 
crisis.\11\ The Commander of U.S. Pacific Command visited the 
Philippines in August 2017, followed by a visit from the Chief of Staff 
for the Armed Forces of the Philippines to Pacific Command headquarters 
in October of that year.\12\ New Zealand and Vietnam have also received 
visits from high-level U.S. military officials in the past year.\13\ 
The United States and India have established an ongoing Military 
Cooperation Group that will be ``the primary forum for developing, 
implementing, and refining a 5-year mil-to-mil plan, in support of the 
emerging 2+2 U.S.-India ministerial dialogue and the Defense Policy 
Group.'' \14\ However, none of the readouts from these bilateral 
military contacts refer to China as a topic of discussion (although 
many refer to the topic of regional security).
---------------------------------------------------------------------------
    \10\ ``Readout of Chairman of the Joint Chiefs of Staff Gen. 
Dunford's Visit With Thailand Counterpart Royal Thai Armed Forces 
General Tarnchaiyan Srisuwan,'' Joint Chiefs of Staff, February 7, 
2018, http://www.jcs.mil/Media/News/News-Display/Article/1435026/
readout-of-chairman-of-the-joint-chiefs-of-staff-gen-dunfords-visit-
with-thaila/; ``Readout of Chairman of the Joint Chiefs of Staff Gen. 
Dunford's Visit with Australian Counterpart Chief of the Defence Force 
Air Chief Marshal Binskin,'' Joint Chiefs of Staff, April 20, 2018, 
http://www.jcs.mil/Media/News/News-Display/Article/1499720/readout-of-
chairman-of-the-joint-chiefs-of-staff-gen-dunfords-visit-with-austra/.
    \11\ Tara Copp, ``Dunford, Mattis Visit South Korea Amid Heightened 
Tensions,'' Military Times, October 26, 2017, https://
www.militarytimes.com/news/your-military/2017/10/26/dunford-mattis-in-
south-korea-amid-heightened-tensions/.
    \12\ ``Commander of U.S. Pacific Command Visits the Philippines,'' 
U.S. Embassy in the Philippines, August 24, 2017, http://www.pacom.mil/
Media/News/News-Article-View/Article/1289109/commander-of-us-pacific-
command-visits-the-philippines/; James D. Mullen, ``Armed Forces of the 
Philippines and U.S. Pacific Command Reinforce `Historic Alliance,''' 
U.S. Pacific Command, October 2, 2017, http://www.pacom.mil/Media/News/
News-Article-View/Article/1331886/armed-forces-of-the-philippines-and-
us-pacific-command-reinforce-historic-allia/.
    \13\ ``Commander U.S. INDOPACOM Visits New Zealand,'' U.S. Embassy 
& Consulate in New Zealand, August 17, 2018, https://nz.usembassy.gov/
commander-u-s-indopacom-visits-new-zealand/; ``COMPACAF Visit to 
Vietnam Affirms Growing Partnership,'' U.S. Indo-Pacific Command, 
December 21, 2017, http://www.pacom.mil/Media/News/News-Article-View/
Article/1402716/compacaf-visit-to-vietnam-affirms-growing-partnership/.
    \14\ Cassandra Gesecki, ``Readout of the 16th U.S.-India Military 
Cooperation Group,'' U.S. Indo-Pacific Command, November 30, 2017, 
http://www.pacom.mil/Media/News/News-Article-View/Article/1384848/
readout-of-16th-us-india-military-cooperation-group/.
---------------------------------------------------------------------------
    Fifth, the U.S. has traditionally considered China an actor only in 
the Indo-Pacific, when in fact it is an increasingly global actor. As a 
corollary, the scope of U.S.-China military exchanges remains largely 
confined to bilateral issues, when in fact the PLA increasingly has a 
routine global presence. For example, it is likely that in the future 
U.S. naval forces will have greater (or even routine) interaction with 
the PLAN in the Indian Ocean and the Mediterranean Sea, and that U.S. 
ground forces will increasingly encounter PLA ground forces through 
peacekeeping actions and potentially in counterterrorism and stability 
operations.


        Recommendation 5: U.S.-China military exchanges should not be 
        limited to U.S. Indo-Pacific Command; they should include other 
        relevant geographic combatant commands, such as Central Command 
        and Africa Command. These exchanges should focus on confidence-
        building and awareness of operational methods to mitigate the 
        risk of unintended consequences or crises.

Competition with China
    China's expanding global influence is changing the contours of 
great power competition. With millions of Chinese nationals overseas 
and hundreds of companies doing business abroad, it is not surprising 
that one mission of the PLA is to secure Chinese interests abroad. \15\ 
The 2018 DOD annual report to Congress notes that China's 
``international interests have grown,'' and that its military 
modernization is ``more focused on investments and infrastructure to 
support a range of missions beyond China's periphery, including power 
projection, sea lane security, counterpiracy, peacekeeping, 
humanitarian assistance/disaster relief (HA/DR), and noncombatant 
evacuation operations.'' \16\ The 2018 report also predicts that China 
will look to follow its establishment of a base in Djibouti by 
expanding its military logistics agreements with friendly countries 
around the world.\17\ China's growing global mission is also seen in 
PLAN's mission expansion to include ``open seas protection'' in 
addition to its previous limited focus on ``offshore waters defense.'' 
\18\
---------------------------------------------------------------------------
    \15\ Annual Report to Congress 2018, ii. For more on how overseas 
interests drive Chinese military modernization, see Oriana Skylar 
Mastro, ``China Can't Stay Home,'' National Interest, November/December 
2014: 38-45.
    \16\ Annual Report to Congress 2018, ii.
    \17\ Annual Report to Congress 2018, ii-iii.
    \18\ Annual Report to Congress 2018, 46.
---------------------------------------------------------------------------
    There are, however, a range of other Chinese activities that may 
portend different forms or arenas of competition in the future. The 
2018 DoD report recognizes that China's trillion-dollar Belt and Road 
Initiative (BRI), which has already funded serious projects across 
Africa and Asia, is part of an effort to ``leverage China's growing 
economic, diplomatic, and military clout to establish regional 
preeminence and expand the country's international influence.'' The 
report notes that countries participating in the BRI might ``develop 
economic dependence on Chinese capital, which China could leverage to 
achieve its interests.'' \19\ On the face of things, the Chinese are 
using this economic initiative to build infrastructure for developing 
countries. But the money comes with strings attached. Many of these 
developing nations are susceptible to Chinese influence on the 
political, military, and economic levels. For example, in July 2017, 
Sri Lanka and China signed a 99-year lease for the Hambantota Port, 
which is both a militarily and economically strategic location in the 
Indian Ocean.\20\
---------------------------------------------------------------------------
    \19\ Annual Report to Congress 2018, i.
    \20\ Maria Abi-Habib, ``How China Got Sri Lanka to Cough Up a 
Port,'' The New York Times, June 25, 2018, https://www.nytimes.com/
2018/06/25/world/asia/china-sri-lanka-port.html.
---------------------------------------------------------------------------
    Given our tendency to mirror-image, we may misinterpret Chinese 
behavior and craft ineffective policy responses as a result. Over the 
course of history, great powers have relied on a particular model of 
interaction with other states to accumulate, exercise, and maintain 
power. The Mongol empire connected lands through trade for the first 
time to fuel its growth; the Qing dynasty built a tributary system; 
Great Britain built an empire of colonies; the Soviet Union expanded by 
land, creating a Communist bloc in Eastern Europe and various spheres 
of influence around the world; the United States established an 
institutionalized order and a global military presence. In the same 
way, China is accumulating and exercising power in a way that is 
different from that used by the United States.
    These examples highlight a common feature of countries that 
successfully rose to great power status: entrepreneurial actions. A 
rising power is entrepreneurial if it looks for new sources of power 
and accumulates and exercises power in a way not previously attempted. 
There are many types of actions that could be considered 
entrepreneurial. A country can introduce new types of international 
organizations, provide new services or benefits to other countries, or 
increase influence in a different geographic area. A rising power can 
also attempt to do something that other countries do, such as provide 
foreign aid, but do it in a different, more efficient way. Lastly, like 
corporations, countries can identify supply shortages and respond to 
them by providing knowledge, products, or services that the incumbent 
power cannot or will not supply.
    China has, in recent years, displayed an effective entrepreneurial 
strategy. The BRI is the centerpiece of its strategy to accumulate and 
exercise power in a way that diverges from historical patterns and that 
therefore does not elicit a proportionate backlash. China would 
probably have met greater resistance if it sought to build colonies, as 
Britain did in the nineteenth century, or to establish a global 
institutional framework, as the U.S. did in the twentieth. Instead, 
China has built influence in novel ways. Its provision of advice to 
autocrats on best practices in internal surveillance and its provision 
of aid without any strings attached are good examples of this type of 
entrepreneurial action.\21\ Delaying military modernization and then 
focusing on asymmetric defensive capabilities, coupled with conducting 
nonthreatening military operations such as the UN peacekeeping and 
antipiracy missions in the Gulf of Aden, have also been innovative ways 
to create ambiguity about its intentions.
---------------------------------------------------------------------------
    \21\ This discussion on types of entrepreneurship is inspired by 
Curtis M. Grimm, Hun Lee, and Ken G. Smith, Strategy as Action: 
Competitive Dynamics and Competitive Advantage (Oxford University 
Press, 2006), 112.
---------------------------------------------------------------------------
    Entrepreneurial action allows China to accumulate power and 
influence without triggering a strong response, because it creates 
uncertainty that hinders the U.S.'s ability to respond. This 
uncertainty is about the nature of the action itself - an action may go 
undetected because the United States understands power accumulation 
according to its methods and therefore is looking for actions similar 
to its own. For example, the DoD is looking for indicators that ``China 
require[s] access to selected foreign ports to pre-position the 
necessary logistics support to sustain naval deployments,'' \22\ 
because this is how the U.S. projects power, failing to realize that 
China may seek to strengthen its position in a different way. In other 
words, even if the BRI did not turn out to have strong military 
dimensions, that does not mean it is not designed to limit U.S. 
military power. China could use its economic clout to more efficiently 
constrain the U.S. Also, even though China has overseas interests, it 
may not pursue a global military presence like the U.S.'s, choosing 
instead to rely primarily on local authorities to protect its 
interests.
---------------------------------------------------------------------------
    \22\ Annual Report to Congress 2018, 111.
---------------------------------------------------------------------------
    China's entrepreneurial actions may also delay a U.S. response if 
the U.S. is skeptical about whether these actions will be successful. 
When the BRI was first announced, for example, many commented that the 
initiative was likely to fail. The BRI's infrastructure development is 
carried out by Chinese state enterprises, which do not fear bankruptcy 
because they expect to be bailed out by the government. Thus, these 
Chinese firms are economically and politically incentivized to invest 
in countries where they have little to no experience compared to their 
Western counterparts, and are likely to invest in projects that are 
deemed unprofitable or risky to other investors.\23\ Moreover, 
countries that benefit from long-term loans can easily default on loans 
from China and put China's economy in a dangerous position.\24\
---------------------------------------------------------------------------
    \23\ David G. Landry, ``The Belt and Road Bubble Is Starting to 
Burst,'' Foreign Policy, June 27, 2018, https://foreignpolicy.com/2018/
06/27/the-belt-and-road-bubble-is-starting-to-burst/.
    \24\ Christopher Woody, ``China's Massive `Belt and Road' Spending 
Spree Has Caused Concern Around the World, and Now It's China's Turn to 
Worry,'' Business Insider, July 2, 2018, https://
www.businessinsider.com/belt-and-road-spending-and-growing-debt-cause-
for-concern-in-china-2018-7.
---------------------------------------------------------------------------
    We can see the delaying effects of entrepreneurial actions in the 
DoD report to Congress itself. China has been leveraging its economic 
power to achieve its national goals for almost two decades now, but the 
2015 annual report to Congress mentions this fact for the first time, 
identifying China's use of punitive trade policies and limits on 
foreign direct investment as instruments of coercion in low-intensity 
conflict.\25\ U.S. analysts have a viewpoint about how threatening 
countries will behave and how the international system operates based 
on U.S. experience and thus may misjudge China's challenge by applying 
traditional critical success criteria without recognizing how these 
criteria have changed.\26\ My research shows that countries like the 
United States may recognize the challenge posed by a rising power, but 
tend to underestimate the rising power's capabilities and the 
effectiveness of its strategies.
---------------------------------------------------------------------------
    \25\ Office of the Secretary of Defense, ``Annual Report to 
Congress: Military and Security Developments Involving the People's 
Republic of China 2015,'' U.S. Department of Defense, 3.
    \26\ Report to Congress 2018, 53.
---------------------------------------------------------------------------
    China's strategy of diversifying the types of power it accumulates 
coupled with its efforts to build power in an entrepreneurial way leads 
me to three policy recommendations.


        Recommendation 6: The United States needs a whole-government 
        approach to ensure that we are accurately and completely 
        identifying what China is doing across domains. There should be 
        not only a DoD annual report to Congress on Chinese security 
        and military developments, but also a USAID report on Chinese 
        foreign aid, a State Department report on China's diplomatic 
        efforts, a Commerce Department report on its growing economic 
        clout, and so on.


        Recommendation 7: All agencies need to engage in a type of red 
        teaming not only to evaluate the strategic environment from 
        China's perspective, but also to explicitly ask how China may 
        approach an objective given that its main goal is to create 
        uncertainty about what it is doing and the payoffs associated 
        with that action. We are too quick to assume that the U.S. way 
        is `best' and that China will follow suit if it can, which 
        makes us blind to new ways China is seeking to challenge the 
        U.S.


        Recommendation 8: Engaging successfully in great power 
        competition with China (per the NSS) requires a global 
        strategy, not a U.S.-China strategy. The United States needs to 
        look beyond its traditional partners and allies to increase its 
        influence across the board. Also, the U.S. needs to be 
        entrepreneurial in its own right, identifying what countries 
        need and providing those services in new ways instead of 
        defaulting to what the U.S. currently has to offer.


        Recommendation 9: Once we get the collection of information and 
        interpretation right, we need a point person on great power 
        competition, a China Czar of sorts, to ensure that the U.S. is 
        taking appropriate matching actions and counteractions to 
        maintain its influence and power around the globe. This could 
        be an expansion of the current role of the National Security 
        Council's Senior Director for Asian Affairs. However, given the 
        additional responsibilities of coordinating with all agencies 
        on U.S. policies beyond Asia (with a focus on what China is 
        doing in those countries), across all issue areas, an 
        additional position may be necessary.


    The bottom line is that while we can learn from history and 
experience, we find ourselves in an unprecedented situation. China as a 
rising power that is primarily accumulating and exercising political 
and economic power (for now), within an institutionalized and 
integrated international system such as we have never had, facing the 
United States as a hegemon more constrained than previous ones, in a 
region that is also rising on the whole. As a result, we need new 
approaches, new institutions, and new processes to ensure that China's 
rise does not come at the expense of the United States.


    Senator Gardner. Thank you, Dr. Mastro.
    Mr. Denmark?

   STATEMENT OF ABRAHAM M. DENMARK, DIRECTOR, ASIA PROGRAM, 
 WOODROW WILSON INTERNATIONAL CENTER FOR SCHOLARS, WASHINGTON, 
                               DC

    Mr. Denmark. Thank you very much, Chairman Gardner, Ranking 
Member Markey, other members of the committee. I appreciate the 
opportunity to express my personal view regarding China's 
remarkable military modernization and its implications for 
American interests.
    The People's Liberation Army, or PLA, today is large, 
increasingly modern and sophisticated, and capable of operating 
far from China's mainland. While it still faces several 
significant challenges, the PLA today has the ability to 
challenge the U.S. military to defend its interests in East 
Asia, the Western Pacific, and beyond.
    I will summarize my prepared testimony by making three main 
analytic points.
    First, China's military modernization supports Xi Jinping's 
broader objectives to achieve the so-called Chinese dream of 
national rejuvenation. This means ensuring that China is stable 
and prosperous at home, dominant in Asia, and influential 
around the world in a way that ensures that the Chinese 
Communist Party, or CCP, is able to pursue its interests and 
prerogatives without restriction.
    Since coming to power, Xi has overseen a significant 
transformation of the PLA in terms of composition, structure, 
and missions. Ultimately these changes are intended to enhance 
the PLA's ability to conduct joint operations, improve its 
ability to fight short duration, high intensity regional 
conflicts at greater distances from the Chinese mainland and a 
diverse set of contingencies, and strengthen the Chinese 
Communist Party's political control over the military.
    My second point. China's military modernization program has 
significant implications for the United States, our allies, and 
our interests in the Indo-Pacific. China's rise is already 
changing the balance of power in the region and will have 
profound implications for the future of the liberal 
international order. For the United States, for our allies, for 
our partners, a more capable Chinese military should be a major 
issue of concern.
    The result of China's military modernization is a force 
that presents a layered set of capabilities spanning the air, 
maritime, space, electromagnetic, and information domains 
designed to conduct long-range attacks against adversary forces 
that might deploy or operate within the Western Pacific Ocean. 
China is also increasingly capable of projecting power further 
afield from China's mainland, enhancing Beijing's ability to 
assert its preferences, defend its interests, and potentially 
to coerce its adversaries at great distances.
    These developments raise the risk of U.S. operations 
throughout the Indo-Pacific and especially within what Chinese 
strategists refer to as the first and second island chains. In 
peacetime, these risks are in my estimation manageable, but in 
war, while personally I believe that the U.S. retains the 
ability to prevail against China in every conceivable 
contingency, such victories will likely come at an increasingly 
high cost.
    In my prepared testimony, I focus on Taiwan, the Korean 
Peninsula, and the East and South China Seas as examples of how 
China's military modernization already poses significant 
challenges for the United States, for our allies, and for our 
interests.
    Most distressingly, in each of these areas, Chinese 
assertiveness and its burgeoning military capabilities raise 
fundamental questions about critical aspects of traditional 
American foreign policy, such as freedom of navigation, and 
implicates explicit U.S. commitments to its allies. A 
miscalculation by Beijing in either of these areas could 
rapidly escalate into a crisis and confrontation with the 
United States.
    My third point. The U.S. has several options it could 
utilize to enhance its ability to address the security 
challenge posed by China. Sustained significant investments in 
relevant military capabilities will be essential for the United 
States to sustain its advantages and address emerging 
challenges vis-a-vis China. This does not just apply to the 
U.S. defense budget. The U.S. competition with China 
encompasses all elements of national power, and all tools of 
competition will require resources.
    There are other areas where the U.S. has the opportunity to 
significantly enhance its ability to compete militarily with 
China. Specifically, the U.S. could develop policies and 
initiatives to enhance its posture in the region while also 
developing initiatives designed to empower its regional allies 
and partners to do more, to contribute to public goods and 
enhance their defense capabilities. Allies and partners have 
played an important role in American foreign and national 
security policy since before the founding of our nation, and we 
should continue to play to our strengths. By implementing such 
a strategy, the United States has an opportunity to proactively 
address regional challenges and sustain American power and 
leadership in the region.
    At the geopolitical level, this will mean sustaining the 
key attributes of the international order that has been 
supported by the United States since the end of the Second 
World War, which were described by Dr. Henry Kissinger as, ``an 
inexorably expanding cooperative order of states observing 
common rules and norms, embracing liberal economic systems, 
forswearing territorial conquest, respecting national 
sovereignty, and adopting participatory and democratic systems 
of government.''
    As Secretary of Defense James Mattis said during his 
confirmation hearing, ``History is clear: nations with strong 
allies thrive, and those without them wither.'' I entirely 
agree and strongly believe that a focused and engaged United 
States, along with empowered and capable allies and partners, 
are our best answer to the significant challenges posed by an 
increasingly capable Chinese military.
    Thank you very much. I look forward to your questions.
    [Mr. Denmark's prepared statement follows:]


                Prepared Statement of Abraham M. Denmark

    Chairman Gardner, Ranking Member Markey, members of the Committee, 
I appreciate the opportunity to give testimony today to examine China's 
remarkable military modernization and its implications for U.S. 
interests. The strategic challenge posed by China is one of the most 
profound foreign policy issues the United States will confront in this 
century, and I commend the Committee for devoting appropriate time and 
attention to this critical subject.
    Forty years after Deng Xiaoping's decision to embrace reform and 
opening, China has emerged as a major player in international politics. 
Its rise has resulted in a rapid and profound shift in the global 
balance of power, with China today representing our most significant 
long-term strategic challenge.
    A significant aspect of the China challenge is the implications of 
its military modernization program. From a single-service force of 
``millet plus rifles,'' the People's Liberation Army (PLA) today is 
large, increasingly modern and sophisticated, and capable of operating 
far from the Chinese mainland. While it still faces several significant 
challenges, the PLA today has the ability to challenge the U.S. 
military to defend its interests in East Asia, the Western Pacific, and 
beyond.
Advancing Military Modernization
    While China's leaders have to date refrained from publicly 
detailing a specific vision of a grand national strategy, a review of 
their statements and official Chinese state media suggests a fairly 
clear vision for the future. At the heart of this vision is a 
revitalized China that is stable and prosperous at home, dominant in 
Asia, and influential around the world in a way that ensures that the 
CCP is able to pursue its interests and prerogatives without 
restriction or interference--what I refer to as the establishment of a 
neo-tributary system.
    In his major address to the 19th National Congress of the CPP, 
Chinese President Xi Jinping encapsulated much of these objectives as 
the ``Chinese dream of national rejuvenation.'' To achieve his 
objectives, Xi has laid out a two-stage development plan to realize 
socialist modernization between 2020 and 2035, and between 2035 and the 
middle of the 21st century to develop China into a great modern 
socialist country ``that is prosperous, strong, democratic, culturally 
advanced, harmonious, and beautiful.'' \1\ These broader objectives 
correspond to similar objectives for the PLA identified by Xi in the 
same speech: ``that by 2035, the modernization of our national defense 
and force is basically completed, and that by the mid-21st century our 
people's army forces have been fully transformed into worldclass 
forces.'' \2\
---------------------------------------------------------------------------
    \1\ Remarks by Xi Jinping Delivered at the 19th National Congress 
of the Communist Party of China, Secure a Deceive Victory in Building a 
Moderately Prosperous Society in All Respects and Strive for the Great 
Success of Socialism with Chinese Characteristics for a New Era,'' 
Delivered October 18, 2017, http://www.xinhuanet.com/english/download/
Xi--Jinping's--report--at--19th--CPC--National--Congress.pdf, 2425.
    \2\ Ibid., 48.
---------------------------------------------------------------------------
    Since coming to power, Xi has overseen a significant transformation 
of the People's Liberation Army in terms of composition, structure, and 
missions.


   Composition. While Beijing does not publish authoritative 
        statistics on its military investments, it is clear that recent 
        years have seen a significant shift in the PLA away from its 
        traditional ground-centric orientation toward air power, naval 
        power, and other capabilities that are essential to projecting 
        power and fighting advanced adversaries. Indeed, while the 
        overall size of the PLA has reportedly shrunk by 300,000 in 
        recent years, the size of the PLA Navy and Air Force has 
        actually increased. Indeed, the PLA Navy, Chinese Coast Guard 
        (CCG), and the People's Armed Forces Maritime Militia (PAFMM) 
        form the largest maritime force in the Indo-Pacific today.\3\
---------------------------------------------------------------------------
    \3\ U.S. Department of Defense, Annual Report to Congress: Military 
and Security Developments Involving the People's Republic of China, 
2018, 16.

   Structure. Beginning in late 2015, the PLA began to implement the 
        most significant set of reforms it has seen since the founding 
        of the PRC in 1949. It included the disbanding of the old 
        general departments, establishing a ground force headquarters, 
        restructuring seven military regions into five joint theater 
        commands aligned against specific regional challenges, 
        transitioning the PLA service headquarters to an exclusive 
        focus on ``organize, train, and equip'' missions, establishing 
        a Strategic Support Force and a Joint Logistics Support Force, 
        and establishing a new joint command and control structure to 
        coordinate China's responses to regional crises and conduct 
        preparations for wartime operations.\4\
---------------------------------------------------------------------------
    \4\ Joel Wuthnow and Phillip C. Saunders, Chinese Military Reform 
in the Age of Xi Jinping: Drivers, Challenges, and Implications, 
(Washington, D.C.: National Defense University press, 2017).

   Missions. The PLA has dramatically expanded the aperture of 
        missions and contingencies it must prepare for. According to 
        the U.S. Department of Defense, Taiwan contingencies remains 
        the PLA's main ``strategic direction,'' while other focus areas 
        for the PLA include the East China Sea, the South China Sea, 
        and China's borders with India and North Korea. In 2015, China 
        outlined eight ``strategic tasks'' that the PLA must be 
---------------------------------------------------------------------------
        prepared to execute:

     Safeguard the sovereignty of China's territory;

     Safeguard China's interests in new domains such as space and 
            cyberspace;

     Maintain strategic deterrence;

     Participate in international security cooperation;

     Maintain China's political security and social stability; and,

     Conduct emergency rescue, disaster relief, and ``rights and 
            interest protection'' missions.\5\
---------------------------------------------------------------------------
    \5\ U.S. Department of Defense, Annual Report to Congress, 45-46.


    These represent a broad mandate for the PLA. Safeguarding 
sovereignty, and conducting ``rights and interest protection'' 
missions, are clear references to Chinese efforts to assert its claims 
in the East and South China Seas. Moreover, the 2017 establishment of 
China's first overseas military base in Djibouti, and expanded PLA Navy 
operations in the Indian Ocean and the Mediterranean, are further 
examples of how broadening national interests are driving PLA 
operations at increasingly greater distances from the Chinese mainland.
    Xi has also sustained decades of significant investments in the 
military. China's announced 2018 military budget--$175 billion, an 
increase of 8.1 percent from 2017\7\--sustains decades of spending 
increases, making China the second-largest military spender in the 
world after the United States. Yet it does not tell the entire story; 
China's announced military budget omits several major categories of 
expenditure, making China's actual military-related spending 
significantly greater. The Department of Defense estimates China's 
actual military-related spending at more than $190 billion in 2017.\7\
---------------------------------------------------------------------------
    \6\ Brad Lendon, ``China boosts military spending 8 percent amidst 
ambitious modernization drive,'' CNN, March 5, 2018, https://
www.cnn.com/2018/03/04/asia/chinese-military-budget-intl/index.html.
    \7\ U.S. Department of Defense, Annual Report to Congress, 82.
---------------------------------------------------------------------------
    Ultimately, these dramatic changes are intended to enhance the 
PLA's ability to conduct joint operations, improve its ability to fight 
short-duration, high-intensity regional conflicts at greater distances 
from the Chinese mainland in a diverse set of contingencies, and 
strengthen the CCP's political control over the military.\8\ As a 
result of these changes, Xi has declared that China has ``initiated a 
new stage in strengthening and revitalizing the armed forces.''
---------------------------------------------------------------------------
    \8\ Ibid., 1.
---------------------------------------------------------------------------
    It is also important to note that other Chinese security forces 
such as the People's Armed Police, the CCG, and the PAFMM also play 
significant roles in defending and advancing Chinese security 
interests.\9\ This is especially true of China's efforts to take 
advantage of the ``gray zone'' to advance China's claims in the East 
and South China Seas.
---------------------------------------------------------------------------
    \9\ See Conor M. Kennedy and Andrew S. Erickson, ``China's Third 
Sea Force, The People's Armed Forces Maritime Tethered to the PLA,'' 
China Maritime Report, No. 1, March 2017.
---------------------------------------------------------------------------
Continued Challenges
    While some in the United States may in the past have not 
appreciated the significance of the challenge posed by China's growing 
military power, it would also be a mistake to overestimate China's 
military capabilities. Despite the incredible transformation we have 
seen from the PLA in recent years, it continues to face significant 
challenges--many of which Xi has sought to address with his recent 
reforms.


   Experience. the last time the PLA fought a war was against Vietnam 
        in 1979. While it some units of the PLA have gained operational 
        experience by conducting Peacekeeping Operations or counter-
        piracy operations off of East Africa, such experience is 
        necessarily limited. Unfortunately, the U.S. military has much 
        more experience in conducting combat operations and extended 
        power projection--though not against an advanced military like 
        the PLA.

   Political Loyalty. Party officials and PLA leaders repeatedly 
        admonish officers and enlistees not to heed calls for ``getting 
        the Party out of the Army,'' ``depoliticizing the military,'' 
        or ``nationalizing the armed forces.'' These repeated 
        remonstrations, as well as Xi Jinping's focus on enhancing the 
        PLA's political loyalty as part of his reforms, suggests that 
        these are issues of particular salience for China's leaders. 
        Yet as scholars at RAND have pointed out, ``for the CCP 
        leadership, the PLA's status as a Party army is an important 
        strength, not a weakness.'' \10\
---------------------------------------------------------------------------
    \10\ Michael S. Chase, Jeffrey Engstrom, et. al., China's 
Incomplete Military Transformation (Monterey: RAND Corporation), 2015, 
44.

   Joint Operations. Like the United States, China is likely to find 
        joint operations easier to describe on paper than to conduct in 
        reality. I expect that achieving true effective ``jointness'' 
---------------------------------------------------------------------------
        will be a long-term objective for the PLA.

   International Relationships. Unlike the United States, China does 
        not enjoy a network of alliances. Indeed, in my experience, 
        Chinese scholars and officials often describe these 
        relationships as fundamentally transactional and coercive in 
        nature, suggesting that Beijing will be hard-pressed to 
        establish the kind of close relationships that Washington has 
        cultivated for decades. This will likely impose a fundamental 
        limit on the PLA's ability to project and sustain power, 
        especially during a conflict.

Implications for the United States
    China's rapid and significant military modernization program has 
significant implications for the United States, our allies, and our 
interests in the Indo-Pacific. China's rise is already changing the 
balance of power in the Indo-Pacific, and will have profound 
implications for the future of the liberal international order. While 
China does not seek to fundamentally undermine this order, it does seek 
to exempt itself from the restrictions and responsibilities that such 
an order would entail--a version of ``Chinese exceptionalism''--to a 
degree that would render it largely irrelevant. For the United States, 
its allies, and its partners, a more capable Chinese military should be 
major issue of concern and a driver of some significant shifts in 
policy and investment.
    I agree with the current administration's explicit recognition of 
the great power competition that is currently underway between China 
and the United States.\11\ Military issues play a significant role in 
that competition--the United States will not be able to sustain a 
``Free and Open Indo-Pacific'' unless it accounts for the challenges 
posed by an increasingly capable PLA.
---------------------------------------------------------------------------
    \11\ President Donald J. Trump, National Security Strategy of the 
United States of America, December 2017; Secretary of Defense James 
Mattis, Summary of the 2018 National Defense Strategy of the United 
States of America.
---------------------------------------------------------------------------
    Unlike the United States, China does not have global 
responsibilities or the need to defend interests around the world 
against the full spectrum of military threats. Rather, the PLA can 
focus its investments and strategies in a relatively limited geography 
(e.g., China's periphery and vital maritime sea lanes) against a 
relatively limited number of potential external threats (e.g., China's 
neighbors and the United States). As a result, the PLA has been able to 
tailor its capabilities to exploit the perceived vulnerabilities of its 
potential adversaries while maximizing China's geographic advantages in 
various contingencies.
    The result is a layered set of capabilities spanning the air, 
maritime, space, electromagnetic, and information domains designed to 
conduct long-range attacks against adversary forces that might deploy 
or operate within the western Pacific Ocean.\12\ China is also 
increasingly capable of projecting power further afield from China's 
mainland, enhancing Beijing's ability to assert its preferences, defend 
its interests, and potentially to coerce adversaries at great 
distances.
---------------------------------------------------------------------------
    \12\ U.S. Department of Defense, Annual Report to Congress, 59.
---------------------------------------------------------------------------
    These developments raise the risk of U.S. operations throughout the 
Indo-Pacific, and especially within what Chinese strategists refer to 
as the ``first and second island chains.'' Every day, U.S. forces 
likely fly, sail, and operate within range of advanced Chinese military 
capabilities. Our military bases in Japan and the Republic of Korea 
similarly live within range of Chinese military power. In peacetime, 
these risks are in my estimation manageable--we simply must reacclimate 
ourselves to life with an advanced military competitor. Still, even in 
peacetime, China's growing military power will be a significant asset 
for Beijing in their efforts to assert territorial claims, undermine or 
adjust international law, and coerce nations smaller, less powerful, 
and with less capable militaries than the United States.
    In a war, China will also pose significant challenges. While I will 
leave official military estimates to my former colleagues in the U.S. 
military, I will convey my personal assessment that the U.S. retains 
the ability to prevail against China in every conceivable contingency. 
Yet as the PLA grows increasingly capable, such victories will likely 
come at an increasingly high cost.
    Several recent scholarly works have focused on the potential for 
conflict between rising great powers and established powers.\13\ Yet 
one point often lost in these historical analyses is that major power 
conflicts often include, and at times are triggered by, interventions 
in peripheral geographical areas. It is for this reason that I am most 
concerned about the potential for crisis and conflict between China and 
the United States along China's periphery, and why I will focus on 
three of those areas to illustrate the implications for the United 
States of China's military modernization.\14\
---------------------------------------------------------------------------
    \13\ Graham Allison, Destined for War: Can America and China Escape 
Thucydides's Trap? (New York: Houghton Mifflin Harcourt, 2017); Evan B. 
Montgomery, In the Hegemon's Shadow (Ithaca: Cornell University Press, 
2016); Kori Schake, Safe Passage: The Transition from British to 
American Hegemony (Cambridge: Harvard University Press, 2017).
    \14\ Chinese officials and scholars would likely dispute that it is 
appropriate to include Taiwan as part of China's periphery, arguing 
that Taiwan is part of China itself. I have not included Taiwan in this 
analysis as a way to make a statement about Taiwan's formal status, but 
rather to point out the geographic realities of a potential conflict 
between China and the United States over Taiwan.
---------------------------------------------------------------------------
Taiwan
    After years on the strategic back burner, Chinese pressure on 
Taiwan is reemerging as a major issue in East Asia and in relations 
between China and the United States. Since Tsai Ing-wen was inaugurated 
as President of Taiwan in 2016, five countries have switched diplomatic 
relations from Taipei to Beijing: Sao Tome and Principe, Panama, the 
Dominican Republic, Burkina Faso, and El Salvador. Cross-strait tourism 
has dropped dramatically, and Beijing has dramatically increased 
military pressure on Taiwan. As described by the U.S. Department of 
Defense, the PLA continued to develop and deploy increasingly advanced 
military capabilities intended to coerce Taiwan, signal Chinese 
resolve, and gradually improve capabilities for an invasion. These 
improvements pose major challenges to Taiwan's security, which has 
historically been rooted in the PLA's inability to project power 
decisively across the 100nm Taiwan Strait, the natural geographic 
advantages of island defense, Taiwan's armed forces' technological 
superiority, and the possibility of U.S. intervention.\15\
---------------------------------------------------------------------------
    \15\ U.S. Department of Defense, Annual Report to Congress, 93.
---------------------------------------------------------------------------
    As a result of China's military modernization effort, Taiwan's 
historic technological and geographical advantages have significantly 
eroded. Taiwan has made important shifts in both investments and 
strategy to account for these changes, and is reportedly working to 
develop new concepts and capabilities for asymmetric warfare. According 
to the Department of Defense, some specific areas of emphasis include 
offensive and defensive information and electronic warfare; high-speed 
stealth vessels; shore-based mobile missiles; rapid mining and 
minesweeping; unmanned aerial systems; and critical infrastructure 
protection.\16\ Yet more will need to be done to develop an effective 
asymmetric and innovative strategy for Taiwan to defend itself. One 
critical aspect will be in the defense budget: Taiwan has consistently 
under-invested in its military, and costs associated with transitioning 
to an all-volunteer force have already diverted resources away from 
defense acquisition programs as well as training and readiness.\17\
---------------------------------------------------------------------------
    \16\ U.S. Department of Defense, Annual Report to Congress, 102.
    \17\ Ibid.
---------------------------------------------------------------------------
    Unlike with its formal allies, the United States does not have a 
formal commitment to defend Taiwan. Rather, as codified in the Taiwan 
Relations Act, it is the policy of the United States ``to maintain the 
capacity of the United States to resist any resort to force or other 
forms of coercion that would jeopardize the security, or the social or 
economic system, of the people on Taiwan.'' \18\ As China's military 
grows increasingly capable, the United States will need to make the 
necessary investments to ensure it retains the capacity to defend 
Taiwan, enhance Taiwan's ability to defend itself, and make it clear to 
Beijing and to the rest of the world that Taiwan is a priority.
---------------------------------------------------------------------------
    \18\ Taiwan Relations Act of 1979, Pub. L. 96-8, 22 U.S.C. 3301 et 
seq.
---------------------------------------------------------------------------
Korea
    The Korean Peninsula has been at the center of East Asia's 
geopolitics for centuries. Since the late 19th century, the question of 
which regional major power would dominate the peninsula has been a 
central issue for three major regional wars.\19\ Considering the 
historic significance of the Korean Peninsula as a flashpoint in U.S.-
China relations, and the pressing realities generated by North Korea's 
illegal nuclear weapons and ballistic missile programs, demand a 
careful consideration of U.S.-China military dynamics on the Korean 
peninsula.
---------------------------------------------------------------------------
    \19\ The First Sino-Japanese War (1894-1895), the Russo-Japanese 
War (1904-1905), the Korean War (1950-1953).
---------------------------------------------------------------------------
    Beijing's objectives for the Korean Peninsula are to maintain 
stability, to denuclearize the Korean peninsula, and over the long-term 
to diminish U.S. power and influence in the Peninsula. But the first 
objective--maintaining stability--is the fundamental driver of 
Beijing's approach, and has two aspects. First, China seeks to avoid a 
war on the Korean Peninsula. Beijing sees both Pyongyang and Washington 
as dangerous and potentially destabilizing, and modulates its strategy 
over time to ensure neither side goes too far. Concurrently, Beijing 
seeks to prevent severe economic sanctions that could threaten to 
undermine the stability of the Kim regime in Pyongyang.
    Relations between China and North Korea may have seen a nadir in 
2016 and 2017, as Pyongyang conducted a series of ballistic and missile 
tests in direct contradiction of UN security council resolutions and 
despite China's publicly-expressed ``grave concern and 
opposition.''\20\ Yet it is clear that relations have improved since 
that time, and relations between China and North Korea have warmed 
considerably. Xi Jinping has met with North Korean leader Kim Jong Un 
three times in 2018, and the propaganda produced by both sides from 
those summits sent a strong signal of two leaders with a close working 
relationship. While it is doubtful that relations between Beijing and 
Pyongyang will ever return to the ``lips to teeth'' alliance of decades 
past, it is clear that China sees significant value in keeping 
relations with North Korea productive--at least while Pyongyang 
continues to refrain from taking provocative and destabilizing actions.
---------------------------------------------------------------------------
    \20\ Holly Ellyatt, ``China has `grave concerns' about North 
Korea's latest missile test,'' CNBC, November 29, 2017, https://
www.cnbc.com/2017/11/29/china-north-korea-missile-reaction.html.
---------------------------------------------------------------------------
    Should a crisis or conflict occur on the Peninsula, China's leaders 
would have several military options to choose from, including securing 
the China-North Korea border and coming to the defense of North Korea 
to defend Kim Jong Un. As my friend and colleague Dr. Mastro has 
written, China's military modernization has given its leaders more 
options than before--China now has the ability to manage instability on 
its borders while also conducting major military operations in the 
Peninsula. I agree with her assessment that China may intervene 
extensively and militarily on the peninsula.\21\ But any decision by 
Beijing to intervene in a Korea contingency would not be taken out of a 
legalistic commitment to the 1961 Sino-North Korea Mutual Aid and 
Cooperation Friendship Treaty, but rather as the result of a 
calculation of China's likelihood of success, of the potential for 
escalation, and which option is believed to maximize China's 
geopolitical position in the region vis-a-vis the United States.
---------------------------------------------------------------------------
    \21\ Oriana Skylar Mastro, ``Why China Won't Rescue North Korea,'' 
Foreign Affairs, January/February 2018.
---------------------------------------------------------------------------
    Today, the threat of war on the Korean Peninsula is diminished 
compared to the ``fire and fury'' rhetoric of 2017. I expect Beijing is 
pleased that Pyongyang has refrained from taking any provocative 
actions, and that both Washington and Pyongyang are committed to a 
diplomatic process that involves the suspension of U.S.-ROK joint 
military exercises. By conducting three summits at the leader level, 
Beijing has sent a clear signal that it has a major role to play on 
this issue, and it will not just go along with Washington's 
preferences.
The East and South China Seas
    In recent years, China has dramatically enhanced its capabilities 
and intensified its operational posture in the East and South China 
Seas. Beijing's goal is to advance its territorial claims in those 
areas, and more broadly to expand its geopolitical power at the expense 
of its neighbors.
    In the East China Sea, Beijing's efforts to advance its claims has 
involved the use of lowintensity coercion operations by the PLA Navy, 
the CCG, and the PAFMM. These so-called ``gray zone'' tactics fall 
below the level of a confrontation that would demand a traditional 
military response, yet over time have the effect of gradually 
increasing pressure on Tokyo and testing its resolve and that of the 
U.S.-Japan Alliance.
    Similarly, in the South China Sea, Beijing seeks to use its 
military and paramilitary forces to assert its claims and gradually 
intensify pressure on its neighbors. Yet unlike in the East China Sea, 
Beijing in the South China Sea has conducted a campaign of island 
reclamation and military construction that is unprecedented in terms of 
speed and scale. China has added over 3,200 acres of land to the seven 
features it occupies in the Spratly Islands, and has constructed 
aviation and port facilities, barracks, weapons stations, sensor 
emplacements, and communication facilities.\22\
---------------------------------------------------------------------------
    \22\ U.S. Department of Defense, Annual Report to Congress, 17.
---------------------------------------------------------------------------
    These outposts are undeniably military in nature, and are capable 
of supporting military operations in the Spratly Islands and throughout 
the region. As described by the U.S. Department of Defense, ``This 
would improve China's ability to detect and challenge activities by 
rival claimants or third parties, widen the range of capabilities 
available to China, and reduce the time required to deploy them.'' \23\
---------------------------------------------------------------------------
    \23\ U.S. Department of Defense, Annual Report to Congress, 17.
---------------------------------------------------------------------------
    During his confirmation hearing earlier this year, Admiral Philip 
Davidson stated that China's militarization of the Spratly Islands 
means ``China is now capable of controlling the South China Sea in all 
scenarios short of war with the United States.'' \24\ I agree with the 
Admiral's assessment, and I would note that this has significant 
implications for the other claimants in the South China Sea and for the 
United States. As we are currently engaged in a peacetime competition 
with China, it is incumbent on the United States to make it clear that 
it will not be cowed or coerced. This is why it is critical that the 
United States--and its allies and partners--continues to fly, sail, and 
operate in the South China Sea and wherever else international law 
allows--it is an undeniable demonstration to our competitors, allies, 
and partners of U.S. resolve and capability.
---------------------------------------------------------------------------
    \24\ ``Advance Policy Questions for Admiral Phiilp Davidson, USN 
Expected Nominee for Commander, U.S. Pacific Command,'' April 2018, 
https://www.armed-services.senate.gov/imo/media/doc/Davidson--APQs--04-
1718.pdf.
---------------------------------------------------------------------------
    Most distressingly, China's assertiveness in the East and South 
China Sea both questions fundamental aspects of traditional American 
foreign policy--freedom of navigation\25\--and implicates explicit U.S. 
commitments to its allies in Japan and the Philippines. A 
miscalculation by Beijing in either of these areas. could rapidly 
escalate into a crisis and confrontation with the United States.
---------------------------------------------------------------------------
    \25\ This is about more than international law as codified by the 
UN Convention on the Law of the Sea (UNCLOS). Recall that the first war 
ever fought by the United States--against the Barbary Pirates (1801-
1815)--was fought over freedom of navigation.
---------------------------------------------------------------------------
    I do not see China's actions in the East and South China Seas to 
date as fundamentally altering U.S. calculations when it comes to 
China. At the most, these actions increase the potential for, and 
severity of, crises between Beijing and Washington. Though I can no 
longer state so authoritatively, my expectation is that U.S. will and 
ability to defend its allies and interests in the region are unchanged. 
The challenge for Washington is to develop realistic and effective 
strategies to counter China's ``grey zone'' tactics and to enhance 
relationships with its allies and partners to form a more effective 
resistance to Chinese assertiveness.
U.S. Options
    Sustained, significant investments in relevant military 
capabilities will be essential for the United States to sustain its 
advantages and address emerging challenges vis-a-vis China. This does 
not just apply to the U.S. defense budget--the U.S. competition with 
China encompasses all elements of national power, and all tools of 
competition will require resources. This includes diplomacy, security 
assistance, and trade and investment policies that deepen ties between 
the United States and the rest of the Indo-Pacific.
    There are other areas where the U.S. has the opportunity to 
significantly enhance its ability to compete militarily with China. 
Specifically, the U.S. should develop policies and initiatives to 
enhance its posture in the region. This could include a multi-billion 
dollar initiative to enhance deterrence and U.S. posture in the Indo-
Pacific by investing in new capabilities, new exercises, and new 
infrastructure tailored to enhancing U.S. capabilities in the Indo-
Pacific.\26\
---------------------------------------------------------------------------
    \26\ For this and other ideas, see Eric Sayers, ``15 Big Ideas to 
Operationalize America's Indo-Pacific Strategy, War on the Rocks, April 
6, 2-18, https://warontherocks.com/2018/04/15-big-ideas-to-
operationalizeamericas-indo-pacific-strategy/.
---------------------------------------------------------------------------
    Additionally, the U.S. could develop initiatives designed to 
empower its regional allies and partners to do more to contribute to 
public goods and enhance their defensive capabilities. Allies and 
partners have played an important role in American foreign and national 
security policy since before the founding of our nation, and we should 
continue to play to our strengths. By implementing a strategy to 
empower its allies and partners in the IndoPacific and more effectively 
drive them to contribute to the health and success of the regional 
liberal order, the United States has an opportunity to proactively 
address emerging regional challenges and sustain American regional 
power and leadership. Such a strategy would not only enhance regional 
stability and prosperity--it will also enhance the ability of the 
United States to compete with China. While this would not necessarily 
be an anti-China strategy, it does recognize the extent of the 
challenge posed by China and would represent a positive approach to 
advance the interests of the United States and its allies and partners.
    This approach was suggested by Secretary of Defense Ash Carter's 
speech at the 2016 Shangri-La Dialogue in Singapore. Secretary Carter 
described the U.S. role in the IndoPacific as providing, with its 
network of allies and partners, the ``oxygen'' of regional stability 
that has underwritten rapid economic growth and the development of 
security ties. He advocated for the further development of the 
increasingly interconnected region into a ``principled security 
network.'' Such a network would entail ``nations building connections 
for a common cause, planning and training together, and eventually 
operating in a coordinated way.'' \27\ The United States would continue 
to serve as the primary provider of regional security and a leading 
contributor to the region's principled security network, while at the 
same time empowering its allies and partners in the region to do more 
for themselves.
---------------------------------------------------------------------------
    \27\ Secretary of Defense Ash Carter, ``Remarks on `Indo-Pacific's 
Principled Security Network' at 2016 IISS Shangri-La Dialogue,'' U.S. 
Department of Defense, June 4, 2016, https://www.defense.gov/News/
Speeches/Speech-View/Article/791213/remarks-on-Indo-Pacificsprincipled-
security-network-at-2016-iiss-shangri-la-di/.
---------------------------------------------------------------------------
    Considering the challenges it faces, the United States should work 
with its allies and partners to preserve the key principles that have 
enabled the region's stability and prosperity, while also adapting its 
approach to reflect the requirements of a changed world. At a 
geopolitical level, this will mean sustaining the key attributes of the 
international order that it has trumpeted since the end of World War 
II, which were described by Henry Kissinger as ``an inexorably 
expanding cooperative order of states observing common rules and norms, 
embracing liberal economic systems, forswearing territorial conquest, 
respecting national sovereignty, and adopting participatory and 
democratic systems of government.'' \28\
---------------------------------------------------------------------------
    \28\ Henry Kissinger, World Order, (New York, NY: Penguin 
Publishing), 2014, 1.
---------------------------------------------------------------------------
    As Secretary of Defense James Mattis said, ``History is clear: 
nations with strong allies thrive, and those without them wither.'' 
\29\ I agree entirely, and strongly believe that a focused and engaged 
United States, along with empowered and capable allies and partners, 
are our best answer to the significant challenges posed by an 
increasingly capable Chinese military.
---------------------------------------------------------------------------
    \29\ ``Stenographic Transcript Before the United States Senate 
Committee on Armed Services To Conduct a Confirmation Hearing on the 
Expected Nomination of Mr. James N. Mattis to be Secretary of 
Defense,'' January 30, 2017, https://www.armed-services.senate.gov/imo/
media/doc/17-03--01-12-17.pdf


    The views expressed are the author's alone, and are not necessarily 
---------------------------------------------------------------------------
those of the Wilson Center or of the U.S. Government.


    Senator Gardner. Thank you, Mr. Denmark.
    And we will begin with questions I think starting where you 
and Mr. Denmark talking about an engaged United States, talking 
about empowered allies.
    The legislation that I mentioned in my opening statements 
that Senator Markey, Senator Kaine, and others on the committee 
are all a part of, the Asia Reassurance Initiative Act, aims at 
sort of building that long-term strategy into law where the 
Congress and the executive branch can speak with one voice. I 
think under the Obama administration, the Asia pivot or 
rebalance was a good idea in concept, but what more can we do 
to actually back that up in law through policy and funding and 
other opportunities to engage diplomatically not just from a 
security standpoint?
    So the bill focuses on three pillars: security and the 
economy and human rights, rule of law. Under the security 
provisions of the bill, it authorizes, the Asia-Pacific 
Security Initiative funds at $1.5 billion over the next 5 
years. From an economic standpoint--it has language dealing 
with North Korea, Taiwan, continuing our commitment to the Six 
Assurances, the Taiwan Relations Act, and other languages to 
help build up counterterrorism capabilities, training efforts, 
maritime domain awareness, issues in the South China Sea. From 
an economic perspective, it highlights the importance of 
multilateral, bilateral trade engagement using USAID 
opportunities to develop better trade capacity and, of course 
dealing with the human rights issues, whether that is Uighurs 
and the situation facing them in China or the challenges we 
face in Myanmar and the Philippines.
    Is an approach like that something that we ought to be 
pursuing? What more can we be doing within legislation like 
that to show our commitment and meat on the bone, so to speak, 
to an Indo-Pacific strategy? Dr. Mastro and then Mr. Denmark.
    Dr. Mastro. So I think that is a good start to what the 
United States could do, but it does fall somewhat in the 
category of what I would label of doing just more of the same. 
Specifically, we focus on our partners and allies, and that is 
important. But what China is doing is exploiting gaps in the 
order. So we talk about the U.S.-led international order and 
whether China is challenging it or not. But in reality there 
are many areas of the order that lack certainty, are ambiguous, 
do not have consensus. I would label cybersecurity as one of 
these areas. And so what China does is it is trying to build 
consensus or work on the periphery of the order. So, for 
example, when they did One Belt, One Road and they initially 
moved into Central Asia, they were not challenging the United 
States because the United States was not there. And so I would 
say that in addition to strengthening our relationship with 
traditional partners and allies, the United States needs to 
think more broadly about its relationships with countries 
around the globe.
    Also, in terms of the security initiatives, I would 
recommend that we think more about demand not supply in kind of 
business terms. You often--at least in my experience, you think 
about what the United States has to offer in terms of security 
assistance. And then we try to put together packages, whether 
it is visits, port visits, or a rotation of a squadron, or what 
have you, instead of looking at what those countries actually 
demand. And so we should move away from this model of 
increasing advertising and hoping that countries around the 
world will decide they want what we have to offer and instead 
try to look at what they actually want and start supplying 
that.
    Senator Gardner. Mr. Denmark?
    Mr. Denmark. I think Dr. Mastro has some very good points 
there.
    If I could build off of what she said, in my conversations 
that I have had over the past 2 years in Asia, there is a broad 
sense amongst both our allies, our partners, and other 
countries that the United States is easily distracted and is 
not devoting the kind of resources that would be required in 
order to effectively compete. While in some areas some 
countries what to see the United States being open about its 
competition with China, other countries find themselves 
uncomfortable with such an idea. So it is difficult to develop 
a strategy for an entire region in which one size fits all. So 
I agree with Dr. Mastro that we need to be able to tailor our 
approach to various countries based on their interests, based 
on their objectives.
    But broadly speaking, there is a sense across the region 
that the United States is not as powerful as we once were, that 
China is more powerful, and that they need to have a good 
relationship with China. But I think what is interesting, that 
despite those conceptions of American and Chinese power, 
universally each country wants to engage the United States. 
They want us there. In terms of demand signal, the main demand 
signal I see broadly speaking for most of these countries in 
the Indo-Pacific is they want the United States engaged. They 
want us to be doing more in the region.
    So while I welcome the idea of additional resources being 
devoted to these things not just on the defense side but across 
all elements of national power the way you described, I also do 
think that we need to be careful at how we tailor these 
initiatives to make sure that they are implemented in a way 
that is acceptable and sustainable for countries that have at 
times very different interests than the United States and at 
times have interests that are not necessarily compatible with 
one another.
    So while I personally welcome more resources for these 
issues, I often say that there is a difference between 
competing verbally or competing in a document and actually 
competing in terms of resources. I think this would help in 
that direction. But at the same time, I completely agree with 
Dr. Mastro. They need to tailor those investments for really 
what is needed both in terms of our potential adversaries but 
also what our allies and our partners are looking for.
    Senator Gardner. Thank you.
    Senator Markey?
    Senator Markey. Thank you, Mr. Chairman, very much.
    A recent survey conducted by the Chicago Council of Global 
Affairs said that China is a rising military power. 62 percent 
of all Americans believe that. But at the same time, only 39 
percent see China's military power as a critical threat facing 
the United States of America.
    So could you each deal with that issue in terms of the 
public perception and, I guess, answer the question of whether 
or not China's growing military might is, in fact, a critical 
threat to U.S. interests? Mr. Denmark?
    Mr. Denmark. Well, I do agree with the minority of 
Americans who see China as being a critical threat in the 
military sense, but I would say more over the long term. At the 
current time, I think China is a military challenge in ways, as 
I explained in my testimony, both to American security, 
American interests and those of our allies. And I would focus 
especially on China's threat to our allies, Japan and the 
Philippines being most immediate. And I discuss this in my 
prepared testimony.
    I do think that the nuances of these issues are generally 
lost on the American public about why China and Japan are 
having problems or why what China is doing in the South China 
Sea is a challenge. And it is difficult to explain to the 
American people why a few thousand acres in the South China Sea 
represents such an important and critical challenge. I am 
sorry. While I believe that China is a critical threat, I also 
understand the phenomenon that the majority of the American 
people do not see it as critically as maybe as those who focus 
on it do.
    Senator Markey. Dr. Mastro, so how do we close that gap, if 
you agree with Mr. Denmark's conclusion that it is a real 
threat? How would you recommend that the Congress or those that 
care about this issue ensure that there is a full understanding 
of what is happening?
    Dr. Mastro. So I am not an expert on American domestic 
politics. But I think the big point here is that what this poll 
represents is that China has done a very good job at what I 
have mentioned, which is creating a great deal of uncertainty 
about its intentions.
    Senator Markey. They have done a very good job of doing 
what?
    Dr. Mastro. So what they are doing is they diversified 
power, and they did it in a sequential way such that anything 
that you point to, for example, a certain military threat, 
someone could equally point to how they are cooperating in the 
Gulf of Aden, for example. Or if you talk about them 
undermining the international order, someone could equally 
point to, well, they are actually a part of the WTO or they 
support the United Nations----
    Senator Markey. So you are saying that results in the 39 
percent thinking that it is not that big--that only 39 percent 
believe that it is a big threat to us.
    Dr. Mastro. Exactly. It creates a delay. Most of our threat 
perceptions come from identifying military forces, and Chinese 
military modernization only began in a big way about 10 to 15 
years ago and the United States has been focused on other 
issues. And so because of this, I think that is why the 
American public is not focused on the potential for conflict 
with China.
    I would just like to conclude that by saying we are too 
focused, I think, on the possibility of war with China. If you 
look historically, the big question is not only whether or not 
the United States and China is going to fight a war, but that 
80 percent of rising powers overtake the great power. So I 
doubt that we would think it is a mark of successful U.S. 
policy if China even peacefully became the dominant global 
leader and we were second to them.
    Senator Markey. Well, we do not want to over-hype that 
threat, though, that we are the world power and they are the 
rising power and that they would overtake us. Is that what you 
are saying? Eight out of 10 times that is what happens.
    Dr. Mastro. Eight out of 10 times that is what happens 
peacefully or through war.
    Senator Markey. So we do not want to over-hype that, 
though, because we clearly have a far superior military right 
now. So what is your recommendation to us that we undertake as 
a strategy in order to make sure that we avoid that result?
    Dr. Mastro. I think we need to switch from a deterrence by 
punishment to deterrence by denial strategy.
    Senator Markey. Deterrence by what?
    Dr. Mastro. By denial strategy.
    So we have this understanding based on our decades of 
experience with our superior military force, as you mentioned, 
sir, that we could force China to give up in certain scenarios 
by inflicting a lot of costs on them. But my understanding of 
Xi Jinping and his military strategy is if they can succeed, 
they do not care what the costs would be. And so instead of 
trying to convey that it would be costly for them, for example, 
to invade Taiwan, we need to start building military forces and 
positioning them such that no matter what level of resolve 
China has, they could not physically accomplish their goal.
    Senator Markey. Great.
    So do you agree with that conclusion, Mr. Denmark, that Xi 
Jinping just does not care what the cost is? They are going to 
do whatever they want and there can be complete indifference to 
what the impact is upon the fiscal wellbeing of their country?
    Mr. Denmark. I think that Xi Jinping has demonstrated 
himself to be willing to take risks, willing to accept 
turbulence in relations with the United States and with his 
neighbors, willing to assert Chinese interests. But at the same 
time, China's leaders are also careful to avoid outright 
conflict and confrontation.
    I do believe that China remains sensitive to risk and to 
cost. I also believe that the idea of the two versions of 
deterrence that Dr. Mastro mentioned, deterrence by denial, 
deterrence by punishment, are not necessarily mutually 
exclusive.
    To get to the fundamental question, though, and I think one 
of the challenges we have when talking about this--and, 
Senator, you gave an example of this--is that when Americans I 
think who are not specialists in this--when they think about 
what would be a threat to the United States, they think about a 
military that is roughly equivalent to the United States, a 
global military power capable of defeating a wide variety of 
forces all around the world.
    And the point that I make in my testimony that other China 
specialists have made in the past is that in order to cause 
significant problems for the United States, for our allies, for 
the broader liberal order, China does not need to equal the 
United States as a military power. Even as a dominant regional 
power or even an equal regional power in the Indo-Pacific, they 
still have tremendous capabilities to cause challenges and to 
be potentially a threat to the United States and their allies. 
And that is the challenge that we face in describing the 
threat, that they do not need to be equal to the United States 
in order for it to be a significant challenge.
    Senator Markey. Okay, thank you.
    Thank you, Mr. Chairman.
    Senator Gardner. Thank you, Senator Markey.
    And along the lines of cost, you know, in the past several 
years we have seen increased investment in new military 
equipment by China, increased arms, armaments, aircraft 
carriers. We have seen the expansion of Chinese military 
operations, the South China Sea expansion. We have also seen 
the base now in Djibouti. We have seen the efforts that China 
is aggressively undertaking as it relates to Taiwan, which is 
an ebb and flow it seems like, but recently, though, we have 
seen their successful efforts in El Salvador, Panama, the DR, 
and others as they have led to sort of de-recognition of Taiwan 
at the behest of China.
    You look back to efforts during the Cold War, U.S., Russia, 
and the U.S. efforts to sort of follow this cost imposition 
model where we would invest in arms, we would invest in 
ballistic missile defense systems and ideas, military 
placements to impose costs on the Soviet Union and how that led 
to the end of the Cold War because, in part, they simply could 
not keep up with the cost that they were being placed under.
    Do you see that same kind of threat, though, that we face 
from China right now where you mentioned they do not have to 
spend equal to the United States? Do we face sort of a Cold 
War-like cost imposition challenge where China forces us to 
spend money in investing arms, basing that we simply cannot 
keep up with? And what does that mean for the U.S. long-term 
competition with China? Dr. Mastro?
    Dr. Mastro. I think that is a very important point. We 
cannot outspend China. This type of competitive strategy is 
something that China has learned about and they are dead set on 
not being tricked into spending more money on things that they 
think they do not need. Even if the United States has superior 
technology, which we absolutely do--I would put my bet on a 
U.S. pilot over a Chinese pilot any day--given the fact that 
they are also developing technologies that are not so sexy that 
we do not hear about in these hearings but are cheaper and they 
can develop more of them means that we are playing this numbers 
game that even if we shoot down, for example, you know, 10 
aircraft for every one they shoot down of ours, they still win 
because they have so many of them.
    And so this is what goes to the point of having maybe a new 
approach, not thinking about what we did in the Cold War but 
thinking if we cannot outspend them, what would we possibly do 
in the Asia-Pacific. I know politically it is not very 
feasible, but I would encourage us at least as an exercise to 
think about if we were to engage in military operations in the 
Asia-Pacific, where would we want forces in Asia? And I will 
tell you we would not want them in Japan and Korea. Those are 
not places from which we can operate effectively against the 
Chinese threat.
    And so maybe it is time that, in addition to strengthening 
our relationships with our partners and allies, we think about 
new ways to be doing military operations, new ways to position 
our forces in that region so that we actually are more 
effective at dealing with this China challenge that Mr. Denmark 
laid out.
    Senator Gardner. Mr. Denmark, do we face a sort of cost 
imposition parallel with China?
    Mr. Denmark. I think there are some examples of particular 
cost challenges that we face within the military challenge. For 
example, a Chinese ballistic missile costs a lot less than a 
U.S. anti-missile defense system, for example. But more 
broadly, I do not see that dynamic at play yet.
    I think there are questions, though. There are challenges 
about how the United States prioritizes its spending. The 
Department of Defense estimates that China spent about $190 
billion in 2017 on defense, which is less than a third of what 
the United States is spending on defense. And I have not seen 
examples of China having a guns versus butter debate yet. To me 
the sustained increases in China's defense budget seem fairly 
sustainable.
    Senator Gardner. But I guess I mean that they would force 
us to spend money, so the reverse of the Cold War.
    Mr. Denmark. So the question to me--I think personally 
speaking that within a $700 billion defense budget, I believe 
that we would have the ability to out-compete with China, but 
it would require for the United States to prioritize 
investments specifically tailored to the China challenge rather 
than funds going elsewhere. And that is a question for the 
executive branch. That is a question for the Congress about 
where our priorities lie.
    There are multiple examples of where the United States--in 
our documents, we say the Indo-Pacific is important. We say 
that we want to compete with China. Yet, in several measures of 
budget expenditure, the numbers tell a different story. For 
example, look at the numbers for security assistance in which 
U.S. security assistance towards East Asia is lower than--I 
think it is the lowest region that the United States spends 
than any other region in the world, including like Latin 
America. So to me it speaks to the old Washington axiom of show 
me your budget and I will show you your strategy.
    I think the language of competition, the strategy of 
competition is very important. As you said, Senator, the Obama 
administration's rebalance I thought was a good start to those 
prospects, but I think we will need to continue to shift our 
budget allocations or begin spending more in order to be able 
to effectively compete.
    Senator Gardner. Dr. Mastro?
    Dr. Mastro. And if I can just add to that by saying if the 
United States is successful in its spending and builds a 
military that China cannot challenge, we still have to have a 
whole-of-government approach because what China is going to do 
is shift to different tools in its toolbox like economic 
coercion, like political persuasion. If China gives some 
benefits to our allies and partners such that they kick out the 
United States military, it does not matter how advanced our 
systems are. So we also have to be very cognizant and look for 
those indicators as well.
    Senator Gardner. Thank you.
    In your testimony, you both talked about increasing 
engagement to China around the globe. Their interests have 
increased, you know, the concern over sea lane security, anti-
piracy efforts, investments in that within their military, 
their business location around the globe, the Chinese business 
community now global indeed. If you look at its actions in El 
Salvador, you look at some of the agreements that it appeared 
that they may have made or at least El Salvador was asking 
them--Taiwan in order to deny China's request involving money, 
dollars, financing of political parties, those kinds of 
things--and perhaps I am going to turn it over to Senator 
Markey. Maybe we can get back to this because I am out of time. 
But I want to get into a little bit about the threat perhaps 
that we face within this hemisphere of Chinese military 
operations, basings in a place like El Salvador if that is part 
of it. But Senator Markey. We will come back to that.
    Senator Markey. Great. Thank you.
    So I am trying to get a frame for this. So let us just say 
roughly for the sake of the discussion that we are having that 
the United States military budget is in the ballpark of $700 
billion, and the Chinese military budget is in the ballpark of 
$180 billion to $200 billion per year. Do you agree with that? 
And that the bulk of their dedication of that $180 billion to 
$200 billion is in the Asia-Pacific area, while ours is spread 
out, although they are beginning operations in other parts of 
the world, but still the large concentration is in that region.
    So talk about that in the context of President Trump's 
America First policy and our need for alliances to deal with 
the fact that while our budgets may look very different in that 
region, the gap is not nearly as great and why it would be 
important for us to keep our alliances intact and in fact to 
enhance them. Mr. Denmark?
    Mr. Denmark. So thank you, Senator.
    I think that the fundamental assessment from my point of 
view is that U.S. alliances in Asia are fundamental to our 
power, our access, and our interests in the region. Not only do 
they host tens of thousands of U.S. service people, but they 
also act alongside us. Their security forces, their militaries 
operate shoulder to shoulder with ours, providing public goods, 
maintaining stability, allowing for the stability and 
prosperity that we have enjoyed in Asia for so long.
    The challenge, of course, as Dr. Mastro has pointed out, is 
that for our allies and our partners, this is not just a 
military question. This is a whole-of-government question. And 
other aspects of American power, particularly trade and 
investment, have geopolitical effects. We have entered a 
situation now for most countries in Asia. They see China as the 
main source of economic opportunity and the United States as 
the main source for security. And the dilemma that these 
countries face is that they want to avoid being forced to 
choose. There is not necessarily a lot of trust towards China, 
even as the dollars come in. In fact, my sense is that the more 
renminbi that comes into a country in terms of Chinese aid, the 
more worried they get about maintaining their own independence, 
their own sovereignty.
    Senator Markey. Just in the context of that region when we 
are talking about the Quad, the multilateral security 
arrangement with Japan, India, Australia, the United States in 
that region as a pact, how important is that and what do we 
have to do to make sure that it does not deteriorate?
    Mr. Denmark. So I would say the Quad is important in 
conception but so far is very limited in terms of what it 
actually brings primarily because the different countries have 
very different approaches to China and very different 
geopolitical orientations. So, for example, India--they are 
worried about China. They want to improve their relations with 
the United States, but at the same time, they have no interest 
in being seen as an ally of the United States. They have no 
interest in being seen as directly trying to confront the 
Chinese. They want to have a more independent approach. And 
because these countries have such different orientations, it 
complicates the effectiveness of these mini-laterals.
    But I do think that the various institutions springing up 
in Asia, be it ASEAN, the various trilaterals, the bilateral 
alliances involving the United States, the emerging 
relationships between various countries like India and Vietnam, 
for example, I think are all important as part of building a 
network of alliances and partnerships that help strengthen the 
international order but also complicate Chinese efforts to put 
themselves at the center of regional geopolitics.
    Senator Markey. So should the United States abandon the 
rules-based international system? And what would the 
concessions be that we would try to extract in order to take 
such a step? Dr. Mastro?
    Dr. Mastro. So, sir, I do not think we should abandon it. 
Instead, what I am arguing for is an expansion of that system. 
I think that actually the rules-based international order is 
very limited. If you look at the definition, the party to that 
order, the amount of countries that actually might be involved 
in certain treaties, it is not every country possible. For 
example, India has very different views on things like 
cybersecurity than the United States does. And so I think if we 
could manage to build consensus in these areas of uncertainty, 
we could actually shape China's choices.
    And to that end, that gives the United States a lot of 
political power because the bottom line is one of the main 
differences between today and maybe 10 years ago is for the 
United States, the security benefits that we give to our 
partners, allies in the region are no longer enough to outweigh 
the economic benefits that they get from interacting with 
China. And so we need a security benefits-plus type of strategy 
in which we think also about the economic benefits, which is 
difficult under the current administration given the trade 
policy, but also those political benefits by building new 
international institutions and building new norms and consensus 
around areas where that consensus has failed to date.
    Senator Markey. Thank you.
    Thank you, Mr. Chairman.
    Senator Gardner. Going back to the question I started to 
talk about, just the investments that China has made in South 
America, the investments China is making in Central America, if 
you look at investments in Panama and El Salvador and at least 
apparently in El Salvador as perhaps part of an agreement as it 
relates to the decision El Salvador made on Taiwan, look at the 
sale of submarines to countries, Thailand, do we see that as a 
continued opportunity for China's military expansion? Will we 
see military basing affecting U.S. operations in Thailand? Will 
we see perhaps opportunity for military entrance into Central 
America, into South America, China basing even perhaps? Mr. 
Denmark?
    Mr. Denmark. Well, I think there is a lot that remains to 
be seen. I do not think there is a definitive yes or no answer 
to that question, but I do expect that Djibouti, being the 
first overseas base that China has established--I fully expect 
that that will not be the last. Where additional facilities may 
pop up remains to be seen. I personally would expect more 
facilities to be established along the trade routes from the 
Western Pacific through the Indian Ocean into the Middle East. 
I would expect to see more there before I would expect to see 
them in Latin America primarily because of China's economic 
interests, but it remains to be seen.
    I do think--and I addressed this in my prepared statement--
that China's thinking about overseas basing and especially 
thinking about alliances and partnerships is very different 
from how the United States thinks about it. Based on my 
conversations with Chinese academics, my sense is that Chinese 
officials and Chinese academics see these relationships as 
fundamentally transactional and fundamentally coercive to a 
degree. And so I think that will ultimately limit the 
effectiveness and the breadth of these facilities in peacetime 
and especially during potential conflict and crisis when these 
countries will suddenly be forced to make a choice to allow 
Chinese military forces to operate from their country. When 
there is a longstanding, deep, values-based alliance, that 
calculation for an ally is very different when the arrangement 
is purely transactional.
    Senator Gardner. Dr. Mastro?
    Dr. Mastro. I do not think China is going to pursue the 
same type of global military presence that the United States 
has. This goes to one of the points in my written testimony 
about entrepreneurial actions. China sees what the United 
States does globally as something that is ineffective being 
largely not only with a global military presence but being very 
intimately involved in the politics of countries and then 
supporting different sides to ensure that you have someone in 
power that is supportive of your military operations or your 
general policies in that region. A lot of Chinese strategists 
will write that this is what is costing the United States so 
much money and will ultimately lead to our demise. And so I 
think China is going to pursue a different way, not because 
they do not have the capabilities to emulate the United States, 
but because they think that is actually what is leading to the 
U.S. decline.
    What might that different thing look like? I think, for 
example, China is much more likely to rely on local authorities 
to protect their interests abroad than the United States would 
feel comfortable with. We already know that they are 
indifferent to who is in power in whatever country. They are 
more than happy to change whatever deal they had with the 
previous administration or leader to a different one right 
after that.
    Also, I think it is telling that Mr. Denmark referred to 
facilities, not bases because the fundamental structure of a 
lot of what China is doing is more right now logistics-focused 
and they are not prepositioning offensive systems there. So I 
think that is important as well.
    The main point is if they do move any sort of military 
operations beyond their immediate region, the purpose is going 
to be not so much to impact U.S. operations but to facilitate 
their own. But the bottom line is, when I saw the National 
Security Strategy and its promotion of this idea that we are in 
a great power competition with China, to me that signaled that 
what becomes important is no longer the U.S.-China competition, 
but the United States' relationship with the rest of the world, 
and it enhances the influence of countries like Djibouti in 
U.S. strategy. So more resources, military or otherwise, need 
to be focused on some of these smaller countries.
    Senator Gardner. Mr. Denmark, you talked a little bit about 
the security versus economic sort of relationship, that they 
look at the United States as a security relationship, they may 
look at China as an economic relationship. But eventually that 
cannot sustain itself because if there is no sort of economic 
interest--or can it sustain itself I guess is the question. If 
there is no economic opportunity and if the benefit of the 
relationship is flowing one way and the expense of the 
relationship is flowing another way, can that continue and will 
nations--and regional in particular--look at that and say there 
is a danger in not having any kind of a--of moving too far down 
the path of a security versus an economic relationship?
    Mr. Denmark. Yes, sir. I believe that countries are 
generally uncomfortable with such a scenario in part because 
they want to avoid being forced to make a choice informed by 
their distrust of Chinese intentions, informed by longstanding 
relations that many of them have with the United States. And to 
me, this points out to the need for the United States to 
enhance other aspects of its engagement with these countries. 
Having worked in the Pentagon, I tried to enhance our security 
relationships with these countries as best I could. But the 
need to enhance other aspects of this engagement, particularly 
on the trade and investment side, is geopolitically critical in 
my estimation to ensure that these countries are not put in the 
difficult position of needing to choose between Washington and 
Beijing because for many of these countries, they may not like 
China, they may prefer to work with the United States, but the 
reality is that China is close, China is large, and the United 
States is far away. And so making sure that they have the 
ability to avoid that choice I think is an important aspect for 
American strategy in the region.
    Senator Gardner. Thank you.
    Dr. Mastro?
    Dr. Mastro. I also just add that I think it is important to 
communicate to our partners and allies that we will not 
negotiate their security with the People's Republic of China. 
For example, when President Trump announced that we had reduced 
military exercises in South Korea, this was music to China's 
ears. This was their key strategy to enhance their relationship 
with North Korea in order to use that to get the United States 
to reduce their military presence. And so if we want to 
maintain those strong security relationships, we have to 
demonstrate to our partners and allies that we are not going to 
sacrifice, for example, our security relationships for the sake 
of economic benefits or cooperation in a different area with 
China.
    Senator Gardner. That is an interesting point. I think a 
question, Dr. Mastro, that I would have to follow up with that 
is if China sees an opening to reduce--and I think testimony 
before us today talked about the interests in the Korean 
Peninsula, China's interests in the Korean Peninsula. I think, 
Mr. Denmark, it was your testimony. You talked about sort of 
the three varying interests of U.S. involvement in the 
peninsula with the ultimate hope of getting the U.S. out of its 
involvement in the Korean Peninsula. Why do you think China has 
not pushed further on North Korea to perhaps widen that 
expectation that President Trump said that he would pursue 
fewer exercises? There have been discussions of whether or not 
troops would be removed from the peninsula. Why has China not 
pushed harder on North Korea to actually denuclearize in hopes 
that perhaps President Trump would further withdraw from the 
Korean Peninsula?
    Dr. Mastro. I think China's assessment is that what North 
Korea is doing, making the promises to consider 
denuclearization, was enough already to get the United States 
there. And so potentially by pushing it too much, you are 
really calling attention to the fact that--I do not want to 
create this image of China as a puppet master, but that this is 
part of a bigger strategy for China to overall reduce U.S. 
military presence and operations in the region. If that is what 
the discussion is about on the Korean Peninsula more openly, I 
think the United States would smartly be more resistant to 
making those types of changes. So I think that is why China is 
kind of indirectly behind the scenes trying to pursue these 
types of strategies.
    Senator Gardner. Senator Markey?
    Senator Markey. Great. Thank you.
    Let us go to North Korea and China and the promise that we 
would end or curtail those military operations and kind of 
reports that China would like to increase trade with North 
Korea just as a way of kind of maybe getting closer to them on 
the one hand but also kind of undermining our objectives with 
North Korea at the same time.
    Could you talk about that issue and what you think China's 
goals are in North Korea at this time?
    Dr. Mastro. I have written extensively on this issue, sir, 
and I think that China's goals are very similar to ours if we 
are looking just in the context of North Korea. Obviously, they 
would prefer a denuclearized Korean Peninsula.
    The difference is that China sees the Korean issue in the 
context of its broader competition with the United States. And 
so that denuclearization no longer becomes the top priority. So 
initially about a year ago, China was actively preparing for 
military contingencies in which they were going to invade North 
Korea without a North Korean invitation. The relationship 
between China and North Korea was very bad at that time, and 
they felt like if there was some sort of contingency involving 
the United States, they would have to get involved to protect 
their own interests.
    Once the diplomatic options became more viable and 
President Trump agreed to talk to Kim and Kim agreed to talk to 
President Trump, China shifted its strategy to try to use 
diplomacy to get the United States to decrease its presence in 
the region.
    So in the end, China would be more than happy, one, for 
North Korea to denuclearize, but two, Xi Jinping himself has 
said that the ideal scenario in the future is a unified Korea 
under South Korean control. Their views of North Korea have 
changed significantly. The issue is they do not want to pay 
costs to get rid of North Korea if that is to the benefit of 
the United States, if all that means is an increase of U.S. 
influence. And so I firmly believe that--and I am not 
advocating for this, but if the United States promised to leave 
the Korean Peninsula if North Korea no longer existed, that 
China would push North Korea so much and be more than happy to 
risk its collapse.
    Senator Markey. Your thoughts, Mr. Denmark.
    Mr. Denmark. I am less confident in my reading of Chinese 
intentions. I do broadly agree with Dr. Mastro about that 
China's approach to this has changed fairly radically, but I do 
think there are some differences between how China approaches 
the North Korea issue and how the United States does.
    First, I think fundamentally China seeks to manage the 
nuclear issue, not to solve it. And a piece of that is to 
prioritize stability over denuclearization. And within that, 
when the Chinese talk about stability on the Korean Peninsula, 
traditionally they seek to avoid the collapse of the North 
Korean regime.
    Yet, at the same time, they also have seen the United 
States as dangerous as well, the United States as a potential 
driver of instability. And so historically when the United 
States has appeared to Beijing to be more unpredictable or more 
likely to begin a conflict, China tries to placate the United 
States and tries to do things to reduce the potential that the 
United States would start a war.
    So I do think they have very different approaches to this 
issue than the United States. But I think right now the 
ultimate sense from Beijing right now is that they see the 
dynamics on the Korean Peninsula fundamentally through the lens 
of geopolitical competition with the United States.
    Senator Markey. Thank you.
    In September of 2013, China began a concerted effort to 
build artificial islands in the South China Sea by crushing 
coral reefs into sand. It built land features where none 
previously existed. On top of that, China expanded small 
outposts into military bases capable of conducting operations.
    Admiral Philip Davidson, the Commander of the United States 
Indo-Pacific Command, stated this year that China's 
militarization of the Spratly Islands in the South China Sea 
means, quote, China is now capable of controlling the South 
China Sea in all scenarios short of a war with the United 
States.
    Ms. Mastro, what considerations or challenges do these 
bases pose for other claimants and the United States in 
peacetime in the gray zone or in conflict? In other words, what 
are the implications of China's military bases in the South 
China Sea?
    Dr. Mastro. So militarily, sir, they expand the range of 
Chinese capabilities. And so I think I made the point 
previously that it is difficult for us to conceive of fighting 
a war with China using our bases in Korea and Japan, and that 
is primarily because of the range of conventional precision-
guided munitions that China has that can reach those bases and 
render them inoperable.
    In the South China Sea, which is about the size of the 
United States, China's power projection capabilities 
historically have been quite limited. And in the report, for 
example, one thing that was highlighted was the H-6K, one that 
has LACMs now. China can extend its range to 3,300 kilometers. 
But if you actually have bases there coupled with carriers, 
then China is able to sustain combat sorties, for example, for 
longer periods of time at farther ranges than it was before. 
And this is what allows it to be able to control, as the quote 
suggested, large areas of the South China Sea, the air and the 
sea.
    I would just mention on the gray zone side that China can 
engage in gray zone activities only because the United States 
allows it to. As far as I understand it, there is nothing that 
tells us that, for example, if China says, well, this is a 
coast guard, then we cannot respond with the use of the U.S. 
Navy. We are too concerned about escalation, and Chinese knows 
this. They do not believe in miscalculation and inadvertent 
escalation, and so they use this to their advantage. And we 
should start being very clear about what our red lines are and 
obviously being then able to follow through with that.
    Senator Markey. So how does their presence there alter our 
military calculations in that region? What is changing now in 
your opinion because of their enhanced presence out in the 
South China Sea?
    Dr. Mastro. So there is a debate, sir, about how the United 
States will operate in that contingency. So certain bases or 
areas that used to be safe would no longer be safe as the 
Chinese are able to operate farther and farther out. So 
something like should the United States be dispersing its 
forces more or should we be spending more money on the defense 
of our bases once China is able to meet them, this is the type 
of debate that then extends beyond Japan to areas farther and 
farther out.
    Senator Markey. Mr. Chairman, thank you.
    Mr. Denmark, what do you make of China's apparent plans to 
use floating nuclear power plants to provide power to these 
bases in the Spratlys? What are the implications of floating 
nuclear power plants out in the ocean?
    Mr. Denmark. I have heard those reports too, Senator. I 
think it is concerning to me, both the idea of adding nuclear 
materials into an already very complex situation that also 
involves tremendous environmental problems created by China.
    I worry both about the sustainability of potentially 
introducing nuclear power into the South China Sea primarily 
because of the very dangerous weather that happens in the South 
China Sea. Personally, I would not want to be stationed on any 
of these islands with a nuclear reactor floating a few hundred 
yards off of the coast. And I think it would be irresponsible 
on the part of China to introduce nuclear materials, fissile 
materials, hazardous materials into the South China Sea in an 
area that does not need them and is already very much 
environmentally damaged by their actions.
    Senator Markey. Thank you.
    Senator Gardner. Thank you, Senator Markey.
    The South China Sea--obviously in the conversations we have 
had today, we have talked about the positioning of U.S. troops 
or forces, making different strategic decisions on where we 
place our investments from a defense perspective and an ally 
perspective.
    What are we left with in the South China Sea? I mean, they 
have militarized the islands. They have built the islands. What 
are we left with? Are we relegated simply to a freedom of 
navigation operation? Is there more that we should be doing? 
Should we talk with other--we should talk with other nations 
about other opportunities, but what are those other 
opportunities? Dr. Mastro?
    Dr. Mastro. So, first I will say that this militarization 
of the South China Sea is not over. In my discussions with 
Chinese Government officials, what I have been told is that 
movement of weapon systems to those islands has barely begun, 
and what they are going to do is maybe wait for a freedom of 
navigation operation or some excuse so that they can say they 
are responding to U.S. action in order to help them move more 
of their forces there. So what we are going to see is a 
hardening and also the movement of more weapon systems to these 
islands over the next few years.
    That being said, what can we do about it? This goes back to 
my previous point about sort of deterrence by denial versus 
deterrence by punishment. There is no amount of freedom of 
navigation operations which will stop China from militarizing 
these islands. Either we decide we are going to physically stop 
the supply or we do not have those other options.
    So what I would recommend is we promote something like a 
coalition that we had in the Gulf of Aden. I mean, we could 
even invite China to be a part of it for legitimacy reasons, 
but the idea would be that we have multinational patrols of the 
South China Sea waters to ensure freedom of navigation because 
right now no one doubts that the United States has freedom of 
navigation. So our ability to conduct these operations--they do 
not actually reassure anyone. Is the United States prepared to 
protect vessels that fly a Vietnamese flag, that fly a 
Malaysian flag? My understanding is we are not there yet, and 
as long as we are not there, then we are not actually going to 
be able to deter Chinese actions.
    Senator Gardner. Mr. Denmark?
    Mr. Denmark. So I agree that conducting freedom of 
navigation operations does not send a very robust reassurance 
signal, but I would say that to not conduct the operations 
would send a terrible----
    Senator Gardner. I agree.
    Mr. Denmark.--lack of reassurance, de-surance maybe, if 
that is a word.
    So I do think it is important for the United States to 
continue freedom of navigation operations and beyond that to 
fly, sail, and operate wherever international law allows. I 
think the key message to send is that China may be doing these 
things in ways that are incompatible with international law, 
but it does not change the United States' behavior or it does 
not intimidate us, that we are going to continue to do what we 
do.
    But I do think there are things that we could do in 
response to China's actions in terms of enhancing the ability 
of our allies and partners to defend their islands. Also, I 
think there are legal options to use the arbitration tribunal 
ruling on the South China Sea as a diplomatic tool against the 
Chinese.
    And another piece of this is that the U.S. has been very 
ambiguous in its take on which country rightfully owns which 
islands. And I think one of the challenges that we have had in 
the South China Sea is that we have called on the Chinese to 
comply with international law, to restrain themselves, but we 
have not had a statement on what happens if they fail. What 
happens if they continue to ignore our requests and the 
requests of the entire international community? And to my mind, 
one of the things that could come after that with the Chinese 
failure to comply with international laws and norms is to 
clarify where the United States has been ambiguous in the past 
and to use those sorts of diplomatic capabilities in order to 
show China that their behavior has consequences.
    Senator Gardner. Now, are you suggesting that we actually 
then would side with a claimant? Is that what you are saying?
    Mr. Denmark. What I would do is to look at what the 
arbitration tribunal ruling says in terms of China's rightful 
claims and the rightful claims of other countries and the 
rights of other countries and to use that as the basis for 
American policy going forward and to actively demonstrate U.S. 
commitment to that ruling.
    In terms of whether one country should control that island 
or not, I am not there yet, but I do think we need to be able 
to show the Chinese that their actions have consequences. And 
by enhancing the ability of our partners to defend themselves 
by maintaining a robust presence and expanding that presence 
and by using international law as a tool of diplomacy, I think 
we can show that their actions do have consequences.
    Senator Gardner. As our attention is drawn to the Korean 
Peninsula, as our attention is drawn in the South China Sea, 
where else is China actively pursuing a, either on land or by 
sea, South China Sea, another one, the South China Sea 2.0, so 
to speak? Is there another area that we are not paying 
attention to right now sufficiently with either a strategy or 
concern that they are encroaching, building, developing in the 
same manner or a similar manner?
    Mr. Denmark. To me, the area that is most like the South 
China Sea would be in the East China Sea. And there are some 
important differences. China is not conducting island building. 
They are not doing military construction there, but there is a 
very heated dispute between China and Japan over those islands 
in the East China Sea. China has been doing more to elevate 
their presence----
    Senator Gardner. We have given a security guarantee to the 
East China Sea. We have not to the Philippines on Scarborough. 
Should we be putting the same kind of security guarantees in 
place?
    Mr. Denmark. Well, it is a bit different because the 
language of the treaties are different. The treaty with Japan 
specifically refers to territory that is administered by Japan, 
in which case the Japanese islands clearly fall within that. 
The treaty with the Philippines is worded differently. So I 
think the way we talk about territory controlled by the 
Philippines would necessarily be different.
    But I do think that the Obama administration decision to 
clarify the U.S. position at the top level on Japan in the East 
China Sea definitely sent a strong signal to the Chinese and, 
at least for a time, my belief is decreased the amount of 
pressure that China was putting on the East China Sea. But I 
also think that is an area that we need to keep an eye on in 
terms of Chinese efforts to put pressure on our allies and to 
expand their claims into other people's territorial areas.
    Senator Gardner. Senator Markey?
    Senator Markey. Thank you.
    Now I would like to turn to nuclear weapons in China. The 
Defense Department reports that China is now in the process of 
completing their nuclear triad and is updating all legs of that 
nuclear force. The People's Liberation Army Rocket Force is 
enhancing its intercontinental ballistic missiles, of which it 
has between 75 and 100, to make them more survivable, more 
mobile. Among other updates, China is building a new stealth 
bomber, and the People's Liberation Army Air Force is upgrading 
its aircraft with two new air-launched ballistic missiles, one 
of which may include a nuclear payload. And at the same time, 
the PLA Navy is improving its submarine-launched ballistic 
missiles.
    Are China's nuclear force developments destabilizing? Do 
you see any indications that the Chinese Communist Party 
intends to reduce the role of nuclear weapons in its national 
security policy, or is it on an upward trajectory that would 
perhaps suggest to us that we should engage in nuclear arms 
control talks with the Chinese as we have traditionally with 
the Soviet Union and Russia? Ms. Mastro?
    Dr. Mastro. Thank you, Senator, for that question. It gives 
me the opportunity to say some things for which I am optimistic 
about the U.S.-China relationship.
    China's modernization of their nuclear forces, both 
quantitative and qualitative, is actually a stabilizing force 
in the U.S.-China relationship. For many decades, China has 
been uncertain about its second strike capabilities, 
specifically whether or not if the United States launched a 
first strike, they would have the capabilities to retaliate. 
And this has led to a number of rethinkings about Chinese 
nuclear strategy, which has traditionally been a no first-use 
strategy and a launch on attack versus launch on warning in 
terms of their exercises.
    And so from the United States' perspective, there has 
always been this gray area. There has been a concern that if 
the United States attacks, given Chinese conventional 
capabilities, this might be misconstrued as a first strike, 
causing China to launch other nuclear weapons because they do 
not have that second strike. So the development of the triad at 
sea and in air hopefully will make the Chinese more optimistic 
about their survivability of their nuclear forces and can 
actually lead to stabilization in a crisis.
    Senator Markey. You are saying that it reduces the hair-
trigger relationship between the United States and China with 
regard to its nuclear arsenal, that because they are deploying 
in a triad, because they are enhancing their capacity to 
withstand a first strike, that they are less likely to just 
push the button in a use it or lose it situation that may be 
ambiguous, that may ultimately trigger an accidental nuclear 
conflict between the United States and China?
    Dr. Mastro. Yes, sir. If it does change the perception of 
their ability to conduct a second strike, yes, it would be 
stabilizing.
    Senator Markey. So from your perspective--to get your 
comment as well, Mr. Denmark--Dr. Mastro, do you believe that 
we should begin to have arms control negotiations with the 
Chinese?
    Dr. Mastro. Sir, if we could, that would be a good idea, 
but there is no way the Chinese would be willing to talk to us 
about arms control over nuclear weapons because their position 
is when the United States reduces its arsenal to reach the 
level that China currently has, then they can begin those types 
of negotiations.
    Senator Markey. And do you agree with that, Mr. Denmark?
    Mr. Denmark. I do. The only other reason I would add for 
Chinese reluctance both because they see a wide disparity of 
nuclear capabilities and the size of our nuclear programs, but 
also they tend to see arms control negotiations, as we had with 
the Soviet Union, as evidence of a Cold War relationship. So if 
we were to begin to engage with them in some dialogue about 
nuclear weapons, whatever it may be, it would have to be 
couched in a way that is clearly different than how we handled 
these issues with the Soviet Union.
    Senator Markey. That is interesting.
    And of their military budget, do you know what percentage 
they are now putting into their nuclear triad?
    Dr. Mastro. I do not have specific numbers for that, but I 
would say that has been a lower priority of their military 
modernization. They have allowed it to go this long without 
having a secure second strike, and I think it is only because 
they do not have to make those tradeoffs between butter and 
guns at this point that they are starting to modernize their 
nuclear force.
    Senator Markey. Mr. Denmark, do you have any idea?
    Mr. Denmark. I have nothing else to add on that.
    Senator Markey. Great. Thank you, Mr. Chairman.
    Senator Gardner. Thank you, Senator Markey.
    And the final question for me. We talked a little bit about 
Taiwan earlier. China's intention as it relates to Taiwan. 
Today Senator Markey and I and Senator Rubio, Senator Menendez 
introduced a bill called the Taipei Act, which would create a 
U.S. strategy to work with countries that have relationships 
with Taiwan, what we can do to encourage those relationships to 
continue to counter Chinese efforts as it pursues the policy 
toward Taiwan.
    What is the ultimate goal of China as it relates? Is this 
an actual invasion force we are going to see? Is this continued 
economic rattling of the sword that we will see further pull 
Taiwan back into its policies, in line with its policies? What 
do you believe the ultimate goal is as it relates to Taiwan, 
Dr. Mastro?
    Dr. Mastro. The ultimate goal is reunification ideally by 
peaceful means. However, Xi Jinping made a number of statements 
in which he promised to the Chinese people that that 
reunification was going to happen I think he said by 2035.
    I was less concerned originally about those statements. I 
thought they were just something rhetorical that a leader says 
originally because I thought Xi Jinping was going to be 
stepping down in a couple years and no one could hold him 
accountable to those statements. But now that he has extended 
his tenure indefinitely, it does change the picture for when he 
made those statements about Taiwan and whether or not he thinks 
he is going to be held accountable to actually live up to them.
    I think the bottom line is China is prepared and is going 
to be willing to use force if they have to for that 
reunification, but they want to do it peacefully in the 
meantime.
    In terms of what the United States can do, I just want to 
highlight a basic point, which is provocation is not 
necessarily a bad thing. We are always worried about some 
action that is going to provoke China. Provocation can lead to 
escalation or tension, but it can also lead to the opposite, 
depending on what China learns from U.S. actions.
    Senator Gardner. So the legislation we introduced would 
also allow the administration to downgrade diplomatic 
relationships with the country that were to follow China as it 
relates to Taiwan. Is something like that an approach that you 
would agree with?
    Dr. Mastro. I think that, if the bottom line is we want to 
signal that we are willing to stand by Taiwan and that we do 
not want China to successfully engage in coercion vis-a-vis 
other countries the United States has to be willing to either 
impose costs on those countries, as you suggested, or provide 
certain benefits or positive inducements to get them----
    Senator Gardner. You mentioned provocation.
    Dr. Mastro. Yes.
    Senator Gardner. Give me an example.
    Dr. Mastro. So something like that, if you wanted to, for 
example, improve your relationship with Taiwan--I have heard 
maybe putting military members in uniform that are stationed 
out in Taiwan--or have high level leaders of the United States 
visit, that is really going to upset Beijing. But that is not 
necessarily going to be a bad thing in the end. It might mean 
that they understand that now is not the time to push the 
United States on Taiwan policy.
    Senator Gardner. Mr. Denmark?
    Mr. Denmark. So I agree the ultimate goal is unification 
with Taiwan preferably by peaceful means although China has 
never renounced the use of force.
    Senator Gardner. Have the odds increased that they would 
use force under Xi Jinping?
    Mr. Denmark. I think that the potential for Chinese force 
is dependent on several different factors, and they have talked 
about publicly what those factors may be. They are fairly 
vague, but I think broadly speaking so long as China's leaders 
believe that there continues to be progress made towards 
unification, that time is on their side. So long as they 
believe that it is possible that any military intervention 
would fail, I think those are some of the issues that they look 
at.
    But I do think it is important that when the United States 
thinks about its relationship with Taiwan, that the primary 
question is focused on what helps our relationship, what helps 
Taiwan. And questions of how China may react should be at most 
secondary, if considered at all.
    But the corollary to that to me is that to recognize that 
China will react. So I tend to look for policies related to 
Taiwan that substantively and substantially help Taiwan, that 
are not symbolic alone because what often happens and what I 
would hope to avoid is symbolic gestures that feel good for a 
bit to help Taiwan but ultimately drive a Chinese response that 
does not hurt the United States substantially but hurts Taiwan. 
So I tend to favor policies that are substantive and less 
symbolic.
    In terms of options on how to maintain Taiwan's 
international space, I do think that we are talking to a lot of 
these countries to maintain the relationship is important to 
convey that maintaining that relationship with Taiwan is in the 
U.S.'s interests. There is a bit of an awkward piece of it for 
our diplomats to handle is that we do not have an official 
relationship with Taiwan, but I think that is manageable.
    The key, though, to me for all of this is to think 
fundamentally: How does this help Taiwan? How does this 
maintain Taiwan's international space? And how do we convey to 
Beijing that maintaining a robust if an unofficial relationship 
with Taiwan is in the interest of the United States?
    Senator Gardner. Thanks, Mr. Denmark.
    Senator Markey?
    Senator Markey. And I just have one final area of 
questioning, if I may, and that just goes back to the Belt and 
Road Initiative which has resulted in a very generous policy by 
China of loaning money to countries, which they then cannot pay 
back, which then results in China being able to extract huge 
long-term concessions from those countries, Sri Lanka is just a 
perfect example where they have now had to give up a 99-year 
lease to the Chinese company, which is partially owned by the 
Chinese Government, 15,000 acres of land.
    And now it appears there are more countries that are 
deciding to reconsider how far in debt they want their 
countries or companies to be to a Chinese entity. But at the 
same time, President Xi just in the last few days has announced 
a new $60 billion program of grants, of loans around the world 
on top of the $60 billion program that they have had in the 
past that now has these consequences.
    So what are the implications for the United States, for 
global security of these Chinese strategies in country after 
country to gain access to or control over ports in countries? 
And what would you recommend to the United States that we do to 
try to make sure that we minimize the ability of this Belt and 
Road program to build economic and security relationships with 
companies in a way almost giving them offers they cannot refuse 
so that they become deeper indebted and more entangled into 
Chinese foreign policy objectives? Dr. Mastro?
    Dr. Mastro. I think just like we mentioned that the Chinese 
military does not have to be as strong as the U.S. military to 
be competitive, the United States does not have to offer as 
much money as China does to be competitive in the economic 
sphere. We really just have to show up and this is because one 
you already mentioned, that there is an increasing backlash 
against what China is doing, but also locally Chinese business 
practices lead to a reduced quality of a lot of these things.
    So I was in Djibouti last year, in Ethiopia, and this made 
me actually very optimistic about the United States' ability to 
compete when it comes to aid because while the United States 
was--for example, our base in Djibouti hires over a hundred 
Djiboutians and we insert hundreds of millions of dollars into 
the economy, the Chinese base hires zero Djiboutians and does 
not contribute to the economy. And they have built a railroad 
that does not even extend to the port, and the only reason they 
got that contract was through bribery.
    So I think what we are seeing now is that countries are 
learning. These economic policies on the part of China are 
relatively new and if they had the opportunity, they would 
rather have a road built by--at least what I heard in 
Ethiopia--like Japan that actually will last them longer versus 
a road built by China which they know they are going to have to 
rebuild in 5 years. And so at least in this area, I think it 
would actually be very easy for the United States to be 
competitive if we were contributing time, resources, and effort 
to being competitive in the economic sphere.
    Senator Markey. You are saying ``made in China'' may not be 
exactly what people are looking for in these countries after 
they have experienced some of the early examples of what that 
means for their country.
    Dr. Mastro. Yes, sir. In a lot of cases, like in the Japan 
example I gave with Ethiopia, our allies or partners have a lot 
stronger presence or relationships with countries than we do. 
And so it might be the case that instead of the United States 
trying to give aid or investing in these infrastructure 
projects, we would be working with our allies and partners to 
do the similar type of thing.
    Senator Markey. So, Mr. Denmark, Dr. Mastro says we have 
got to show up. We have got to have something that we are 
presenting here that demonstrates the United States' interest 
in these countries. So what do you recommend?
    Mr. Denmark. Thank you, Senator.
    Every year several senior Chinese officials will go to 
China with CEOs in tow, have a high level meeting with dozens 
of presidents, announce all these big deals, announce 
infrastructure projects, and it is a consistent high-level 
engagement. I completely agree with Dr. Mastro that we got to 
show up, but I would add that we need to show up with something 
in hand. Good intentions are not going to be sufficient in 
Africa.
    I think the Chinese miscalculate or overestimate the 
geopolitical effects of their economic moves. One of the 
problems I think of being a Marxist is that you tend to 
overestimate the political effects of economic ties.
    As I said, my sense is that as countries become more and 
more economically tied to China, the more they are worried 
about maintaining their own independence. So I do think they 
are looking for the United States. I do think they would rather 
work with the Americans or the Japanese or the Europeans or 
whomever, but we do need to show up.
    The initiative announced several weeks ago by Secretary of 
State Pompeo in this vein to enhance U.S. economic engagement 
in these areas I thought was a good indication of seeing the 
problem and trying to address it, not trying to copy the 
Chinese system, but playing to American strengths of the free 
market and American corporations. Secretary Pompeo received 
some criticism for the number he announced of $113 million. I 
think that is sort of an unfair comparison to what the Chinese 
announced especially in an off budgetary cycle announcement. 
But I do hope that as this initiative becomes more funded we 
are able to put more resources behind it because I do think it 
is the beginning of a very important geopolitical response to a 
lot of these challenges.
    Senator Markey. Thank you.
    Senator Gardner. Thank you, Senator Markey.
    Thanks to Senators Risch and Kaine for participating in the 
hearing today.
    And I think, Mr. Denmark, Dr. Mastro, the Asia Reassurance 
Initiative Act that I talked about at the very beginning of the 
hearing is something that will allow the U.S. to show up with 
policies and resources in hand to develop greater economic 
ties, greater security alliances and help on human rights and 
democracy throughout the region. And so with the Asia 
Reassurance Initiative Act, with the BUILD Act, I think that is 
a great step towards U.S. leadership and presence in Asia 
providing opportunities for a strategic balance and continued 
economic growth for the region.
    So thanks to both of you for your time and testimony today. 
Your homework assignment: the record will remain open for 
members to submit questions through Friday, until the close of 
business on Friday. I would ask that you return your answers to 
those questions as soon as possible.
    And with the thanks of the committee, the hearing is now 
adjourned.


    [Whereupon, at 4:05 p.m., the hearing was adjourned.]



                              ----------                              



              Additional Material Submitted for the Record


            Responses to Additional Questions for the Record
     Submitted to Dr. Oriana Skylar Mastro by Senator Cory Gardner

Sensitive Technologies
    Question 1.  There have been instances of U.S. technology companies 
willingly partnering with Chinese entities in critical technology 
sectors, including with state-owned Chinese entities or entities tied 
to the People's Liberation Army.

   Do you believe that the United States companies should continue to 
        partner with Chinese entities, including in sensitive areas 
        such as processor memory chips? Should the U.S. Government be 
        concerned about such partnerships?
   What is the appropriate role of government when a U.S. company 
        willingly partners or transfers technology to a Chinese entity 
        that may threaten overall U.S. competitiveness in that sector 
        or raise national security concerns? What options should 
        Congress and the U.S. Government consider in such cases?

    Answer. First, there needs to be a distinction between private 
sector activity that hurts U.S. economic competitiveness and that which 
raises significant national security concerns.
    I do not believe the U.S. Government should regulate the former if 
done willingly. However, Washington needs to continue to pressure China 
on issues of industrial espionage and cyber-enabled IPR theft. An FBI 
investigation in 2015 indicated that China paid Chinese nationals to 
work at U.S. technology companies where they became insiders and 
transferred sensitive technology back to China. Cyber theft is another 
area where China has targeted U.S. assets. The report for IP Commission 
in 2013 showed that 96% of the world's cyber theft was from China which 
resulted each year in 100 billion in lost sales, 2.1 million in lost 
jobs, and $300 billion worth of stolen intellectual property.
    In the case of the latter, if technology transfer improves PLA 
lethality, it should be prevented, even at significant economic cost to 
U.S. companies. This issue is that currently the U.S. Government does 
not have a system to monitor venture investing or transferring early-
stage technology. More importantly, the Committee on Foreign Investment 
in the United States (CFIUS), one of the primary tools to mitigate 
foreign investment, is only partially effective in protecting national 
security since transactions that do not result in a foreign controlling 
interest cannot be reviewed by CFIUS. This is the first step in 
monitoring and investigating the partnerships and transactions between 
U.S. and Chinese companies that work in sensitive sectors--this can 
potentially be done by expanding the authority of CFIUS.
UAS/MCTR
    Question 2.  The recent Department of Defense report to Congress on 
Chinese military power notes that the Chinese continue to exploit the 
void left by the U.S. in the unmanned aerial system (UAS) space, due to 
U.S. Government concerns about the Missile Technology Control Regime 
(MTCR).

   How should the Trump Administration ensure that we quickly respond 
        to the urgent UAS requirements of our partners and allies given 
        the MTCR restrictions, especially considering the growing 
        Chinese role in the UAS market?
   What are the concerns about our partners and allies obtaining 
        Chinese UAS technology?

    Answer. There are three main concerns with partners and allies 
obtaining Chinese UAS technology: 1) Foreign Military Sales are often 
used as a tool of diplomacy, and thus U.S. allies and partners could 
become closer to, and more technologically intertwined, with China; 2) 
If allies are reliant on China for certain platforms and technologies, 
then in a conflict scenario they may not have access to needed 
replacements, refurbishments and maintenance, which could impact their 
military effectiveness, 3) External sales provides financial support to 
the
    Currently, MTCR constrains U.S. ability to export UAS. Since China 
does not sign the MTCR, China can sell drones to all nations without 
clear standard and regulations, including countries in the Middle East 
that the U.S. does not sell to due to national security concerns. For 
instance, in 2015, China sold CH-4s to Iraq, Saudi Arabia, UAE and even 
U.S. allies such as Jordan and Egypt. While the U.S. had a deal to sell 
UAVs to Jordan and Egypt, its slow approval processes forced its allies 
to purchase China's drones instead.
    MTCR has played an important role in limited the proliferation of 
missile technology--and the United States should continue to support 
the control regime. A unilateral U.S. move that violates its MTCR 
commitments could weaken the regime. If possible, the best course of 
action is to work within the regime to change, update and specify its 
coverage over UAS and aspects of its emerging technology.



                               __________


            Responses to Additional Questions for the Record
        Submitted to Abraham M. Denmark by Senator Cory Gardner

Sensitive Technologies
    Question 1.  There have been instances of U.S. technology companies 
willingly partnering with Chinese entities in critical technology 
sectors, including with state-owned Chinese entities or entities tied 
to the People's Liberation Army.

   Do you believe that the United States companies should continue to 
        partner with Chinese entities, including in sensitive areas 
        such as processor memory chips? Should the U.S. Government be 
        concerned about such partnerships?
   What is the appropriate role of government when a U.S. company 
        willingly partners or transfers technology to a Chinese entity 
        that may threaten overall U.S. competitiveness in that sector 
        or raise national security concerns? What options should 
        Congress and the U.S. Government consider in such cases?

    Answer. Partnerships between American and Chinese companies, if 
structured correctly, offer significant opportunities for both sides. 
Yet China's practices of demanding technology transfers, its history of 
using any means to steal intellectual property, and the close 
relationship between many large Chinese companies and the Chinese 
Communist Party raises national security concerns that cannot be 
ignored. I personally have significant concerns about partnerships 
between Chinese entities and U.S. companies that manufacture components 
of critical infrastructure and/or the defense industrial base for the 
United States.
    The U.S. Government would need to balance the interests of 
maintaining a free market and supporting legitimacy trade and 
international investment with national security considerations of 
defending critical technologies from theft or exposing critical 
infrastructure to potential malign activities. Personally, I would 
argue that government should focus on the national security 
implications of any particular partnership or technology transfer 
between an American company and a Chinese entity.
UAS/MCTR
    Question 2  The recent Department of Defense report to Congress on 
Chinese military power notes that the Chinese continue to exploit the 
void left by the U.S. in the unmanned aerial system (UAS) space, due to 
U.S. Government concerns about the Missile Technology Control Regime 
(MTCR).

   How should the Trump administration ensure that we quickly respond 
        to the urgent UAS requirements of our partners and allies given 
        the MTCR restrictions, especially considering the growing 
        Chinese role in the UAS market?
   What are the concerns about our partners and allies obtaining 
        Chinese UAS technology?

    Answer. UASs offer unique capabilities at a lower cost than some 
manned systems, making them particularly attractive for countries that 
face significant security challenges but limited resources. 
Reclassifying UAS as aircraft, rather than missiles, could help the 
U.S. Government bypass MTCR restrictions. Yet further and more 
stringent end-use constraints may be required to ensure that such 
capabilities do not proliferate. Yet I would argue that this decision 
should be made from a national security perspective--to build the 
capabilities of, and maintain interoperability with, key allies and 
partners.
    My primary concern would be regarding a lack of interoperability. 
One of the reasons U.S. forces are able to operate so effectively with 
those of our allies and partners is because our platforms are often 
built for interoperability. By acquiring Chinese UAS capabilities, 
allies and partners may limit the ability of their forces to operate 
effectively with their American counterparts. Even if work-arounds 
could be developed, the U.S. military would need to examine any 
potential vulnerabilities involved with operating Chinese-origin UAS on 
U.S. networks.

                          THE CHINA CHALLENGE



          PART 3: DEMOCRACY, HUMAN RIGHTS, AND THE RULE OF LAW

                              ----------                              


                       TUESDAY, DECEMBER 4, 2018

                               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 10:33 a.m. in 
Room SD-419, Dirksen Senate Office Building, Hon. Cory Gardner, 
chairman of the subcommittee, presiding.
    Present: Senators Gardner, Rubio, Markey, and Kaine.

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

    Senator Gardner. This hearing will come to order.
    Let me thank you all, all the witnesses, to the 11th and 
final hearing for the Senate Foreign Relations Subcommittee on 
East Asia, The Pacific, International Cybersecurity Policy in 
the 115th Congress.
    I first want to again thank Senator Markey for being an 
incredible partner, absolutely incredible partner, on this 
subcommittee. You could not have asked for anybody better to 
work with.
    The East Asia has held the most hearings of any Foreign 
Relations subcommittee in the 115th Congress. It is quite an 
achievement for the American people who sent us here to conduct 
vigorous oversight over our nation's foreign policy. And I 
thank Senator Markey for the work that we have done together 
throughout the Indo-Pacific region.
    In conjunction with this hearing, we authorized the Asia 
Reassurance Initiative Act, or ARIA, the landmark legislation 
that will strengthen our alliances and deter our adversaries in 
the Indo-Pacific for generations to come. To inform this 
legislation, we conducted five hearings, examining a range of 
national security, economic, and rule of law challenges in the 
Indo-Pacific. We concluded with a hearing on May 15th, 2018 
featuring State Department and Department of Defense officials. 
On June 21st, 2018, Secretary Pompeo and Secretary Mattis 
formally endorsed ARIA in a letter to this committee. ARIA 
passed this committee unanimously on September 26th, 2018, and 
I am hopeful that it will be signed into law before the end of 
the year.
    In this subcommittee, we also held two hearings on North 
Korea, examining the shift from strategic patience policy of 
the last administration to the maximum pressure and engagement 
policy of this one. We agreed that clearly much more work needs 
to be done to achieve complete, verifiable, and irreversible 
denuclearization of the North Korean regime, as required by 
U.S. law.
    We also held an important hearing on cybersecurity policy, 
examining state-sponsored threats in cyberspace as a vital 
national security concern for the United States that needs to 
be seriously and immediately addressed.
    This hearing today will be the final hearing in a three-
part series of hearings titled ``The China Challenge'' that 
examines how the United States should respond to the challenge 
of a China that seeks to upend and supplant the U.S.-led 
liberal world order.
    Our first two hearings focused on security and economic 
aspects of China's authoritarian rise. Today's hearing will 
focus on democracy, human rights, and the rule of law, values 
that have been fundamental to the conduct of U.S. foreign 
policy for generations.
    As these values relate to China, the Trump administration 
has been clear on the scope of the problem and gravity of the 
challenge before us. According to the National Security 
Strategy, for decades U.S. policy was rooted in the belief that 
support for China's rise and for its integration into the post-
war international order would liberalize China. Contrary to our 
hopes, the report stated China expanded its power at the 
expense of the sovereignty of others.
    According to the National Defense Strategy, the central 
challenge to U.S. prosperity and security is the reemergence of 
long-term strategic competition by what national security 
strategy classifies as revisionist powers. It is increasingly 
clear that China and Russia want to shape a world consistent 
their authoritarian model and gaining veto authority of over 
nations' economic, diplomatic, and security decisions.
    The so-called authoritarian closing under President Xi 
Jinping has resulted in an unprecedented and intensifying 
crackdown on civil society, ethnic minorities, and religious 
freedom in China. The news of mass concentration camps for 
Uighur Muslims in the Xinjiang autonomous province has shocked 
the conscience and necessitates a serious response from the 
United States and the international community.
    The crackdowns in the Tibet autonomous region is 
intensifying while Beijing continues to refuse negotiations 
with the Central Tibetan administration. Human rights defenders 
are routinely jailed, tortured, and otherwise deprived of 
liberty. A genuine freedom of speech and assembly are 
nonexistent. Corruption and abuse of power are rampant. The 
judicial system is a tool of the state and the party and not an 
impartial arbiter of legal disputes.
    So today, we have three distinguished administration 
witnesses to shed light on how the United States should 
approach democracy, human rights, and the rule of law as they 
relate to strategic competition with China and how the United 
States should advance these values on Chinese soil.
    With that, I will turn it over to Senator Markey for his 
opening comments.

              STATEMENT OF HON. EDWARD J. MARKEY, 
                U.S. SENATOR FROM MASSACHUSETTS

    Senator Markey. Thank you, Mr. Chairman, very much. And 
again, thank you for this incredible set of hearings which we 
have had in this subcommittee over the past 2 years. They've 
been just absolutely fantastic, and I want to compliment you 
for that.
    This hearing is just a continuation of them, looking at 
Chinese policies and influences. These challenges are not 
insurmountable, but they do require our thoughtful study and 
close attention.
    Around the world, all countries, including the United 
States, rely on the rules-based international order to underpin 
security and prosperity, to help provide a level playing field, 
to provide the maximum opportunity for the greatest number of 
people, and to defend and protect certain fundamental rights. 
So, it is of the utmost importance that we do everything in our 
power to ensure that this system remains.
    Our first hearing focused on economic policies of the 
Chinese Government that ran counter to these tenets.
    The subsequent hearing explored China's military 
modernization and expansion and its implications for the 
security interests of America, our allies, and the fundamental 
peace and stability of the Indo-Pacific.
    Today's hearing seeks to capture developments in Chinese 
domestic policy that could have broad implications for the way 
people are treated around the world. After all, what has made 
American foreign policy strong and effective is not just our 
economic and military strength, but our commitment to certain 
values. The world has looked up to the United States. It 
watched as our democratic experiment developed--one that 
prioritized the promotion of basic individual freedoms and 
liberties.
    But we must make clear that this was not just an 
experiment, that American democracy is not obsolete, and that 
U.S. leadership on human rights is not temporary. While 
American democracy has been messy at times, it has also been 
the envy of the international community. It is what has allowed 
us to be a moral leader in the eyes of the world.
    As China rises, it grows evermore influential around the 
world, and elements of China's policies have challenged long-
established concepts of rights and freedoms.
    I, like many others, at one point believed that China's 
entry into the international community would lead to increased 
political openings, the promotion of freedom of expression, and 
greater commitment to human rights.
    Unfortunately, we are seeing just the opposite trend. We 
are seeing the Chinese Government's authoritarian attitudes 
influence five key areas.
    First, it seeks to politically curb dissent through 
censorship of all types of freedom of expression, including 
online. This approach is drawing American companies such as 
Google into this way of thinking and, along the way, 
compromising data privacy provisions on their online platforms 
in exchange for greater market access for American companies.
    Second, it is employing extrajudicial tactics to intimidate 
citizens, including those from the United States. Along with 
Senators Cardin, Rubio, and Gardner, I am concerned that this 
administration is not raising these issues with the Chinese 
Government, including its use of exit ban policies to prevent 
innocent Americans from leaving China, which violate 
international conventions and bilateral agreements. We have to 
do more.
    Third, we are seeing the continued ethnic and religious 
repression of minority communities in China. The Chinese 
Government's tactics to repress Tibetan Buddhists is being 
replicated in Xinjiang. There are reports that as many as 1 
million Muslim Uighurs have been forced to take part, quote, in 
reeducation camps where they must renounce their religious and 
ethnic identity. This policy is an abomination and defies all 
forms of basic human rights principles. This sadly falls into a 
pattern of state behavior as the Government's policies to 
target Christians and members of other faiths is well known.
    Fourth, the Chinese Government is now exhibiting the bold 
behavior of targeting activists and dissidents overseas. In one 
case, Chinese authorities have threatened the family members of 
Radio Free Asia's Uighur news service journalists, should they 
continue to report on the activities inside of China.
    And finally, China's Government has protected other 
governments accused of significant human rights violations. 
China is working through the United Nations Security Council to 
protect the Government in Burma from international condemnation 
for its brutal assault on the Rohingya. It is weakening the 
international efforts to pressure the Hun Sen regime in 
Cambodia by offering financial loans. It is giving lucrative 
lines of credit to Venezuela as the world tries to isolate 
President Maduro. And it is noticeably silent on President 
Duterte's drug war in the Philippines, as it strengthens the 
economic and security partnership with Manila. Such policies 
undermine established human rights standards internationally, 
and they challenge the individual freedoms and liberties the 
majority of the world holds dear.
    So it is imperative that we confront this challenge. We 
must engage with our Chinese counterparts head-on about our 
concerns and work with our allies and partners to establish a 
collective front against this malign behavior. And we have to 
do it at the highest levels, starting with the President, 
because we cannot credibly defend human rights without the 
backing of the Office of the President.
    And there are many unanswered questions about how this 
administration is dealing with China's authoritarian behavior. 
How effective are we in calling out Chinese behavior? 
Especially when we pull out of institutions like the Human 
Rights Council, which can serve as an effective venue to 
applying pressure. How are we raising our concerns with the 
Chinese Government, and what is our President saying to 
President Xi about human rights? Did this come up at the G20, 
and if so, how did the conversation go? If not, why not? We do 
not know.
    We need to shed light on these questions if we want to help 
stem the tide of its authoritarian challenges to democracy, 
human rights, and the rule of law. We must ensure our 
diplomatic efforts are comprehensive and effective. Our moral 
leadership of the planet depends upon it.
    So I thank you, Mr. Chairman, once again, and I thank this 
very distinguished panel for being here today. And I yield 
back.
    Senator Gardner. Thank you, Senator Markey.
    And I am going to introduce all three witnesses, and then 
we will begin with you, Mr. Busby.
    Our first witness is Scott Busby who serves as Deputy 
Assistant Secretary of State at the Bureau of Democracy, Human 
Rights, and Labor. Previously he served as Director for Human 
Rights on the National Security Council in the White House from 
2009 to 2011 where he managed a wide range of human rights and 
refugee issues. Welcome to the committee and thank you for your 
service.
    Our second witness is Laura Stone, who serves as Acting 
Deputy Assistant Secretary of State at the Bureau of East Asian 
and Pacific Affairs. Previously she served as the Director of 
the Office of Chinese and Mongolian Affairs, Director of the 
Economic Policy Office in EAP, and Economic Counselor in Hanoi, 
Vietnam. Thank you for being here.
    Our third witness is Gloria Steele, who serves as Acting 
Assistant Administrator at the Bureau for Asia of the United 
States Agency for International Development, or USAID. A career 
member of the U.S. Senior Executive Service, she was USAID 
Mission Director for the Philippines and the Pacific Islands 
prior to her appointment. I look forward to your testimony.
    Secretary Busby, please begin.

  STATEMENT OF SCOTT BUSBY, DEPUTY ASSISTANT SECRETARY, HUMAN 
   RIGHTS AND LABOR, U.S. DEPARTMENT OF STATE, WASHINGTON, DC

    Mr. Busby. Thank you, Mr. Chairman and Ranking Member 
Markey, and members of the subcommittee. We very much 
appreciate your attention to the human rights situation in 
China and the invitation to appear before you today.
    Defending universal rights and fundamental freedoms has 
been and will continue to be an essential element of American 
foreign policy. Governments that respect human rights remain 
the best vehicle for promoting prosperity, happiness, and 
peace.
    Vice President Pence aptly summed up the current human 
rights situation in China in his recent speech at the Hudson 
Institute where he said, quote, ``For a time Beijing inched 
toward greater liberty and respect for human rights. But in 
recent years, China has taken a sharp U-turn toward control and 
oppression of its own people.'' I think you both fully 
described that situation in your own remarks this morning.
    As both of you mentioned, some of the most widespread and 
worst human rights abuses taking place in China right now are 
occurring in the Xinjiang Region. The U.S. Government assesses 
that since April 2017, Chinese authorities have indefinitely 
detained at least 800,000 and possibly more than 2 million 
Uighurs, ethnic Kazakhs, and members of other Muslim minorities 
in internment camps. Reports suggest that most of those 
detained are not being charged with crimes, and their families 
have little to no information about their whereabouts.
    At first, China denied the existence of such camps, but as 
public reports have emerged, Chinese authorities now assert 
that they are, quote, vocational education centers, closed 
quote, which glosses over the fact that many renowned Uighur 
intellectuals and retired professionals are also detained in 
these camps.
    Former detainees who have reached safety have spoken of 
relentless indoctrination and harsh conditions. For example, 
praying and other religious practices are forbidden. The 
apparent goal is to force detainees to renounce Islam and 
embrace the Chinese Communist Party.
    The recent testimony of Marigall Terson is a chilling and 
heart-wrenching account of just how badly the Chinese 
Government is mistreating many of the people who have been 
detained in the Xinjiang Region.
    Life outside the internment camps is not much better. 
Neighborhoods have entry and exit checkpoints manned by armed 
police. Families have been forced to accept Chinese officials 
into their homes for extended home stays. Thousands of mosques 
have been shuttered or destroyed. Some have even been converted 
into communist propaganda centers.
    Unfortunately, fleeing China is not enough to escape the 
long arm of the Chinese Government. China has routinely 
pressured other countries to return Uighurs, ethnic Kazakhs, 
and members of other Muslim minority groups, which has often 
proven successful. Even when such individuals reach safety, 
China continues to harass and intimidate them.
    China's repression of minority groups does not end in 
Xinjiang. Its policies have spread hundreds of miles away, for 
instance, to Hui Muslim communities. Tibetans also face 
continued repression and pervasive surveillance. Indeed, the 
Tibetan Autonomous Region was the testing ground for many of 
the techniques now used in Xinjiang.
    Chinese authorities also continue to restrict the freedom 
of religion of Christian communities and others. Protestant 
house churches are being shut down, and even officially 
registered churches are under increased government scrutiny. In 
September, the Holy See and China signed a 2-year provisional 
agreement on the selection of bishops in China, which raises 
additional religious freedom concerns. Falun Gong members and 
members of the Church of Almighty God also reportedly continue 
to face detention, forced labor, and torture.
    As both of you noted, the Government also continues to 
abuse lawyers, human rights defenders, and other activists. We 
are particularly concerned about the cases of Wang Quanzhang, 
Jiang Tianyong, and Huang Qi, who have been imprisoned and 
abused for their efforts to fight for the rights of others and 
to document abuses.
    Any organizing to raise collective concerns or advocate for 
social change, it seems, including the efforts of women's, 
LGBTI, labor, and migrants' rights groups runs the risk of 
intimidation and harassment.
    Journalists also continue to have their practices 
restricted and rights abused.
    As members of this committee have previously noted, China's 
system of repression is exacerbated by the Government's 
increasing technological sophistication.
    In sum, we see a concerted effort to use both new advanced 
technology and old-fashioned repression to control all aspects 
of Chinese society.
    Despite these developments, the United States continues to 
advocate for human rights in China. While Laura will speak to 
how we seek to advance human rights in the bilateral 
relationship, my bureau, DRL, is implementing $10 million of 
fiscal year 2018 economic support funds to support human rights 
in China, just as we have done for the past several years. 
Nevertheless, such programs are increasingly challenged by the 
difficult operating environment in China, including the new and 
highly restrictive foreign NGO management law.
    We are also working with our allies and using multilateral 
fora to encourage China to improve its human rights situation, 
as demonstrated through our recent engagement in China's 
universal periodic review. And we, along with the U.S. Agency 
for Global Media, continue to push back against China's closed 
Internet by, among other things, funding programs that support 
anti-censorship technologies and promote digital safety.
    We welcome the spotlight that this hearing shines on the 
human rights situation in China, and we will continue to work 
closely with this subcommittee to support the efforts of those 
in China, who are seeking to stand up for their rights.
    Thank you.
    [Mr. Busby's prepared statement follows:]


                   Prepared Statement of Scott Busby

    Chairman Gardner, Ranking Member Markey, and members of the 
subcommittee, thank you for the invitation to appear before you today 
to testify on the human rights situation in China. This hearing is 
particularly timely coming one week before the 70th anniversary of the 
United Nation's adoption of the Universal Declaration of Human Rights. 
This Declaration, which the General Assembly adopted by consensus, 
states that every individual has the rights to freedom of thought, 
conscience, religion or belief, expression, peaceful assembly and 
association.
    Defending these universal rights and fundamental freedoms has been, 
and will continue to be, an essential element of American foreign 
policy, including U.S. policy toward China. As the President's National 
Security Strategy states, ``the United States supports those who seek 
freedom, individual dignity, and the rule of law . . .  and we will 
advocate on behalf of religious freedom and threatened minorities.'' 
Governments that respect human rights remain the best vehicle for 
prosperity, human happiness, and peace.
    Vice-President Pence aptly summed up the situation in China in his 
speech at the Hudson Institute on October 4: ``For a time, Beijing 
inched toward greater liberty and respect for human rights. But in 
recent years, China has taken a sharp U-turn toward control and 
oppression of its own people.''
    Today, the Chinese Communist Party is implementing a system where, 
to quote President Xi Jinping, ``the Party exercises overall leadership 
over all areas of endeavor in every part of the country.'' Space for 
civil society and free thought continue to shrink. There is mass 
detention of Uighurs, ethnic Kazakhs, and members of other Muslim 
minority groups in the Xinjiang Uighur Autonomous Region (Xinjiang). 
Surveillance is intrusive and omnipresent, not only in Xinjiang but 
also in many other parts of China. The Government blocks U.S. press and 
social media websites and imprisons its own people for sharing their 
opinions online. Those who call on China to live up to its own laws and 
commitments to protect human rights have been punished. And China is 
doing the same to Chinese citizens abroad, including harassing 
political dissidents on foreign soil, detaining journalists' family 
members who remain in China, and coercing members of Chinese Muslim 
minority groups to return from overseas.
    Some of the worst human rights abuses are occurring unchecked in 
the Xinjiang Uighur Autonomous Region. Since April 2017, Chinese 
authorities have detained at least 800,000, and possibly more than 2 
million, Uighurs and members of other Muslim minorities in internment 
camps for indefinite periods of time. This is the U.S. Government 
assessment, backed by our intelligence community and open source 
reporting. Reports suggest that most of those detained are not being 
charged with crimes, and their families lack information about their 
whereabouts, their well-being, and for how long they will be held. The 
reasons given for detention appear to vary widely; in some cases, 
police have claimed they are detaining someone merely because they 
travelled abroad, or because they have family abroad. There appears to 
be no ability to contest such detention.
    At first, China denied such camps existed. As numerous public 
reports emerged through the testimony of brave victims and intrepid 
researchers and journalists, the international community began to speak 
out about the mass internments. Chinese authorities have recently 
asserted that these internment camps are ``vocational education 
centers'' designed to help young, unemployed people in Xinjiang learn 
job skills and the Chinese language, glossing over the fact that 
renowned Uighur intellectuals and retired professionals are also 
detained there. Former detainees who have reached safety have spoken of 
relentless indoctrination and harsh conditions. They report mandatory 
classes where detainees are required to recite Communist slogans and 
sing songs praising the Chinese Communist Party. Failure to quickly 
learn these lessons leads to beatings and food deprivation. There are 
reports of the use of stress positions, cold cells, and sleep 
deprivation in the camps. We have also seen reports of other forms of 
torture or cruel, inhumane or degrading treatment, including sexual 
abuse. One common goal in reports from former detainees seems to be to 
forcing detainees to renounce Islam and embrace the Chinese Communist 
Party. For example, praying and using common Muslim greetings are 
forbidden in the camps. There are reports that authorities constantly 
surveil detainees to ensure that they do not pray, even in their own 
beds in the middle of the night. Detainees are reportedly forced to eat 
pork and drink alcohol. Some have reported being forcibly medicated 
with unknown substances.
    Life in Xinjiang outside these internment camps is not much better. 
The Chinese Government is engaged in an effort to monitor every aspect 
of life for Uighurs and members of other Muslim minority groups. 
Families have been forced to accept Communist officials into their 
homes for extended ``home stays.'' Thousands of mosques have been 
shuttered or destroyed; some have even been converted into Communist 
propaganda centers. Those that are still open are often guarded and 
monitored, and entry is limited via checkpoints with electronic ID 
scanners.Neighborhoods also have entry and exit checkpoints manned by 
armed police. The pervasive surveillance in place across Xinjiang today 
has been frequently described as an ``open-air prison.''
    Unfortunately, fleeing China is not enough to escape the long arm 
of the Chinese Communist Party. China has routinely pressured other 
countries to return Uighurs, ethnic Kazakhs, and members of other 
Muslim minority groups to China, many of whom are seeking asylum 
overseas. In 2015, Thailand returned nearly 100 Uighurs to China and 
roughly 50 remain in detention in Thailand today. In July 2017, 
Egyptian authorities deported two dozen Uighurs, who promptly 
disappeared upon arriving in China. According to civil society groups, 
most Uighurs involuntarily returned to China face arbitrary 
imprisonment, disappearance, torture, or summary execution. In some 
cases, most recently in Malaysia, foreign governments have resisted 
Chinese pressure--often at the urging of the United States and other 
like-minded countries--and refused to deport or return Uighur 
individuals to China, instead considering their asylum claims or 
allowing them to travel onwards to safe destinations.
    Even when Uighurs, ethnic Kazakhs, and other members of Muslim 
minority groups reach safety, Chinese security services and their 
proxies continue to harass and intimidate them. In 2017, Uighurs 
worldwide reported being contacted by Chinese police and ordered to 
return home. Those who complied often disappeared; those who did not 
received calls from family members begging them to return, for fear of 
retribution. The Government also threatens the family members of 
Uighurs abroad whose work the Government opposes. For example, six 
Uighur journalists for Radio Free Asia (RFA) living in the United 
States have reported that family members have been disappeared or 
detained. Of those, five have said Chinese authorities raised their 
work at RFA with their families prior to the disappearances and 
detentions of family members. China has also exploited international 
law enforcement cooperation mechanisms, like INTERPOL, in attempts to 
persuade countries to arrest Uighur dissidents on politically motivated 
charges. For instance, Dolkun Isa, the president of the World Uyghur 
Congress, has been repeatedly detained and harassed around the world 
due to an INTERPOL Red Notice issued based on China's false accusation 
of terrorism. INTERPOL rescinded this Red Notice in February.
    While the focus is often on Uighurs, who at 45% of the population 
of Xinjiang are the largest of the Muslim minority groups targeted by 
China's repressive campaign, it is not limited to them. . Several 
ethnic Kazakh Chinese nationals have given public interviews about 
their own experiences in camps. We also have reports from family 
members in the United States that ethnic Uzbeks have also been detained 
by Chinese authorities.
    China's repression of minority groups does not end in Xinjiang. 
China's repressive policies toward minority Muslim groups have spread 
hundreds of miles away to Hui Muslim communities with plans to shut 
down mosques in the Ningxia Hui Autonomous Region. Tibetans also face 
continued repression and pervasive surveillance; the Tibetan Autonomous 
Region (TAR) was the testing ground for many of the techniques now used 
in Xinjiang, especially the pervasive surveillance based on ethnicity. 
Outside the TAR, the Chinese Government maintains harsh controls on 
Tibetans and religious and educational centers focused on the study of 
Tibetan Buddhism. For example, within the past few years, authorities 
have reduced the number of people living in the monastic communities of 
Larung Gar and Yachen Gar by forcibly evicting thousands of monks, 
nuns, and laypersons and destroying thousands of their homes. According 
to RFA, authorities forced many monks and nuns evicted from Larung Gar 
to attend patriotic re-education classes for up to six months, with 
eerie parallels to the repressive practices on Muslims in Xinjiang.
    Chinese authorities also continue to restrict the freedom of 
religion of Christian communities in China. Unregistered Protestant 
``house churches'' like the Zion Church in Beijing and the Early Rain 
Covenant Church in Chengdu continue to be shut down throughout the 
country; in one notable case in January, authorities used dynamite to 
demolish a house church in Shanxi province. Even officially registered 
churches are under increased government scrutiny, with the Government 
requiring the removal of crosses and, in some cases, the hanging 
pictures of Xi Jinping and Mao Zedong inside the church and the 
installation of surveillance equipment. We have received reports of 
officials destroying or limiting the access to religious materials, 
like the allegations that Chinese authorities have burned both Bibles 
and Qurans. In September, the Holy See and China signed a two-year 
provisional agreement on the selection of bishops in China. The 
agreement has not been made public, however reports suggest the Vatican 
committed to filling vacant bishop positions from a slate of candidates 
selected by the Chinese Government-run Chinese Catholic Patriotic 
Association (CCPA). Such procedures raise concerns regarding the 
freedom of religion. Falun Gong members and members of the Church of 
Almighty God also reportedly continue to face detention, forced labor, 
and torture on account of their religious beliefs.
    China's repression is not limited, though, to members of religious 
groups or ethnic minorities. The Chinese Government continues to abuse 
lawyers, human rights defenders, and other activists. Despite the 
restrictions China puts on information gathering, the Congressional-
Executive Commission on China maintains a database with detailed 
information on more than 1,400 current Chinese political prisoners. I 
would like to highlight a few of the most egregious cases. Authorities 
have held Wang Quanzhang incommunicado for over three years because of 
his work defending in court those whose human rights were abused. In 
April, his wife, Li Wenzu, attempted to walk the 100 kilometers from 
their home to Beijing to the Tianjin detention facility where Wang was 
rumored to be held. Chinese authorities forced her to turn around and 
placed her under house arrest instead. Her courage and dedication in 
the face of adversity is inspiring, and we highlighted Li Wenzu's story 
during our series on women human rights heroes in March.
    Huang Qi, who founded the Tianwang Center for Missing Persons, 
later renamed the Tianwang Human Rights Center, is another priority 
case. His initial mission was to stop trafficking in persons, and he 
created a website to track missing persons thought to have been 
trafficked. Over time, the site began tracking all manner of human 
rights abuses. Since 1998, Huang has been in and out of prison, but has 
not given up his fight for human rights. In 2016, authorities arrested 
him again. Reports suggest he is suffering from a number of illnesses 
and is at risk of dying in prison. Despite this, the Government 
reportedly has stopped providing him with necessary medical care. 
Moreover, officials have reportedly tortured him to extract a 
confession to ``leaking state secrets overseas.'' Despite this, he has 
persevered and refused to confess.
    Students, independent labor activists, and others advocating for 
fair and safe working conditions are also increasingly under threat. 
For example, in August, authorities in Guangdong, Beijing, and other 
parts of China detained approximately 50 workers and students from 
several universities who had been supporting workers that had been 
dismissed for trying to organize an independent trade union. This case 
is only the latest in a long-standing crackdown on independent labor 
organizers, which includes coordinated efforts by the Chinese 
Government at all levels to disrupt labor rights advocacy. Workers' 
ability to freely associate and advocate for decent working conditions 
are both human rights and critical to ensuring a level playing field in 
global supply chains. The only unions allowed in China are affiliated 
with the All-China Federation of Trade Unions, or ACFTU, which is a 
Chinese Communist Party organ chaired by a member of the Politburo. 
This ban on independent unions contravenes workers' freedom of 
association.
    We also have ongoing concerns about forced labor in China. Despite 
China officially ending its ``re-education through labor'' system, we 
continue to receive reports of detainees compelled to perform menial 
labor in ``administrative detention facilities'' and ``drug 
rehabilitation centers'' without appropriate compensation or judicial 
processes. And though information is limited, we've also heard 
anecdotal reports about forced labor in Xinjiang's internment camps as 
well. Every year, the Department addresses forced labor around the 
world in our Trafficking in Persons report; China remains a Tier 3 
country, the lowest ranking.
    Any organizing or political mobilization in China to raise 
collective concerns or advocate for social change runs the risk of 
intimidation and harassment by Chinese authorities. Women's rights 
advocates are routinely evicted from their homes on the orders of 
police. LGBTI content is routinely removed from the Chinese internet. 
Prior to one event to celebrate ``International Day Against 
Homophobia,'' students were warned to avoid the event as it was being 
organized by ``an illegal organization that may collude with Western 
powers.'' In November 2017, Beijing authorities evicted tens of 
thousands of migrant workers without advance notice, despite the 
freezing weather. When locals organized to assist those evicted, 
authorities evicted them from their homes and offices as well.
    And despite changing the infamous one-child policy to a two-child 
rule, coerced abortions and sterilization continue across China. 
National Public Radio recently published a story about Chinese 
authorities forcing an ethnic Kazakh woman to abort her baby, because 
she already had two children, by threatening to detain her brother in 
the internment camps in Xinjiang. After she had the abortion, officials 
detained him anyway.
    Journalists also continue to have their rights abused. The 
Committee to Protect Journalists ranks China as the country with the 
second highest number of journalists jailed. The Government controls 
most media outlets, dictating what stories journalists can cover and 
often the language they must or cannot use. Regulations passed in 2017 
requires online content providers to obtain licenses from the 
Government or be shut down, subjecting online content to censorship. 
China's restrictions are not limited to domestic media outlets. U.S. 
and international journalists in China face various undue restrictions 
and harassment, including limitations on visa issuances or renewals in 
retaliation for objectionable content.
    China's weak adherence to the rule of law only exacerbates these 
issues. The new ``liuzhi'' detention system, which replaced the Party 
``shuanggui'' system by formally combining Chinese State and Communist 
Party investigatory mechanisms, does not represent any 
improvement.Under the old system, Party members could be informally 
held and subjected to solitary confinement, beatings, sleep 
deprivation, and stress positions to force a confession. The new 
system, legally codified under the National Supervision Law, can target 
any public official, and those held are not entitled to appeals or to 
file suit against their captors. This is the rule by law, not the rule 
of law.
    China's human rights abuses are being assisted by the Government's 
increasing technological sophistication. For example, Chinese 
authorities have many capabilities to filter and block access to 
objectionable online content, known collectively as ``the Great Fire 
Wall.'' These techniques include the ability to inspect data at a deep 
level in transit, to reset connections with sites sending data with 
blacklisted keywords, and to identify and block the use of encrypted 
protocols. China is also capable of attacking sites it dislikes and it 
employs various methods to interrupt or intercept online content. The 
online activities of Tibetans, Uighurs, and others are frequently 
subject to monitoring.
    China is also investing heavily in artificial intelligence and 
machine learning, especially in pattern recognition software. The 
security services seek to use facial and voice recognition to rapidly 
identify and track individuals in a crowd. To support these systems, 
the authorities have initiated the mass collection of biometric 
information including voice samples, pictures, fingerprints, and DNA.
    In total, we see a concerted effort by the Chinese Communist Party 
to use both new advanced technologies and old-fashioned repression to 
intensify control or constraints on social interaction and civil 
liberties in China. One concerning example is the creation of a 
``social credit system'' to provide real-world incentives to people for 
being ``good citizens'' and punish those who are not.
    The United States continues to advocate for human rights in China. 
While my colleague, Acting Deputy Assistant Secretary of State Laura 
Stone, can speak better to the bilateral relationship, our bureau is 
implementing $10 million of FY2018 Economic Support Funds for human 
rights in China. This funding will support programs that improve rights 
awareness, strengthen citizen participation in policy formation, 
promote transparency and accountability, increase the ability of 
rights-focused civil society groups to work together, promote 
internationally recognized labor rights, and engage on rights-focused 
issues of broad concern to the Chinese public. Our strategy is to 
support existing reform trends within Chinese society where they exist, 
seeking out reformers and activists who are already having success 
advocating for and protecting the rights of their fellow citizens, and 
giving them the tools and support they need to deepen and expand their 
impact.
    The operating environment in China continues to be highly 
constrained due to the intensified Chinese Government crackdown on 
civil society organizations, lawyers, and activists; increasing 
restrictions on and closures of organizations receiving foreign funding 
and partnering with foreign organizations; and heightened scrutiny of 
foreign NGOs and their staff. The Foreign NGO Management Law that went 
into effect on January 1, 2017 also has cast a shadow over the 
operating environment by subjecting international NGOs to greater 
scrutiny, leading many international funders to suspend their China 
programs. In the face of these difficulties, Chinese activists, 
lawyers, and civil society continue to request U.S. Government support 
for their work, and DRL programs make progress within their areas of 
focus as implementers work creatively and courageously faced with these 
Chinese Government restrictions.
    We are also using multilateral fora to encourage China to improve 
its human rights situation. Prior to China's Universal Periodic Review 
in November, for example, we submitted advance questions to push China 
to answer for its human rights abuses on a range of topics, including 
Xinjiang, Tibet, religious freedom, and the rule of law. During our 
intervention at the review, we specifically stated our concern about 
the situation for Muslim minority groups in China and called on China 
to abolish arbitrary detention, including within the internment camps 
in Xinjiang; cease the harassment, detention, and abduction of human 
rights defenders; amend the definition of subversion to remove all 
exercise of an individual's human rights and fundamental freedoms from 
its scope; and cease interference in the selection and education of 
religious leaders, such as Tibetan Buddhist lamas.
    We also continue to push back against China's vision of a closed 
internet under state control. The United States, through the State 
Department and the U.S. Agency for Global Media, is funding several 
programs, including proven anti-censorship technologies and the 
creation of protocols to be adopted by tool developers to make their 
technology less susceptible to censorship or interception.
    We welcome the spotlight that this hearing shines on the human 
rights situation in China. The Chinese people deserve a government that 
respects their human rights and governs under the rule of law. We 
continue to call on the Chinese Government to end the counter-
productive repression in Xinjiang, to release all political prisoners, 
and to respect the fundamental freedoms of all in China. We will 
continue to work closely with this subcommittee to support the efforts 
of those in China who are seeking to realize their rights.


    Senator Gardner. Thank you, Mr. Busby.
    Ms. Stone?

STATEMENT OF LAURA STONE, ACTING DEPUTY ASSISTANT SECRETARY OF 
     STATE, BUREAU OF EAST ASIAN AND PACIFIC AFFAIRS, U.S. 
              DEPARTMENT OF STATE, WASHINGTON, DC

    Ms. Stone. Chairman Gardner, Ranking Member Markey, 
distinguished members of the subcommittee, I truly appreciate 
the invitation to appear before you today on this important 
issue.
    The United States wants a constructive, results-oriented 
relationship with China, grounded in the principles of 
fairness, reciprocity, and respect. China's protection of human 
rights and fundamental freedoms is essential to our ability to 
achieve this vision and to realize a sustainable U.S.-China 
relationship.
    Today, however, China is clearly doubling down on 
repressive domestic controls in stark contrast to the universal 
values that the United States and its partners have championed 
for many decades. In recent years, we have witnessed a 
regression in terms of China's respect for human rights and 
fundamental freedoms, including religious freedom, the rule of 
law, and civil society.
    While my colleague, DAS Busby, can speak more to many of 
these items in more detail today and written statements 
highlight them as well, today I will share with you some of the 
action the State Department is taking to reinforce our support 
for human rights and fundamental freedoms in China in the face 
of these challenges.
    In Xinjiang, we are particularly alarmed by reports of 
China's mass detention of Uighurs, Kazakhs, and other members 
of Muslim minority groups in so-called camps. We consistently 
urge China to reverse counterproductive policies that conflate 
terrorism with peaceful expression of religious beliefs or 
political views.
    I have received reports that U.S. lawful permanent 
residents, family members of U.S. citizens, and individuals who 
have participated in State Department exchange programs have 
been detained in camps. We regularly raise these cases with 
Chinese authorities and insist that China provide information 
on the locations and medical conditions of those detained and, 
more importantly, immediately release them.
    Secretary Pompeo with Secretary Mattis highlighted these 
very issues just last month in Washington at the Diplomatic and 
Security Dialogue press event. The Vice President spoke about 
this issue publicly in early October, and U.N. Ambassador Haley 
did the same in speaking about the security challenges that 
China's campaign in Xinjiang poses to the international 
community.
    The State Department is leading interagency efforts within 
the administration to review and develop a U.S. whole-of-
government strategy to address the campaign of repression in 
Xinjiang. Elements of the strategy could include utilizing a 
number of tools to promote accountability by Chinese officials 
for human rights abuses, preventing China's use of U.S. goods 
and services to perpetuate its egregious activities in 
Xinjiang, and strengthening our diplomatic and public diplomacy 
efforts throughout the world to attract like-minded partners.
    Department officials continue to meet with members of the 
Uighur diaspora and coordinate with U.S. law enforcement 
agencies to prevent the harassment of Uighurs in the United 
States. The Department has conducted outreach to U.S. and 
Chinese companies with business in Xinjiang to draw attention 
to the risks of their exposure to Chinese abuses and to 
underscore the U.S. commitment to avoid complicity.
    U.S. embassies around the world are providing assistance to 
survivors of Xinjiang's camps. We have engaged dozens of 
foreign governments to successfully prevent the refoulement to 
China Uighurs and other members of Muslim minority groups whose 
lives or freedom would be threatened. If we are to 
fundamentally China's behavior in Xinjiang, the international 
community must act together.
    Beyond Xinjiang the Department of State officials regularly 
attend the trials and sentencing of Chinese human rights 
lawyers and activists, and I and others have met with the wives 
and family members of those who have been detained. We press 
for the release both publicly and privately of all political 
prisoners, and many of their names appear in my written 
testimony. Though we were unsuccessful in our intensive efforts 
to secure the freedom of Liu Xiaobo, persistent public and 
private advocacy secure the long-sought release of his widow, 
Liu Xia, in July this year. Ambassador Branstad has been 
especially active in engaging China's leadership on cases such 
as these.
    When we speak up, we try to do so in concert with allies 
and partners throughout the world that are similarly concerned. 
Again, though, speaking out publicly is just one tool we have. 
A Chinese security official was among the first ever tranche of 
foreign officials sanctioned using Executive Order 13818, which 
builds on the Global Magnitsky Human Rights Accountability Act 
for his role in the death of an activist held in government 
custody.
    America's critical role in protecting and promoting human 
rights and fundamental freedoms in China is in many ways more 
important today as China attempts to take a global leadership 
role. And there is more the United States can do.
    We look forward to working closely with this subcommittee 
to support the efforts of the Chinese people to realize their 
human rights and fundamental freedoms and to promote 
accountability for those who seek to violate or abuse those 
rights and freedoms.
    Thank you for the invitation to testify today on these very 
important issues. And, of course, I am happy to answer any 
questions that you might have.
    [Ms. Stone's prepared statement follows:]


                   Prepared Statement of Laura Stone

    Chairman Gardner, Ranking Member Markey, and distinguished members 
of the subcommittee, I appreciate the invitation to appear before you 
today to testify on the human rights situation in China. President 
Trump wants a constructive, results-oriented relationship with China 
grounded in principles of fairness, reciprocity, and respect. Improving 
China's respect for and protection of human rights and fundamental 
freedoms is essential to our ability to achieve this vision and realize 
a sustainable U.S.-China relationship.
    Today, however, China is doubling down on repressive domestic 
controls in stark contrast to the universal values that the United 
States and its partners have championed for many decades. In recent 
years, we have witnessed a regression in terms of China's respect for 
human rights and fundamental freedoms, including religious freedom; the 
rule of law; and civil society. China's mass detentions of members of 
Muslim minority groups in Xinjiang, while perhaps the most egregious 
example, is only one of many recent actions taken by the Chinese 
leadership that run counter not only to China's international human 
rights commitments, but also to Chinese law.
    Today I will share with you the actions that the State Department 
is taking to reinforce our support for human rights and fundamental 
freedoms in China in the face of these challenges.
China's Human Rights Situation
    The State Department's annual Human Rights Report and its 
International Religious Freedom Report document how China routinely and 
severely restricts freedoms of expression, peaceful assembly, 
association, and religion or belief. Deputy Assistant Secretary Busby 
outlined many of them in his testimony.
    Chinese security officials reportedly elicit forced confessions 
through torture and other abuse, target members of religious and ethnic 
minority groups, arrest human rights lawyers, censor media and online 
speech, and restrict citizen participation in the political process. 
The death of Nobel Peace Prize Laureate Liu Xiaobo while in custody in 
July 2017, and the prolonged, unfounded house arrest of his wife, Liu 
Xia, are glaring symbols of China's mistreatment of those seeking to 
defend the rights of all individuals to exercise their fundamental 
freedoms.
    Beijing is also significantly strengthening censorship controls on 
the internet, media, and academia. Its 2016 law on foreign 
nongovernmental organizations (NGOs) constricts the activities of these 
groups by imposing stringent registration requirements and granting 
supervisory authority to public security agencies. Many of the American 
NGOs that have been negatively affected by this law have contributed 
significantly to China's economic and social development over several 
decades and have facilitated important people-to-people exchanges 
between our two countries.
    There have been continued reports that Tibetan Buddhists have been 
subjected to forced disappearance, physical abuse, arbitrary detention, 
and arrest. The Chinese Government asserts authority over the 
selection, approval, and veneration of reincarnations of Tibetan 
Buddhist lamas and supervises their religious education. We remain 
concerned about the lack of meaningful autonomy for Tibetans, and we 
regularly urge China to cease restrictions on the rights of Tibetans, 
as well as their unique religious, linguistic, and cultural traditions 
and practices.
    Recently, oppressive activities aimed at residents of the Xinjiang 
Uighur Autonomous region reportedly have severely intensified, as 
documented by the dogged reporting of diplomats, reporters, academics, 
and Muslim communities abroad. The concluding observations on China by 
the U.N. Committee on the Elimination of Racial Discrimination further 
shined a spotlight on the worsening human rights crisis there. Under 
the guise of fighting ``terrorism'' and so-called ``religious 
extremism,'' China's leadership is intensifying long-standing 
repressive policies targeting individuals who practice non-violent 
cultural and religious practices in Xinjiang, including by reportedly 
torturing and abusing prisoners held for their beliefs and forcing 
individuals to renounce their religion and pledge allegiance to the 
Communist Party.
    We are particularly alarmed by reports that since April 2017, 
extremely large numbers of Uighurs and other members of Muslim minority 
groups have been detained in camps. Detainees are reportedly trained to 
diminish their ethnic identities, religious beliefs, and nonviolent 
cultural and religious practices. There are reports of abuse, including 
torture, and deaths in these camps. China's claims that these camps are 
all ``humane job-training centers'' are preposterous. These brutal 
tactics risk creating the very radicalization to violence that China 
seeks to avoid. We consistently urge China to reverse its 
counterproductive policies that conflate terrorism with the peaceful 
expression of religious beliefs or political views.
    We have received reports that U.S. lawful permanent residents 
(LPRs), family members of U.S. citizens, and individuals who have 
participated in State Department exchange programs have been detained 
in these internment camps. This treatment of U.S. citizens, U.S. LPRs, 
and their family members is unacceptable. We regularly raise these 
cases with Chinese authorities and insist that China provide 
information about the locations and medical conditions of those 
detained and immediately release them.
    We are also concerned by Chinese security services harassing 
Uighurs abroad in order to compel them to act as informants against 
other Uighurs, or return to Xinjiang, sometimes by detaining their 
family members in these centers, or keep silent about the situation 
there. This includes harassment of American citizens, LPRs, and 
individuals legally residing in the United States.
    China has applied similar pressure to dual nationals or family 
members of citizens in other countries. The detention and persecution 
of Uighur and other Muslim minorities in Xinjiang reportedly have 
compelled them to stop communicating with their family and friends 
based abroad, including in the United States, for fear of retribution 
by authorities.
U.S. Policy and Advocacy Regarding Human Rights
    The administration regularly condemns human rights violations and 
abuses in China. We routinely raise and advocate for individual cases 
of concerns with our Chinese counterparts. The Secretary has made clear 
in his engagements, including this past month with his counterpart in 
the Politburo and China's Defense Minister, that the United States 
would continue to advocate for human rights and fundamental freedoms. 
The Vice President spoke about this publicly in early October, and U.N. 
Ambassador Haley did the same in speaking about the security challenges 
that China's campaign in Xinjiang pose to the international community.
    Department of State officials regularly attend the trials and 
sentencings of Chinese human rights lawyers and activists, and hold 
meetings privately with the wives and family members of those who have 
been detained. We press for the release of all political prisoners, 
including but not limited to prominent figures like Ilham Tohti, Tashi 
Wangchuk, Li Yuhan, Yu Wensheng, Pastor Cao ``John'' Sanqiang, and 
Huang Qi. Last July, State Department officials highlighted the third 
anniversary of the Chinese Government's nationwide campaign of 
intimidation against defense lawyers and rights defenders and the fact 
that Wang Quanzhang has been detained more than three years without 
trial. We expressed concerns about the detention of Swedish citizen and 
Hong Kong bookseller Gui Minhai, the sentencing of Chinese human rights 
defenders Wu Gan and Xie Yang, and the conviction of human rights 
lawyer Jiang Tianyong. Though we were unsuccessful in our intensive 
efforts to secure the freedom of Nobel Peace Prize Laureate Liu Xiaobo, 
persistent, public and private advocacy secured the long-sought release 
of his widow Liu Xia in July this year. Ambassador Branstad has been 
especially active in engaging China's leadership on cases such as 
these.
    Speaking out publicly is just one tool we have. The Department of 
State has also taken actions to promote accountability for those 
responsible for human rights abuses in China, including Chinese 
Government and party officials. In December 2017, the Department of 
Treasury, in consultation with the Department of State, designated a 
former Chinese prison official, Gao Yan, for the detention and torture 
of human rights activist Cao Shunli using Executive Order 13818, which 
builds on and implements the Global Magnitsky Human Rights 
Accountability Act. We have also used our high-level meetings with the 
Chinese to urge China to address our concerns on China's foreign NGO 
management law and unfair exit bans placed on U.S. citizens.
    Last month in Geneva, the United States delivered comprehensive and 
strong recommendations on human rights at China's Universal Periodic 
Review. At every opportunity, we urge China to address policies in 
Tibetan areas that threaten the rights and distinct religious, 
cultural, and linguistic identity of the Tibetan people, and to end 
counterproductive policies in Xinjiang that restrict peaceful 
expression and religious freedom and risk inciting radicalization to 
violence.
    The United States will continue to stand up and speak out when the 
Chinese Government cracks down on civil society, imprisons peaceful 
reformers, silences legitimate dissent, or enacts legislation at odds 
with the freedom of religion and expression, including for members of 
the press. When we speak up, we will do so in concert with allies and 
partners throughout the world that are similarly worried about China's 
human rights abuses.
U.S. Policy and Advocacy Regarding Xinjiang
    The most severe human rights crisis in China--perhaps since the 
Cultural Revolution--is the mass detention and deployment of high-tech 
surveillance technologies to systematically repress Uighurs, Kazakhs, 
and other Muslim minority groups in Xinjiang. In April, Spokesperson 
Nauert met with the six brave U.S.-based Radio Free Asia (RFA) 
journalists, who shared troubling reports of Uighurs and other Muslims 
in Xinjiang, including their families, who have been harassed and 
arbitrarily or unlawfully detained. Secretary Pompeo and Vice President 
Pence highlighted our concerns about the situation in Xinjiang at the 
Ministerial to Advance International Religious Freedom in July, where 
they also met with Survivors of Religious Persecution representing 
China's Christian, Uighur Muslim, and Tibetan Buddhist communities. The 
Secretary raised this again at the U.S.-China Diplomatic and Security 
Dialogue last month.
    Department officials meet with members of the Uighur diaspora and 
coordinate with U.S. law enforcement agencies to address the harassment 
of Uighurs in the United States. The Department of State has conducted 
outreach to U.S. and Chinese companies with business in Xinjiang to 
draw attention to the risks of their exposure to China's abuses and to 
underscore the U.S. commitment to avoid complicity. There is a steady 
drip of asylum seekers from Xinjiang seeking refuge outside of China 
for fear of detention, torture, or worse. U.S. embassies around the 
world are providing assistance to survivors of Xinjiang's camps, 
including Ms. Miriguli Tuerson Mahmoud, who testified here before 
Congress last week and spoke about the horrifying abuses in these 
camps. In addition to consistently pressing China to end its campaign 
of repression, we have engaged dozens of foreign governments to 
successfully prevent the refoulement to China of Uighurs and other 
members of Muslim minority groups whose lives or freedom would be 
threatened on account of their religion or where there are substantial 
grounds to believe they are in danger of being subjected to torture.
    The State Department is leading interagency efforts within the 
administration to review and develop a U.S. whole-of-government 
strategy to address the campaign of repression in Xinjiang. Elements of 
this strategy could include utilizing a number of tools to promote 
accountability of Chinese officials for human rights abuses, preventing 
China's use of U.S. goods and services to perpetrate its egregious 
activities in Xinjiang, and strengthening our diplomatic and public 
diplomacy efforts throughout the world, not just in the West. If we are 
to fundamentally change China's behavior in Xinjiang, the international 
community must act together.
Conclusion
    America's critical role in protecting and promoting human rights 
and fundamental freedoms in China is more important today than in many 
years. There is more the United States can do to lead on global human 
rights; this is part of our moral responsibility as Americans, and it 
is profoundly in our interests. We look forward to working closely with 
this subcommittee to support the efforts of the Chinese people to 
realize their human rights and fundamental freedoms and promote 
accountability for those who seek to violate or abuse those rights and 
freedoms.
    Thank you. I look forward to your questions.


    Senator Gardner. Thank you very much for your testimony.
    Ms. Steele, please proceed.

  STATEMENT OF GLORIA STEELE, ACTING ASSISTANT ADMINISTRATOR, 
    BUREAU FOR ASIA, UNITED STATES AGENCY FOR INTERNATIONAL 
                  DEVELOPMENT, WASHINGTON, DC

    Ms. Steele. Chairman Gardner, Ranking Member Markey, Mr. 
Kaine, thank you very much for this opportunity to talk about 
democracy, human rights, and rule of law in China.
    In support of America's foreign policy, the U.S. Agency for 
International Development leads the U.S. Government's 
international development and disaster assistance. Our work 
saves lives and helps countries to become more self-reliant and 
stronger partners to America.
    For the purposes of today's hearing, I will first highlight 
USAID's work with the Tibetans and then provide a brief 
overview of our support to strengthen democracy and respect for 
human rights and rule of law in Asia.
    Thanks to strong bipartisan support in Congress, USAID 
partners with Tibetans to help them protect and preserve their 
threatened way of life. Within China, we support the 
preservation of Tibetan culture, the development of sustainable 
livelihoods, and assistance with environmental conservation. To 
date, USAID has supported the preservation of nearly 7 million 
Tibetan cultural heritage items. And in part, due to our 
environmental conservation support, Tibetan communities are 
empowered to lead the management of their natural resources 
from rangelands to rivers.
    In India and Nepal, USAID helps Tibetan communities 
strengthen their self-reliance and resilience. This includes 
strengthening their health and education systems. For example, 
our work in training teachers in modern methods has benefited 
more than 21,000 students at 75 Tibetan schools in India and 
Nepal.
    We are helping Tibetans maintain the vitality of their 
communities and institutions while sustaining their unique 
identity and culture. We have bolstered the public service 
leadership of more than 330 Central Tibetan Administration 
staff. And in support of sustainable livelihoods, USAID has 
launched a pilot program to help garment vendors sustain or 
grow their businesses through small, low-interest loans. In 
fiscal year 2017, the program benefited over 800 micro-
enterprises and boasted a 100 percent on-time repayment rate.
    Next, I will highlight our democracy, human rights, and 
rule of law work in Asia.
    Over the last 5 years, democratic institutions across Asia 
have been significantly tested. Some foreign influences have 
overtly and covertly co-opted political leaders and exploited 
institutional weaknesses. This has given rise to increased 
corruption, opaque commercial deals, and subversions of 
national sovereignty. We are seeing competing development 
models that can lead to unsustainable debt or limit economic, 
political, and social freedoms. These unfortunate developments 
undermine the long-term stability of our partner countries. In 
contrast, the U.S. Government offers an alternative development 
approach that fosters strategic partnership and self-reliance, 
not long-term dependence.
    In support of the Indo-Pacific strategy, USAID promotes 
democratic citizen-centered governance that is representative 
of the will and interests of the people and is infused with 
democratic principles of participation, inclusion, 
transparency, and accountability. We promote adherence to 
international rules and standards, and we support legal 
institutional respect for human rights, the protection of which 
is a cornerstone of strong democratic governance.
    We have achieved some notable progress. However, we 
recognize that we still have a lot of way to go and must remain 
steadfast in our engagement.
    Before closing, I would like to mention our work concerning 
improving governance in the natural resource sector. The 
natural resources, upon which many of our partner countries 
depend for their long-term economic growth, are increasingly 
threatened by irresponsible extraction, predatory behavior, and 
poor governance. That is why USAID prioritizes improving the 
management of natural resources across Asia. We promote 
transparent government policies, regulations, and transactions 
that foster adherence to internationally accepted standards, 
including environmental safeguards that help to mitigate the 
entry of predatory players. Of particular note is a new 3-year 
program that we are launching called Mekong Safeguards that 
will support responsible infrastructure development in the 
lower Mekong Region.
    There is no doubt that China is increasingly exerting its 
influence across the region. This presents challenges to our 
partner countries' sustainable development and can threaten 
countries' sovereignty. The strategic partnership we offer 
provides a clear alternative development choice, one that 
invests in increasing country self-reliance and sustainable 
prosperity and helps countries to make informed decisions about 
their own futures.
    Thank you and I look forward to your counsel and questions.
    [Ms. Steele's prepared statement follows:]


                  Prepared Statement of Gloria Steele

    Chairman Cory Gardner, Ranking Member Edward Markey, and members of 
the subcommittee: Thank you for inviting me to this important hearing 
on democracy, human rights and rule of law in China.
    On behalf of the American people, the U.S. Agency for International 
Development (USAID) promotes and demonstrates democratic values abroad, 
and advances a free, peaceful and prosperous world. In support of 
America's foreign policy, USAID leads theU.S. Government's 
international development and disaster assistance through partnerships 
and investments that save lives, strengthen democratic governance, 
assist countries with emerging from humanitarian crises, and help 
partner countries move forward on their journeys to self-reliance.
    For the purposes of today's hearing, I will first highlight USAID's 
support for Tibetans and then speak more broadly about our support for 
democracy, human rights and rule of law in the Asia region.
Support for Tibetans in China, India and Nepal
    As an oppressed religious minority in China, Tibetans face 
restrictions on their rights, as well as their unique religious, 
linguistic and cultural traditions and practices. With strong 
bipartisan support in Congress, USAID partners to help protect and 
preserve Tibetans' threatened way of life. For nearly 20 years, USAID 
has supported Tibetan communities in and around the Tibet Autonomous 
Region and in other areas of China. Since 2012, we have supported 
Tibetan communities in India and Nepal.
    Within China, we support the promotion and preservation of Tibetan 
culture and the resilience of Tibetan communities. This includes the 
development of sustainable livelihoods and assistance with 
environmental conservation. We are helping Tibetan communities preserve 
their cultural and religious traditions, including the Tibetan 
language. To-date, USAID has supported the preservation of nearly seven 
million Tibetan cultural heritage items, including documented cultural 
traditions and historically important Tibetan texts--many previously 
unknown, including text composed by the Fifth Dalai Lama. All items 
have been digitized and made available online. Thanks to our 
environmental conservation support, Tibetan communities are empowered 
to lead the management of their natural resources, including 
grasslands, rangelands and rivers, which are important to maintaining 
their traditional way of life.
    We have helped advance sustainable livelihoods for Tibetans. For 
example, we have helped nearly 4,000 Tibetans secure new or better 
employment opportunities. We have helped Tibetan-owned small- and 
medium-sized businesses attract investment valued at approximately $2 
million. And we have developed the life skills of thousands of 
Tibetans, including hundreds of English Language Program graduates over 
the past decade. These individuals are now widely recognized as leaders 
in their communities and hold critical roles within NGOs and local 
civil society organizations.
    Outside of China, in India and Nepal, USAID helps Tibetan 
communities strengthen their self-reliance and resilience, including by 
strengthening their health and education systems. This support is 
managed by our mission in India and implemented primarily by The Tibet 
Fund. On health, we are working to improve the Tibetan health system in 
ways that help expand access to care, including maternal, child and 
tuberculosis-related care. The Tibetan health system serves a 
population of approximately 107,000 Tibetans in India and Nepal. On 
education, we are working to strengthen the Tibetan education system in 
innovative, replicable ways. We have provided training and professional 
development to more than 1,100 teachers at 75 Tibetan schools, 
benefitting more than 21,000 students in India and Nepal.
    We are helping Tibetans thrive economically, become effective 
leaders and maintain the vitality of their communities and institutions 
while sustaining their unique identity and culture. We have bolstered 
the public service leadership and management of more than 330 Central 
Tibetan Administration (CTA) staff through high-quality trainings. And, 
in support of sustainable livelihoods, USAID launched a pilot program 
to help garment vendors make their businesses viable or grow their 
operations through small, low-interest loans. In fiscal year 2017, the 
program benefited over 800 microenterprises and boasted a 100 percent 
on-time repayment rate.
Supporting Democratic, Citizen-Centered Governance in Asia
    Across Asia, USAID sees countries making short term economic 
decisions that can lead to unsustainable debt, undermine sovereignty, 
or limit economic, political and social freedoms, which ultimately 
undermines a country's path to self-reliance. Put simply: the 
alternative choice we offer is one of strategic partnership, not 
strategic dependence.
    Over the last five years, democratic institutions across Asia have 
been significantly tested. Some foreign influences overtly and covertly 
have co-opted political leaders and exploited institutional weaknesses, 
giving rise to increased corruption, opaque commercial deals and 
subversions of national sovereignty. These developments consequently 
undermine the democratic institutions and the long-term stability of 
our partner countries.
    Across Asia, and in support of President Trump's vision of a Free 
and Open Indo-Pacific region, USAID promotes democratic, citizen-
centered governance that is representative of the will and interests of 
the people, and is infused with the democratic principles of 
participation, inclusion, transparency and accountability. We support 
legal and institutional respect for human rights--the protection of 
which is a cornerstone of democratic governance and ensures meaningful 
citizen engagement. We promote adherence to international rules and 
standards and the integrity of electoral processes. Our work helps 
protect human rights and promote religious freedom, support the 
independence of media and information integrity, strengthen reliance on 
evidence-based policy analysis and advocacy, and foster anti-corruption 
initiatives. We advance these objectives through support for like-
minded civil society leaders and strategic alliances between current 
and emerging democratic leaders.
    We have seen some promising developments. For example, in the 
Philippines, USAID improved the independent detection, investigation 
and prosecution of corruption in the public and private sector. The 
conviction rates for Office of Ombudsman cases increased from 45 
percent to 77 percent from 2012 to 2017 while simultaneously increasing 
the number of cases filed against high-ranking government officials 
from 395 to 2,513 over the same period. And in Indonesia, USAID helped 
the country rebuild, launch and expand its first-ever integrated 
national complaint handling system. The system now processes more than 
20,000 citizen complaints per month--a tenfold increase from fewer than 
2,000 a month in 2015 before USAID's assistance--and has been formally 
adopted by the national government. Despite this and other progress, we 
recognize that we are far from where we'd like to be and must remain 
steadfast in our engagements.
    We are also working to improve governance in the natural resource 
sector. The natural resources upon which many of our partner countries 
depend for their long-term growth and economic sustainability are 
threatened by a variety of factors, including irresponsible extraction, 
predatory behavior and poor governance. That's why USAID prioritizes 
improving the management and resilience of natural resources across 
Asia. We promote transparent government policies, regulations and 
transactions that foster adherence to internationally-accepted 
standards, including environmental safeguards, and mitigate the entry 
of predatory players. For example, some poorly conceived infrastructure 
projects on the Mekong River threaten the food, water and livelihoods 
of 60 million people who live downstream in Southeast Asia. USAID is 
launching a three-year program called Mekong Safeguards that will 
support policies that lead to high-standard, high-quality 
infrastructure development in the region. Under the Indo-Pacific 
Strategy, we are also supporting the Infrastructure Transaction and 
Assistance Network (ITAN), which aims to promote sustainable, private 
enterprise-driven infrastructure development in the region.
Conclusion
    Mr. Chairman, there is no doubt that China is increasingly exerting 
its influence across the region. This presents challenges to our 
partner countries' sustainable development and can threaten country 
sovereignty. The strategic partnership we offer to countries throughout 
the region provides a clear, alternative choice--one that invests in 
increasing country self-reliance and sustainable prosperity, and helps 
countries to make informed decisions about their own futures.
    Thank you for the opportunity to appear before you today. I look 
forward to your counsel and questions.


    Senator Gardner. Thank you for your testimony. I think the 
testimony from the three of you has presented one of the most 
damning views of China's rise the committee has heard. And I 
want to go through some of Secretary Busby's statement again 
because I think it is important in this context to again 
reiterate what was said here.
    We are talking about mass detention of Uighurs, ethnic 
Kazakhs.
    Surveillance is intrusive and omnipresent.
    Harassment of political dissidents, not just in China but 
by Chinese on foreign soil.
    Detaining journalist family members who remain in China to 
harass those abroad.
    Coercing members of Chinese Muslim minority groups to 
return from overseas.
    Reports that suggest that most people detained are not 
charged with crimes. Their families lack information about 
their whereabouts, their wellbeing, or for how long they will 
be held. Some are being merely detained because they traveled 
abroad or because they have family abroad. There appears to be 
no way to contest such detentions.
    Failure to quickly learn the lessons taught in these camps 
leads to beatings and food deprivation in your testimony.
    Reports of the use of stress positions, cold cells, and 
sleep deprivation in the camps.
    Reports of torture or cruel, inhumane or degrading 
treatment, including sexual abuse.
    One common goal in the reports from former detainees seems 
to be forcing detainees to renounce Islam and embrace the 
Chinese Communist Party. You said that.
    Reports that there is constant surveillance of detainees to 
ensure they do not pray even in their own beds in the middle of 
the night.
    Forced to eat pork and drink alcohol.
    Reportedly being forced to medicate with unknown 
substances.
    Civil society groups say most Uighurs involuntarily 
returned to China face arbitrary imprisonment, disappearance, 
torture, or summary execution.
    One case you cite in your testimony, authorities in China 
used dynamite to demolish a house church in Shangxi province.
    They are requiring the removal of crosses, in some cases 
the hanging of picture of Xi Jinping and Mao Zedong inside the 
church and the installation of surveillance equipment inside 
the church.
    Reports of officials destroying or limiting the access to 
religious materials like the allegations that Chinese 
authorities have burned the Bibles and Korans.
    We are talking about one of the most significant trade 
partners this country and many countries around the globe have 
with over a billion people. We are not talking about some tin-
pot dictatorship. We are talking about a country that people 
look to more and more for leadership around the globe. What you 
have described are damning evidence of horrendous human rights 
violations.
    Could you please explain, Secretary Busby, some of the 
steps this administration has taken to hold people accountable 
for these actions and what we are doing at the United Nations 
and other places to perhaps provide inspectors, access, and 
pressure from these kinds of activities from continuing--to 
prevent these kinds of activities?
    Mr. Busby. Thank you, Chairman Gardner for the question.
    First of all, we have been trying to raise public awareness 
about the situation. At the first-ever religious freedom 
ministerial that Secretary Pompeo hosted in July, both he and 
the Vice President called attention to the abuses in Xinjiang 
province. And we circulated among other attendees a statement 
on human rights abuses in China that talked about the abuses in 
Xinjiang province. Ever since then, we have been trying to 
continue to spread the word about what is going on in Xinjiang 
province.
    In the United Nations, we recently participated in the 
universal periodic review, which is something that every 
country has to go through. And in our brief statement--it had 
to be brief because of the number of folks who wanted to speak 
at this event--we called attention to the human rights abuses 
in China, in Xinjiang province in particular, and called for 
them to cease.
    As my colleague, Acting Deputy Assistant Secretary Stone, 
mentioned, there is a very robust interagency process underway, 
led by the National Security Council, to look at specific 
concrete steps we can take to respond to the horrific things 
happening in Xinjiang province and try to bring them to a stop.
    Senator Gardner. Thanks, Mr. Busby.
    Secretary Stone, have any sanctions been leveled against 
any Chinese officials involved in these suspected or confirmed 
events, actions? Has any passport been suspended? Has any 
official action been levied against the Chinese Government?
    Ms. Stone. Thank you very much for the question, Chairman.
    I obviously share, at a personal level, our concerns about 
what is going on in Xinjiang. I do not think anybody who is 
working on these issues for a long time could have any other 
position.
    The tools that the Congress has given us--we really do 
appreciate them. They are the kind of things that we can use.
    It is a little frustrating. I understand. It is frustrating 
for us as well. The process sometimes is not as fast as we 
would like. That is actually a good feature of our system.
    Senator Gardner. I am going to run out of time, and I want 
to give Senator Markey--just quickly. So I apologize. Has any 
action been taken?
    Ms. Stone. Okay. So we are working through a process right 
now in order to get through to the appropriate actions, using 
the tools that you have given us. And the process is moving 
along. We hope to move on those issues and we hope to take 
action as soon as the process has continued.
    Senator Gardner. Well, I hope those processes move quickly. 
I know Treasury is involved in those decisions as well, but I 
encourage action to be taken quickly.
    Senator Markey?
    Senator Markey. Thank you, Mr. Chairman, very much.
    I want to raise the issue of the missing Chinese-based 
relatives of six Radio Free Asia Uighur reporters. What is the 
administration doing about this? How are we raising that issue? 
It undermines, obviously, the credibility of that whole 
mission, and it creates a chilling effect in terms of our 
ability to be able to deliver an honest message about what it 
is that we see happening in that region. So what are we doing 
to protect these relatives?
    Mr. Busby. Well, first off, we have raised the cases with 
the Chinese Government so far to no avail. Our spokesperson, 
Heather Nauert, met with the RFA journalists here to hear about 
the situation of their relatives. And at that meeting, she 
called out again the Chinese Government for undertaking these 
actions against the relatives. So it is an issue we continue to 
track and we continue to press----
    Senator Markey. But thus far, we have been unsuccessful in 
receiving any change in policy by the Chinese Government. Is 
that correct?
    Mr. Busby. So far, to my knowledge, we do not have any 
relatives who have been released as a consequence of these 
efforts.
    Senator Markey. What else could we do in this area in order 
to get the proper response?
    Ms. Stone. Obviously, there is a lot we can do, and many 
them are, as I referred to, tools that have been provided by 
Congress, which we are very appreciative of. I referred to in 
my testimony some of the actions that we are considering. I 
cannot prejudge exactly the process. Obviously, we are a 
country--we really are a country ruled by law. So we are going 
through that process. We want to make sure that these are 
actions that can stand up under legislative scrutiny, judicial 
scrutiny. And we will continue to move forward on those 
actions.
    I mean, I think the real point on this, though, is that 
even if we do not have an immediate impact on what we are 
doing, I think that it is still important that we take these 
actions.
    Senator Markey. I agree with you. Just more must be done.
    Ms. Stone. Yes.
    Senator Markey. I want to move on to online censorship. 
Google, Apple, and Facebook are reported to have aided the 
Chinese Government Internet censorship efforts as part of their 
efforts to access the Chinese market. For example, Google 
disables domain fronting capacity used to evade censors and is 
working on a censored version of the search engine Dragonfly to 
launch in China. Apple has removed more than 400 virtual 
private networks while handing over their China iCloud user 
data to the Chinese state-owned mobile operator.
    Has the State Department engaged the administration to 
monitor and discourage these corporate behaviors which go 
against the fundamental value of freedom of expression?
    Mr. Busby. Thank you for the question, Senator.
    Yes, we have. Indeed, we recently met with senior officials 
from Google in the wake of the news story about the development 
of the Dragonfly application and expressed our strong concerns 
that any collaboration by them with the Chinese Government to 
develop a censored version of their search tool would be very 
problematic for us.
    Senator Markey. I think that must continue to escalate in 
terms of the pressure that we are applying. We just cannot 
separate ourselves and our corporations from the goals which we 
have in China and other countries.
    And, Ms. Stone or Mr. Busby, there are some calls for 
Uighurs to be given temporary protected status to ensure 
Uighurs are not sent back to China to face repression. Other 
European governments have halted extraditions of Uighurs. Do 
you support that move?
    Mr. Busby. I mean, that is one of many options that is 
being considered.
    Senator Markey. Do you support that move? We are not 
extraditing people back to a country which is repressing them.
    Mr. Busby. We are generally opposed to return of any 
Uighurs back to China, and the issue of TPS itself, again, is 
one of the many options being considered.
    Senator Markey. Yes. Well, I think it is the option, which 
should be considered and implemented. We just cannot, as a 
country, be sending people back to what we know is repression.
    And what is our diplomatic strategy to engage Muslim 
majority countries to condemn Chinese behavior? It seems like 
there should be more of an outcry from the Muslim world. We 
have not heard them. These are Muslims who are being oppressed 
inside of China. What is the United States strategy to get more 
cooperation from Muslim countries to speak up for their co-
religionists?
    Mr. Busby. Senator, a very good question point.
    I was recently in Malaysia and raised this very issue with 
the Government there and we have been raising with other Muslim 
majority countries, again with a goal of establishing a 
likeminded----
    Senator Markey. Have we raised it with Saudi Arabia?
    Mr. Busby. I cannot speak to Saudi Arabia.
    Senator Markey. Do you know, Ms. Stone, if we have?
    Ms. Stone. We would be happy to get you a list of the 
countries that we have raised it with. I know it has been the 
majority of Muslim majority countries. So I assume so, but I 
would have to check.
    [Ms. Stones's response to Senator Markey follows:]


    Ms. Stone. The Department of State has a global diplomatic campaign 
to raise awareness about China's human rights violations and abuses 
against Uighurs, ethnic Kazakhs, and members of other Muslims in China. 
We have directly reached out over 50 governments to raise the issue of 
China's crackdown in Xinjiang.
    There has been a focused effort, led by U.S. embassies and visiting 
senior officials, to reach out to Western allies on human rights 
issues, China's neighbors worried about the security threat of 
radicalization to violence, and Muslim majority countries across Asia 
and the Middle East.
    We have asked these governments to:

   Support stronger diplomacy and public messaging about China's 
        abuses
   Support all those affected by this repressive campaign;
   Comply with their respective obligations under international law; 
        and, where applicable,
   Ensure respect of the non-refoulement principle.


    Senator Markey. This is a lot of Muslim clout out there. We 
just do not see it at work here. I do not think China is going 
to respond unless they know that in the Muslim world--from 
government to government, we should be telling Saudi Arabia and 
other countries we expect that as their policy.
    Thank you, Mr. Chairman.
    Senator Gardner. Senator Rubio?
    Senator Rubio. Thank you.
    This whole topic of China I think is so much more than just 
the balance of trade. President Xi certainly views himself as a 
historic and transformational figure, and one of their goals is 
to remake the global order more in their image and more 
advantageous to them. And many of the things that are being 
talked here today are a part of it. If you look at the record, 
the abuses that are well documented against the Uighur Muslims, 
trying to strip the people of Tibet of their identity and their 
religion, the longstanding attacks on Falun Gong practitioners. 
Obviously, we know the stress that Christianity has faced.
    And then on the field of democracy, we have seen the 
erosion of it in Hong Kong, the disqualification of four pro-
democracy lawmakers from the ballot, the jailing of three 
prominent pro-democracy student leaders. And then you see sort 
of what the global reaction has been to it, and there is reason 
to be concerned that this post-World War II pro-democracy, pro-
human rights, global norms are being eroded and reshaped and 
that China is using its geopolitical heft and its economic 
power to push it in that direction. Senator Markey just 
mentioned the silence of the Muslim world in the face of the 
forced internment of hundreds of thousands of Muslim Uighurs.
    And the U.N., for example, in April security forces ejected 
an ethnic Uighur representing an accredited nongovernmental 
organization, clearly at the request of somebody. He was 
accredited.
    And Greece blocked the European Union from issuing a 
statement or a position at the Human Rights Council for the 
first time I believe ever a definitive statement--delivering a 
statement. And we can all surmise why. They own every port in 
Greece. They have incredible economic leverage on Greece.
    I mean, the list goes on. In 2017, the U.N. Secretary-
General introduced President Xi at an event that was closed to 
civil society, by the way, and he made no reference of the 
human rights environment in China.
    The EU Council and Commission at a summit in Brussels on 
the first and second of June publicly, quote/unquote, expressed 
concern about human rights abuses in China, but did not call 
for the release of political prisoners, including their own 
citizens, citizens of the EU, or even the repeal of abusive 
laws.
    This is all from a report, I believe, from Human Rights 
Watch. But in June Italian police briefly detained and later 
released the same ethnic Uighur NGO representative who had been 
invited to speak at the Italian Senate, and they briefly 
detained him, even though he had been invited to be there. 
Again, it is not clear whether the Chinese requested it.
    On issue after issue, it appears to us you can see around 
the world that even nations that long have been committed to 
democracy and human rights, when it comes to China are either 
being quiet, looking the other way, or frankly are now 
leveraged to the point where they cannot speak out.
    And so that is why it is so important for the United States 
to be forceful about it because no one else can or wants to. 
And whether others do want to, you are concerned when we do not 
join them.
    So as an example, earlier this month, there were 15 Western 
ambassadors in Beijing, spearheaded by Canada. They reportedly 
sent a letter to Xinjiang's Communist Party Chief, Chen 
Quanguo. He is seeking a meeting and expressing deep concern 
regarding the growing crackdown. No one thought that meeting 
was going to happen per se.
    But I am curious, Ms. Stone, why did the U.S. not sign onto 
that letter? Do you know?
    Ms. Stone. So we agree with you completely. Thank you very 
much for the question and the clear statement of support for 
the U.S. speaking out strongly on the human rights conditions 
in China and also the conditions in Xinjiang.
    The specific letter--sometimes the countries involved--they 
are likeminded partners, and we may or may not join on any kind 
of particular measure that is coming out of the embassies in 
Beijing. But I do want to assure you that we are working 
consistently with those likeminded partners to do real action. 
And the thing is we have many more tools and we also have a lot 
more spine sometimes to be able to take real action----
    Senator Rubio. And I appreciate it. I am running out of 
time.
    I just want to make the point that if we are here 
complaining, on the one hand, about how all these countries are 
not doing enough, when they actually do something, we cannot 
even sign onto a letter. I do not know if that decision was 
made here in D.C. as part of the broader relationship with 
China or made by the Ambassador. But I think it was a big 
mistake.
    In your written testimony, you mentioned the fact that 
Chinese security services are harassing Uighurs abroad. We have 
heard firsthand from people who say this is the case.
    Can you tell us if the Department is working with other 
agencies on this issue, in particular, protecting U.S. citizens 
and legal permanent residents? And what sort of outreach is 
anyone doing to these communities who feel like the long arm of 
China is reaching them here within the United States?
    Ms. Stone. Yes, we are. We are working closely with the FBI 
to make sure that any information that comes our way goes to 
them. And we would be very happy if you hear of anything 
additional to also work with you to pass that along.
    And in terms of making sure that the message gets out, 
whenever we meet with the communities, we do everything we can. 
We also ensure that we are constantly updating our travel 
guidance to make sure that people are aware of the situation.
    Senator Rubio. Well, again, my last question is in this 
particular case, these are people inside the United States. But 
I agree with the travel part.
    Finally, in your written testimony, you indicated that the 
Department of State had conducted outreach to U.S. and Chinese 
companies with businesses in Xinjiang to draw attention to the 
risks of their exposure to these abuses.
    There is a company, Thermo Fisher Scientific, which has 
sold DNA sequencers to the police there. This is against the 
backdrop of these grave human rights violations including, by 
the way, mandatory data banking of the entire population. I had 
testimony last week at the Bicameral Commission on China that 
they are forcing people to turn over blood to get a passport or 
just compelling it. Thermo Fisher Scientific, an American 
company, is selling them DNA sequencers. That is what it is 
used for.
    Can you tell us whether that is one of the companies that 
the Department of State has reached out to and expressed 
concerns about how their technology could be used by the 
Chinese to do these horrifying things?
    Ms. Stone. I cannot speak to that particular company, but I 
can tell you that is the kind of company that we are definitely 
speaking with.
    Senator Gardner. Senator Kaine?
    Senator Kaine. Thank you, Mr. Chair.
    And thanks to the witnesses for your service and your 
testimony.
    Senators Gardner, Markey, Rubio, Daines, Warner, and I 
wrote a letter to Secretary Pompeo about the Radio Free Asia 
journalists' families on the 26th of July. To my knowledge, we 
have not received a reply to this letter. It was a letter to 
ask Secretary Pompeo to brief us on the status of the cases and 
what is being done to try to help the family members who are 
detained. Four of the six journalists are residents of 
Virginia.
    I would like to introduce the letter into the record 
hopefully without objection.
    Senator Gardner. Without objection.


    [The information referred to above is located at the end of 
this hearing transcript.]


    Senator Kaine. Secretary Pompeo is busy. We are not 
expecting him to drop everything and do a response. But 
somebody needs to respond to this letter. It is more than 4 
months old.
    And it may not be within any of your purviews to do that 
response, but I hope you would take back to the committee that 
when we write a letter like this, we are not just doing it for 
our health. I mean, take it back to the State Department. We 
would like an answer.
    Do you know, for example, whether--has Secretary Pompeo 
raised the issue of the imprisoned journalists' families 
directly with his counterpart? Are you aware of whether he has 
or has not?
    Ms. Stone. Sir, on that specific issue, he obviously has 
raised it in Xinjiang, as you could see in the diplomatic and 
security dialogue press conference with the Chinese standing 
right next to him. Whether he has raised that particular case, 
could I take that and get back to you?
    Senator Kaine. Please.
    [Ms. Stones's response to Senator Kaine follows:]


    Ms. Stone. As he mentioned publicly following the U.S.-China 
Diplomatic and Security Dialogue, November 9, 2018, Secretary Pompeo 
highlighted to his Chinese counterparts the strong concern of the U.S. 
and the international community with respect to China's repression of 
religious groups.
    In addition to Department officials' regularly raising the specific 
case of the Radio Free Asia journalists and their families with Chinese 
counterparts, senior officials have publicly spoken out regarding 
China's harassment or imprisonment of the Radio Free Asia journalists' 
families:

   State Department Spokesperson Heather Nauert in April 2018 spoke 
        publicly about the case following her meeting with the RFA 
        journalists,
   Secretary Pompeo mentioned the case in a July 24, 2018 USA Today 
        OP-ED titled ``Religious Persecution in Iran, China Must End 
        Now,'' and
   Vice President Pence cited the case in an October 4, 2018 speech at 
        the Hudson Institute.


    Senator Kaine. I would like to also know whether Ambassador 
Branstad has directly raised the issue of these journalists' 
families with his counterpart, and I would like to know an 
answer to whether President Trump has directly raised this 
issue in dialogue with the Chinese. And again, we would 
appreciate a response to this letter, which is now more than 4 
months old.
    And I got to tell you I am nervous about this issue and 
these journalists' families. Just last week, the Secretary of 
State wrote an editorial in the ``Wall Street Journal'' with 
respect to another journalist, Virginia resident Jamal 
Khashoggi, who was murdered by the Saudis. And this is a quote 
from his editorial. Quote: The October murder of Saudi national 
Jamal Khashoggi in Turkey has heightened the Capitol Hill 
caterwauling and media pile-on.
    You know, we are not raising this issue about journalists 
who are being targeted and their families being targeted just 
to score political points. It is not about caterwauling and 
media pile-on. We put it in the First Amendment for a reason 
here in this country. We put it in the First Amendment for a 
reason. And when people living in Virginia, my home State, 
living in this country lawfully are being murdered or their 
families are being targeted and we are silent, we are not 
taking ample steps, it raises questions about whether we are 
being faithful to a value that we proclaim.
    I will give Secretary Pompeo credit. The first paragraph of 
that editorial suggests that our raising the question of 
Khashoggi is caterwauling. In the eleventh paragraph, he says, 
well, of course, the murder of a journalist is against American 
values. But I do not like being accused as a Member of this 
body when I raise a question about the murder of a journalist 
who lawfully lives in my State of being engaged in caterwauling 
or media pile-on. And I do not think my colleagues appreciate 
it either.
    Let me switch for a minute and ask this. Do you have a good 
estimate of the number of Uighurs that are currently being 
detained in detention camps in China?
    Mr. Busby. Thank you, Senator, for the question.
    In my statement, what I said--and this is derived from what 
our intelligence bureau has estimated, that there are at least 
800,000 and possibly up to a couple of million folks in these 
detention facilities. It is hard for us to get precise data 
because we do not have full access to that region, but that is 
our current----
    Senator Kaine. That is staggering. And I have seen public 
reports or press reports that it is a million. And I think you 
right. It is hard to get a fix on the exact number, but that is 
a staggering number.
    Press reports also indicate that a million Han Chinese have 
been recruited to essentially forcibly occupy the homes of 
Uighurs. So those who are not in detention camps are having Han 
Chinese placed in their homes so that people will be studied to 
make sure there is not a Koran visible, they are not praying 
during the day.
    You know, we have a constitutional provision, the Third 
Amendment, that is one of the least used of all, which 
prohibits the quartering of government troops in people's 
homes. It has never really been used because no government is 
stupid enough to try to do it. But the notion of a million Han 
Chinese being deployed into Uighur homes--and you have also 
indicated other things, guarding checkpoints into Uighurs 
neighborhoods. I mean, this is very significant.
    The last thing I would like to ask, if you would--I am 
over, Mr. Chair. But the situation of the Falun Gong is also an 
interesting one. What exactly is the Chinese Government's 
rationale for imprisoning Falun Gong members? Is it just a 
general suspicion of any kind of concerted or coordinated 
activity, or is there a Chinese Governmental belief that the 
Falun Gong ideology is somehow counter to the state? Explain 
that to me please.
    Mr. Busby. Thanks for the question, Senator.
    I think your analysis is right. The mere fact that there is 
a group of people meeting independently with views that 
independent of the Communist Party is viewed as a threat by the 
Communist Party. I think that is the primary source of their 
suspicion of the Falun Gong.
    Senator Kaine. So there is no allegation that Falun Gong 
are participating in terrorist activities or things like that, 
as far as you know.
    Mr. Busby. Not to my knowledge.
    Senator Kaine. All right. Thank you very much. I appreciate 
your testimony.
    Senator Gardner. Thank you, Senator Kaine.
    I want to go back to one of the comments that I made during 
my first round of questions. I talked about inspectors, U.N. 
observation, ambassadorial visits to the region.
    Secretary Busby, in your opening statement, you talked 
about the universal declaration of human rights. Have official 
U.N. envoy, inspectors visited the region?
    Mr. Busby. Not to my knowledge recently, Senator. There are 
people called special rapporteurs who are mandated by the Human 
Rights Council to look into issues like freedom of expression, 
freedom of association and assembly, freedom from torture. My 
understanding is that virtually all of them have asked for 
access to China in recent years, but none of them have been 
granted such access. So to my knowledge, no U.N. official 
charged with looking into human rights issues has been allowed 
access to China.
    Senator Gardner. Has the U.S. presence at the U.N. pushed 
for such access with China and attempted to build a coalition, 
encouraging China to accept such----
    Mr. Busby. We have regularly raised that issue with the 
Chinese Government, urging to receive such special----
    Senator Gardner. Has our ambassador asked to visit the 
region?
    Ms. Stone. We have not asked recently. It is on a list of 
places that we do want to visit. The United States diplomats do 
occasionally visit Xinjiang. It is not a closed area. Our 
concern is that we need an independent body from the United 
Nations to be able to go in and do a proper investigation.
    Senator Gardner. And I would encourage the ambassador to 
visit, to request such a visit. I would encourage us to do 
everything we can at the United Nations to the rappateurs or 
whoever it is responsible--inspections to get in there 
immediately. This is not acceptable. I mean, again, this is 
somebody that we are doing billions upon billions of trade with 
each and every day. And some of the most heinous human rights 
violations are occurring right before our very eyes.
    Mr. Busby. Mr. Chairman, that is a very good point.
    Unfortunately, such access obviously depends on the assent 
of the Chinese Government, and so far we have not been able----
    Senator Gardner. Let me ask you this. In the trade 
discussions that are taking place, the tariffs that have been 
levied--has human rights ever been associated with those 
tariffs in the trade conversations?
    Ms. Stone. I actually have not been in the trade meetings. 
In the discussions that I have been in, they have been at a 
technical level. But I do want to reassure you that whenever we 
are doing preparations for any visit, I always raise these 
issues. I feel very strongly about it, and I also feel that the 
U.S. Government has a real role in making sure that China knows 
that to the extent that they want to play a greater role in the 
world, that this is just essential. These are the kinds of 
international norms that they have to abide by.
    Senator Gardner. Perhaps I will follow up with this 
question too on China and North Korea. Is China still receiving 
laborers from North Korea?
    Ms. Stone. I am sorry, sir. I would have to get back to you 
with the exact information, the latest on that.
    Senator Gardner. I guess one of the concerns that I have 
had over the past several years, China's willingness to accept 
laborers and basically violations by North Korea of human 
rights. Are you familiar with any of the actions China has 
taken regarding the laborers?
    Ms. Stone. I am familiar with the fact that in the past, 
China certainly accepted a large number of laborers from North 
Korea. Because the North Korean laborers do not have the 
ability to keep their own salaries and have any kind of 
freedom, we do consider them to be slave laborers. And one of 
the things that we worked with our likeminded partners in the 
U.N. Security Council resolutions was to ensure that the 
laborers and new laborers going into countries has to be 
tapered off.
    But in terms of where the exact situation is at the moment, 
I am afraid that I would have to get back to you.
    Senator Gardner. Thank you.
    [Ms. Stone's response to Senator Gardner follows:]


    Ms. Stone. Thousands of North Koreans are sent abroad every year to 
work in slave-like conditions, earning revenue for the regime. We 
remain deeply concerned about the condition in which these workers live 
and work and regularly raise these concerns with other governments.
    There continue to be reports of North Koreans working in China. We 
maintain an ongoing dialogue with China regarding their UNSCR 
obligations, which include capping the number of North Korean workers 
at levels as of August 5, 2017, not issuing new work authorizations 
after September 11, 2017, and expelling all North Koreans earning 
income in their jurisdiction as soon as possible, but no later than 
December 22, 2019. Simultaneously, we have engaged with the business 
community to remind them that all goods made in whole or in part by 
North Koreans are banned from import into the United States and to urge 
them to carefully review their supply chain for North Korean workers.
    The international community must remain united in implementing U.N. 
sanctions until the final, fully verified denuclearization of the DPRK 
is achieved. The United States and our allies and partners are 
committed to the same goal--the final, fully verified denuclearization 
of the DPRK.


    Senator Gardner. Administrator Steele, when it comes to 
Tibet, conversations regarding the Dalai Lama and the Catholic 
Church's decision to agree with the Chinese Government about 
positions within the Catholic Church in China, how does that 
affect the Dalai Lama and future actions taken in Tibet?
    Ms. Steele. We have been working in Tibet for over 20 years 
and helping them with livelihood development and environmental 
conservation. We have stayed around the same areas that they 
have indicated that is of interest to them, and we believe we 
will continue to stay in those areas.
    Senator Gardner. And that is probably not the best question 
for you, but perhaps, Ms. Stone, if you would like to comment 
about that question as well.
    Ms. Stone. So in terms of the recent agreement with the 
Catholic Church and the Chinese, obviously it is something that 
we are watching very closely. The U.S. Government has not taken 
a position in the actual agreement. But we are very aware of 
the fact that the Chinese Government in the past has taken a 
very aggressive and oppressive role towards religion, and so we 
do want to track this very closely.
    Senator Gardner. Thank you.
    Senator Markey?
    Senator Markey. Thank you, Mr. Chairman, very much.
    I would like to turn to the United Nations, the Security 
Council, China blocking condemnation of the Burmese Government 
over their treatment of the Rohingya in Burma and in 
Bangladesh.
    So what is the strategy which the United States has to put 
pressure on China using our other allies in order to ensure 
that there is maximum pressure which is imposed upon the 
Chinese Government so that they do not continue to block 
official statements of global condemnation about the Burmese 
policy?
    Mr. Busby. Thank you for the question, Senator.
    As you have seen, Ambassador Haley in New York has raised 
Burma on multiple occasions in the context of the Security 
Council. Indeed, when our report on abuses in Rakhine State was 
first finalized, she was the one who raised the conclusions in 
that report in the Security Council.
    So we continue to raise our concerns about what has 
happened in the Security Council. We continue to discuss with 
our allies how to raise the situation of Rakhine State and 
Burma in the U.N. generally. But obviously, so long as China 
has a veto, it is very difficult to overcome that in any way.
    I believe there have been discussions with the Chinese 
about this. China has an interest in stability in the region. 
But so far, they have not indicated a willingness for a 
concrete Security Council action when it comes to Burma.
    Senator Markey. Did President Trump raise these human 
rights issues with President Xi in his discussions at the G20? 
What was that conversation, if any, that took place between 
President Trump and President Xi on the issue of human rights 
in Burma, and other countries around the world where China is 
actually helping governments to engage in repressive behavior?
    Ms. Stone. So, unfortunately, I was not--well, maybe not 
unfortunately. I was not in the room, and so I do not know the 
discussion that went on during the meeting between President 
Trump and President Xi. But I can assure you that on the 
margins, we certainly raised these issues, and we certainly 
raised the exit bans as well. We acknowledge that the State 
Department's most important role is the protection of American 
citizens, and so we certainly raised that as well.
    Senator Markey. I appreciate that, but I think you used the 
right phrase: ``on the margins.'' There is no guarantee, no 
evidence that the President raised the issue himself,and that 
is the only level, ultimately at which it works, especially if 
President Trump is meeting with President Xi. That is the point 
at which American values are restated very strongly and that Xi 
understands that the United States is willing to pay a price 
for our maintenance of our leadership of human rights issues 
around the planet. So, that clearly has not taken place.
    Now, with regard to the issue in Tibet that Chairman 
Gardner raised and what we are saying to the Chinese Government 
about the Dalai Lama, and the protection of religious liberty 
in Tibet, could you give us, again, a summary of what our 
statement of policy is that we are sending to the Chinese 
Government?
    Ms. Stone. Thank you very much for that important question.
    The United States is deeply concerned about the lack of 
meaningful autonomy for the Chinese people. We have certainly 
pressed for the release of detained activists throughout the 
entire country, but very importantly on the Tibetan plateau and 
in historical Tibet. And we have been pushing for reciprocity 
of access. I know that that is an important issue. We do want 
to work with Congress on that shared goal. And we do continue 
to have very serious concerns about the ability of the Tibetan 
people to continue to have the ability to express their unique 
culture, their unique language, and their religious practices.
    Senator Markey. So it is pretty clear that there is a 
systematic effort by the Chinese Government, not just inside of 
China, but around the world, to back those policies which are 
most repressive and allow for a compromise of human rights. It 
may be Facebook or Google, it may be the Uighurs, may be the 
Rohingya, or it may be other countries like Venezuela. Anyplace 
they are putting their footprints is a place where they are 
willing to turn a blind eye, use economic power, and encourage 
repression by a government of human rights--the natural 
aspirations of human beings to express their views to be able 
to be who they were born to be.
    So we have high expectations for you, but we have higher 
expectations for Donald Trump to express those views clearly, 
concisely, powerfully, insistently, and persistently with the 
Chinese leadership. We have not seen evidence of that thus far, 
but we thank you for your service.
    Thank you, Mr. Chairman.
    Senator Gardner. Senator Kaine?
    Senator Kaine. Briefly. Mr. Busby and Ms. Stone, will you 
endeavor to get us a response to the letter that we sent the 
Secretary in July?
    Mr. Busby. Senator, I am sorry there has not been a 
response. I do not believe I have seen the letter, but we will 
take it back and we will get you a response.
    Senator Kaine. That would be appreciated. Thank you.
    Senator Gardner. Thank you, Senator Kaine.
    I want to follow up a little bit on the questions on Tibet. 
I asked the question regarding Catholic Church policy, the 
agreement they reached with China and the Dalai Lama. China has 
said that they will pick the next Dalai Lama.
    The Tibetan Policy Act of 2002 mandated that American 
officials should visit Tibet on a regular basis.
    I want to get into both of these.
    If China proceeds and tries to impose a Dalai Lama, what 
will the U.S. response be?
    Ms. Stone. Thank you very much, and I think that is a very 
important question because the fact that you are asking that 
question is an important signal in itself to the Chinese 
Government that this is the kind of issue that we are watching 
very closely and at very senior levels.
    The United States has a very clear position that religious 
decisions should be made within religious organizations, that 
this is not the role of the state. I would not want to prejudge 
exactly how a future scenario would roll out, but I would like 
to lay a marker that that is the clear position of the United 
States Government and I think widely supported within American 
society that those are the kinds of decisions that should be 
made by religious communities on their own and without outside 
interference.
    Senator Gardner. Thank you. I think it is clear that this 
Congress would not recognize a Chinese imposition.
    The 2002 Tibetan Policy Act mandated that American 
officials should visit Tibet on a regular basis. We know that 
very few diplomats, officials have been able to visit Tibet to 
date primarily because issues of the Chinese Government 
refusing to grant access.
    Could you describe perhaps the level of access to Tibet 
that your agency has received over the last 3 years? If anybody 
else wants to answer this on the panel as well.
    Ms. Stone. I am sorry, sir. I do not have at my fingertips 
the exact number of visitors. So I would ask that we be allowed 
to get back to you on that.
    But I do want to state very clearly that I do understand 
that the Senate is considering the Reciprocal Access to Tibet 
Act. We do want to continue to work very closely with Congress 
and with your staff with the goal of seeing that Americans do 
have access to Tibet.
    Senator Gardner. Well, thank you. I think it is important 
that we know what exact access we have had to Tibet from our 
diplomatic corps.
    I know Chinese officials who purport to represent Tibet 
have freely come to the United States. I do not know if you 
know that number, but I would like to know those numbers.
    You mentioned the legislation itself. I think we need to 
consider reciprocal access as part of our policy and approach 
to Tibet and China and what is being done to address this and 
to promote our access to Tibet.
    Do you share the goals of our reciprocal act?
    Ms. Stone. We certainly share the goals, and we do look 
forward to working with you to figure out how best to achieve 
those goals.
    Senator Gardner. And if passed, you would work to implement 
it?
    Ms. Stone. Of course.
    Senator Gardner. Thank you.
    Senator Markey?
    Senator Markey. Thank you, Mr. Chairman.
    I just have one final question, and that is on the Human 
Rights Council. We are trying to push China on their human 
rights abuses, and the Human Rights Council is one aspect of 
our ability to coordinate with allies to put pressure on those 
who are violating human rights.
    We are now pulling out of the Human Rights Council. How 
does that hurt our ability to rally other nations to put 
together a plan that targets China and do so in a comprehensive 
way using that Human Rights Council as a mechanism to 
accomplish that goal? Mr. Busby?
    Mr. Busby. Thank you for the question, Senator.
    Well, as you know from Secretary Pompeo's and Ambassador 
Haley's statement at the time of the decision to withdraw from 
the council, our concerns had to do with the membership on the 
council which, as you point out, included China--China has been 
a member of the council for a lot of the council's years--as 
well as the process by which members are elected to the 
council.
    And our second concern was the fact that the council pays 
disproportionate attention to Israel, and after years of trying 
to fix both of those problems, we were not succeeding. And that 
is what prompted the decision to withdraw.
    However, the fact that we have withdrawn from the council 
does not mean we are withdrawing from advocacy around human 
rights in China. Indeed, in New York on multiple occasions at 
the U.N. there, we have raised our concerns about China. We 
have raised it in multiple statements publicly. In the case 
that Senator Rubio raised in which China sought to preclude a 
Uighur representative from joining a meeting, our mission there 
actually pushed back and succeeded in getting that person 
access to the U.N. in New York. So we continue to look at any 
and all venues in which we can push back on China's own 
situation and China's own efforts to influence the U.N.
    Senator Markey. Well, I do not think ``any and all'' is 
accurate. I do not think we have any evidence the President is 
using his leverage with President Xi to communicate our values 
at the highest level. So, it is in that short list of 
considerations for the Chinese Government as they are trying to 
decide what their relationship with our country is.
    And I disagree. I think that being in the Human Rights 
Council does help because it is the organizing principle, and 
we might not be happy with all aspects of it. But on this China 
issue I think it is an additional point of significant 
pressure, which we should be using as an organizing principle 
to send a very strong message on human rights. I think down the 
line, there are many tools that just are not being used from 
the Oval Office right down to the Human Rights Council as well, 
and there is evidence that as a result, we are not really 
seeing any response from the Chinese on these issues. So I just 
think that a change in direction is absolutely necessary.
    So thank you.
    Mr. Chairman, thank you for your incredible leadership on 
this committee, and we thank the witnesses as well for your 
input.
    Senator Gardner. Thank you.
    Secretary Busby, you talked about some of the dollars used 
toward democracy training. I would point out how important that 
those efforts are, a civil society, teaching about democracy, 
teaching young leaders about the values of human rights. And 
the bill that Senator Markey and I have introduced, Asia 
Reassurance Initiative Act, would greatly increase dollars for 
democracy, human rights, rule of law programming, training, and 
I hope that you will work with us on implementation of those 
dollars to provide a better, stronger voice for that.
    Administrator Steele, I do not know if there is anything 
you would like to add. It looks like you do.
    Ms. Steele. Yes, I did. Strengthening democratic 
institutions is a major component of the administration's Indo-
Pacific strategy which was part of my testimony here. We all 
realize that development assistance can play an important role 
in counterbalancing the effect that China has in weakening 
countries through its own very adversarial methods. I just 
wanted to confirm and verify that it is going to be a very 
important component of the administration's Indo-Pacific 
strategy.
    Senator Gardner. Very good. Thank you for that.
    Thank you again to all of you for your time and testimony 
today, providing us with your testimony.
    For the information of members, the record will remain open 
until the close of business Thursday for members to submit 
questions for the record. I would ask that the witnesses 
respond as promptly as possible. Your responses will be made a 
part of the record.
    With the thanks of this committee, the hearing is now 
adjourned.


    [Whereupon, at 11:48 a.m., the hearing was adjourned.]



                              ----------                              



              Additional Material Submitted for the Record


     Responses to Additional Questions for the Record Submitted to 
                  Laura Stone by Senator Cory Gardner

    Question 1. Since 2010, the Chinese Government has suspended the 
official dialogue with the Dalai Lama's representatives to resolve the 
Tibetan issue. Secretary Mike Pompeo has said that he ``will express 
publicly, and at the highest levels of government, that Chinese 
authorities need to engage in meaningful and direct dialogue with the 
Dalai Lama or his representatives, without preconditions, to lower 
tensions and resolve differences.'' What has the State Department done 
so far to encourage the facilitation of this dialogue?

    Answer. The United States continues to encourage engagement in 
meaningful and direct dialogue, without preconditions, to lead to a 
settlement that resolves differences.
    We urge Chinese authorities to resume a dialogue with the Dalai 
Lama or his representatives without preconditions.
    The Government of China continues to characterize the Dalai Lama as 
a separatist and to assert that it will not allow "outside 
interference" in Tibetan issues.

    Question 2. The Tibetan Policy Act of 2002 mandates that American 
officials should visit Tibet on a regular basis. What is the level of 
access to Tibet that U.S. Government officials have received? Can you 
provide a list of visits by U.S. Government officials in the last three 
years?

    Answer. Below is a list of visits by U.S. Government officials to 
the Tibetan Autonomous Region (TAR), although it may not be 
comprehensive. U.S. Government access to the TAR is not regular and is 
more restricted than travel to other regions or provinces of China. 
During the past three years, Chinese officials have denied multiple 
U.S. Government requests to meet with TAR officials. Regular trips 
granted to other U.S. officials are heavily scrutinized.

                   Visits by U.S. Government Officials to the Tibetan Autonomous Region (TAR)
----------------------------------------------------------------------------------------------------------------
          Date                      U.S. Official                       Purpose                    Location
----------------------------------------------------------------------------------------------------------------
May 2015                  Ambassador Max Baucus             Met with TAR officials           Lhasa
----------------------------------------------------------------------------------------------------------------
November 2015             Consular officer                  Routine consular visit           Lhasa
----------------------------------------------------------------------------------------------------------------
November 2015             CODEL Pelosi                      Met with TAR officials;          Lhasa
                                                             discussed TAR access
----------------------------------------------------------------------------------------------------------------
June 2016                 Consular officer                  Routine consular visit           Lhasa and Shigatse
----------------------------------------------------------------------------------------------------------------
December 2016             Consular officer                  Routine consular visit           Linzhi
April 2017                CODEL Daines                      Met with TAR officials           Lhasa
----------------------------------------------------------------------------------------------------------------
August 2017               Consular officers                 Routine consular visit           Lhasa, Shigatse,
                                                                                              and Everest Base
----------------------------------------------------------------------------------------------------------------
November 2017             Consul General in Chengdu as      Met with TAR officials; raised   Linzhi, Lhasa
                            well as Political/Economic and    religious freedom and U.S.
                            PAS officers                      Business access issues
----------------------------------------------------------------------------------------------------------------
April 2018                Consular officer                  Routine consular visit           Shannan
----------------------------------------------------------------------------------------------------------------
May 2018                  Regional security officers        Advance for Ambassador           Lhasa
                                                             Brandstad's trip
----------------------------------------------------------------------------------------------------------------
October 2018              Consular officers                 Routine consular visit           Lhasa
----------------------------------------------------------------------------------------------------------------
November 2018             Consul General in Chengdu and     Met with Lhasa Party Secretary;  Lhasa
                            Political Officer                raised TAR access issues for
                                                             U.S. citizens and U.S.
                                                             businesses, religious freedom,
                                                             as well as cultural and
                                                             education exchanges
----------------------------------------------------------------------------------------------------------------



    Question 3. Tibetan-Americans, attempting to visit their homeland, 
report having to undergo a discriminatory visa application process, 
different from what is typically required, at the Chinese embassy and 
consulates in the United States, and often find their requests to 
travel denied. Are you aware of this practice and have you investigated 
these allegations, as they represent a clear discrimination against 
certain U.S. citizens?

    Answer. We have received anecdotal reports that Tibetan-Americans 
must undergo strict screening and meet conditions required only of 
Tibetans when applying for visas at Chinese embassies. We do not have a 
means to collect comprehensive data about how many applications are 
submitted, accepted, or denied by the Chinese Government.
    We are aware of instances when Chinese authorities have denied 
Tibetan-Americans' entry into China despite those individuals 
possessing valid Chinese visas and travel documents. For example, On 
February 22, 2018, according to Radio Free Asia, authorities at 
Shuangliu International Airport in Chengdu denied entry to a U.S. 
citizen of Tibetan ethnicity who possessed a current and valid Chinese 
visa. Radio Free Asia journalist Palden Gyal reported that in August 
2017 customs officials at the Baiyun International Airport in 
Guangzhou, China detained him at the airport, seized his electronic 
devices, and denied his entrance into China.
    The Consul General at the U.S. Consulate General in Chengdu has 
raised the issue of U.S. citizens' access to the Tibetan Autonomous 
Region (TAR) in every meeting with TAR officials, including on specific 
cases such as these.

    Question 4. The Foreign Correspondents Club of China reports that: 
a) 2008 rules prevent foreign reporters from visiting the Tibet 
Autonomous Region without prior permission from the Government of such 
Region; b) such permission has only rarely been granted; and c) 
although the 2008 rules allow journalists to travel freely in other 
parts of China, Tibetan areas outside such Region remain ``effectively 
off-limits to foreign reporters.'' Do you monitor the number of 
requests made by U.S. journalists to travel to Tibet and how many have 
been rejected over the last three years?

    Answer. While we do not have the means to monitor comprehensively 
the requests made by U.S. journalists to enter Tibet, we regularly 
engage with U.S. journalists to discuss this issue, including the 
Foreign Correspondents' Club. We understand that U.S. journalists seek 
access to Tibet on a regular basis.
    In the last three years there have been a limited number of 
instances in which Chinese officials selected and escorted U.S. 
journalists to pre-designated places in the Tibetan Autonomous Region 
(TAR). Outside of these trips, U.S. journalists are not allowed to go 
to the TAR.

    Question 5. How many visas have you granted to Chinese journalists 
over the last three years?

    Answer. Below are the number of I Visas issued to Chinese nationals 
for the last 3 years:

          FY 2018: 587
          FY 2017: 732
          FY 2016: 836

    Please note that the FY 2017 and FY 2016 data (along with prior 
years) is available on http://Travel.State.Gov on the Nonimmigrant Visa 
Statistics page (https://travel.state.gov/content/travel/en/legal/visa-
law0/visa-statistics/nonimmigrant-visa-statistics.html) under the 
section called Nonimmigrant Visa Issuances by Visa Class and 
Nationality. FY 2018 data is not publicly available yet.

    FY 2018 data are preliminary and subject to change. Any changes 
would not be statistically significant.

    Question 6. The Government of the People's Republic of China does 
not grant United States diplomats and other officials, journalists, and 
other citizens[`] access to Tibet on a basis that is reciprocal to the 
access that the Government of the United States grants Chinese 
diplomats and other officials, journalists, and citizens. Have you 
already or do you plan to identify who are the Chinese officials both 
at the local level in Tibet and at the central level in Beijing, who 
are responsible for blocking access to Tibet for American citizens?

    Answer. The Chinese Government does not disclose the names of 
officials who are involved in issuing travel permits to American 
citizens to access the Tibetan Autonomous Region (TAR).
    The Department will fully implement the Reciprocal Access to Tibet 
Act, if it is signed into law.

  Letter Sent by Senator Tim Kaine to Mike Pompeo, U.S. Secretary of 
State, Regarding China's Retaliation Against the Families of Radio Free 
                            Asia Journalists

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



   U.S. Department of State's Response to Senator Tim Kaine's Letter 
 Regarding China's Retaliation Against the Families of Radio Free Asia 
                              Journalists

                         United States Department of State,
                                               Washington, DC 20520
Hon. Tim Kaine,
U.S. Senate, Washington, DC 20510


    Dear Senator Kaine, Thank you for your letter of July 26 on the 
worsening human rights crisis in China's Xinjiang Uyghur Autonomous 
Region (Xinjiang), and its impact on six U.S.-based journalists with 
Radio Free Asia's (RFA) Uyghur Service and their family members. We 
regret the delay in responding. The Department of State shares your 
deep concerns about the growing crackdown on and mass detention of 
Uighurs, ethnic Kazakhs, and members of other Muslim minority groups in 
China.
    China's harsh repression of ethnic and religious minorities' 
expressions of their cultural identity and religious practices 
throughout Xinjiang has the potential to incite radicalization and 
recruitment to violence. Secretary Pompeo highlighted the 
Administration's concerns at the State Department's Ministerial to 
Advance Religious Freedom in July, and raised the issue directly with 
the Chinese government at the Diplomatic and Security Dialogue in 
November.
    The Department is particularly alarmed by reports of the mass 
detention of at least 800,000 to possibly more than two million 
Uighurs, ethnic Kazkahs, and other members of Muslim minorities for 
indefinite periods in internment camps for so-called ``patriotic re-
education.'' Former detainees have said publicly that they were 
regularly subjected to beatings, stress positions, sleep deprivation, 
and other forms of abuse and were aware of deaths in the camps. U.S. 
officials have consistently called on China to immediately release all 
those arbitrarily detained.
    In April, Spokesperson Nauert met with those RFA journalists, who 
shared reports of Uighurs and other Muslims in Xinjiang, including 
their families, who have been harassed and arbitrarily detained. 
Spokesperson Nauert publicly called on China to release all those 
unlawfully detained and to respect filndamental freedoms. Department 
officials continue to meet regularly with these journalists and other 
U.S. citizens and lawful permanent residents whose family members have 
disappeared or been similarly detained in Xinjiang, and press for 
information on their cases with Chinese officials.
    The Department will continue to raise its grave concerns to the 
Chinese government about its repression of Muslims in Xinjiang, and to 
urge China to provide information about the locations and medical 
conditions of those detained and immediately release them and to lift 
the martial law-like restrictions in the region.
    We hope this information is helpful to you. Please let us know if 
we can be of further assistance.
          Sincerely,
                                     Mary Elizabeth Taylor,
                 Assistant Secretary, Bureau of Legislative Affairs

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