[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]




 
  CHINA'S MARITIME SILK ROAD INITIATIVE: IMPLICATIONS FOR THE GLOBAL 
                         MARITIME SUPPLY CHAIN

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

                                (116-37)

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                COAST GUARD AND MARITIME TRANSPORTATION

                                 OF THE

                              COMMITTEE ON
                   TRANSPORTATION AND INFRASTRUCTURE
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             FIRST SESSION

                               __________

                            OCTOBER 17, 2019

                               __________

                       Printed for the use of the
             Committee on Transportation and Infrastructure
             
             
             
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]             
             
 
     Available online at: https://www.govinfo.gov/committee/house-
     transportation?path=/browsecommittee/chamber/house/committee/
                             transportation
                             
                             
                             _____                      


             U.S. GOVERNMENT PUBLISHING OFFICE 
41-367 PDF            WASHINGTON : 2020                             
                             
                             
                             

             COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

  PETER A. DeFAZIO, Oregon, Chair
SAM GRAVES, Missouri                 ELEANOR HOLMES NORTON,
DON YOUNG, Alaska                      District of Columbia
ERIC A. ``RICK'' CRAWFORD, Arkansas  EDDIE BERNICE JOHNSON, Texas
BOB GIBBS, Ohio                      RICK LARSEN, Washington
DANIEL WEBSTER, Florida              GRACE F. NAPOLITANO, California
THOMAS MASSIE, Kentucky              DANIEL LIPINSKI, Illinois
MARK MEADOWS, North Carolina         STEVE COHEN, Tennessee
SCOTT PERRY, Pennsylvania            ALBIO SIRES, New Jersey
RODNEY DAVIS, Illinois               JOHN GARAMENDI, California
ROB WOODALL, Georgia                 HENRY C. ``HANK'' JOHNSON, Jr., 
JOHN KATKO, New York                 Georgia
BRIAN BABIN, Texas                   ANDRE CARSON, Indiana
GARRET GRAVES, Louisiana             DINA TITUS, Nevada
DAVID ROUZER, North Carolina         SEAN PATRICK MALONEY, New York
MIKE BOST, Illinois                  JARED HUFFMAN, California
RANDY K. WEBER, Sr., Texas           JULIA BROWNLEY, California
DOUG LaMALFA, California             FREDERICA S. WILSON, Florida
BRUCE WESTERMAN, Arkansas            DONALD M. PAYNE, Jr., New Jersey
LLOYD SMUCKER, Pennsylvania          ALAN S. LOWENTHAL, California
PAUL MITCHELL, Michigan              MARK DeSAULNIER, California
BRIAN J. MAST, Florida               STACEY E. PLASKETT, Virgin Islands
MIKE GALLAGHER, Wisconsin            STEPHEN F. LYNCH, Massachusetts
GARY J. PALMER, Alabama              SALUD O. CARBAJAL, California, 
BRIAN K. FITZPATRICK, Pennsylvania   Vice Chair
JENNIFFER GONZALEZ-COLON,            ANTHONY G. BROWN, Maryland
  Puerto Rico                        ADRIANO ESPAILLAT, New York
TROY BALDERSON, Ohio                 TOM MALINOWSKI, New Jersey
ROSS SPANO, Florida                  GREG STANTON, Arizona
PETE STAUBER, Minnesota              DEBBIE MUCARSEL-POWELL, Florida
CAROL D. MILLER, West Virginia       LIZZIE FLETCHER, Texas
GREG PENCE, Indiana                  COLIN Z. ALLRED, Texas
                                     SHARICE DAVIDS, Kansas
                                     ABBY FINKENAUER, Iowa
                                     JESUS G. ``CHUY'' GARCIA, Illinois
                                     ANTONIO DELGADO, New York
                                     CHRIS PAPPAS, New Hampshire
                                     ANGIE CRAIG, Minnesota
                                     HARLEY ROUDA, California
                                     Vacancy
                                     
                                ------                                

        Subcommittee on Coast Guard and Maritime Transportation

 SEAN PATRICK MALONEY, New York, 
               Chair
BOB GIBBS, Ohio                      RICK LARSEN, Washington
DON YOUNG, Alaska                    STACEY E. PLASKETT, Virgin Islands
RANDY K. WEBER, Sr., Texas           JOHN GARAMENDI, California
BRIAN J. MAST, Florida               ALAN S. LOWENTHAL, California
MIKE GALLAGHER, Wisconsin            ANTHONY G. BROWN, Maryland
CAROL D. MILLER, West Virginia       CHRIS PAPPAS, New Hampshire, Vice 
SAM GRAVES, Missouri (Ex Officio)    Chair
                                     Vacancy
                                     PETER A. DeFAZIO, Oregon (Ex 
                                     Officio)
                                     

                                CONTENTS

                                                                   Page

Summary of Subject Matter........................................     v

                 STATEMENTS OF MEMBERS OF THE COMMITTEE

Hon. Sean Patrick Maloney, a Representative in Congress from the 
  State of New York, and Chairman, Subcommittee on Coast Guard 
  and Maritime Transportation:

    Opening statement............................................     1
    Prepared statement...........................................     3
Hon. Bob Gibbs, a Representative in Congress from the State of 
  Ohio, and Ranking Member, Subcommittee on Coast Guard and 
  Maritime Transportation:

    Opening statement............................................     4
    Prepared statement...........................................     5
Hon. Peter A. DeFazio, a Representative in Congress from the 
  State of Oregon, and Chairman, Committee on Transportation and 
  Infrastructure:

    Opening statement............................................     6
    Prepared statement...........................................     7
Hon. Sam Graves, a Representative in Congress from the State of 
  Missouri, and Ranking Member, Committee on Transportation and 
  Infrastructure, prepared statement.............................    73

                               WITNESSES
                                Panel 1

Chad Sbragia, Deputy Assistant Secretary of Defense for China, 
  Office of the Secretary of Defense:

    Oral statement...............................................     9
    Joint prepared statement of Mr. Sbragia and Lieutenant 
      General Tuck...............................................    12
Lieutenant General Giovanni K. Tuck, Director for Logistics, J4, 
  Joint Chiefs of Staff:

    Oral statement...............................................    11
    Joint prepared statement of Lieutenant General Tuck and Mr. 
      Sbragia....................................................    12
Carolyn Bartholomew, Chairwoman, United States-China Economic and 
  Security Review Commission:

    Oral statement...............................................    17
    Prepared statement...........................................    19

                                Panel 2

Jonathan E. Hillman, Director, Reconnecting Asia Project, Center 
  for Strategic and International Studies:

    Oral statement...............................................    42
    Prepared statement...........................................    43
Jeffrey D. Becker, Ph.D., Research Program Director, Indo-Pacific 
  Security Affairs, CNA:

    Oral statement...............................................    47
    Prepared statement...........................................    49
Kathleen A. Walsh, Associate Professor of National Security 
  Affairs, U.S. Naval War College:

    Oral statement...............................................    58
    Prepared statement...........................................    60

                       SUBMISSIONS FOR THE RECORD

Letter of October 17, 2019, from Scott N. Paul, President, 
  Alliance for American Manufacturing, Submitted for the Record 
  by Hon. Sean Patrick Maloney...................................    73
Joint Statement of Kathryn Waldron, Fellow, National Security and 
  Cybersecurity, R Street Institute and Kristen Nyman, Government 
  Affairs Specialist, National Security and Cybersecurity, R 
  Street Institute, Submitted for the Record by Hon. Sean Patrick 
  Maloney........................................................    76
Statement of the United Steelworkers, Submitted for the Record by 
  Hon. Sean Patrick Maloney......................................    78

                                APPENDIX

Questions from Hon. Sean Patrick Maloney to Chad Sbragia, Deputy 
  Assistant Secretary of Defense for China, Office of the 
  Secretary of Defense...........................................    81
Questions from Hon. Rick Larsen to Chad Sbragia, Deputy Assistant 
  Secretary of Defense for China, Office of the Secretary of 
  Defense........................................................    81
Questions from Hon. Sean Patrick Maloney to Lieutenant General 
  Giovanni K. Tuck, Director for Logistics, J4, Joint Chiefs of 
  Staff..........................................................    82
Questions from Hon. Rick Larsen to Lieutenant General Giovanni K. 
  Tuck, Director for Logistics, J4, Joint Chiefs of Staff........    83
Questions from Hon. Anthony G. Brown to Lieutenant General 
  Giovanni K. Tuck, Director for Logistics, J4, Joint Chiefs of 
  Staff..........................................................    84
Questions from Hon. Sean Patrick Maloney to Carolyn Bartholomew, 
  Chairwoman, United States-China Economic and Security Review 
  Commission.....................................................    84
Questions from Hon. Rick Larsen to Carolyn Bartholomew, 
  Chairwoman, United States-China Economic and Security Review 
  Commission.....................................................    85
Questions from Hon. Sean Patrick Maloney to Jonathan E. Hillman, 
  Director, Reconnecting Asia Project, Center for Strategic and 
  International Studies..........................................    89
Questions from Hon. Rick Larsen to Jonathan E. Hillman, Director, 
  Reconnecting Asia Project, Center for Strategic and 
  International Studies..........................................    89
Questions from Hon. Sean Patrick Maloney to Jeffrey D. Becker, 
  Ph.D., Research Program Director, Indo-Pacific Security 
  Affairs, CNA...................................................    90
Questions from Hon. Rick Larsen to Jeffrey D. Becker, Ph.D., 
  Research Program Director, Indo-Pacific Security Affairs, CNA..    91
Questions from Hon. Sean Patrick Maloney to Kathleen A. Walsh, 
  Associate Professor of National Security Affairs, U.S. Naval 
  War College....................................................    92
Questions from Hon. Rick Larsen to Kathleen A. Walsh, Associate 
  Professor of National Security Affairs, U.S. Naval War College.    94
  
  

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                            October 11, 2019

    SUMMARY OF SUBJECT MATTER

    TO:      LMembers, Subcommittee on Coast Guard and Maritime 
Transportation
    FROM:  LStaff, Subcommittee on Coast Guard and Maritime 
Transportation
    RE:      LHearing on ``China's Maritime Silk Road 
Initiative: Implications for the Global Maritime Supply Chain''
_______________________________________________________________________


                                PURPOSE

    The Subcommittee on Coast Guard and Maritime Transportation 
will meet on Thursday, October 17, 2019, at 2:00 p.m. in 2167 
Rayburn House Office Building to examine the 21st Century 
Maritime Silk Road Initiative, one component of a formal global 
development strategy promoted by the Chinese government to 
enhance their trade networks. The Subcommittee will hear from 
the Office of the Secretary of Defense, United States-China 
Economic and Security Review Commission, Center for Security 
and International Studies, Naval War College, and Center for 
Naval Analysis about the impacts of this policy and strategic 
implication for American maritime commerce.

                               BACKGROUND

    In 2013, China unveiled the concept for the 21st Century 
Maritime Silk Road Initiative (MSRI), the maritime component of 
the Belt and Road Initiative (BRI) published in both Chinese 
and English.\1\ The BRI is widely regarded as Chinese President 
Xi Jinping's flagship project, and the MSRI is designed to 
expand the nation's blue economy and enhance infrastructure 
connectivity throughout Southeast Asia, Oceania, the Indian 
Ocean, and East Africa with Chinese-financed port, road, and 
energy infrastructure.\2\ The MSRI's three ``blue economic 
passages'' (BEPs) include the China-Indian Ocean-Africa-
Mediterranean Sea BEP, China-Oceania-South Pacific BEP, and 
China-Arctic Ocean-Europe BEP. As of April 2019, 126 countries 
have signed on to the BRI.\3\
---------------------------------------------------------------------------
    \1\ The Silk Road Economic Belt and 21st Century Maritime Silk Road 
became ``One Belt, One Road'' for short. In late 2015, the central 
government issued guidelines on standardizing the English translation, 
specifically demanding that ``initiative'' should now be used in 
association with Belt and Road, whereas ``strategy,'' ``project,'' 
``program,'' and ``agenda'' should not be used. One Belt, One Road 
became Belt and Road Initiative in English, but its Chinese name 
remained ``Yidai Yilu.''
    \2\ Mathieu Duchatel and Alexandre Sheldon Duplaix, ``Blue China: 
Navigating the Maritime Silk Road to Europe,'' European Council of 
Foreign Relations, April 23, 2018.
    \3\ The Second Belt and Road Forum for International Cooperation, 
``List of Deliverables of the Second Belt and Road Forum for 
International Cooperation,'' [http://www.beltandroadforum.org/english/
n100/2019/0427/c36-1312.html] April 27, 2019.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

Figure 1_The MSRI will begin in Quanzhou in Fujian province, and visit 
 Guangzhou (Guangdong province), Beihai (Guangxi), and Haikou (Hainan) 
before heading to the Malacca Strait. From Kuala Lumpur, the MSRI heads 
to Kolkata, India then crosses the rest of the Indian Ocean to Nairobi, 
  Kenya (the Xinhua map does not include a stop in Sri Lanka, despite 
indications in February that the island country would be a part of the 
Maritime Silk Road). From Nairobi, the MSRI goes north around the Horn 
 of Africa and through the Red Sea into the Mediterranean, stopping in 
Athens before meeting the land-based Silk Road in Venice. Reconnecting 
                       Asia, CSIS, June 20, 2019.

    Command of the maritime transportation system has long 
acted as the stage on which great powers compete. Globally, 
over 90% of commercial goods travel by sea. The infrastructure 
facilitating their transport--ocean-going vessels, deep-water 
ports, high-speed railways, and fiber optic cables--descend 
from technologies that Western powers leveraged from the mid-
19th century through World War I to expand their access to 
foreign markets. In some places along the BRI, China is 
literally replacing and retracing colonial projects, building 
railways in Africa and laying data cables under the sea.
    The U.S. high seas presence (the Navy, Coast Guard, and 
international commercial fleet) has for decades secured 
American sea-power and access to materials and markets through 
existing trade lanes and strategic straits. This hearing will 
shed light on the degree to which the MSRI might co-opt the 
global maritime transportation system for Chinese industrial, 
commercial, and security gains, disable the remnant U.S. 
international trading fleet by monopolizing the transport of 
U.S. commerce, and destabilize both the U.S. Merchant Marine 
and maritime supply chain.

THE BELT AND ROAD INITIATIVE

    ``Hard'' infrastructure projects occur mostly in the 
following sectors: transportation (ports, roads, railways), 
energy (pipelines, power grids, hydropower dams), and 
information technologies and communications (fiber-optic 
networks, data centers, satellite constellations). Rapidly 
emerging as the third major element is a ``New Digital Silk 
Road'' that will provide telecommunications and information 
connectivity for both maritime and land routes. According to 
official sources from within China's State-owned Assets 
Supervision and Administration Commission, 80 Chinese state-
owned enterprises (SOEs) have undertaken over 3,100 BRI 
projects since 2013.\4\ Of these, 288 projects are seaports and 
another 136 are dry ports connected to the MSRI.\5\ Rapidly 
developing Asian economies alone will require $26 trillion in 
additional infrastructure investment by 2030 to maintain growth 
momentum.\6\ Consequently, infrastructure investments, and the 
strategic implications they carry, are likely to intensify in 
the coming years.
---------------------------------------------------------------------------
    \4\ Nadege Rolland, A Concise Guide to the Belt and Road Initiative 
[https://www.nbr.org/publication/a-guide-to-the-belt-and-road-
initiative/], National Bureau of Asian Research, April 11, 2019.
    \5\ Reconnecting Asia Project, Mapping Continental Ambitions 
[https://reconnectingasia.csis.org/], Center for Strategic and 
International Studies.
    \6\ Asian Development Bank, Meeting Asia's Infrastructure Needs 
[https://www.adb.org/sites/default/files/publication/227496/special-
report-infrastructure.pdf], February 2017.
---------------------------------------------------------------------------
    The Chinese People's Liberation Army Navy (PLAN) is already 
active in the Middle East and Western Indian Ocean and conducts 
a wide range of peacetime operations to protect Chinese 
maritime trade, assets, and personnel established, in part, 
under the auspices of the MSRI.\7\ The development of BRI 
infrastructure near key strategic straits for the U.S. and 
other maritime trading states (e.g., the Strait of Hormuz, Bab 
el-Mandeb Strait, and Suez Canal) has enabled the Chinese 
commercial fleet to support PLAN operations in international 
waters outside Chinese jurisdiction while development is 
underway.\8\
---------------------------------------------------------------------------
    \7\ Jeffrey Becker et al., China's Presence in the Middle East and 
Western Indian Ocean: Beyond the Belt and Road [https://www.cna.org/
CNA_files/PDF/DRM-2018-U-018309-Final2.pdf], CNAS, February 2019.
    \8\ Ibid.
---------------------------------------------------------------------------
    The BRI also includes ``soft'' infrastructure, such as the 
creation of special economic zones and the negotiation of free 
trade agreements, currency swap agreements, and reduced 
tariffs. China's early plans for the BRI envision the Silk Road 
as a region of ``more capital convergence and currency 
integration;'' a region where currency exchanges are fluid and 
easy.\9\ China's currency, the renminbi, is becoming more 
widely used in Mongolia, Kazakhstan, Uzbekistan, Vietnam, and 
Thailand.\10\
---------------------------------------------------------------------------
    \9\ Shannon Tiezzi, ``China's `New Silk Road' Vision Revealed,'' 
[https://thediplomat.com/2014/05/chinas-new-silk-road-vision-revealed/] 
The Diplomat, May 9, 2014.
    \10\ Ibid.
---------------------------------------------------------------------------
    Skeptical scholars worry this may ensnare strategically 
located developing countries ``in a debt trap that leaves them 
vulnerable to China's influence.'' \11\ Echoing the same 
criticism, former U.S. Secretary of State Rex Tillerson in 
October 2017 described China's model of financing 
infrastructure projects as ``predatory economics'' resulting in 
``financing default and conversion of debt into equity.'' \12\ 
For example, Pakistan, a key BRI partner, asked the 
International Monetary Fund earlier this year to help the 
country out of a balance of payments crisis.\13\ In addition, 
Malaysia in August 2018 abandoned more than US$20 billion worth 
of Chinese-funded infrastructure projects, saying it could no 
longer afford them.\14\
---------------------------------------------------------------------------
    \11\ Brahma Chellaney, China's Debt Trap Diplomacy [https://
www.project-syndicate.org/commentary/china-one-belt-one-road-loans-
debt-by-brahma-chellaney-2017-01?barrier=accesspaylog], Project 
Syndicate, January 23, 2017.
    \12\ Rex Tillerson, Defining Our Relationship with India for the 
Next Century: An Address by U.S. Secretary of State Rex Tillerson 
[https://csis-prod.s3.amazonaws.com/s3fs-public/event/
171018_An_Address_by_U.S._Secretary_of_State_Rex_Tillerson.pdf], Center 
for Strategic and International Studies, October 18, 2017.
    \13\ James Mackenzie, IMF board approves $6 billion loan package 
for Pakistan [https://www.reuters.com/article/us-pakistan-imf/imf-
board-approves-6-billion-loan-package-for-pakistan-idUSKCN1TY2JW], 
Reuters, July 3, 2019.
    \14\ James Suokas, ``Chinese state enterprises undertake over 3,100 
Belt & Road projects,'' [https://gbtimes.com/chinese-state-enterprises-
undertake-over-3100-belt-and-road-projects] GBTimes, October 31 2018.
---------------------------------------------------------------------------

DUAL-USE INFRASTRUCTURE

    Dual-use infrastructure projects are developments that 
serve both commercial and military purposes. Through project 
financing tools (i.e., guarantees and conditions, controlling 
source funds, debt, etc.), design and construction standards, 
technology transfer, and intelligence acquisition through 
ownership and operation of infrastructure, states can advance 
both economic and non-economic objectives.\15\ While the MSRI 
to date is mostly an economic and political program with 
military implications, dual-use facilities constructed under 
the banner of the BRI could enable the PLAN to incrementally 
expand operations regionally and globally to create potential 
new risks for militaries operating in the Indian Ocean basin 
and beyond.\16\ Securing MSRI routes would require the PLAN to 
more regularly patrol the sea lanes that link China's far-flung 
port investments.
---------------------------------------------------------------------------
    \15\ Jonathan Hillman, Infrastructure and Influence: the Strategic 
Stakes of Foreign Projects [https://csis-prod.s3.amazonaws.com/s3fs-
public/publication/190123_Hillman_Influenceand
Infrastructure_WEB_v3.pdf], Center for Strategic and International 
Studies Reconnecting Asia Project, January 2019.
    \16\ Daniel Kilman and Abigail Grace, Power Play: Addressing 
China's Belt and Road Strategy [https://s3.amazonaws.com/
files.cnas.org/documents/CNASReport-Power-Play-Addressing-Chinas-Belt-
and-Road-Strategy.pdf?mtime=20180920093003], Center for a New American 
Security, September 2018.
---------------------------------------------------------------------------
    Observers of the BRI are skeptical that its partnerships 
are anything more than market development for its cadre of 
SOEs.\17\ As home to seven of the world's ten largest 
construction companies, China used more cement between 2011 and 
2013 than the United States did during the entire 20th century. 
As such, China is motivated to invest in infrastructure 
projects regardless of military application.\18\ Nonetheless, 
the potential for MSRI infrastructure to obstruct strategic 
U.S. overseas operations and create pinch-points in the 
maritime supply chain remain a concern for some security 
analysts.\19\
---------------------------------------------------------------------------
    \17\ Thomas Eder, ``Chinese companies are clearly the main 
beneficiaries of BRI projects,'' [https://www.merics.org/en/china-
flash/chinese-companies-are-clearly-main-beneficiaries-bri-projects] 
Belt and Road Forum, Mercator Institute for China Studies, April 24, 
2019; China Power Team. ``How will the Belt and Road Initiative advance 
China's interests?'' [https://chinapower.csis.org/china-belt-and-road-
initiative/] China Power, May 8, 2017, Updated May 29, 2019.
    \18\ Jonathan Hillman, ``Five myths about China's Belt and Road 
Initiative,'' [https://www.washingtonpost.com/outlook/five-myths/five-
myths-about-chinas-belt-and-road-initiative/2019/05/30/d6870958-8223-
11e9-bce7-40b4105f7ca0_story.html?utm_term=.e32b1fe47c0a] Washington 
Post, May 31, 2019.
    \19\ Kilman and Grace, Power Play, CNAS 2018.

------------------------------------------------------------------------
                                           Design &        Ownership &
       Stage              Finance        Construction       Operation
------------------------------------------------------------------------
Strategic            Win political     Set standards     Collect
 Objectives           concessions                         intelligence
                     Reward            Transfer          Restrict access
                      supporters        technology
                     Set standards     Collect           Adapt to
                                        intelligence      disruptions
                     Access resources                    Monopolize
                                                          skills &
                                                          technologies
                     Control
                      operations
------------------------------------------------------------------------

Figure 2_SOE Infrastructure Cycle that treats infrastructure investment 
 as statecraft. Jonathan Hillman, ``Infrastructure and Influence: the 
Strategic Stakes of Foreign Projects,'' CSIS Reconnecting Asia Project, 
                             January 2019.

CASE STUDY IN THE WESTERN HEMISPHERE

    On the Pacific and Atlantic sides of the Panama Canal, 
Hutchinson Whampoa, a Chinese marine terminal operator, 
controls transshipment cargo bound for the United States and 
other countries. Another Chinese entity, the Landbridge Group, 
recently acquired the Margarita Island Port on the Atlantic end 
of the canal, a move that will give the Chinese additional 
influence on the movement of international trade through the 
canal. A special declaration at the Community of Latin American 
and Caribbean States (CELAC) Forum on the BRI identified that 
``Latin American and Caribbean countries are part of the 
natural extension of the Maritime Silk Route and are 
indispensable participants in international cooperation of the 
Belt and Road.'' \20\ Ye Cheng, the President of Landbridge 
Group, noted, ``Landbridge's ports in Asia and Oceania together 
with the Panama Colon Container Port (PCCP) on Margarita Island 
will be efficiently connected to exploit maritime cooperation, 
contributing to the economic development of all countries.'' 
The acquisition of these properties occur at the same time as 
Panama shifts its stance toward China, expediting the Margarita 
Port project award after signing a bilateral agreement.\21\
---------------------------------------------------------------------------
    \20\ See http://www.itamaraty.gov.br/images/2ForoCelacChina/
Special-Declaration-II-CELAC-CHINA-FORUM-FV-22.1.18.pdf.
    \21\ Gabriel Alvarado, ``Beijing seeks to rapidly solidify its 
position in Latin America amidst spat with Washington,'' Global 
Americans, February 11, 2019.
---------------------------------------------------------------------------
    In line with China's BRI strategy, the plan for Margarita 
Port is to capitalize on the doubling of the capacity of the 
canal, which can now handle the New Panamax container ships 
that can transport up to 14,500 TEU (twenty-foot equivalent 
units). That work was completed in June 2016.\22\ The Margarita 
Island Port is expanding its handling capacity to 11 million 
TEU, adding a Liquid Natural Gas terminal and control center, 
and deeper berths.\23\ This integrated development approach has 
the potential to disadvantage other marine terminal operators 
on either end of the canal and undermine competition from other 
international carriers.
---------------------------------------------------------------------------
    \22\ See http://www.globalconstructionreview.com/news/chinese-firm-
starts-w7rk-1bn-panama7nian-meg7aport/.
    \23\ Ibid.
    
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
  Figure 3_A poster for the PCCP. Image provided by anonymous source.

    While the Margarita Island Port was purchased by a private 
company, the state-owned China Communications and Construction 
Corporation (CCCC) and its subsidiary, China Harbor Engineering 
Company (CHEC), have performed the expansion work.\24\ In July 
2018, CCCC and CHEC won a contract to build the fourth bridge 
over the canal.\25\ CCCC also has a record of supporting the 
Chinese military and Beijing's broader geostrategic interests 
and is the same company that supplied dredging services for 
China's island building efforts in the South China Sea.\26\
---------------------------------------------------------------------------
    \24\ Alvarado, ``Beijing seeks to rapidly solidify its position in 
Latin America amidst spat with Washington,'' [https://
theglobalamericans.org/2019/02/beijing-seeks-to-rapidly-solidify-its-
position-in-latin-america-amidst-spat-with-washington/] Global 
Americans.
    \25\ Ibid.
    \26\ Greg Torode and Brenda Goh, ``China's state firms cementing 
lucrative role in South China Sea, new research shows,'' [https://
www.reuters.com/article/us-southchinasea-china/chinas-state-firms-
cementing-lucrative-role-in-south-china-sea-new-research-shows-
idUSKBN1KU0MJ?feedType=RSS&feedName=topNews.] Reuters, August 9, 2018.
---------------------------------------------------------------------------
    While developing nations across the Indo-Pacific have thus 
far welcomed Chinese infrastructure investment, there are 
growing questions about the economic viability of MSRI port 
development projects and their potential dual-use as strategic 
military installations or avenues for foreign policy and 
leverage.\27\ The potential monopolization of the Panama Canal 
by Chinese-owned entities, one crucial leg of the MSRI, 
illustrates the additional strategic value of key trade nodes 
in the Western Hemisphere and the potential for the Chinese to 
create a choke point for U.S. maritime commerce.
---------------------------------------------------------------------------
    \27\ Daniel Kilman and Abigail Grace, Power Play: Addressing 
China's Belt and Road Strategy, [https://s3.amazonaws.com/
files.cnas.org/documents/CNASReport-Power-Play-Addressing-Chinas-Belt-
and-Road-Strategy.pdf?mtime=20180920093003] Center for a New American 
Security, September 2018.
---------------------------------------------------------------------------

THE CHINESE MARITIME INDUSTRY AND COMMERCIAL FLEET

    China continues to rely on international trade as an 
important component of its economic growth. Roughly 20 percent 
of China's GDP is derived from the export of goods and services 
abroad.\28\ China now ranks as the world's largest trading 
nation, with roughly 13 percent of all the world's exports and 
about 10 percent of the world's imports.\29\ Moreover, roughly 
90 percent of all world trade is carried by sea; 
unsurprisingly, most Chinese sources state that a similar 
percentage of Chinese trade is seaborne as well.\30\ The five 
major Chinese carriers together controlled 18% of all container 
shipping handled by the world's top 20 companies in 2015, 
higher than the next country, Denmark (the home nation of 
Maersk Line, the world's biggest container shipping group).\31\
---------------------------------------------------------------------------
    \28\ World Bank, ``Exports of Goods and Services (% of GDP),'' 
[https://data.worldbank.org/indicator/
NE.EXP.GNFS.ZS?locations=US&type=points&view=map] 2017.
    \29\ World Trade Organization, ``Country Profiles--China,'' [http:/
/stat.wto.org/CountryProfile/
WSDBCountryPFView.aspx?Language=E&Country=CN] WTO--Trade Profiles, 
2017.
    \30\ International Chamber of Shipping, ``Shipping and World 
Trade,'' [http://www.icsshipping.org/shipping-facts/shipping-and-world-
trade] 2017.
    \31\ Kynge et al.,``Beijing's global power play: How China rules 
the waves,'' [https://ig.ft.com/sites/china-ports/] Financial Times, 
January 12, 2017.
---------------------------------------------------------------------------
    China's growing dual-use merchant marine fleet has been 
developed according to regulations requiring certain civilian 
vessels, including roll on/roll off (RORO) vessels, tankers, 
and container ships, to be built to military specifications, 
and can be requisitioned during wartime, natural disasters, 
emergencies, or ``special circumstances.'' \32\
---------------------------------------------------------------------------
    \32\ Becker et al., China's Presence in the Middle East and Western 
Indian Ocean: Beyond the Belt and Road [https://www.cna.org/CNA_files/
PDF/DRM-2018-U-018309-Final2.pdf], CNAS, February 2019.
---------------------------------------------------------------------------
    The MSRI is a linchpin in China's dominance of 
international maritime trade and the trained labor to support 
its operation. The largest global operational shipping 
alliance, Ocean Alliance, principally comprised of Chinese 
owned and/or Chinese government-controlled carriers except for 
France's CMA CGM, is one of the three major carrier alliances 
formed over the last four years. The number of U.S. flagged 
vessels sailing in the international trade has dwindled from 
183 ships in 1992 to 82 as of December 2017,\33\ mostly due to 
policy changes limiting subsidies to only the vessels and labor 
necessary to maintain sealift in times of war. Conversely, 
China's investment in its national fleet has made China the 
most prolific shipbuilding nation to date and dramatically 
altered the dynamics of the global maritime trades. The 
development of China's foreign trade, domestic and distant 
water fisheries,\34\ and oceanographicfleets,\35\ which include 
icebreakers, have enhanced Chinese expertise in vessel 
construction (e.g., over 37% of global shipbuilding occurred in 
China alone, the most of any nation, in 2017) \36\ and enabled 
the expansion of a Chinese high seas presence globally.
---------------------------------------------------------------------------
    \33\ U.S.-Flag Share of Foreign Trade (2005-2015) Based on Cargo 
Weight [https://www.transportation.gov/content/state-us-flag-maritime-
industry]. Maritime Administration Analysis based on Census data.
    \34\ Hongzhou, Zhang, ``China's Fishing Industry: Current Status, 
Government Policies, and Future Prospects,'' [https://www.cna.org/
cna_files/pdf/China-Fishing-Industry.pdf] CNA China as a Maritime Power 
Conference, July 2015.
    \35\ Martinson, Ryan and Peter Dutton, ``China's Distant-Ocean 
Survey Activities: Implications for U.S. National Security,'' [https://
dnnlgwick.blob.core.windows.net/portals/0/NWC
Departments/China%20Maritime%20Studies%20Institute/
China%20Maritime%20Report%20%
233_NOV%202018.pdf?sr=b&si=DNNFileManagerPolicy&sig=%2Fuy2RAjBuIGTqqfUw%
2BJ
%2BcPviM2cPLVTsqcXimocOjsw%3D] China Maritime Report, Volume 3 (2018).
    \36\ United Nations Conference on Trade and Development, ``Ships 
built by country of building, annual, 2014-2017,'' [https://
unctadstat.unctad.org/wds/TableViewer/tableView.aspx?
ReportId=89493] UNCTAD, Division on Technology and Logistics, based on 
data supplied by Clarkson Research Services, Accessed July 15, 2019.
---------------------------------------------------------------------------
    Powered by the world's largest shipbuilding industry, 
China's armed forces comprise three major organizations, each 
with a maritime subcomponent that is already the world's 
largest such sea force by number of ships.\37\ By 2020, China's 
maritime armed forces (``gray-hulled'' Navy units, ``white-
hulled'' Coast Guard, and ``blue-hulled'' Maritime Militia) are 
projected to have a total of 1,300 ships to operate near-shore 
and worldwide.\38\
---------------------------------------------------------------------------
    \37\ Andrew Erikson, ``Maritime Numbers Game: Understanding and 
Responding to China's Three Sea Forces,'' [http://apdf-magazine.com/
maritime-numbers-game/] Indo-pacific Defense Forum, January 28, 2019.
    \38\ Ibid.
---------------------------------------------------------------------------

IMPLICATIONS FOR U.S. MARITIME INDUSTRY

    1. LInternational commercial standards will come under 
pressure as China races to execute infrastructure projects and 
moves to create a new legal architecture associated with BRI.
    2. LRestricted access to important maritime chokepoints and 
supply routes: China relies heavily on access to seaborne 
energy imports and maritime trade, the majority of which 
transit maritime chokepoints located in the Middle East and 
Southeast Asia.
    3. LRestricted access to maritime infrastructure: A larger 
Chinese military and civilian presence in the region also means 
that the U.S. Navy is likely to face greater competition for 
access to ports, airfields, and other infrastructure.
    4. LCompetition and risk: Non-Chinese companies will 
compete for BRI contracts on an uneven playing field and 
participate in projects on Beijing's terms. China will attempt 
to externalize some of the financial risk associated with BRI 
projects by inviting Western investors.
    5. LIncreasing militarization of maritime routes: 
International straits in the Arctic, South China Sea, and 
elsewhere might escalate geopolitical tension.

                              WITNESS LIST

PANEL I

     LLieutenant General Giovanni K. Tuck, Director for 
Logistics, J4, Joint Chiefs of Staff
     LMr. Chad Sbragia, Deputy Assistant Secretary of 
Defense for China, Office of the Secretary of Defense
     LMs. Carolyn Bartholomew, Chairwoman, United 
States-China Economic and Security Review Commission

PANEL II

     LMr. Jonathan E. Hillman, Director, Reconnecting 
Asia Project, Center for Strategic and International Studies
     LDr. Jeffrey Becker, Research Program Director, 
Center for Naval Analysis
     LMs. Kathleen Walsh, Associate Professor of 
National Security Affairs, Naval War College

 APPENDIX A: MAP OF COUNTRIES FORMALLY ENDORSING THE BRI (CNAS, 2019).
 
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]




  CHINA'S MARITIME SILK ROAD INITIATIVE: IMPLICATIONS FOR THE GLOBAL 
                         MARITIME SUPPLY CHAIN

                              ----------                              


                       THURSDAY, OCTOBER 17, 2019

                  House of Representatives,
          Subcommittee on Coast Guard and Maritime 
                                    Transportation,
            Committee on Transportation and Infrastructure,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 3:06 p.m. in 
room 2167, Rayburn House Office Building, Hon. Sean Patrick 
Maloney (Chairman of the subcommittee) presiding.
    Mr. Maloney. Let me begin by apologizing to our 
distinguished panelists, and to all of you who have been 
waiting for an hour. We were detained by a vote on the House 
floor and by a commemoration and memorialization of the service 
and life of our colleague, Elijah Cummings, who, as you all 
know, passed away overnight.
    And I would also like to begin our hearing today just 
acknowledging our bipartisan shock and sorrow at the passing of 
one of this subcommittee's most valued members and a former 
chairman, Congressman Cummings. He was a great leader on this 
subcommittee, and a steadfast champion of our Coast Guard and 
of the U.S. merchant marine. His contributions to this body and 
to the House of Representatives cannot be understated. Truly, 
his leadership will be sorely missed. I know I speak for every 
member on this subcommittee in extending our deep condolences 
to his wife, Maya, his three children, and their entire family. 
We have placed flowers in Elijah's spot here on the dais.
    And I just want to say, on a personal note, if you ever 
spent time with Congressman Cummings you knew you were just 
dealing with a deeper humanity than you encountered in a lot of 
people in this business. And there was something that I think 
all the Members were feeling today when they learned the news 
that we have just lost something very important in this body, 
and something that we all should aspire to.
    So with those remarks, good afternoon. Welcome. I apologize 
again for beginning late. We will try to move it along. And I 
know we will be joined by other Members who are still leaving 
the House floor.
    But I would like to extend a welcome to this afternoon's 
hearing, which will take stock of China's Maritime Silk Road 
Initiative and its implications for the United States maritime 
industry and military readiness.
    This hearing comes at a critical moment in our relationship 
with the People's Republic of China, where we once found a 
willing international partner, or thought we did. We now face 
an increasingly aggressive and confrontational adversary.
    Just last week, in fact, I and my bipartisan, bicameral 
congressional delegation from a different committee were denied 
visas to visit the U.S. Embassy in Beijing. This unprecedented 
step of barring a United States congressional delegation from 
the country occurred for one reason only: our planned visit to 
Taiwan. Chinese officials stated clearly that if we canceled 
our visit to Taiwan, the visas would be issued. When we made 
clear that canceling the delegation stop in Taiwan was not an 
option, the officials demanded that I issue a statement 
endorsing Beijing's version of the One China policy, 
delegitimizing Taiwan's political existence, and further 
isolating the island's 24 million people. I declined.
    This incident is emblematic of the challenges the United 
States and private businesses and industries such as the NBA, 
the Apple Corporation, and Hollywood studios now face in 
confronting China's bullying and intimidation tactics which 
grow out of China's regional and global ambitions.
    Moreover, as a Nation, we find ourselves at a fork in the 
road as to the best course to ensure American access to 
efficient, reliable, and secure global maritime commerce in 
this new geopolitical context.
    The Maritime Silk Road Initiative is one component of an 
expansive foreign policy promoted by China, referred to as the 
Belt and Road Initiative. This overarching strategy intends to 
reshape the global economic and security landscape and seascape 
through Chinese investments in global infrastructure, including 
maritime infrastructure.
    Command of the maritime transportation system has long 
acted as the stage on which great powers compete. Now, 
globally, over 90 percent of commercial goods travel by sea, 
and the competition is rightly intense. The infrastructure 
facilitating the transport of maritime commerce, oceangoing 
vessels, deepwater ports, high-speed railways, and fiber optic 
cables descend from technologies Western powers once leveraged 
in the 19th and 20th centuries to expand their access to 
foreign markets.
    Today the Maritime Silk Road Initiative mimics these 
strategies, for example, by building railways and naval ports 
in Africa, or laying transatlantic data cables. In some 
locations new MSR projects are literally replicating former 
colonial projects.
    The Maritime Silk Road, or MSR Initiative, is a strategic 
economic policy and security initiative intended to promote the 
Chinese workforce, build bilateral ties, foster dependence, and 
ensure near exclusive access to foreign ports for Chinese-
controlled or affiliated vessels employing Chinese-built 
technologies, 5G just being the most obvious example.
    Through MSR projects, China can advance both economic and 
security objectives simultaneously. These projects act as 
``dual-use infrastructure,'' developments that serve both 
commercial and military purposes. China deploys many different 
tools to cajole or coerce the cooperation of foreign states, 
including project finance tools like loan guarantees and 
conditions, or the control of source funds and debt service 
obligations.
    In addition, design and construction standards, technology 
transfer requirements, and intelligence acquisition through 
ownership and operation of infrastructure enable China to gain 
favorable access and control of the Marine Transportation 
System.
    The stakes are high. In an economically interconnected 
world, foreign-financed infrastructure investments can fuel 
both development and strategic competition. The MSR is a 
linchpin of China's dominance of international maritime trade, 
and the development of trained labor to support its operations.
    China's investment in its national fleet has made China the 
most prolific shipbuilding nation to date, dramatically 
altering the dynamics of the global maritime trades. In fact, 
the five major Chinese carriers alone controlled 18 percent of 
the global volume of container shipping in 2015. At the same 
time, we in the United States have allowed our U.S.-flag fleet 
in the foreign trades, our maritime workforce, and our domestic 
commercial shipbuilding capacity to erode to their lowest 
points since before the Second World War. As a result, we have 
critically undermined our military readiness and a secure 
sealift capability.
    The prospect of being unable to mobilize, support, and 
supply our Armed Forces for a sustained conflict, whether in 
the Taiwan Strait, the Middle East, or anywhere else in the 
world, should concern every Member of this body. And it is my 
experience this is an area of genuine bipartisan agreement and 
concern.
    The number of U.S.-flag vessels sailing into international 
trade has dwindled from 183 ships in 1992 to just 82 ships as 
of December 2017, while over 3,000 Chinese-flagged vessels 
operate in the international trade today. In a world economy 
increasingly powered by maritime commerce and bluewater 
presence, we cannot continue to allow the United States 
deepwater fleet to decay on our watch.
    This hearing will shed light on the degree to which the 
Maritime Silk Road Initiative might co-opt the global maritime 
transportation system for Chinese industrial, commercial, and 
security gains, disable the remnant U.S. international trading 
fleet by monopolizing the transport of U.S. commerce, and 
destabilize both the U.S. merchant marine and maritime supply 
chain.
    [Mr. Maloney's prepared statement follows:]

                                 
 Prepared Statement of Hon. Sean Patrick Maloney, a Representative in 
  Congress from the State of New York, and Chairman, Subcommittee on 
                Coast Guard and Maritime Transportation
    Good afternoon, and welcome to this afternoon's hearing to take 
stock of China's Maritime Silk Road Initiative and its implications for 
the United States' maritime industry and military readiness.
    This hearing comes at a critical moment in our relationship with 
the People's Republic of China. Where we once found a willing 
international partner, we now face an increasingly aggressive and 
confrontational adversary. Just last week, I and my bipartisan 
Congressional delegation were denied visas to visit the U.S. Embassy in 
China.
    The unprecedented step of barring a U.S. Congressional delegation 
from the country occurred for one reason only--our planned visit to 
Taiwan. Chinese officials stated that if we cancelled our visit to 
Taiwan the visas would be issued.
    When we made clear that canceling the delegation's stop in Taiwan 
was not an option, the officials demanded that I issue a statement 
endorsing Beijing's version of the ``one China policy'' delegitimizing 
Taiwan's political existence and further isolating the island's 24 
million people. I declined.
    This single incident is emblematic of the numerous challenges the 
United States now faces in confronting China's regional and global 
ambitions.
    Moreover, as a Nation we find ourselves at a fork in the road as to 
the best course to ensure American access to efficient, reliable and 
secure global maritime commerce in this new geopolitical context.
    The Maritime Silk Road Initiative, or ``MSR'', is one component of 
an expansive trade policy promoted by China referred to as the Belt and 
Road Initiative. This overarching strategy intends to reshape the 
global economic seascape through Chinese investment in foreign maritime 
infrastructure.
    Command of the marine transportation system has long acted as the 
stage on which great powers compete. Now, globally, over 90 percent of 
commercial goods travel by sea, and the competition is intense.
    The infrastructure facilitating the transport of maritime 
commerce--ocean-going vessels, deep-water ports, high-speed railways, 
and fiber optic cables--descend from technologies Western powers once 
leveraged in the 19th and 20th centuries to expand their access to 
foreign markets. Today, the MSR mimics these strategies, for example, 
by building railways in Africa or laying transoceanic data cables. In 
some locations, new MSR projects are literally replacing colonial 
projects.
    The MSR is a strategic economic policy, intended to promote the 
Chinese workforce, build bilateral ties, foster dependence, and ensure 
near-exclusive access to foreign ports for Chinese controlled or 
affiliated vessels employing Chinese-built technologies, such as 5G.
    Through MSR projects, China can advance both economic and non-
economic objectives simultaneously. These projects act as ``dual-use 
infrastructure,'' developments that serve both commercial and military 
purposes.
    China deploys many different tools to cajole or coerce the 
cooperation of foreign states, including project finance tools like 
loan guarantees and conditions, or the control of source funds and debt 
service obligations. In addition, design and construction standards, 
technology transfer requirements, and intelligence acquisition through 
ownership and operation of infrastructure, enable China to gain 
favorable access and control of the marine transportation system.
    The stakes are high: In an economically interconnected world, 
foreign-financed infrastructure investment can fuel both development 
and competition. The MSRI is a linchpin in China's dominance of 
international maritime trade and the development of trained labor to 
support its operation.
    China's investment in its national fleet has made China the most 
prolific shipbuilding nation to date, dramatically altering the 
dynamics of the global maritime trades. In fact, the five major Chinese 
carriers alone controlled 18 percent of the global volume of container 
shipping in 2015.
    At the same time, we in the United States have allowed our U.S. 
flag fleet in the foreign trades, our maritime workforce, and our 
domestic commercial shipbuilding capacity to erode to their lowest 
points since before the second World War. As a result we have 
critically undermined our military readiness and a secure sealift 
capability.
    The number of U.S. flagged vessels sailing in the international 
trade has dwindled from 183 ships in 1992 to 82 as of December 2017, 
while over 3 thousand Chinese flagged vessels operate in the 
international trade today. In a world economy increasingly powered by 
maritime commerce and blue-water presence, we cannot continue to allow 
the United States deep-water fleet to decay on our watch.
    This hearing will shed light on the degree to which the MSRI might 
co-opt the global maritime transportation system for Chinese 
industrial, commercial, and security gains, disable the remnant U.S. 
international trading fleet by monopolizing the transport of U.S. 
commerce, and destabilize both the U.S. Merchant Marine and maritime 
supply chain.

    Mr. Maloney. I would now like to call on the ranking 
member, Mr. Gibbs, for his opening remarks.
    Mr. Gibbs. Thank you, Chairman Maloney, and I also concur 
with you that I am sorry to hear of the passing of former Coast 
Guard and Maritime Transportation Subcommittee Chairman Elijah 
Cummings. As chairman, he shepherded through Congress in 2010 
the Coast Guard Authorization Act, which made significant 
improvements to the Coast Guard's acquisition program, and 
enhanced its maritime safety efforts.
    When the Coast Guard frustrated him, he would eloquently 
use the chairman's seat to ensure that no witnesses ever left 
the subcommittee unclear of where he stood. As a member of the 
Committee on Oversight and Reform, I came to appreciate the 
passion he devoted to his chairmanship.
    I pray for his family, friends, and staff, that they find 
peace and strength in his memory and legacy.
    China has developed an industrial policy to align with its 
foreign policy, and it has now expanded that policy outward 
through efforts to control the means of conducting 
international maritime trade, the same means used to project 
military force.
    China has developed an extensive shipbuilding and 
industrial base, and controls the third largest container line 
in the world. The Maritime Silk Road Initiative builds on those 
capabilities by financing port, road, and energy infrastructure 
in 126 countries in the Pacific Basin and routes to Europe.
    There are two concerns about these investments: first, the 
dual commercial and military uses of these assets; second, the 
debt incurred by these countries will tie them to China in ways 
that will facilitate China's international pursuits, and 
potentially inhibit U.S. overseas operations.
    The U.S.-flag fleet has retreated from the world stage. 
Only remnants remain, which survive to provide sealift capacity 
for the Department of Defense. However, for even that small 
fleet to be useful, it has to have access to port facilities 
throughout the world. I look forward to hearing from the 
witnesses today whether the access to such ports is jeopardized 
by China's efforts to extend its influence through the Maritime 
Silk Road Initiative.
    I am also interested in China's efforts to gain a foothold 
in the Arctic. China has declared itself an Arctic-adjacent 
country, and has built two research icebreakers in the last 
decade. The United States, an actual Arctic nation, is only now 
beginning an icebreaker recapitalization program. In contrast 
to the Chinese Maritime Silk Road Initiative, after 5 years 
neither of the last two administrations have managed to produce 
a legislatively mandated national maritime strategy. Perhaps 
today's hearing will prompt MARAD to meet the latest statutory 
deadline next February for this plan.
    Mr. Chairman, thank you for holding this hearing today, and 
I yield back.
    [Mr. Gibbs' prepared statement follows:]

                                 
Prepared Statement of Hon. Bob Gibbs, a Representative in Congress from 
the State of Ohio, and Ranking Member, Subcommittee on Coast Guard and 
                        Maritime Transportation
    First, let me note how sorry I was to hear this morning of the 
passing of former Coast Guard and Maritime Transportation Subcommittee 
Chairman Elijah Cummings.
    As Chairman, he shepherded through Congress the 2010 Coast Guard 
Authorization Act, which made significant improvements to the Coast 
Guard's acquisition program and enhanced its marine safety efforts. 
When the Coast Guard frustrated him, he very eloquently used the 
Chairman's seat to ensure that no witness ever left the Subcommittee 
unclear of where he stood.
    In this Congress, I served on the Committee on Oversight and 
Government where I came to appreciate the passion he devoted to his 
chairmanship.
    I pray for his family, friends, and staff, that they find peace and 
strength in his memory and legacy.
    Turning to today's topic, China has developed an industrial policy 
to align with its foreign policy and has now expanded that policy 
outward through efforts to control the means of conducting 
international maritime trade--the same means used to project military 
force.
    China has developed an extensive shipbuilding industrial base and 
controls the third largest container line in the world. The Maritime 
Silk Road Initiative builds on those capabilities by financing port, 
road, and energy infrastructure in 126 countries in the Pacific basin 
and on routes to Europe.
    There are two concerns about these investments: first, the dual 
commercial and military uses of these assets; second, that the debt 
incurred by these countries will tie them to China in ways that will 
facilitate China's international pursuits and potentially inhibit U.S. 
overseas operations.
    The U.S.-flag fleet has retreated from the world stage. Only a 
remnant remains to provide sealift capacity for the Department of 
Defense. However, for even that small fleet to be useful it has access 
to port facilities throughout the world. I look forward to hearing from 
the witnesses today whether the access to such ports is jeopardized by 
China's effort to extend its influence through the Maritime Silk Road 
Initiative.
    I am also interested in China's efforts to gain a foothold in the 
Arctic. China has declared itself an Arctic adjacent country and has 
built two research icebreakers in the last decade. The United States--
an actual Arctic nation--is only now beginning an icebreaker 
recapitalization program.
    In contrast to the Chinese Maritime Silk Road Initiative, after 
five years, neither of the last two administrations has managed to 
produce a legislatively mandated National Maritime Strategy. Perhaps 
today's hearing will prompt MARAD to meet the latest statutory 
deadline, next February, for this plan.

    Mr. Maloney. I thank the gentleman for his remarks.
    I would also like to ask unanimous consent at this time to 
insert statements from the United Steelworkers, the Alliance 
for American Manufacturing, and the R Street Institute into the 
hearing record.
    Without objection, so ordered.
    [The information is on pages 73-79.]
    Mr. Maloney. At this time I would like to recognize the 
chairman of the full committee, Mr. DeFazio.
    Mr. DeFazio. Thank you, Mr. Chairman, and I certainly 
support your spirited remarks and observations at the beginning 
of the hearing, so I won't restate a number of those arguments 
or concerns.
    But before I make a brief statement, let me just say that 
my colleague of many years, Elijah Cummings, died last night. 
We have a little something here to remember him. I will just 
tell one story. There are a lot of stories about Elijah.
    The Coast Guard screwed up the 110s. They were going to 
section them and make them longer, and the design didn't work. 
And we were trying to get to the bottom of what went wrong, how 
it could have gone that badly wrong, because this was a very, 
very, very expensive mistake. And Elijah began a hearing at 10 
o'clock in the morning with a number of panels of experts and 
witnesses and the Coast Guard, and a lot of participation by 
Members during the day.
    Then it got to dinner time and, yes, there is still more 
witnesses and a few people left here. And then, by 11 o'clock 
at night it was me and Elijah and Jim Oberstar still sitting 
here. And by midnight it was just Elijah. And I think shortly 
after midnight the hearing adjourned, and that brought about 
very significant reforms in the acquisition process at the 
United States Coast Guard and with the icebreaker's new 
coordination with the Navy.
    So that was just one of many, many difficult issues he 
dealt with, drilled into, and resolved. He will be greatly 
missed.
    So let me just say briefly--and I regret I can't stay, 
because I think this is an extraordinarily important hearing 
for this committee--that I have, unfortunately, because of the 
delay of the votes and commitments after this I can't avoid. 
But the U.S. has always been referred to as a great maritime 
nation.
    If you think back to Captain Alfred Mahan and his theories, 
which were backed up by Teddy Roosevelt, we had to guarantee 
access to international markets as a maritime-dependent nation, 
and it required three things: a vibrant merchant fleet to carry 
American products to new markets, a great highway of the high 
seas; a battleship navy to deter or destroy our rivals who 
might attack our maritime ships; and a network of naval bases 
abroad.
    Now, unfortunately, post-World War II, with the 
globalization--liberalization, so-called--of trade, the rise of 
the IMO and the chase around the world to the least regulation 
and the cheapest possible, most abusable labor in the merchant 
marine industry, most of requirement number 1 is gone, the 
vibrant merchant fleet.
    We still are set on requirement number 2, we do have the 
most powerful navy, but the Chinese are building quickly to 
challenge that. Some of our naval assets, given new missile 
systems and others, may have become more vulnerable in the 
future. So not quite as big of a given.
    And then, China has essentially adopted the policy and 
theories of Teddy Roosevelt and Captain Mahan with their very 
own principle of sea power to construct its own Maritime Silk 
Road. In addition to which they are building bases or ports in 
diverse nations around the world, and they are doing it in ways 
that are truly despicable. Often the construction is 
substandard. Often it is done under an extortionate agreement 
to the host country. But it is always done to the advantage of 
China.
    Little notice has been taken of this, their growing 
dominance as they aggregate the merchant fleets to try and 
dominate our ports here. We finally got some minor action in 
the last Congress on that front, and some action out of MARAD, 
but more needs to be done.
    So I think this is an incredibly important hearing. As 
Mahan once wrote, ``Those who rule the waves rule the world.'' 
I don't think that has changed an awful lot these days, and we 
can't forget that.
    So thank you, Mr. Chairman.
    [Mr. DeFazio's prepared statement follows:]

                                 
   Prepared Statement of Hon. Peter A. DeFazio, a Representative in 
     Congress from the State of Oregon, and Chairman, Committee on 
                   Transportation and Infrastructure
    Chairman Maloney, thank you for scheduling this afternoon's hearing 
to assess China's Maritime Silk Road Initiative and the implications 
for our national and economic security.
    As our country and China recalibrate our relationship in the 
beginning of the 21st century, nothing could be more important. Allow 
me to provide some context to squarely frame the irony of how we got to 
where we are today, and the challenges before us if we seek to reclaim 
our mantle as a great maritime power.
    First, a little history. In 1890, Captain Alfred Thayer Mahan, a 
lecturer in naval history and the president of the United States Naval 
War College, published The Influence of Sea Power upon History, 1660-
1783.
    In this seminal thesis, Mahan argued that British control of the 
seas paved the way for Great Britain's emergence as the world's 
dominant military, political, maritime and economic power.
    Mahan and some leading American politicians of the time such as 
Theodore Roosevelt believed that these lessons could be applied to U.S. 
foreign policy, particularly in the quest to expand U.S. markets 
overseas.
    To ensure that the U.S. Government could guarantee access to new 
international markets, the principal of Sea Power required three 
elements:

      A vibrant merchant fleet, which could carry American 
products to new markets across the ``great highway'' of the high seas;
      An American battleship navy to deter or destroy rival 
fleets; and,
      A network of naval bases abroad capable of providing 
logistical support for an enlarged, global navy, and maintaining open 
lines of communications between the United States and its new markets.

    This policy, wholly adopted, resulted not only in the creation of 
Roosevelt's ``Great White Fleet'', but elevated the status of the 
United States as a global maritime and economic power.
    For much of the first half of the 20th century, policymakers abided 
by the need to maintain both naval power and a globally competitive 
merchant marine.
    But starting in the later part of the 20th century, globalization 
and the liberalization of trade began to undermine Sea Power's 
prevalence in U.S. maritime policy. Today, Sea Power has come to mean 
maintaining the world's most powerful navy, but paying little attention 
to the maintenance of a vibrant merchant fleet.
    The irony I referred to earlier is the fact that the Chinese 
Government has co-opted our very own principal of Sea Power to 
construct its Maritime Silk Road Initiative. China is using Sea Power 
to guide its rapid and unrelenting technological development, and is 
using expansion of its own maritime and shipbuilding industries to 
brazenly advance its own security interests, both economic and 
sovereign, abroad.
    That is why this hearing is so important. The Chinese are literally 
beating us at our own game, and few people seem to care or even notice 
what this means for our national and economic security.
    We can no longer remain ignorant, and I believe this hearing is a 
vital first step to pry open everyone's eyes. Mahan once wrote, ``those 
who rule the waves, rule the world.'' I look forward to hearing from 
our witnesses this afternoon to better understand the dynamics of that 
competition, and what we need to do to win it.

    Mr. Maloney. And I thank the gentleman. I would like to now 
introduce our panel of witnesses.
    First we are joined by Mr. Chad Sbragia, Deputy Assistant 
Secretary of Defense for China in the Office of the Secretary 
of Defense; Lieutenant General Giovanni K. Tuck, Director for 
Logistics J4, for the Joint Chiefs of Staff; and Ms. Carolyn 
Bartholomew, Chairwoman of the United States-China Economic and 
Security Review Commission.
    Thank you all for being here today. I apologize again for 
keeping you waiting. I know you are busy, but we appreciate it. 
We know you have prepared statements, I have reviewed those 
statements, and thank you. They are excellent. Without 
objection, our witnesses' full statements will be included in 
the record. And since we have that written testimony, and it 
has been made part of the record, we do request that you limit 
your oral testimony to 5 minutes to allow maximum time for 
Members' questions.
    With that, thank you again. Mr. Sbragia, you may proceed.

   TESTIMONY OF CHAD SBRAGIA, DEPUTY ASSISTANT SECRETARY OF 
    DEFENSE FOR CHINA, OFFICE OF THE SECRETARY OF DEFENSE; 
 LIEUTENANT GENERAL GIOVANNI K. TUCK, DIRECTOR FOR LOGISTICS, 
J4, JOINT CHIEFS OF STAFF; AND CAROLYN BARTHOLOMEW, CHAIRWOMAN, 
  UNITED STATES-CHINA ECONOMIC AND SECURITY REVIEW COMMISSION

    Mr. Sbragia. Chairman Maloney, Ranking Member Gibbs, 
distinguished members of the subcommittee, thank you for this 
opportunity to testify. Before I begin, and to echo the 
comments already made, please allow me to express my 
condolences on the passing of Representative Cummings. We 
recognize his historic place in this chamber, and his 
longstanding service, including in this subcommittee. Our 
thoughts and prayers are with his family at this time.
    As for the business in front of us today, China's Maritime 
Silk Road is exactly the type of issue in which we need to 
communicate across traditional lines of effort because of the 
unique challenge that China presents--echoing your comments. We 
welcome the chance to do so at this hearing.
    My remarks are going to focus on China's strategy and how 
the Department of Defense is supporting the whole-of-Government 
competitive response. China's leaders certainly believe that 
they can and must contend for global leadership in a ``new era 
for socialism with Chinese characteristics,'' heralded most 
authoritatively at the 19th Congress of the Communist Party of 
China in October of 2017.
    In the maritime domain this means building China into a 
maritime great power, which the Chinese Communist Party made an 
official national priority at its 18th party congress as early 
as 2012.
    In 2017, President Xi Jinping linked this maritime great 
power status to China's goals for national rejuvenation by 
2049. Maritime great power status includes access to resources, 
a developed maritime economy, and protection of perceived 
maritime rights and interests. This is well-served by China's 
One Belt, One Road and Maritime Silk Road Initiatives, which 
focus on policy coordination and building transportation 
infrastructure globally to expand developmental ties to China.
    In this context, while we do not oppose China's 
contributions to high-quality development based on 
international standards, we must recognize that China is also 
competing for strategic advantage. While in the past China's 
leaders have disavowed any direct connection between OBOR, or 
the One Belt, One Road, and the People's Liberation Army, or 
their security interests, there is clear evidence that this is 
changing.
    For example, China's 2019 national defense white paper 
identified the need to build China's far seas forces and a need 
for overseas logistical facilities. In January of this year 
President Xi Jinping called for the completion of a security 
system for OBOR to ensure the security of major overseas 
projects.
    In July, China's Defense Minister openly declared that 
China is willing to deepen military exchanges in cooperation 
with Caribbean and Pacific Island countries under the framework 
of OBOR.
    Finally, as an example, the PLA Navy has recently argued 
for a long-term strategy to obtain bases overseas, using 
methods such as constructing, purchasing, and long-term leasing 
of foreign ports. Lieutenant General Tuck will go into more 
detail on the military implications of China's activities, but 
I would like to quickly stress that OBOR projects could also 
increase other countries' exposures to pressure, and affect the 
security of digital infrastructure, as well.
    Overlapping with China's Maritime Silk Road is the 21st-
century Digital Silk Road, in which Chinese companies are 
building infrastructure in areas like 5G, fiber optic links, 
undersea cables, and infrastructure connected to satellite 
navigation.
    For example, this past June, Huawei, a Chinese company, 
announced an agreement with a Chinese container operator, the 
sixth largest in the world, to establish a 5G innovation hub. 
Because China lacks an independent judiciary, and the extensive 
security vulnerabilities in Huawei products, we are concerned 
critical sectors could be vulnerable as China links port 
developments with its technology exports and its diplomatic 
engagements.
    So how are we responding to this challenge? DoD's response 
is guided by our National Defense Strategy, which identifies 
great power competition as our principal priority. Increasing 
lethality and strengthening alliances and partnerships are 
long-term undertakings for competing with China. And I am glad 
to be leading a new office within the Defense Department 
dedicated to assisting in this role.
    Critically, the National Defense Strategy also states that 
the Defense Department will support interagency approaches and 
work by, with, and through our allies and partners.
    The most important takeaway from our discussion is this: we 
need economic, diplomatic, and security efforts to respond to 
China's Maritime Silk Road activities. DoD supports this whole-
of-Government response in three ways.
    The first is: we provide assessments to our interagency 
counterparts to identify which of China's investments have 
national security implications from the Maritime Silk Road.
    Second, we work to deepen security partnerships and 
underwrite stability, enabling economic and diplomatic tools to 
succeed. We don't seek to counter China dollar for dollar here, 
but to play to our strengths by promoting shared principles, 
developing high-standard alternatives for acute needs, and 
working with our allies and partners hand-in-hand.
    Finally, we share best practices with other countries for 
engaging with China's military. We encourage carefully scoped 
defense engagements, hard discussions on the risks of China's 
military presence, national security-based investment 
screening, and a risk-based security framework for issues like 
5G. This helps build long-term principles-based approaches to 
address this risk.
    We welcome the subcommittee's continued attention to this 
issue, and look forward to your questions. Thank you.
    [The joint prepared statement of Mr. Sbragia and Lieutenant 
General Tuck follows Lieutenant General Tuck's oral statement.]
    Mr. Maloney. I thank the gentleman.
    General Tuck?
    General Tuck. Good afternoon, Chairman Maloney, Ranking 
Member Gibbs, and distinguished members of the committee. Thank 
you for your invitation to be here today.
    I would like to add my condolences on the passing of your 
fellow committee member, Representative Elijah Cummings, an 
icon who will be missed.
    I appreciate your time and willingness to discuss China's 
Maritime Silk Road Initiative, and the implications of the 
global maritime supply chain. Our ability to project and 
sustain power globally at a time and place of our choosing 
remains our strategic comparative advantage, and it is 
imperative to our ability to ensure the balance of power 
remains in our favor. Logistics underwrites deterrence.
    I will focus my comments today on the impact of China's 
Maritime Silk Road Initiative to that of the Department of 
Defense, specifically to the global transportation system and 
logistics.
    I will begin with just a comment on background and context 
of where our maritime industry is today, impact to the National 
Defense Strategy, and then what the future may look like and 
our opportunities to shape it.
    I would like to provide the context of today versus where 
we were in the Gulf War, Chairman, where you started us today 
in your conversation.
    In 1990, we had hundreds of U.S.-flag ships. Depending on 
what metric you are looking at, 400 or so, and 29,000-plus 
mariners. Today, 82 is the number, sir, that you quoted, which 
is accurate, for international trade. And if you take a look at 
11,700 or so mariners, just under 12,000, that is a whopping 
number less than what we had back just a few years ago.
    So what does this dwindling fleet mean to the Department of 
Defense? We rely very heavily on the commercial maritime sector 
to transport a lethal and ready force and sustain our 
operations. As the age of the sealift fleet continues to 
increase, and the readiness continues to drop, fewer ships are 
available to provide steady jobs for our mariners, and which 
also impacts our shipyards.
    Many of today's mariners are dual hatted, as you know, both 
commercial mariners and reservists. The results of this 
combination leaves some uncertainty as to whether a wartime 
demand can be satisfied. The Maritime Administration estimates 
the shortage of about 1,800 or so during sustained military 
operations. And it will be impacting.
    We are increasingly concerned, as we see China continue to 
maneuver geopolitically, economically, militarily, pursuing its 
goal to become the regional leader and a great power. In doing 
so the Maritime Silk Road Initiative may affect our ability to 
execute the National Defense Strategy in the future if we don't 
change our trajectory, specifically our ability to project 
power and sustain combat operations.
    The expanding Chinese influence could limit our ability to 
use ports, access ships, expose data, and the like. 
Additionally, it could strain or change our relationships with 
partners and allies.
    The U.S. Transportation Command pays particular attention 
to dozens of ports across the globe, monitoring potential 
threats to the joint deployment and distribution enterprise. I 
point you to the Port of Djibouti as just an example. The 
strategic location, crossroads of shipping lanes of Africa, 
Asia, and Europe, our military camp that is there--and the 
Chinese have an operation there, as well. There is tension 
between these two bases, and that is just one example that I 
will leave you with.
    One significant impact to DoD operations in cyberspace 
domain is shipping data--support and subsequent IT systems are 
at risk of being exposed, compromised, contributing to the 
Chinese artificial intelligence industry.
    Chinese influence can limit our footprint, reduce our 
throughput, or jeopardize access. Our partners may not be able 
to assist or work with us when we need them due to Chinese 
influence.
    So, given the picture, where to go from here? We need to 
take a proactive approach and seek opportunities to shape our 
future with the whole-of-Government approach.
    To minimize the effects of the Maritime Silk Road 
Initiative by China we really have to pay attention to 
recapitalizing our sealift fleet, which is U.S. Transportation 
Command's number-one priority; ensure sufficient workload for 
U.S.-flag vessels; and create incentives to develop and retain 
our mariners.
    I truly appreciate your time today. Thank you for this 
opportunity. I hope you will find this to be informative, and I 
look forward to your questions.
    [The joint prepared statement of Mr. Sbragia and Lieutenant 
General Tuck follows:]

                                 
Joint Prepared Statement of Chad Sbragia, Deputy Assistant Secretary of 
 Defense for China, Office of the Secretary of Defense and Lieutenant 
 General Giovanni K. Tuck, Director for Logistics, J4, Joint Chiefs of 
                                 Staff
                              Introduction
    Chairman Maloney, Ranking Member Gibbs, distinguished members of 
the Subcommittee, thank you for your invitation to testify on China's 
Maritime Silk Road Initiative, its implications for the Department, and 
our contributions to a whole-of-government response. We appreciate the 
opportunity to engage this Subcommittee on an important topic for 
collaboration and information sharing in order to compete effectively 
with China.
         China's Strategy and the One Belt, One Road Initiative
    China's leaders believe they can and must contend for global 
leadership in a ``New Era for Socialism with Chinese Characteristics,'' 
heralded at the 19th Congress of the Communist Party of China in 
October 2017. China's leaders have consistently sought to expand 
China's comprehensive national power to achieve the Party's strategic 
objectives by promoting what they see as the advantages of their 
authoritarian model and reshaping the international order to their 
liking.
    China's leaders have set major economic and political milestones 
for 2021, 2035, and 2049 in the lead up to the 100th anniversary of the 
founding of the People's Republic of China. China's military ambitions 
are linked to these milestones. By 2035, China's military leaders seek 
to complete military modernization, and, by 2049, they seek to become a 
``world-class'' military. In this regard, China's efforts are designed 
with a clear purpose in mind: to displace the United States in the 
Indo-Pacific region; to expand the reaches of China's state-driven 
economic model; to reorder the region in its favor; and ultimately to 
compete for global leadership.
    President Xi Jinping's signature ``One Belt, One Road'' (OBOR) 
initiative also serves these goals. Made public in 2013, this 
initiative aims to use economic instruments to expand economic and 
commercial ties to China by developing transportation infrastructure, 
natural gas pipelines, hydropower projects, technology, and industrial 
parks. The initiative has transformed since its announcement in 2013 
from a regional economic initiative centered along China's periphery, 
to an economic and foreign policy strategy that spans Asia, Africa, 
Latin America, Europe, the Arctic, and even into the digital and space 
domains.
    Ultimately, China's leaders intend OBOR to facilitate greater 
political, diplomatic, and even military connectivity between China and 
other countries. Specifically, they seek to use OBOR to shape other 
countries' interests to align with the Communist Party's and to deter 
confrontation and criticism of China's behaviors that do not comport 
with international rules and norms. China claims that more than 120 
countries are participating in OBOR and has pressured other countries 
and international organizations--including the United Nations--to 
include language endorsing OBOR in policy documents.\1\
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    Regrettably, some OBOR projects do not meet acceptable standards. 
Although we welcome China's contributions to sustainable high-quality 
development in accordance with international standards, too often OBOR 
projects are characterized by corruption, lack of public oversight, 
opaque and excessive lending, and nonviable projects that do not 
adequately account for the needs of partnering nations' populations. 
For example, China built a new wharf for Vanuatu at the cost of $100 
million that failed to meet the specifications needed for visiting 
cruise ships, resulting in more than a 50 percent decline in port usage 
and negative impacts on the local economy.
    China has also failed to perform risk assessments for some OBOR 
projects and inflated project costs to the benefit of its state-owned 
firms. Moreover, to facilitate the growth of China's statist economic 
model, Chinese policy banks have overburdened some countries with debt 
and jeopardized the economic viability of projects. In Kyrgyzstan, for 
example, Chinese firms engaged in corrupt practices that inflated 
project costs, forcing the Kyrgyzstan Government to launch a corruption 
investigation. In the Maldives, China made a series of inflated loans 
to the country's former administration that were so opaque that the 
current Maldivian administration is still struggling to calculate the 
more than $1.4 billion in debt it has inherited.
                China's Maritime Initiatives Under OBOR
    In 2017, China released a ``Vision of Maritime Cooperation under 
the Belt and Road Initiative,'' which lays out three maritime corridors 
and emphasizes the importance of maritime security cooperation. One of 
these corridors extends from China through the Indian Ocean to Africa 
and the Mediterranean Sea. Another corridor extends from China to 
Oceania and the South Pacific, and the last corridor extends from China 
to Europe and through the Arctic Ocean.
    Today, China is the world's largest exporter of goods, and its 
state-owned shipping firms carry more cargo than any other country. In 
fact, six of the top ten container ports in the world are in China. 
China's maritime industry, therefore, has extensive experience in port 
operations, upon which China increasingly relies to develop the 
Maritime Silk Road (MSR). China's commercial capabilities are matched 
by its growing military emphasis on the maritime domain and increasing 
demands on the People's Liberation Army Navy (PLAN).
    In recent years, China's party-state regime has grown more vocal 
about increasing China's role in the global maritime industry. 
President Hu Jintao first declared at the 18th Party Congress in 2012 
that the Communist Party of China should ``build China into a strong 
maritime power.'' His successor, Xi Jinping, made the same declaration 
five years later at the 19th Party Congress, adding that China needed 
to ``pursue coordinated land and marine development,'' reflecting its 
efforts to develop roads, railways, and economic zones to link ports 
with inland resources and facilitate the transport of goods in China. 
In April 2019, President Xi called for building a ``maritime community 
of common destiny,'' describing maritime connectivity and development 
of the ``blue economy'' as MSR objectives. This scheme is especially 
notable across the Indo-Pacific and Africa. In Africa alone, China has 
nearly 50 commercial port projects either complete or in various stages 
of execution.
    In addition to MSR, China has increased its activities and 
engagement in the Arctic region since gaining observer status on the 
Arctic Council in 2013. In January 2018, China published its first 
Arctic strategy that promoted a ``Polar Silk Road'' and self-declared 
China to be a ``Near-Arctic State.'' The strategy identifies access to 
resources, securing Arctic sea lines of communication, and promoting an 
image of a ``responsible major country'' in Arctic affairs as specific 
interests, and highlights China's icebreaker vessels and research 
stations as integral to its implementation.
                 Military Implications of OBOR and MSR
PLA Posture and Access
    China is competing for access and influence at the global level. 
This past August our office met with counterparts from China's military 
for a brief on China's 2019 National Defense White Paper, which they 
explained defines China's national defense aims to include 
``safeguard[ing] China's overseas interests'' and identifies a need to 
build its far seas forces and a need for ``overseas logistical 
facilities.'' China's Science of Military Strategy, an official 
military document published in 2013, indicates its military strategists 
have also long been concerned with safeguarding China's maritime 
industry and the ability of Chinese ships to transit strategic sea 
lines of communication.
    Although China's senior leaders for many years disavowed any direct 
connection between OBOR and the PLA, Beijing has now explicitly linked 
China's global development framework with its overseas military 
ambitions. At a January 2019 Communist Party study session, Xi Jinping 
called for completion of a ``security system'' for OBOR to ``strengthen 
protection of [China's] interests and ensure the security of major 
overseas projects,'' without elaborating on the PLA's role or how the 
concept will account for the sovereignty concerns of partnering 
countries. And in July 2019, China's Defense Minister openly declared 
that ``China is willing to deepen military exchanges and cooperation 
with the Caribbean countries and Pacific island countries under the 
framework of OBOR.''
    There are more signs China will seek to use OBOR to expand its 
international military cooperation. China's policymakers may believe 
that by leading with economic and technology exchanges in their 
interactions with partnering countries, they can subsequently generate 
opportunities for defense cooperation or military access. For example, 
in 2017, the PLAN deployed its Navy Task Group 150 on a cruise from 
Shanghai to Europe, not coincidentally along the pathway of the 
Maritime Silk Road. Along the way, Task Group 150 made numerous 
goodwill port calls and conducted at-sea exercises with OBOR partnering 
nations.
    Furthermore, it is becoming increasingly clear China is 
aggressively seeking opportunities for military access and basing. The 
PLAN has argued in its publications for a long-term strategy to obtain 
bases overseas, using methods such as constructing, purchasing, and 
long-term leases to obtain rights to foreign ports. The PLA already 
opened China's first overseas military facility in Djibouti, and has 
operated there since late 2017. International press reporting has 
indicated China is seeking to expand its military basing and access in 
the Middle East, Southeast Asia, and the western Pacific, and may be 
considering additional locations in Africa. In the Arctic, civilian 
research could also support a strengthened Chinese military presence.
Exposure to Influence
    China's maritime infrastructure activities could also be leveraged 
to exert political influence. OBOR is more than an economic 
initiative--it is a strategic program with strategic implications for 
partnering nations. Given China's demonstrated history of using 
economic leverage to exact political retribution against other 
countries, we are concerned these projects will increase partner 
nations' concessions from or exposure to Chinese influence or pressure. 
For example, the Chinese government is restricting trade and tourism 
with Australia and Canada, and detaining Canadian citizens, in an 
effort to interfere in their political and judicial processes. After 
the Dalai Lama visited Mongolia in 2016, the Chinese government closed 
its border with the land-locked country, effectively crippling 
Mongolia's economy. Beijing consistently incentivizes and pressures 
elites, usually in an opaque manner, to toe the CCP line on issues such 
as Taiwan, Hong Kong, human rights, etc.
Technology Challenges
    Alongside OBOR, President Xi has promoted the ``21st Century 
Digital Silk Road,'' an initiative that includes cooperation in 
frontier technology areas and building information and communications 
technology infrastructure, particularly in developing countries. This 
has overlapped with the MSR as Chinese state-owned shipping enterprises 
seek to link their shipping operations and port developments with 
Chinese technology exports. Huawei has also identified the 
digitalization of ports as an emerging sector for its 5th Generation 
(5G) telecommunications equipment. For example, in June this year, 
Huawei announced an agreement with China Merchants Port Group (CMPort), 
the sixth-largest container operator in the world, to establish a 5G 
innovation hub. CMPort has stated the hub will demonstrate the 
integration of Huawei 5G into port operations and predicted these 
innovations would support the development of OBOR-affiliated ports in 
foreign countries.\2\
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5g_innovation_lab/; https://
lloydslist.maritimeintelligence.informa.com/LL1127403/Huawei-makes-
inroads-in-smart-ports; https://container-news.com/cmport-huawei-build-
5g-innovation-lab/
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    The presence of Huawei 5G equipment in Chinese-operated foreign 
ports would present new risks due to the inherent security 
vulnerabilities associated with Chinese telecom vendors. Future 5G 
networks will underpin critical infrastructure, including automated 
systems that will support industrial and maritime infrastructure, and 
systems that track shipping containers and products through the global 
supply chain. The presence of low-assurance components--such as 
equipment from Huawei or ZTE--would compromise the integrity of these 
vital sectors.
    Of particular concern are China's laws that compel Chinese 
companies to cooperate with its security and intelligence services, 
even when operating abroad. In addition, independent analyses have 
identified extensive security vulnerabilities in Huawei products 
compared to those of competitors.\3\ Maritime infrastructure reliant on 
Chinese 5G services would therefore be vulnerable not only to Beijing's 
influence, but also to any other State or non-State actor with basic 
cyber capabilities. The presence of equipment from high-risk vendors in 
our allied and partner 5G networks could also affect the means and 
manner of U.S. information sharing.
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    Lastly, China's ability to aggregate vast amounts of SOE-furnished 
shipping data across entire regions or continents poses threats to the 
competitiveness of global markets and maritime economies. Chinese 
overseas port operations, working in concert from centralized data 
stores and enabled by artificial intelligence and big data analytics, 
could evolve to predict supply and demand at a scale beyond what we 
currently understand.
                     Department of Defense Approach
    The U.S. National Defense Strategy (NDS) states that DoD will 
``support U.S. interagency approaches and work by, with, and through 
our allies and partners'' to counter coercion by revisionist powers. 
The challenges presented by China's expanding global access cannot be 
solved primarily or exclusively in the military ``lane.'' The 
Department therefore views our response as supporting a whole-of-
government approach, primarily through the first two lines of effort of 
the NDS.
    The first line of effort is preparing a more lethal and resilient 
joint force. The NDS takes into account the scope and pace of our 
competitors' ambitions and capabilities, and prioritizes investment in 
modernizing key U.S. capabilities, including nuclear forces; space and 
cyberspace capabilities; Command, Control, Communications, Computers, 
Intelligence, Surveillance, and Reconnaissance (C4ISR); missile 
defense; capabilities to strike diverse targets inside adversary air 
and missile defense networks; smaller, dispersed, resilient, and 
adaptive basing; and autonomous systems. The Secretary of Defense 
designated the Chairman of the Joint Chiefs as the global integrator, 
which allows him to work across the Combatant Commands to ensure a 
lethal and resilient joint force is available at the right time, place, 
and scale. Within the Office of the Secretary of Defense, the 
Department established the Office of the Deputy Assistant Secretary of 
Defense for China in June to drive alignment on our strategic 
competition with China as we carry out NDS implementation.
    The second line of effort is strengthening alliances and attracting 
new partners, which the NDS identifies as a crucial and durable 
asymmetric advantage no other country can match. This has been a key 
focus in our support to the Indo-Pacific Strategy,\4\ as strengthening 
and evolving U.S. partnerships into a networked security architecture 
helps uphold a ``free and open'' order characterized by 1) respect for 
sovereignty and independence of every nation, no matter its size; 2) 
peaceful dispute resolution without coercion; 3) free, fair, and 
reciprocal trade and investment; and 4) adherence to international 
rules and norms. Select efforts include integrating NDS implementation 
with Japan's National Defense Program Guidelines; implementing Major 
Defense Partner status with respect to India; reinvigorating our 
alliances with Thailand and the Philippines; pursuing access and 
training opportunities in Singapore; investing in emerging partnerships 
with Indonesia, Vietnam, and Malaysia; and enhancing our engagement in 
the Pacific Islands to maintain access and promote our status as a 
security partner of choice. DoD is also investing $521 million over the 
next five years in programs like the Maritime Security Initiative to 
build the capacity of our allies and partners in the region, including 
developing partners' ability to conduct maritime security and maritime 
domain awareness operations, and advancing interoperability with U.S. 
forces. The United States is also working closely with Australia, 
Canada, France, Japan, New Zealand, and the United Kingdom to enforce 
UN Security Council Resolutions that seek to prevent North Korea from 
exporting coal and importing refined petroleum in the maritime domain. 
DoD is also engaging on these challenges beyond the Indo-Pacific 
region, as seen by recent senior leader trips to Europe and the Middle 
East, for example.
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    To ``drill down'' on the subject of this hearing, there are three 
specific ways the Department is responding to challenges presented by 
China's Maritime Silk Road activities: evaluating access, supporting 
targeted responses, and shaping high standards for engagement with 
China's military.
Evaluating Access
    First, DoD will continue to assess Beijing's efforts to contend for 
influence and access globally, including by identifying where specific 
investments have security implications. Importantly, the Department 
does not view every one of China's expanding global activities as 
problematic. Many countries have genuine economic development needs, 
particularly for infrastructure, and U.S. policy does not oppose 
China's investment activities as long as they respect sovereignty and 
the rule of law, use sustainable financing, and operate in a 
transparent and economically sustainable manner in accordance with 
international standards. Instead, we promote the principles of a ``free 
and open Indo-Pacific,'' where countries can determine their own 
economic interests and needs. We are concerned, however, by actions 
China's party-state has taken that are out-of-step with international 
norms, diminish countries' sovereignty, or undermine U.S., allied, or 
partner security. To that end, we have set up a framework for 
evaluating where China's investments in ports and other infrastructure 
could impact DoD equities, and have provided specific information to 
our interagency counterparts, recognizing this is one variable in our 
whole-of-government decision-making.
Targeted Responses
    Second, and informed by our assessments, the Department has 
supported interagency counterparts and our allies and partners to 
respond in cases where there are acute needs. Our multilateral response 
to China's state-driven initiatives has emphasized upholding shared 
principles and promoting high standards for trade and investment. The 
Department does not support a plan to counter China dollar-for-dollar 
or emulate its state-backed approach and the accompanying costs to host 
countries. Rather, DoD welcomes the development of new tools by our 
interagency and Congressional counterparts to increase our 
competitiveness: the Better Utilization of Investment Leading to 
Development (BUILD) Act which doubled our development finance capacity; 
targeted State Department initiatives like the Digital Connectivity and 
Cyber Security Partnership and Infrastructure and Transaction 
Assistance Network; and strengthened U.S. contributions to regional 
institutions--we believe these are exactly the type of actions needed 
to promote quality alternatives. Although DoD may not be the 
appropriate Department to employ such tools, we provide support through 
our own tools: deepening security engagements with allies and partners, 
underwriting the stability needed for partnerships to thrive, and 
providing timely assessments, as when DoD identified concerns about 
potential Chinese investment in a deep water port in the Indo-Pacific.
    Allies and partners have promoted high-standard alternatives as 
well. Last year Australia worked to fund a military base for Fiji's 
armed forces, for example. In September 2019, the European Union and 
Japan signed a deal for a 60 billion-Euro fund to coordinate 
infrastructure, transportation, and digital projects linking Europe and 
Asia.
Shaping Engagement with China's Military
    Finally, DoD shares our best practices with other countries for 
engaging with China, and with China's military in particular. As 
China's military is increasingly present around the globe and seeks to 
build bases in other countries, we encourage hard discussions regarding 
the risks associated with this presence. The Department stands ready to 
assist any country in its assessments. The Department also continues to 
engage with China to build a constructive, results-oriented defense 
relationship focused on building the communications necessary to de-
escalate crisis and reduce risk to forces. DoD has worked to scope our 
own engagements with the PLA carefully to avoid contact that would 
constitute a national security risk while welcoming cooperation from 
China on issues of mutual interest.
    DoD has also joined interagency counterparts in promoting national 
security-based investment screening mechanisms as a best practice for 
evaluating offers that could compromise maritime and digital 
infrastructure, and in advocating for a risk-based security framework 
for 5G infrastructure contracts in particular. DoD specifically 
emphasizes the defense risks presented by the lack of an independent 
judiciary between China's vendors and its security and intelligence 
services. Continued outreach on these issues will further deepen our 
cooperation with allies and partners and build a long-term foundation 
for addressing risks to our critical infrastructure.
                               Conclusion
    Your Department of Defense will continue supporting these and other 
whole-of-government actions to respond to China's efforts to influence 
the maritime domain in ways that are inconsistent with U.S. national 
interests and values. To that end, we will continue to field a Joint 
Force that can compete, deter, and win in this increasingly complex 
security environment. We welcome Congress's continued attention to 
these vital issues.

    Mr. Maloney. Thank you, General.
    Ms. Bartholomew?
    Ms. Bartholomew. Thank you. Thank you very much. And I join 
everybody in condolences on the loss of Mr. Cummings. The arc 
of his life really is an example of the promise of this country 
and the best that we have to offer. He will be really missed.
    Chairman Maloney, Ranking Member Gibbs, members of the 
subcommittee, thank you for the opportunity to testify today. 
It is an honor to appear before you and to serve on this panel 
with such distinguished witnesses. The views in this testimony 
are informed by the Commission's body of work. They are, 
however, my own, and do not necessarily reflect the full U.S.-
China Economic and Security Review Commission.
    Our Commission was created by the Congress in 2000 as China 
acceded to the WTO to advise you on the national security 
implications of the U.S.-China economic relationship, and to 
make recommendations to Congress on our findings. Our 2019 
report is in print. It has gone to press right now, and will be 
released in November.
    The Commission first discussed China's Belt and Road 
Initiative in our 2015 annual report. Much has changed since 
then.
    The BRI is the signature foreign policy of General 
Secretary of the Chinese Communist Party, Xi Jinping, and it 
has become a pillar of China's expanding presence on the global 
stage. Chinese leaders want to use BRI, of which the Maritime 
Silk Road is a critical component, to revise the global 
political and economic order to align with Chinese interests. 
In my testimony I would like to situate China's Maritime Silk 
Road activities in the bigger economic picture, focusing on two 
key aspects: China's industrial policies for its shipping and 
shipbuilding industries, and China's investment in ports around 
the world.
    First, on China's industrial policies. Like other 
industries the Chinese Government has focused on and built, 
China's shipping and shipbuilding firms benefit from industrial 
policies to the detriment of U.S. companies. China's largest 
shipping and shipbuilding companies are all state-owned 
enterprises. A 2017 Harvard University study found evidence 
that China had significantly subsidized shipyard costs, leading 
to substantial misallocation of global production. Subsidies 
for Chinese shipbuilding SOEs have harmed the U.S. shipbuilding 
industry's ability to compete in the global market, and have 
led to shipyard closings and a reduced U.S. vendor base over 
the past several decades.
    Second, to the very important issue of ports, China is the 
world's largest exporter and second largest importer, so its 
investment in ports helps facilitate China's global trade 
footprint. Today at least two-thirds of the world's top 50 
container ports are Chinese owned or invested, up from about 
one-fifth almost a decade ago. China's investments include U.S. 
ports such as Los Angeles and Seattle, and four Chinese SOEs 
are among the world's leading port operators.
    Chinese control of ports can be used as a form of market 
creation through which China can leverage its port control to 
strengthen their economic relationships with certain countries. 
By owning and/or operating a network of logistical nodes across 
Asia, Europe, and Africa, China can control a significant 
portion of its inbound supply chain for essential commodities 
and outbound trade routes for its exports. In the event of 
conflict, China could use its control over these and other 
ports to hinder trade access to other countries.
    Additionally, Chinese port investment can translate into 
increased political leverage. Chinese investments in the Port 
of Piraeus in Greece, for example, have influenced Athens' 
response to China's claims and activities in the South China 
Sea and human rights abuses, with Athens blocking an EU 
consensus in 2017 by refusing to endorse an EU statement 
critical of China's human rights records in the U.N. Human 
Rights Council.
    Finally, control of ports could also allow for economic and 
traditional espionage, as China can install surveillance 
equipment in ports to monitor foreign companies and U.S. 
military activity or that of our allies and partners.
    Mr. Chairman, you mentioned standards. A couple of other 
people have mentioned that. This is an issue that we think 
people really need to be paying more attention to. It is really 
critically important for the U.S. to participate actively in 
standard-setting bodies, including the IMO and the ISO.
    In the IMO, China is a 2018-2019 member of the Council, 
which is the country body elected by the Assembly, and it 
serves as the executive body of the IMO. It also serves the 
Assembly's role between sessions of the Assembly, which 
generally meets once every 2 years.
    In the ISO, in addition to its leadership position on the 
Technical Committee on Ships and Maritime Technology, China is 
currently a member of the 20-member Council which is the core 
governing body of the ISO. Membership on the Council rotates. 
The U.S. is also currently a member.
    In 2015 to 2017, the ISO president was from China, but 
within the ISO, the Technical Committee on Ships and Maritime 
Technology, ISO/TC8, is responsible for the standardization of 
design, construction, structural elements, outfitting parts, 
equipments, method and technology, and marine environmental 
matters used in shipbuilding and the operation of ships, 
comprising seagoing ships, vessels for inland navigation, 
offshore structures, ship-to-shore interface, and all other 
marine structures subject to IMO requirements. ISO/TC8's 
Secretariat is China's Standardization Administration.
    I have been reading recently ``The Guns at Last Light: The 
War in Western Europe, 1944-1945,'' by Rick Atkinson, which 
describes the extensive level of logistics that went into 
preparing for D-Day. Our sailors, merchant marines, 
longshoremen, and factory workers, as well as our soldiers, 
were critical to that mission and to helping win the war. I 
hope that we never face a task like that again. But I worry 
that, if we do, we no longer have the manufacturing capacity, 
the shipbuilding capacity, and the elements of the shipbuilding 
industry that would be necessary to meet the challenge.
    China has built its economy and its military power under 
the U.S. security umbrella. It is gaining long-term economic 
and strategic influence through subsidizing its shipping and 
shipbuilding industries and investing in overseas ports. We 
must develop and run a whole-of-Government approach to 
addressing the challenges that it presents.
    In my written testimony I have included a list of 
recommendations the Commission has previously made on maritime 
security, as well as a map illustrating the global scope of BRI 
and China's quest for influence.
    Thank you for the opportunity to testify, and I look 
forward to any questions you may have.
    [Ms. Bartholomew's prepared statement follows:]

                                 
 Prepared Statement of Carolyn Bartholomew, Chairwoman, United States-
             China Economic and Security Review Commission
    Chairman Maloney, Ranking Member Gibbs, Members of the 
Subcommittee, thank you for the opportunity to testify today. It is an 
honor to appear before you and to serve on this panel with such 
distinguished witnesses. The views in this testimony are informed by 
the Commission's body of work. They are, however, my own and do not 
necessarily reflect those of the full U.S.-China Economic and Security 
Review Commission.
           I. Overview of the Commission and its Study of BRI
    The U.S.-China Commission was created by the Congress in 2000, as 
Congress voted to grant China Permanent Normal Trade Relations (PNTR), 
which paved the way for China's accession to the World Trade 
Organization (WTO). We were established to advise Congress on the 
national security implications of the U.S.-China economic relationship 
and to make recommendations to Congress on our findings.
    There are 12 Commissioners--six Democrats and six Republicans--
three each appointed by the House and Senate Democratic and Republican 
leaders. Commissioners are backed up by an excellent professional 
staff. We do an annual report to the Congress based on eight hearings, 
meetings with government officials and other experts, outside research, 
and, generally, one trip to the Indo-Pacific region. Our 2019 report, 
which has 38 recommendations to the Congress on a range of economic and 
national security issues, has gone to press and will be released on 
November 14. I have included, as an attachment, a list of some of the 
Commission's previous recommendations which may be of interest to the 
Subcommittee's members (see Appendix 1).
    The Commission first discussed China's Belt and Road Initiative 
(BRI), originally called One Belt One Road (OBOR), in our 2015 Annual 
Report in a section on China and Central Asia. Indeed, when BRI was 
first introduced, most of its focus was on Asia. Much has changed since 
then.
   II. The History and Current State of the Belt and Road Initiative
    The BRI, formally launched in 2013, is the signature foreign policy 
of General Secretary of the Chinese Communist Party (CCP) Xi Jinping, 
and has become a pillar of China's expanding presence on the global 
stage. BRI is not a new concept. It is a culmination and rebranding of 
previous policies and projects aimed at linking China with its trading 
partners. It is, however, so important now that Chinese leaders call it 
the ``Project of the Century'' and have written it into China's 
constitution. The BRI marks the end of Deng Xiaoping's era of ``hide 
your capabilities and bide your time'' and underscores China's move 
onto the global stage, with economic, diplomatic, geopolitical, and 
national security implications.
    Chinese leaders want to use BRI to revise the global political and 
economic order to align with Chinese interests. In a speech marking 
BRI's fifth anniversary in August 2018, General Secretary Xi emphasized 
that the initiative serves as a solution for China to participate in 
global opening up and cooperation, improve global economic governance, 
promote common development and prosperity,'' and build a ``community of 
common human destiny.\1\
---------------------------------------------------------------------------
    \1\ Xinhua, ``Xi Pledges to Bring Benefits to People Through Belt 
and Road Initiative,'' August 27, 2018. http://www.xinhuanet.com/
english/2018-08/28/c_137423397.htm; Xinhua, ``Xi Jinping: Promote the 
Successful Implementation of One Belt, One Road to Benefit the 
People,'' August 27, 2018. Translation.
---------------------------------------------------------------------------
    Broadly, BRI's land-based ``Belt'' crosses from China to Central 
and South Asia, to the Middle East, and then to Europe. The sea-based 
``Road'' connects China with South Asia, the Middle East, East Africa, 
and Europe via sea lanes traversing the South China Sea, Indian Ocean, 
Red Sea, Suez Canal, and Eastern Mediterranean.\2\ (See map in Appendix 
2.)
---------------------------------------------------------------------------
    \2\ National Development and Reform Commission, China's Ministry of 
Foreign Affairs, and China's Ministry of Commerce, Vision and Actions 
on Jointly Building Silk Road Economic Belt and 21st-Century Maritime 
Silk Road, March 28, 2015.
---------------------------------------------------------------------------
    China's ambitions for BRI are not confined to just two geographic 
paths. China's vision for BRI includes Latin America and the Caribbean, 
the Arctic, space, and cyberspace (the so-called ``Digital Silk 
Road''). The most visible manifestations of BRI are economic and 
official Chinese communiques focusing on economic objectives. But BRI 
has clear strategic intent, including increasing China's influence over 
global politics and governance.
    According to the Chinese government, it has signed 171 BRI 
cooperation agreements with 29 international organizations and 123 
countries.\3\ Others estimate around 70 countries.\4\ The second Belt 
and Road Forum took place in Beijing in late April. A reported 5,000 
delegates, including leaders from 37 countries, delegations from more 
than 150 countries and 90 international organizations, participated. 
One-third of the participating heads of state were from Europe.\5\
---------------------------------------------------------------------------
    \3\ China Daily, ``China has Signed 171 B&R Cooperation 
Documents,'' March 7, 2019. https://eng.yidaiyilu.gov.cn/qwyw/rdxw/
81686.htm.
    \4\ U.S.-China Economic and Security Review Commission, Hearing on 
A `World-Class' Military: Assessing China's Global Military Ambitions, 
written testimony of Isaac B. Kardon, June 20, 2019, 5.
    \5\ Shannon Tiezzi, ``Who Is (and Who Isn't) Attending China's 2nd 
Belt and Road Forum?'' Diplomat, April 27, 2019. https://
thediplomat.com/2019/04/who-is-and-who-isnt-attending-chinas-2nd-belt-
and-road-forum/.
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         III. The Economic Background on the Maritime Silk Road
    The witnesses from the Department of Defense are focusing on the 
national security implications of the Maritime Silk Road, a critical 
component of BRI. I would like to situate China's Maritime Silk Road 
activities in the bigger economic picture.
    China is the world's largest exporter and second-largest importer, 
so its investment in ports helps facilitate China's global trade 
footprint. By owning and/or operating a network of logistical nodes 
across Asia, Europe, and Africa, China can control a significant 
portion of its inbound supply chain for essential commodities and 
outbound trade routes for its exports. About 90 percent of the world's 
trade is carried by sea.\6\ China's growing investments in ports 
increases Beijing's ability to influence and control global supply 
chains, which could affect the United States' ability to maintain 
reliable cross-border trade volumes. China has focused its port 
investments in countries where the interruption of its own trading 
routes would be most costly, based on the amount of trade that would be 
diverted, or the extra distance that would have to be traveled, if 
shipping were interrupted.\7\
---------------------------------------------------------------------------
    \6\ International Chamber of Shipping, ``Shipping Facts.'' http://
www.ics-shipping.org/shipping-facts/shipping-facts.
    \7\ Economist, ``China's `Maritime Road' Looks More Defensive than 
Imperialist,'' September 28, 2019. https://www.economist.com/graphic-
detail/2019/09/28/chinas-maritime-road-looks-more-defensive-than-
imperialist.
---------------------------------------------------------------------------
    The Maritime Silk Road rebrands existing maritime policies and 
directs investment toward key strategic blue economy sectors, which 
include traditional marine industries (e.g., shipbuilding and 
fisheries), emerging strategic industries (e.g., maritime engineering 
and maritime renewable energies), and maritime services (e.g., maritime 
transport and finance).\8\ According to a 2018 report from the European 
Council of Foreign Relations,
---------------------------------------------------------------------------
    \8\ Mathieu Duchatel and Alexandre Sheldon Duplaix, ``Blue China: 
Navigating the Maritime Silk Road to Europe,'' European Council on 
Foreign Relations, April 2018, 4, 10. https://www.ecfr.eu/page/-/
Blue_China_Navigating_the_Maritime_
Silk_Road_to_Europe.pdf.

        Concretely, today the Maritime Silk Road consists of a set of 
        flagship projects in port infrastructure [e.g., Piraeus in 
        Greece, Hambantota and Colombo Port City in Sri Lanka, Gwadar 
        in Pakistan, and Djibouti], financial investment in port 
        management, and acquisitions of container management companies 
        across Europe, the MENA region, and east Africa.\9\
---------------------------------------------------------------------------
    \9\ Mathieu Duchatel and Alexandre Sheldon Duplaix, ``Blue China: 
Navigating the Maritime Silk Road to Europe,'' European Council on 
Foreign Relations, April 2018, 14. https://www.ecfr.eu/page/-/
Blue_China_Navigating_the_Maritime_
Silk_Road_to_Europe.pdf.

    The Chinese Communist Party (CCP) has repeatedly highlighted the 
importance of its maritime economy and shipbuilding industry in recent 
high-level meetings and policy documents, including the 13th Five-Year 
Plan, the 19th Party Congress, and the Made in China 2025 Plan.
    A major goal of BRI is to open more markets for Chinese goods, 
displacing goods and services currently provided by the U.S. and other 
countries. While BRI is characterized as a boon to global development, 
it is, in large part, designed to boost the competitiveness and 
innovative capacity of Chinese companies. China's ``marine GDP'' (which 
includes marine industries, services such as transport and tourism, and 
exploitation of ocean resources) made up about 10 percent of its total 
GDP in 2017, according to China's State Oceanic Administration.\10\ BRI 
provides ripe opportunities to expand those activities.
---------------------------------------------------------------------------
    \10\ Mathieu Duchatel and Alexandre Sheldon Duplaix, ``Blue China: 
Navigating the Maritime Silk Road to Europe,'' European Council on 
Foreign Relations, April 2018, 3. https://www.ecfr.eu/page/-/
Blue_China_Navigating_the_Maritime_
Silk_Road_to_Europe.pdf; Xinhua, ``China Focus: China's Maritime 
Economy Expands by 7.5 Percent in Recent Five Years,'' January 21, 
2018. www.xinhuanet.com/english/2018-01/21/c_136913316.htm.
---------------------------------------------------------------------------
      IV. Chinese Investments in Ports and Related Infrastructure
    Chinese state-owned enterprises (SOEs) play a major role in BRI 
activities. China's largest shipping and shipbuilding companies are all 
SOEs. Four Chinese SOEs are among the world's leading port operators: 
COSCO Ports, China Merchants Ports, Shanghai International Port Group, 
and Qingdao Port International.\11\ These companies are backed by 
Chinese state-owned banks. For example, in 2017 state-owned China 
Development Bank provided COSCO a $26 billion credit facility to 
develop its shipping interests.\12\
---------------------------------------------------------------------------
    \11\ Mathieu Duchatel and Alexandre Sheldon Duplaix, ``Blue China: 
Navigating the Maritime Silk Road to Europe,'' European Council on 
Foreign Relations, April 2018, 15. https://www.ecfr.eu/page/-/
Blue_China_Navigating_the_Maritime_
Silk_Road_to_Europe.pdf.
    \12\ Costas Paris, ``China Shipping Giants Seek Control of 
`Maritime Silk Road,' '' Wall Street Journal, April 7, 2017. https://
www.wsj.com/articles/chinese-shipping-giants-seek-control-of-maritime-
silk-road-1491557405.
---------------------------------------------------------------------------
    The total amount of Chinese port investment is difficult to 
determine because of the lack of transparency around deals. According 
to estimates by London-based investment bank Grisons Peak, between mid-
2016 and mid-2017, Chinese investments in overseas ports reached $20 
billion.\13\ Nearly two-thirds of the world's top 50 container ports 
were Chinese owned or invested in by 2015, up from about one-fifth in 
2010, according to research from the Financial Times.\14\ Chinese 
investments in overseas ports have mostly been outside of the world's 
top 25 container ports (ten of the top 25 container ports in the world 
are in China).\15\ According to the Financial Times, of the top 10 port 
operators worldwide, Chinese companies handled 39 percent of all 
volumes, nearly double the next largest nation group (Singapore).\16\
---------------------------------------------------------------------------
    \13\ James Kynge, ``Chinese Purchases of Overseas Ports Top $20 
billion in Past Year,'' Financial Times, July 16, 2017. https://
www.ft.com/content/e00fcfd4-6883-11e7-8526-7b38dcaef614.
    \14\ James Kynge, Chris Campbell, Amy Kazmin, and Farhan Bokhari, 
``How China Rules the Waves,'' Financial Times, January 12, 2017. 
https://ig.ft.com/sites/china-ports/.
    \15\ World Shipping Council, ``Top 50 World Container Ports.'' 
http://www.worldshipping.org/about-the-industry/global-trade/top-50-
world-container-ports.
    \16\ James Kynge, Chris Campbell, Amy Kazmin, and Farhan Bokhari, 
``How China Rules the Waves,'' Financial Times, January 12, 2017. 
https://ig.ft.com/sites/china-ports/.
---------------------------------------------------------------------------
    Chinese port investments range from building the port to managing 
and operating the port. They include:

      Landlord ports: China Merchants Port Holding's 99-year 
lease on Hambantota Port in Sri Lanka is an example of Chinese 
ownership through a ``landlord port'' model. In this model, ``the port 
authority acts as regulatory body and as landlord, while port 
operations . . . are carried out by private companies.'' This model is 
dominant in larger and medium-sized ports around the world.\17\ Under 
the concession agreement, China Merchants Port Holding holds a 70 
percent stake in the Sri Lankan joint venture running the commercial 
operations of the port.
---------------------------------------------------------------------------
    \17\ World Bank, ``Port Reform Toolkit: Alternative Port Management 
Structures and Ownership Models.'' https://ppiaf.org/sites/ppiaf.org/
files/documents/toolkits/Portoolkit/Toolkit/module3/
port_functions.html.
---------------------------------------------------------------------------
      Fully privatized ports: In fully privatized ports, the 
ownership of port land is transferred from the public to the private 
sector. In addition, ``some governments may simultaneously transfer the 
regulatory functions to private successor companies.'' \18\ For 
example, in 2016, COSCO acquired a 51 percent stake in the Piraeus Port 
in Greece. The Greek government agreed to privatize the port in 2015 as 
part of its bailout deal with the European Union. Piraeus is the only 
port in Europe where a Chinese company owns the port authority.\19\
---------------------------------------------------------------------------
    \18\ World Bank, ``Port Reform Toolkit: Alternative Port Management 
Structures and Ownership Models.'' https://ppiaf.org/sites/ppiaf.org/
files/documents/toolkits/Portoolkit/Toolkit/module3/
port_functions.html.
    \19\ Joanna Kakissis, ``Chinese Firms Now Hold Stakes in Over a 
Dozen European Ports,'' NPR, October 9, 2018. https://www.npr.org/2018/
10/09/642587456/chinese-firms-now-hold-stakes-in-over-a-dozen-european-
ports; George Georgiopoulos, ``China's Cosco Acquires 51 Percent Stake 
in Greece's Piraeus Port,'' Reuters, August 10, 2016. https://
www.reuters.com/article/greece-privatisation-port/chinas-cosco-
acquires-51-pct-stake-in-greeces-piraeus-port-idUSL8N1AR252.

    China also has port investments in the Western Hemisphere. COSCO 
has minor investments in U.S. ports, including at the ports of Los 
Angeles and Seattle.\20\ In 2013, China Merchant Holdings acquired a 49 
percent stake in commercial container operator Terminal Link, which 
owns 15 container terminals around the world, including in Miami and 
Houston.\21\ In April 2019, Hong Kong-based Orient Overseas sold its 
ownership stake in the Long Beach Container Terminal to comply with an 
agreement reached with CFIUS to mitigate national security concerns; 
the agreement allowed COSCO to acquire Orient Overseas in July 
2018.\22\ Panama Ports Company (a subsidiary of the Hong Kong-based 
firm Hutchinson Whampoa Ltd.) operates the two main ports--Balboa and 
Cristobal--located on either side of the Panama Canal. In addition, 
Chinese firms are acquiring and constructing port facilities on both 
sides of the canal.\\
---------------------------------------------------------------------------
    \20\ Costas Paris and Joanne Chiu, ``China's Cosco Puts Long Beach 
Container Terminal Up for Sale,'' Wall Street Journal, November 20, 
2018. https://www.wsj.com/articles/chinas-cosco-puts-long-beach-
container-terminal-up-for-sale-1542736508.
    \21\ Eleanor Albert, ``China's Global Port Play,'' Diplomat, May 
11, 2019. https://thediplomat.com/2019/05/chinas-global-port-play/; 
Journal of Commerce, ``CMA CGM Sells Stake in Ports Unit to China 
Merchants,'' January 25, 2013. https://www.joc.com/maritime-news/
container-lines/cma-cgm/cma-cgm-sells-stake-ports-unit-china-
merchants_20130125.html.
    \22\ Chester Yung, ``Cosco Shipping Units to Sell U.S. Long Beach 
Container Terminal for $1.78 Billion,'' Wall Street Journal, April 30, 
2019. https://www.wsj.com/articles/cosco-shipping-units-to-sell-u-s-
long-beach-container-terminal-for-1-78-billion-11556595995/; Costas 
Paris and Joanne Chiu, ``China's Cosco Puts Long Beach Container 
Terminal Up for Sale,'' Wall Street Journal, November 20, 2018. https:/
/www.wsj.com/articles/chinas-cosco-puts-long-beach-container-terminal-
up-for-sale-1542736508.
    \\ For a map of Chinese firms' role in Panamanian port 
construction and a full list of Chinese port projects in Latin America 
and the Caribbean, see Katherine Koleski and Alec Blivas, ``China's 
Engagement with Latin America and the Caribbean,'' U.S.-China Economic 
and Security Review Commission, October 17, 2018, 26, 33-34. https://
www.uscc.gov/Research/chinas-engagement-latin-america-and-caribbean.
---------------------------------------------------------------------------
    China's shipping giants see investment in the port terminal 
business as an important source of growth. According to researchers 
from the European Council on Foreign Relations,

        Operating port terminals is a source of predictable and stable 
        return on investment for Chinese conglomerates, unlike 
        shipping, which depends on oil prices. As a result there is an 
        incentive for Chinese state-owned enterprises to expand into 
        business areas surrounding shipping, including investment in 
        port infrastructure and other logistical components of maritime 
        trade.\23\
---------------------------------------------------------------------------
    \23\ Mathieu Duchatel and Alexandre Sheldon Duplaix, ``Blue China: 
Navigating the Maritime Silk Road to Europe,'' European Council on 
Foreign Relations, April 2018, 13-14. https://www.ecfr.eu/page/-/
Blue_China_Navigating_the_Maritime_
Silk_Road_to_Europe.pdf.

    The chairman of COSCO Shipping said in a 2016 interview he expects 
the company's investment in the port terminal business to significantly 
increase in the coming years and become an important source of growth. 
He added the port terminal business is more stable and often more 
profitable than shipping because it has a fixed rate of return on 
investment, generally between 8 to 10 percent.\24\
---------------------------------------------------------------------------
    \24\ Mathieu Duchatel and Alexandre Sheldon Duplaix, ``Blue China: 
Navigating the Maritime Silk Road to Europe,'' European Council on 
Foreign Relations, April 2018, 14. https://www.ecfr.eu/page/-/
Blue_China_Navigating_the_Maritime_
Silk_Road_to_Europe.pdf.
---------------------------------------------------------------------------
    Port investments can give Beijing significant economic leverage as 
well as advance its geostrategic goals. Analysts have pointed to a 
number of ports where China is invested and, if converted to include a 
military presence or function, would significantly improve China's 
ability to project naval power. Indeed, the requirements in China's 
2017 National Defense Transportation Law to ``embed military in 
civilian'' suggest commercial ports could be utilized by military 
personnel if Beijing were to decide it was in its interests to do 
so.\25\ Chinese investment in civilian ports can also pave the way for 
military visits to rest crews, refuel, repair ships, or for joint 
exercises--even if China does not have a base there.\26\
---------------------------------------------------------------------------
    \25\ U.S.-China Economic and Security Review Commission, Hearing on 
A `World-Class' Military: Assessing China's Global Military Ambitions, 
written testimony of Isaac B. Kardon, June 20, 2019, 10; U.S.-China 
Economic and Security Review Commission, Hearing on A `World-Class' 
Military: Assessing China's Global Military Ambitions, oral testimony 
of Isaac B. Kardon, June 20, 2019,132, 188; People's Republic of China 
National Defense Transportation Law, 2017.
    \26\ U.S. Department of Defense, Annual Report to Congress: 
Military and Security Developments Involving the People's Republic of 
China 2019, May 2019, 11. https://media.defense.gov/2019/May/02/
2002127082/-1/-1/1/2019_CHINA_MILITARY_POWER_REPORT.pdf.
---------------------------------------------------------------------------
    We can already see examples of where Chinese control of ports can 
be used as a form of market creation, through which China can leverage 
its port control to strengthen their economic relationships with 
certain countries. The ports in Hambantota, Gwadar, and Djibouti, for 
example, all include plans for free trade zones. Those three ports, as 
well as Piraeus and Colombo, also include plans for additional 
investment in the transportation sector, including airports, additional 
flight routes, roads, and railways.\27\
---------------------------------------------------------------------------
    \27\ Mathieu Duchatel and Alexandre Sheldon Duplaix, ``Blue China: 
Navigating the Maritime Silk Road to Europe,'' European Council on 
Foreign Relations, April 2018, 16. https://www.ecfr.eu/page/-/
Blue_China_Navigating_the_Maritime_
Silk_Road_to_Europe.pdf.
---------------------------------------------------------------------------
    Nearly two-thirds of global container traffic flows through 
Chinese-owned or -invested ports. China has significant investments in 
two of the world's top 30 busiest container ports by volume: Colombo, 
at #24, with 7.05 million TEU,\=\ and Piraeus, at #30, with 4.91 
million TEU. In the event of conflict, China could use its control over 
these and other ports to hinder trade access to other countries. 
Beijing could provide Chinese vessels preferential berthing rights,\28\ 
potentially leading to delays for U.S. companies getting goods in and 
out of Chinese-invested or owned ports.\29\ It could also use control 
over ports to set higher prices and dictate onerous terms of engagement 
to trade partners.\30\
---------------------------------------------------------------------------
    \=\ TEU (Twenty-Foot Equivalent) is a measurement of a ship's 
carrying capacity.
    \28\ Costas Paris, ``China Shipping Giants Seek Control of 
`Maritime Silk Road,' '' Wall Street Journal, April 7, 2017. https://
www.wsj.com/articles/chinese-shipping-giants-seek-control-of-maritime-
silk-road-1491557405.
    \29\ Tony Padilla, Senior Advisor, U.S. Department of 
Transportation Maritime Administration, briefing to Commission, 
Washington, DC, February 14, 2018.
    \30\ Mathieu Duchatel and Alexandre Sheldon Duplaix, ``Blue China: 
Navigating the Maritime Silk Road to Europe,'' European Council on 
Foreign Relations, April 2018, 13-14. https://www.ecfr.eu/page/-/
Blue_China_Navigating_the_Maritime_
Silk_Road_to_Europe.pdf.
---------------------------------------------------------------------------
    Chinese port investment can translate into increased political 
leverage. Chinese investments in the port of Piraeus in Greece, for 
example have influenced Athens' response to China's claims and 
activities in the South China Sea and human rights abuses, with Athens 
in 2017 blocking an EU consensus by refusing to endorse an EU statement 
critical of China's human rights record in the UN Human Rights 
Council.\31\
---------------------------------------------------------------------------
    \31\ Reuters, ``Shanghai Port Teams up with Greece's Piraeus to 
Boost Container Traffic,'' June 12, 2018; Thorsten Benner et al., 
``Authoritarian Advance: Responding to China's Growing Political 
Influence in Europe,'' Global Public Policy Institute and Mercator 
Institute for China Studies, February 2018, 16; Theresa Fallon, ``The 
EU, the South China Sea, and China's Successful Wedge Strategy,'' 
Center for Strategic and International Studies Asia Maritime 
Transparency Initiative, October 13, 2016.
---------------------------------------------------------------------------
    Even if countries try to reduce their dependence on trade with 
China in order to lessen their exposure to economic coercion, Chinese 
ownership of ports worldwide could complicate these efforts. For 
instance, companies moving operations to Vietnam could still be 
susceptible to Chinese coercion if a Chinese company controls their 
ability to ship their goods.\32\
---------------------------------------------------------------------------
    \32\ Christopher R. O'Dea, ``How China Weaponized the Global Supply 
Chain,'' National Review, June 20, 2019. https://
www.nationalreview.com/magazine/2019/07/08/how-china-weaponized-the-
global-supply-chain/.
---------------------------------------------------------------------------
    Control of ports also could allow for economic and traditional 
espionage, as China can install surveillance equipment in ports to 
monitor foreign companies and U.S. military activity or that of our 
allies and partners.\33\ Shortly after gaining control of the port of 
Piraeus, for example, China replaced the network infrastructure of the 
port with internet routers, firewalls, and switches for the data center 
with technology from Huawei.\34\
---------------------------------------------------------------------------
    \33\ Christopher R. O'Dea, ``How China Weaponized the Global Supply 
Chain,'' National Review, June 20, 2019. https://
www.nationalreview.com/magazine/2019/07/08/how-china-weaponized-the-
global-supply-chain/.
    \34\ Christopher R. O'Dea, ``How China Weaponized the Global Supply 
Chain,'' National Review, June 20, 2019. https://
www.nationalreview.com/magazine/2019/07/08/how-china-weaponized-the-
global-supply-chain/.
---------------------------------------------------------------------------
V. The Role of Industrial Policy in Advancing China's Shipping Industry
    The Chinese economy is not a free market. It is a state-managed 
economy with an industrial policy. The Chinese government is 
transparent in its plans and goals. When it identifies strategic 
sectors, it uses a whole-of-government approach to build them up. The 
government's toolkit includes subsidies to boost domestic firms; tariff 
and non-tariff barriers to limit foreign access to the Chinese market; 
and acquisition, licit and illicit, of foreign technology to drive 
domestic development. The Chinese shipping and shipbuilding industries 
are the beneficiaries of this policy, to the detriment of the U.S. 
industries.
    Like other industries the Chinese government has focused on and 
built, China's shipping and shipbuilding firms benefit from industrial 
subsidies.\35\ The dominant firms in both industries have undergone a 
wave of consolidations over the past few years. For example:
---------------------------------------------------------------------------
    \35\ Myrto Kalouptsidi, ``China's Shipbuilding Industry: Measuring 
the Effect of Industrial Policy,'' LSE Business Review, April 15, 2019. 
https://blogs.lse.ac.uk/businessreview/2019/04/15/chinas-shipbuilding-
industry-measuring-the-effect-of-industrial-policy/.

      Shipping: In 2016, China's two largest shipping 
corporations, China Ocean Shipping Company (COSCO) and China Shipping 
Group, merged into a new company, China COSCO Shipping Group. In 2018, 
the China COSCO Shipping Group acquired Hong Kong-based Orient Overseas 
(International) Limited,\36\ and is now the third-largest container 
shipping company in the world, behind APM-Maersk (Denmark) and 
Mediterranean Shipping Company (Switzerland).\37\
---------------------------------------------------------------------------
    \36\ Brenda Goh. ``COSCO Shipping's Takeover of OOCL to Complete by 
End-June: Vice Chairman,'' Reuters, April 3, 2018. https://
www.reuters.com/article/us-ooil-m-a-cosco-ship-hold-idUSKCN1HA0VB.
    \37\ ``10 Largest Container Shipping Companies in the World,'' 
Marine Insight, July 8, 2019. https://www.marineinsight.com/know-more/
10-largest-container-shipping-companies-in-the-world/.
---------------------------------------------------------------------------
      Shipbuilding: In July 2019, China's two largest 
shipbuilding corporations, China Shipbuilding Industry Corp. (CSIC) and 
China State Shipbuilding Corp. (CSSC), announced plans to merge. This 
merger would form the second's largest shipbuilding company, after the 
planned merger of South Korea's Hyundai Heavy Industries Co. and Daewoo 
Shipbuilding & Marine Engineering Co.\38\ In addition, the state-run 
shipbuilding company China Merchants Industry Holdings Co. Ltd. (CMIH) 
is reportedly in negotiations to merge the shipbuilding and marine 
engineering operations of shipbuilding firms China International Marine 
Containers (Group) Ltd. (CIMC) and AVIC International Holding Group 
(AVIC INTL) under the CMIH umbrella.\39\
---------------------------------------------------------------------------
    \38\ Costas Paris, ``Merger of Yards in South Korea, China Will 
Control Global Shipbuilding,'' Wall Street Journal, August 1, 2019. 
https://www.wsj.com/articles/merger-of-yards-in-south-korea-china-will-
control-global-shipbuilding-11564653601; Yujie Bai, Bao Zhiming, Jason 
Tan, and Tang Ziyi, ``Exclusive: Three More Chinese Shipbuilders in 
Merger Talks,'' Caixin, July 10, 2019. https://www.caixinglobal.com/
2019-07-10/exclusive-three-more-chinese-shipbuilders-in-merger-talks-
101437571.html.
    \39\ Jon Grevatt, ``China's AVIC in Talks to Merge Shipbuilding 
Business,'' Janes Defense Weekly, July 10, 2019. https://www.janes.com/
article/89813/china-s-avic-in-talks-to-merge-shipbuilding-business; 
Yujie Bai, Bao Zhiming, Jason Tan, and Tang Ziyi, ``Exclusive: Three 
More Chinese Shipbuilders in Merger Talks,'' Caixin, July 10, 2019. 
https://www.caixinglobal.com/2019-07-10/exclusive-three-more-chinese-
shipbuilders-in-merger-talks-101437571.html.

    A 2017 study by Myrto Kalouptsidi of Harvard University on the 
impact of industrial subsidies in Chinese shipbuilding found evidence 
that China had subsidized shipyard costs by between 13 and 20 percent 
between 2006 and 2012.\40\ The study concluded Chinese government 
subsidies in the shipbuilding industry ``have led to substantial 
misallocation of global production.'' \41\
---------------------------------------------------------------------------
    \40\ Myrto Kalouptsidi, ``Detection and Impact of Industrial 
Subsidies: The Case of Chinese Shipbuilding,'' VoxEU, September 9, 
2017. https://voxeu.org/article/chinas-hidden-shipbuilding-subsidies.
    \41\ Myrto Kalouptsidi, ``Detection and Impact of Industrial 
Subsidies: The Case of Chinese Shipbuilding,'' VoxEU, September 9, 
2017. https://voxeu.org/article/chinas-hidden-shipbuilding-subsidies.
---------------------------------------------------------------------------
    U.S. leadership in maritime engineering equipment and high tech 
maritime vessels is under threat. Ocean engineering and high-tech ships 
are one of the 10 target areas of Made in China 2025. There is evidence 
that some of the U.S. companies are being targeted. In July 2019, Shan 
Shi, a U.S. citizen originally from China, was convicted of stealing 
trade secrets from a U.S. company by poaching employees of other 
companies and enticing them to bring to his company data on syntactic 
foam technology for the benefit of CBM-Future New Material Science and 
Technology Co., Ltd., a Taizhou-based Chinese company. The U.S. 
government alleged that Shan did so in order to benefit China as part 
of China's plan to close its gap in buoyancy technology, which has both 
military and commercial shipping uses.\42\
---------------------------------------------------------------------------
    \42\ U.S. Department of Justice, ``Texas Man Convicted of 
Conspiracy to Commit Theft of Trade Secrets,'' July 29, 2019. https://
www.justice.gov/opa/pr/texas-man-convicted-conspiracy-commit-theft-
trade-secrets; Spencer S. Hsu, ``Houston Businessman Convicted of 
Conspiring to Steal Trade Secrets, Acquitted of Economic Espionage for 
China,'' Washington Post, July 29, 2019. https://
www.washingtonpost.com/local/legal-issues/houston-businessman-
convicted-of-conspiring-to-steal-trade-secrets-acquitted-of-economic-
espionage-for-china/2019/07/29/92418df2-b245-11e9-8f6c-
7828e68cb15f_story.html.
---------------------------------------------------------------------------
    While many of the traditional shipping financiers (largely European 
banks) are scaling back their exposure, Chinese state-owned banks are 
ramping up their investments.\43\ In 2008, no Chinese bank ranked in 
the top 15 shipping lenders.\44\ As of 2017, Bank of China is the 
world's largest shipping lender and China Eximbank the second largest, 
with China Development Bank also ranking in the top 20.\45\ While entry 
into the shipping industry was based on market factors, lending has 
also been used to subsidize Chinese shipyards and expand China's 
merchant fleet.\46\ Industry experts expect China will control about 
half of the total financing market for the shipping industry by 
2025.\47\
---------------------------------------------------------------------------
    \43\ [Ms. Bartholomew's prepared statement did not list a footnote 
for reference no. 43.]
    \44\ [Ms. Bartholomew's prepared statement did not list a footnote 
for reference no. 44.]
    \45\ [Ms. Bartholomew's prepared statement did not list a footnote 
for reference no. 45.]
    \46\ [Ms. Bartholomew's prepared statement did not list a footnote 
for reference no. 46.]
    \47\ [Ms. Bartholomew's prepared statement did not list a footnote 
for reference no. 47.]
---------------------------------------------------------------------------
       VI. BRI and China's Promotion of its Technology Standards
    BRI is intended to advance the adoption of Chinese technology 
standards. BRI can create new barriers to U.S. exports and investment 
to the extent that China is able to get participating countries to 
accept Chinese technical standards, for example in high-speed rail, 
telecommunication, and energy. If these efforts are successful, they 
will create long-term reliance on Chinese intellectual property and 
technology, while disadvantaging U.S. and other foreign companies.
    It is critically important for the U.S. to participate actively in 
standard-setting bodies, including the International Maritime 
Organization (IMO) and International Organization for Standardization 
(ISO). In the IMO, China is a 2018-2019 member of the Council, a 40-
country body that is elected by the Assembly (the highest governing 
body, consisting of all members) and serves as the executive body of 
the IMO. It also serves the Assembly's role between sessions of the 
Assembly, which generally meets once every two years.\48\ In the ISO, 
in addition to its leadership position on the Technical Committee on 
Ships and Maritime Technology, China is currently a member of the 20-
member Council, which is the core governing body of the ISO. Membership 
on the Council rotates (the U.S. is also currently a member).\49\ In 
2015-2017 the ISO president was from China (the president is elected by 
all member countries).\50\
---------------------------------------------------------------------------
    \48\ International Maritime Organization, ``Structure of the IMO.'' 
http://www.imo.org/en/About/Pages/Structure.aspx#2.
    \49\ International Organization for Standardization, ``ISO 
Council.'' https://www.iso.org/committee/55010.html; International 
Organization for Standardization, ``ISO Structure.'' https://
www.iso.org/structure.html; ISO, ``ISO/TC8 Ships and Marine 
Technology.'' https://www.iso.org/committee/45776.html.
    \50\ International Organization for Standardization, ``Past 
Principle Officers of ISO.'' https://isotc.iso.org/livelink/livelink/
fetch/-15620321/15620323/15620665/
ISO_past_Officers.pdf?nodeid=18595424&vernum=-2.
---------------------------------------------------------------------------
    Within the ISO, the Technical Committee on Ships and Marine 
Technology (ISO/TC8) is responsible for the standardization of design, 
construction, structural elements, outfitting parts, equipment, methods 
and technology, and marine environmental matters, used in shipbuilding 
and the operation of ships, comprising sea-going ships, vessels for 
inland navigation, offshore structures, ship-to-shore interface and all 
other marine structures subject to IMO requirements. ISO/TC8's 
Secretariat is China's Standardization Administration.\51\
---------------------------------------------------------------------------
    \51\ ISO, ``ISO/TC8 Ships and Marine Technology.'' https://
www.iso.org/committee/45776.html.
---------------------------------------------------------------------------
                            VII. Conclusion
    Through the Maritime Silk Road, China is gaining long-term economic 
and strategic influence by financing, building, operating, and owning 
overseas ports. While doing so, it is edging out shipping companies 
owned by U.S. allies and partners. China's increasing role in shipping 
finance could result in other shipping companies to relocate to Asia.
    Subsidies for Chinese shipbuilding SOEs have harmed the U.S. 
shipbuilding industry's ability to compete in the global market, and 
have led to shipyard closings and a reduced U.S. vendor base over the 
past several decades.\52\
---------------------------------------------------------------------------
    \52\ U.S. House of Representatives Committee on Transportation and 
Infrastructure, Hearing on U.S. Maritime and Shipbuilding Industries: 
Strategies to Improve Regulation, Economic Opportunities and 
Competitiveness, oral testimony of Mark H. Buzby, March 6, 2019. 
https://www.transportation.gov/content/us-maritime-and-shipbuilding-
industries-strategies-improve-regulation-economic-opportunities.
---------------------------------------------------------------------------
    I have been reading The Guns at Last Light: The War in Western 
Europe, 1944-1945. The prologue to this book by Rick Atkinson describes 
the extensive level of logistics that went into preparing for D-Day. It 
was astonishing. Our sailors, merchant marines, longshoremen, and 
factory workers, as well as our soldiers, were critical to that mission 
and, indeed, critical to helping to win the war. I hope that we never 
face a task like that again. I worry that, if we do, we no longer have 
the manufacturing capacity, the shipbuilding capacity, and the elements 
of the shipping industry that would be necessary to meet the challenge. 
The U.S. economy and the U.S. military are vulnerable to disruptions in 
the global supply chain. We are, for example, 100 percent import-
reliant on 18 key mineral commodities, many of which are critical to 
our defense industrial base.\53\
---------------------------------------------------------------------------
    \53\ U.S. Department of the Interior and U.S. Geological Survey, 
``Mineral Commodity Summaries 2019,'' February 28, 2019, 7-8. https://
prd-wret.s3-us-west-2.amazonaws.com/assets/palladium/production/atoms/
files/mcs2019_all.pdf.
---------------------------------------------------------------------------
    China is clearly moving into a stronger position on the global 
stage and is determined to remake global institutions to reflect its 
interests and values. The Belt and Road Initiative is a major component 
of its efforts and the Maritime Silk Road is an important component of 
BRI. We must develop a whole-of-government approach to addressing the 
challenges it presents.
    Thank you for the opportunity to testify today. I look forward to 
answering any questions.
 appendix 1: u.s.-china commission recommendations on maritime security
                                  2018
Chapter 3, Section 1: Belt and Road Initiative
      Congress require the Director of National Intelligence to 
produce a National Intelligence Estimate (NIE), with a classified 
annex, that details the impact of existing and potential Chinese access 
and basing facilities along the Belt and Road on freedom of navigation 
and sea control, both in peacetime and during a conflict. The NIE 
should cover the impact on U.S., allied, and regional political and 
security interests.
                                  2017
Chapter 2, Section 3: Hotspots along China's Maritime Periphery
      Congress require the executive branch to develop a whole-
of-government strategy for countering Chinese coercion activities in 
the Indo-Pacific coordinated through the National Security Council that 
utilizes diplomatic, informational, military, economic, financial, 
intelligence, and legal instruments of national power.
                                  2016
Chapter 4: China and the U.S. Rebalance to Asia
      Congress direct the U.S. Department of Defense to include 
a permanent section in its Annual Report on Military and Security 
Developments Involving the People's Republic of China on the role and 
activities of China's maritime militia and the implications for U.S. 
naval operations.
                                  2015
Chapter 3, Section 2: China and Southeast Asia
      Congress direct the U.S. Government Accountability Office 
to prepare a report assessing the effectiveness of recent U.S. efforts 
to enhance the maritime security capabilities of allies and partners in 
Southeast Asia and identifying the remaining challenges and 
opportunities.
      Congress urge the Administration to enhance its support 
for regional information sharing institutions focused on maritime 
security in Southeast Asia.
                                  2014
Chapter 2, Section 2: China's Military Modernization
      Congress fund the U.S. Navy's shipbuilding and 
operational efforts to increase its presence in the Asia Pacific to at 
least 67 ships and rebalance homeports to 60 percent in the region by 
2020 so that the United States will have the capacity to maintain 
readiness and presence in the Asia Pacific, offset China's growing 
military capabilities, and surge naval assets in the event of a 
contingency.
                                  2013
Chapter 2, Section 3: China's Maritime Disputes
      Congress fund the U.S. Navy's shipbuilding and 
operational efforts to increase its presence in the Asia Pacific to at 
least 60 ships and rebalance homeports to 60 percent in the region by 
2020 so that the United States will have the capacity to maintain 
readiness and presence in the Western Pacific, offset China's growing 
military capabilities, and surge naval assets in the event of a 
contingency.
      Congress fund Departments of Defense and State efforts to 
improve the air and maritime capabilities of U.S. partners and allies 
in Asia, particularly with regard to intelligence, surveillance, and 
reconnaissance, to improve maritime domain awareness in the East and 
South China Seas.
      Congress urge the Department of Defense to continue to 
develop the U.S.-China maritime security relationship in order to 
strengthen strategic trust. The relationship should be within the 
bounds of the National Defense Authorization Act for Fiscal Year 2000 
(Public Law 106-65) and based on the principles of reciprocity and 
transparency.
      Congress fund U.S. Coast Guard engagement efforts with 
coast guard and maritime law enforcement agencies in the Western 
Pacific to increase understanding among civilian maritime bodies in the 
Asia Pacific.
             appendix 2: map of bri corridors and passages
             
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

Source: Devin Thorne and Ben Spevack, ``Harbored Ambitions: How China's 
Port Investments are Strategically Reshaping the Indo-Pacific,'' C4ADS, 
           2017, 13. https://static1.squarespace.com/static/
   566ef8b4d8af107232d5358a/t/5ad5e20ef950b777a94b55c3/1523966489456/
                        Harbored+Ambitions.pdf.

    Mr. Maloney. Thank you, Ms. Bartholomew. We will now 
proceed to Member questions, observing the 5-minute rule. I 
begin by recognizing myself for 5 minutes.
    This question is a general question for the panel, but it 
may be best directed at General Tuck.
    Just back from the region, I know you have to think about 
worst-case scenarios. In a situation where we had an active 
conflict develop in the South China Sea, on the Korean 
Peninsula, or on the island of Taiwan, and we had to move large 
numbers of American forces to the region in a hurry, what would 
that look like? What would you be up here telling us? What 
would the realities of that challenge be, given the state of 
our maritime infrastructure?
    General Tuck. Sir, thanks. Thanks for the question. I think 
what is different today when previously we could set the 
conditions and arrive in a place like Saudi with hundreds of 
thousands of troops, and actually just build up that 
sustainment to do the things that we needed to do, now you are 
talking about fighting a near-peer adversary. Dropping and 
going to either fighting tonight or bringing a decisive force 
into a highly contested environment. So that in and of itself 
is going to present a challenge.
    Mr. Maloney. Well, just so we are clear, this is not some 
esoteric scenario. I mean we have all read, I assume, President 
Xi's statements about Taiwan. We all understand the realities 
of what is going on in the Korean Peninsula. This is a real 
possibility. We see what is happening in Hong Kong.
    So what does that look like? So we are talking about a 
worst-case scenario. None of us wants or hopes to find 
ourselves there. But in that event, when we turn and say, ``How 
are we going to move these forces to that region in a hurry,'' 
what are we looking at?
    General Tuck. Yes, so what you are looking to do is 
mobilize the Department to be able to activate ships that 
belong to the Maritime Administration, put them under the 
Military Sealift Command. So a quantity of those ships that 
reside in the Navy Sealift Command, added with the maritime 
community on top of that, leveraging vessels that are in the 
commercial sector, which you are going to have to need to do 
this, and then have the mariner pool available to be able to do 
this, and start sending all of these forces to a coast to get 
on vessels and then start moving to where they are intended to 
go.
    Mr. Maloney. I appreciate that. And if you look at each of 
those elements that you just specified, how would you describe 
the status of each of those components of that response?
    General Tuck. OK, so from----
    Mr. Maloney. Are we ready? Are they robust?
    General Tuck. So----
    Mr. Maloney. Is it everything you could hope for? Or is it 
something else?
    General Tuck. Yes, sir. U.S. Transportation Command, just 
within the last few weeks, activated 33 ships out of the Navy 
Sealift Command, which was--Military Sealift Command, 6 of 
those ships, 27 out of the Maritime Administration, to get them 
out of a reduced status, put some port activity together, do 
sea trials. And so we hadn't done something of that size and 
magnitude in years, and it gave us an opportunity to take a 
look at a scorecard and see how we did from a readiness 
perspective. And we are still cranking through what that might 
look like, from a report perspective, to be able to share that 
information with our leadership.
    But just the significance of doing something like that that 
we hadn't done before, we are taking readiness very seriously, 
as you know.
    Then you transfer to the commercial industry. And I take a 
look at the commercial industry, and I put them in, basically, 
four bins. What strategic impact? What is the strategic value 
of our commercial industry base? What is their readiness, their 
performance? And then, lastly, if we needed to take a look at 
cost, that would factor in.
    But based on that, we take a look at the fact that in the 
past we were really good at rotating forces in on top of 
brigade combat teams. Now we are deploying brigade combat teams 
across the globe. And so that muscle memory of what we used to 
do early in the 1990s, we now have attained, and we are very 
successful in that sphere.
    Mr. Maloney. And what are the risks you see, then? Ms. 
Bartholomew or Mr. Sbragia, feel free to weigh in.
    But tell me about the risks, sir. What should we be focused 
on here? And what kind of one-two-three investments would you 
recommend if this committee were going to get active on that 
subject?
    General Tuck. So the risk is that we are operating on old 
ships. And so Navy sealift recapitalization is very important.
    The mariner pool that we have today is being used both in 
commercial and in its Reserve capacity. So you are using both 
sectors, if you will, with one pool to get that done. And so 
that is important.
    I think advocating for a maritime security program, and 
funding it, and having the ability to not only resources but 
signal to industry that we have a plan for you to keep these 
ships viable, U.S.-flag ships, to be able to use at the time 
and place that we need to is also critical.
    But those are just three examples of where I think we 
should put the weight of this committee.
    Mr. Maloney. I thank the gentleman and I see my time has 
expired. I am going to yield to Mr. Gibbs, but I appreciate 
that the others may have something to say on that subject.
    Go ahead, sir.
    Mr. Gibbs. Thank you. You know, this is real--to me, it is 
alarming testimony, what is happening. Because when you talk--
like Ms. Bartholomew, you talk about the economic and the 
military, and those are intertwined. I have always said in this 
country if we have a strong economy, a strong military, the 
world is safer. But if one of those isn't there, there are 
issues.
    And then, of course, now, with the negotiations with China 
and trade, this all kind of fits together into what is going on 
in Hong Kong and, of course, Taiwan, as the chairman mentioned.
    I guess to start off, General, thank you for your service. 
But back in--what was it, 1991, when we kicked Saddam Hussein 
out of Kuwait, we mobilized some of our maritime fleet to move 
equipment over there. Correct? And I think you said in your 
testimony we have gone from 400 ships down to 84, something 
like that.
    When we did that, how much capacity did we use of our 
capacity to get that armament over to Kuwait, over to the 
Middle East? And then what is our ability to do something like 
that today?
    General Tuck. So, sir, I will take your question as one on 
scale.
    What we were asked to do back in the 1990s was to support 
an effort based on plans back then that were related to square 
foot, square foot required to do day-to-day operations and 
square feet required to surge. So far, if you take a look at 
the plans today to do the things that we need to across the 
globe, there is a certain amount of square feet that is 
required to be able to move the U.S. military where it needs to 
be. And right now, we have enough to do what we need to do. The 
only difference in conversation between back then and now is 
the inventory of capabilities that we have to be able to 
prosecute the National Defense Strategy. It is much limited 
today versus--and you know this--versus what we had back then.
    And so, for us to shift from one combatant commander's 
resources and move them to another part of the globe adds to 
this discussion.
    Mr. Gibbs. And, of course, our assets today on the maritime 
side to do that, the assets--the ships are much older, right, 
and that is an issue?
    General Tuck. Yes, sir.
    Mr. Gibbs. So we are really in a very precarious position, 
right?
    General Tuck. We really are. Some of the vessels are 
approaching their end-of-use life. So the strategy would be you 
are either going to extend some of these ships, you are going 
to buy used to get some of them faster at a lower rate--not 
taking away, hopefully, shipyard business, because you are 
going to maintain and modify ships, so put the yards to use to 
do that--and then buy new. And with this approach, I think we 
can help the delta of the gap that we are seeing. But unless we 
do something very soon, we are going to find ourselves just 
widening the gap of capacity that we need.
    Mr. Gibbs. And I know I am really concerned. I see the map 
with all the countries that were--like, almost 130 countries--
where China has a foothold in there because they put 
investments in there. And I know when you invest in a business 
or create a partnership with a person to do a business, you 
usually have some say-so, you have got some clout.
    And so I guess, Mr. Sbragia, what are your concerns about 
what is going on there, and what can we do, as a country, to 
try to offset some of that, those initiatives that China is 
doing?
    And, obviously, they can do some of this because of their 
system of government, it is easier for them to do it. But how 
concerned are you, moving forward, if they stay on the same 
track?
    Mr. Sbragia. Thank you. That is a great question. I will 
tell you I certainly refer you to the written statement that we 
submitted, and then a little bit of my opening comments, as 
well.
    But to underscore Lieutenant General Tuck's comments, which 
is, I think we understand China pretty well, that by 2050 they 
have aspirations to achieve a world-class military. And when I 
talk to them and ask them about what that means, their single 
aspiration is to elevate their own status and capacity on a 
global scale, even if they haven't figured out in quite detail.
    What it does mean is that they will have a global military 
where the U.S. essentially may have no safe harbors, to echo 
General Tuck's comment, which is it will not look like it did 
in the past. We will have to move across the space an entire 
way that could be contested, both for ourselves and our allies, 
from the start and in all domains, and we need to take that 
seriously.
    The challenge for the United States is to set conditions in 
our favor, certainly both for deterrence and of necessity to 
prevail. Our advocacy is internally, as we laid out, but 
certainly here is, while we applaud this subcommittee 
addressing this challenge, which is--it branches out across 
multiple lanes, and you can't artificially bifurcate this issue 
into one single element. It is going to take all of us working 
together to do this.
    Certainly I would call for further advocacy with our allies 
and partners to make them aware of this, and understand that it 
will need the whole-of-Government approach, and certainly for 
us to deepen our exploration of areas about where they are 
going to go, not just where they have been in the past, where 
it is going to go in the future.
    One case example is the Arctic. It was raised earlier 
today. The DoD wrote a report on our Arctic strategy on June 
29, 2019, this June, and it covers three things: building 
awareness, enhancing operations, and upholding a rules-based 
order. These are the types of areas that we have not had to 
contend with in the past that we will have to orient on better.
    Mr. Gibbs. I am out of time. I would just say in closing we 
have got to be really careful to address this issue, because we 
could be held hostage.
    Mr. Sbragia. Yes.
    Mr. Gibbs. And just economically and, of course, 
militarily. I yield back.
    Mr. Maloney. I thank the gentleman.
    Mr. Larsen?
    Mr. Larsen. Thank you, Mr. Chairman.
    Ms. Bartholomew, thanks for helping us out today. Has the 
Commission looked at whether or not any U.S. companies are 
involved in either operation, technical advice, or in 
construction on any BRI projects?
    Ms. Bartholomew. I think we did a chart in our 2018 report. 
We can provide for you some information.
    Most of the U.S. companies that are involved in BRI 
projects are involved as subcontractors. They are having a 
tough time breaking into full contracting. Not surprisingly, 
the Chinese Government is doing here what it does other places, 
which is it is making these projects advantageous for Chinese 
companies, bringing in Chinese workers, and making it difficult 
for U.S. and other companies to get involved.
    Well, our staff will get to your staff a list of the 
companies.
    Mr. Larsen. Yes, yes. And is the Commission report recently 
or in the future? Do you have an opinion on whether U.S. 
companies should participate at all?
    Ms. Bartholomew. We probably would not come to a consensus 
on that. We have not taken a position. I mean, our belief is 
that U.S. companies should have opportunities around the world. 
So I don't think that we would be saying that they shouldn't be 
participating in those projects.
    But what we are is disappointed that, if China is indeed 
going to spend as much money as it says it is going to spend on 
infrastructure, that our companies, which have a lot of 
experience, should have opportunities to participate there.
    Mr. Larsen. Yes, that was the opinion of the administration 
when it sent a U.S. representative delegation in 2017 to China 
to the first BRI conference, as well.
    You mentioned Seattle and L.A. as two ports. There are 
other ports, as well. The Chinese companies don't operate the 
ports. They operate individual terminals at ports. So it is not 
like they are operating an entire port.
    Has the Commission developed or have you studied whether or 
not these ports that have Chinese operators of individual 
terminals have taken any steps at all to protect shipping data, 
to protect communications, to do anything that causes the 
concerns that we have heard from the panel today?
    Ms. Bartholomew. We have not specifically looked at that as 
something--we could certainly try to look into--I don't know 
how much information the ports will actually share on some of 
those things. I will express I know 5G was mentioned.
    Mr. Larsen. Yes.
    Ms. Bartholomew. Sort of the broader concern about where 
Chinese technology is getting into communication systems----
    Mr. Larsen. Yes.
    Ms. Bartholomew [continuing]. And the data that they are 
able to gather, and what they are able to do with that. I would 
say that I certainly have a concern about that, although I 
don't have any specific information to answer your question.
    Mr. Larsen. Yes. Well, I guess one of my--it is nice to 
point out a problem, but it would be better to hear some 
solutions, as well, on that point.
    Ms. Bartholomew. Absolutely. That is the case. I would also 
say it would be good to make sure that we can try to prevent 
these problems as much as we can.
    Mr. Larsen. Yes, all right. On that point, with regards to 
technology standards IMO and ISO--and this gets to the Huawei 
issue, as well, and ZTE--about 35 percent of the standard-
essential patents for 5G are actually owned by Chinese-based 
companies like Huawei or ZTE or state-owned enterprises. And 
about 15 percent of those standard-essential patents are owned 
by U.S. companies. So we are focused a lot on the name on the 
box, as opposed to the guts inside the box.
    And so if the standard-essential patents are owned by 
Huawei, that piece will end up in a non-Huawei box because it 
is a standard-essential patent. And so it gets into the 
standard-setting issue.
    And so the question I have for you is--it is, again, one 
thing to point out that ISO and IMO--that there is a problem. 
But what are we doing to show up and make the argument, and be 
in the room when the votes are taken about what these standards 
are going to be?
    Ms. Bartholomew. Well, Mr. Larsen, I mean, I think you are 
putting your finger on a very important point, which is to make 
sure that we are showing up and that we are participating in 
these.
    One thing the Commission has done, not IMO- and ISO-
specific, is that we have done a database of where the Chinese 
Government is involved in multinational organizations, 
multilateral organizations, because they--it is a strategy, 
right?
    Mr. Larsen. Right.
    Ms. Bartholomew. I mean, they are consistently putting 
people into positions where they can help determine what 
standards are going to be.
    I recognize that the Huawei situation, the technology, it 
is complicated stuff. You know, things are developed in 
different places and they are manufactured in different places. 
And it is complicated stuff. Our role is really to point out 
some of the concerns about potential problems and, as I said, 
to try to make sure that we prevent those. But----
    Mr. Larsen. But to say--I am out of time. I would just say, 
in conclusion, we are playing a lot of defense and not a lot of 
offense here. And I would like to see us open up the other side 
of that playbook. And that goes to everybody at the table.
    Ms. Bartholomew. Yes.
    Mr. Larsen. Thanks.
    Ms. Bartholomew. Thank you.
    Mr. Maloney. I thank the gentleman.
    Mr. Gallagher?
    Mr. Gallagher. Thank you. Whenever we talk about China, I 
am always struck by what I perceive to be the level of 
bipartisan consensus on this issue, which I think is remarkable 
at a time when Congress is divided, I think, on the most 
important strategic issue, not just of today, but perceivably 
for the next two decades. There is a ton of bipartisan support 
for a more realistic, if not aggressive, posture with respect 
to Chinese influence, expanding influence around the world. And 
so that is something we should continue to foster.
    And thank you for holding this hearing, Mr. Chairman. That 
gives me a lot of hope. Not to say we agree on everything. 
Sometimes you guys are wrong about things and I am right. But I 
just think that is a very, very good thing.
    And looking at the map, you can't help but notice that the 
BRI projects overlap with a lot of the key sea lines of 
communication and maritime choke points. And the chairman sort 
of referenced Mahanian theory earlier.
    And I would just be curious, Lieutenant General Tuck, as a 
professional logistician, if you were seeking militarily to 
dominate and, if necessary, shut down the world's key trade and 
military supply nodes, how similar would be the areas you would 
want to control, compared to where the PRC is going with BRI?
    General Tuck. Thanks for the question. We do share the same 
concern that you just raised, sir, with respect to global choke 
points. And just like was mentioned earlier, we just have to be 
present there. Not just watching, but actually present.
    So if you take a look at ports like the Suez, the Red Sea, 
Panama Canal, Malacca Straits, where it is very vital to have 
freedom of navigation, just from a rules order perspective and 
international law, and so our partnerships with countries that 
either are a part of the equation and our partnership there, it 
is just going to be impactful and enormous for us to consider.
    And this is now a whole-of-Government approach on how we 
actually make sure that we have the access that we need.
    And so I really think that working with our allies and 
partners, which is part of the National Defense Strategy, is 
key. We have to keep the conversation going. And if you are 
thinking about just in our own hemisphere, working with the 
folks south of Mexico, it is very vitally important.
    So, from an interoperability--exercising mil-to-mil 
dialogues, relationships, key leadership engagements, I think 
they are going to remain pivotal in ensuring that we have 
access to the areas that you have talked about. And so that is 
a priority that, as I pay attention to working with combatant 
commanders, to make sure that we do that, working with the J5 
and how we interact with our embassies, our state 
representatives out there to keep the dialogue going, and 
fostering the development that we need to have with these 
countries.
    Mr. Gallagher. I appreciate that. One area where I always 
feel like we give--we get a short shrift, maybe just because 
CENTCOM and INDOPACOM take up most of our time, is AFRICOM. And 
certainly we have seen the Chinese militarize their presence in 
Djibouti. You know, going east of that, Gwadar may be the next 
sort of port to follow.
    But do you, Mr.--I apologize if I am mispronouncing this--
Sbragia, did I get that close enough? You are allowed to 
correct a Member of Congress.
    Do you expect to see the Chinese Government militarize 
other ports and locations along the Belt and Road?
    Mr. Sbragia. Yes, they--absolutely. It is very evident and 
clear. I have talked to the Chinese military personally about 
this issue. They have an aspiration to do so.
    I did reference earlier about China's 2019 defense white 
paper published by their State Council. I have had discussions 
with them and their principal authors at both their Academy of 
Military Science and National Defense University with oversight 
of their Office of International Military Cooperation who was 
the principal pen.
    It was absolutely clear of what their intent is. It is to 
not only take Djibouti, which--I think my personal view is best 
viewed as a test case of how you start this practice, how you 
do best practices, how do you set up a port, how you do 
communications work, how do you do all the overseas command and 
control functions. That is a first step, it is not the last 
step. So you are going to see that come more often. And they 
told us that directly.
    Mr. Gallagher. Great.
    Mr. Sbragia. Both in terms of an aspiration to do it, and 
to further mature how they do those things.
    Mr. Gallagher. Well, I thank you for the work you are 
doing.
    And again, thank you for holding this hearing.
    Mr. Maloney. I thank the gentleman.
    Mr. Garamendi?
    Mr. Garamendi. General Tuck, are you aware that the U.S. 
Navy cannot fuel the fleet with American vessels?
    General Tuck. I am sorry, sir, can you----
    Mr. Garamendi. Are you aware that the U.S. Navy cannot fuel 
its fleet with American vessels?
    General Tuck. [No response.]
    Mr. Garamendi. The answer is yes.
    General Tuck. Yes.
    Mr. Garamendi. You are aware, and the U.S. Navy cannot 
provide fuel for its fleet with American vessels. OK? OK.
    Are you aware that the U.S. is exporting oil and gas?
    General Tuck. Yes.
    Mr. Garamendi. OK. Are you aware that none of this fuel is 
on American flagged and owned ships?
    General Tuck. I am not.
    Mr. Garamendi. The answer is none of the oil and gas is on 
American--excuse me, none of the gas is on American-flagged 
ships. Some of the oil is.
    Are you aware that there is legislation that could take a 
small percentage of that oil and gas and lead to the 
construction of perhaps 50 American flagged, owned, and built 
vessels?
    General Tuck. Yes.
    Mr. Garamendi. Thereby solving part of the problem that the 
U.S. Navy has.
    General Tuck. Yes, sir, I am.
    Mr. Garamendi. Good. Then I would like to have the support 
of TRANSCOM for that legislation. It is called the Energizing 
American Shipbuilding Act.
    General Tuck. I am aware of it, sir.
    Mr. Garamendi. Good. So where is the support?
    You have got a problem, you have got a very, very serious 
problem. You don't have American ships that are under American 
control to fuel the U.S. Navy. You have to rely on Chinese 
ships to do it. So we have got a problem. I would appreciate 
your insight into it.
    And I suppose that the political appointees also ought to 
be aware. Are you?
    Mr. Sbragia. Congressman, there are clear aspects of that 
that I am aware of. Not all of them.
    Mr. Garamendi. Good.
    Mr. Sbragia. Our job is to get busy figuring those out.
    Mr. Garamendi. The bottom line here is we sit here and we 
talk about these things forever--and we have for at least the 
last half-dozen years, if not longer. I have yet to see this 
administration step forward with a solution to the problem.
    There is one at hand. It would simply require that a small 
percentage of our exported oil and gas be on American-built 
ships.
    Also, it could lead to a significant reduction in the cost 
of naval vessels. An example was given to me yesterday that 
there was competition for a small naval vessel that didn't 
exist before, but a new competitor entered the market. The cost 
savings was 40 percent from what was anticipated.
    If we were to build vessels in the United States--for 
example, oilers and LNG vessels--we might have more competition 
in our shipyards, with a reduced price to the U.S. Navy for its 
kinetic vessels, which, by the way, can't get to where they 
need to go because they don't have the fuel to get there.
    So beyond that, a question having to do with the islands in 
the Pacific, some of the little-known islands in the Pacific. 
Is it true that the Chinese are building significant ports in 
many of these obscure little-known islands out in the Pacific? 
Any one of you want to answer that?
    Ms. Bartholomew?
    Ms. Bartholomew. Well, we know that they are dramatically 
increasing their presence. I think there is one of the 
islands--which is----
    Mr. Garamendi. Let's see, there is--in Luganville in 
Vanuatu.
    Ms. Bartholomew. Yes.
    Mr. Garamendi. Yes, we have that.
    Ms. Bartholomew. Yes.
    Mr. Garamendi. It is supposed to be for fishing, but it is 
big enough for the largest Chinese ships.
    Ms. Bartholomew. Yes.
    Mr. Garamendi. Gee, what is that all about?
    Ms. Bartholomew. Yes.
    Mr. Garamendi. Any of you have any idea what that is all 
about?
    Ms. Bartholomew. I think we have to presume that we know 
what it could be about.
    I would say I have been in the region twice in the past 6 
months, and certainly the Australians are engaging with the 
United States in having a greater presence, generally, in the 
Pacific Islands.
    Mr. Garamendi. Do we have----
    Ms. Bartholomew. And there is growing concern----
    Mr. Garamendi. Is there an American strategy to deal with 
this?
    Ms. Bartholomew. I can't answer that. I am a congressional 
advisory.
    [To panelists:] Somebody--is there an American strategy to 
deal with it?
    General Tuck. So, sir----
    Ms. Bartholomew. I think there is, actually.
    General Tuck. The example that you quoted about China 
building a wharf in Vanuatu, for instance, it is coming with 
some problems.
    But the one thing I can share with you is that the Pacific 
Area Symposium for Logistics--senior officers--29 or 30 
countries get together. They meet in the Pacific, annually. 
These are the small countries that come, and we talk about 
either bilat or multilat sharing of information of what the 
Chinese might be doing and what we might be doing out there.
    The reason why this is important to talk to you about, sir, 
is because there are a lot of islands out there that want us to 
come in and be a part of them versus them wanting to do 
something elsewhere. And I think that----
    Mr. Garamendi. And what are we doing----
    General Tuck [continuing]. That is important for us to----
    Mr. Garamendi [continuing]. To address their desire to be 
partners?
    General Tuck. [No response.]
    Mr. Garamendi. I am out of time. The answer is little, if 
anything. I am out of time. Thank you, I yield----
    Ms. Bartholomew. Mr. Chairman, could I just clarify one 
thing, which is there have been recent reports that the Chinese 
are leasing the island of Tulagi from the Solomon Islands, and 
it was an island that was important in our World War II Pacific 
war. And a lot of people are very upset, both in the Solomon 
Islands and elsewhere.
    Mr. Garamendi. There is also a place called Subic Bay----
    Ms. Bartholomew. Yes.
    Mr. Garamendi [continuing]. That is about to be taken over 
by a Chinese company.
    Mr. Maloney. The gentleman's time has expired. I thank the 
gentleman, thank the witnesses.
    Mrs. Miller?
    Mrs. Miller. Thank you, Chairman Maloney. The gentleman 
from California has certainly altered some of my speaking, so 
to speak.
    I represent West Virginia. And trade is very important to 
West Virginia because we export timber, coal, oil, and gas, and 
we are always interested in fair trade. The presence of the 
infrastructure development to me is very concerning.
    Lieutenant General Tuck, what are the U.S. military's 
concerns with the Chinese military showing so much force in 
Southeast Pacific and the South China Sea?
    General Tuck. Ma'am, thanks for your question. I mean, from 
what we have been seeing for years--and you all have been 
seeing it, too--they are trying to bolster their own regional 
security, they are trying to bolster their own sphere of 
influence.
    And from--at least from the lens that I have seen as a 
logistics officer for the joint staff, it is--again, I am going 
back to rules-based order, international law, freedom of 
navigation. I am responsible, at least in advising the chairman 
on access basing and overflight or freedom of navigation. So 
how do I--how do we best do this?
    And I go back to--at least since you called out the South 
China Sea, ma'am--the INDOPACOM Pacific strategy, which talks 
about posture and presence, we have to be out there. And so 
that is something that I would like to have resonated with this 
committee.
    It is about partnership capacity, to be able to have our 
relationships that we have with not only our FVEY partners, and 
it is not necessarily just the U.S., but it is Japan and India, 
it is Australia and Vietnam. It is Vietnam and New Zealand. It 
is those kinds of arrangements that are going to help areas 
like the South China Sea maintain rules-based order, freedom of 
navigation, so that commerce and economy can flow.
    And then, last but not least is this idea of--that we all 
know about--it is interoperability. Not only is it good for us 
to partner when there is a humanitarian disaster that happens 
in that part of the world to show that we can be trusted as a 
partner by bringing our military assets to bear, and bringing 
lifesaving skills or recovery efforts for places like Nepal and 
the earthquake there, or Malaysia and the earthquake, or 
tsunamis and the like, but that hand that we lend as a military 
in times like that can lend incredible trust when it comes to 
having to then demonstrate why it is important for us to be 
present when it comes to freedom of navigation, and making sure 
that commerce flows the way it needs to.
    Mrs. Miller. And you called that partnerability?
    General Tuck. I call it building partnership capacity.
    Mrs. Miller. Partnership capacity. OK, thank you. Mr. 
Sbragia, what steps has the Trump administration taken to drive 
China to join the international community on trade standards 
agreed to by members of the World Trade Organization? And have 
these efforts been successful?
    Mr. Sbragia. Congresswoman, that is a great question. I got 
to tell you, that is a bit outside the scope of my expertise. 
My concentration is on DoD issues. We are fully supportive and 
participate across interagency efforts, and certainly advocate 
to align those issues. But for trade issues, I am not the best 
person to talk about----
    Mrs. Miller. Would either of the other----
    Ms. Bartholomew. I can try addressing that a little bit, 
and preface it with the U.S. Ambassador to the WTO, Dennis 
Shea, was a long-serving member of this Commission, so he is 
very well steeped in the U.S.-China issues. And I think that 
the administration is certainly trying to make some changes at 
the WTO that would address the bigger challenges that China has 
created there.
    Mrs. Miller. Do you expect these ongoing negotiations to 
continue?
    Ms. Bartholomew. I can say that I hope that they continue. 
It is very difficult to predict what is going to happen.
    Mrs. Miller. OK. What role can Congress play in making sure 
that the United States will continue to be prepared for world 
conflicts and disasters?
    Ms. Bartholomew. I am sure we would all have answers to 
that. I would say that it is certainly important for us to 
strengthen our relationships with friends and allies--in this 
case, in the region, in Asia--but around the world, because we 
are going to need to be able to work with them to address any 
problems that might arise. To me that is one of the most 
important things.
    And again, traveling in Asia, it is one of the concerns 
that we hear, that people aren't sure of our commitment. They 
are not sure that they can rely on us. And I think they need to 
be convinced that they can.
    Mrs. Miller. Absolutely. Thank you. I yield back my time.
    Mr. Maloney. I thank the gentlelady.
    Mr. Lowenthal? The gentleman from California is recognized.
    Mr. Lowenthal. It is hard to hear you all the way over here 
in California.
    I represent the Port of Long Beach. I live in Long Beach. 
And I am the cochair of the PORTS Caucus. And so I hear--or my 
staff probably more than even me--hear from ports across the 
country. And one of the things I hear is the fear of increased 
tariffs on the ship-to-shore cranes, the cranes that come from 
China that all of our ports use.
    So I am wondering maybe, Ms. Bartholomew, you can--what are 
the implications of having us so reliant on Chinese equipment 
for our ports? That is really, in my port, what is going on. 
Not so much the terminal. It is the terminal, we had to sell--
China had to sell one of the terminals. But it is the reliance 
on the equipment. Maybe you could talk to us about that, and 
what that means.
    And does China use leverage when they have that--you know, 
is this an important tool that--because we are so dependent on 
their equipment, their cranes?
    Ms. Bartholomew. Well, I think we see the use of leverage 
on other products. I can't say that I have seen it on the use 
of cranes, but I think that having us dependent on sort of any 
one source is a problem, especially when that source is a 
country that doesn't necessarily see us as a friend.
    But we have certainly seen them use economic leverage in 
the tariff war that is taking place, the products that they 
targeted in response to the President's tariffs. We are very 
focused, and we see in their presence, sort of their BRI 
presence and their presence in the ports, their willingness to 
use their economic presence and economic power to achieve other 
means, too, to achieve diplomatic means and political means.
    Somebody mentioned Africa earlier. It is a little off of 
what you are saying, but one of the concerns about Africa is 
China's growing economic presence there. But their presence in 
the communications system, they are training journalists, they 
are running the 4G system, they look like they are going to 
have an edge in the 5G system, and so they are creating an 
environment where it is very difficult to oppose something that 
they are saying or doing.
    So for me it is a twofold thing. One is the influence that 
they have, and two is the possibility that they could target 
that sector and shut down work at our ports if they do that.
    Mr. Lowenthal. That is right. I wonder if anybody else on 
the panel has any thoughts about that. We are so reliant in our 
ports on Chinese equipment now, cranes and large--do you see 
this as a potential threat to the United States?
    General Tuck. Sir, thanks for the question. Thanks for 
allowing me to comment.
    There was a time when all we needed to do in our country 
was just really take a look at physical port security, 
something that the Coast Guard is very well equipped to do. And 
now you are talking about the resiliency of a port.
    Mr. Lowenthal. Right.
    General Tuck. The point that you perfectly raised. And the 
cyber activity, the AI that could go with that, any amount of 
technology that you throw at--including these mega-cranes that 
you are referring to, sir.
    And so there is some concern, absolutely, because the last 
thing you want, as a person responsible for helping combatant 
commanders be successful by moving large military forces to a 
port to then put them on a conveyance and get them sailing in 
terms of their equipment, is to have something happen at that 
port where they don't actually leave. And so, without us even 
getting close to getting out of town, we need to make sure that 
we have mechanisms in place that can assure that power 
projection.
    And so any of these technologies that you mention, to 
include automated systems that are right here in the State of 
Virginia, could cause some alarm if we don't have the right 
control mechanisms, the right SCADA ICS kinds of systems in 
place that we can actually protect so that when we need them to 
operate, they do operate the way that they are supposed to, 
versus preventing us from doing the things we need to to get 
out of town. So it is a concern, sir.
    Mr. Lowenthal. Thank you. Any comments on that? Defense 
worried about that? They have all the equipment in--our large 
equipment in our ports.
    Mr. Sbragia. I think it is an excellent question. I 
certainly echo the other panel members. At the strategic level 
it is important to make sure that you are measuring the costs 
and implications of those kind of issues. In the past we just 
haven't. I think that was raised. That is something that we 
have to do.
    Earlier the congressman raised about what we are doing 
overseas, as well. Those are the same kind of practices that we 
have to help, and the efforts that we are making now to help 
our allies and partners out with as well. That is one of the 
main efforts; it is not just domestic, it is with this larger 
network. That is certainly part of our Indo-Pacific strategy 
that we have, is to help do that.
    It is assessing best practices, it is talking about what 
the costs are. It is understanding to a greater depth and 
degree than we have in the past about what the implications are 
of this, and getting serious about it, and understanding that 
this issue traditionally may be something that the military 
wouldn't--or the Defense Department wouldn't pay that much 
attention to. It is that we have to, and we have to share with 
our colleagues across the departments and agencies to 
understand what those implications are, and argue with them 
about what the choices are that they can help make.
    One of the reasons we are here today is to do that here.
    Mr. Lowenthal. Thank you, and I yield back.
    Mr. Maloney. I thank the gentleman. I am going to move to 
the second panel.
    But I do want to associate myself with the gentleman's 
remarks and underscore how important that issue is. If there is 
a future 9/11 coming, God forbid, it may be a cyber 9/11. If 
there is a future Pearl Harbor coming, it may well be a cyber 
Pearl Harbor. The dependency of U.S. logistics, operations, 
port infrastructure, the technology, the physical equipment on 
systems that may be produced or manipulated by our adversaries 
is real.
    We should be focused on it, and that is before you even 
begin talking about the ships themselves that are under 
different flags. And when you look at the totality of our 
dependence and its vulnerability to the influence of our near-
peer competitors, it is alarming, indeed.
    I want to thank the panel for your testimony, for your 
service, the work you are doing. We appreciate it.
    We are going to move to the second panel in the interest of 
time. I know we have been keeping you waiting a long time, but 
we do appreciate your presence here today. With that I would 
like to introduce the second panel, give them an opportunity to 
move to the witness table.
    [Pause.]
    Mr. Maloney. Well, moving now to our second panel, I would 
like to welcome our panel of witnesses. We are joined today by 
Mr. Jonathan E. Hillman, director of the Reconnecting Asia 
Project for the Center for Strategic and International Studies; 
Dr. Jeffrey Becker, research program director of the Center for 
Naval Analyses; and Ms. Kathleen Walsh, associate professor of 
national security affairs at the Naval War College.
    Thank you all for being here today. We look forward to your 
testimony.
    Without objection, the witnesses' full statements will be 
included in the record.
    And as with the previous panel, we would ask that you limit 
your oral remarks to 5 minutes so we can move to the Members' 
questions.
    And with that, Mr. Hillman, you may proceed.

 TESTIMONY OF JONATHAN E. HILLMAN, DIRECTOR, RECONNECTING ASIA 
   PROJECT, CENTER FOR STRATEGIC AND INTERNATIONAL STUDIES; 
   JEFFREY D. BECKER, Ph.D., RESEARCH PROGRAM DIRECTOR, INDO-
PACIFIC SECURITY AFFAIRS, CNA; AND KATHLEEN A. WALSH, ASSOCIATE 
 PROFESSOR OF NATIONAL SECURITY AFFAIRS, U.S. NAVAL WAR COLLEGE

    Mr. Hillman. Chairman Maloney, Ranking Member Gibbs, and 
distinguished members of the subcommittee, thank you for the 
opportunity to testify today.
    Very briefly, I would like to just touch on four areas to 
help frame the discussion here, drawing on some of the work 
that we have been doing at CSIS, tracking China's activities.
    So first, despite lots of hype about China's new overland 
routes through its Belt and Road Initiative, the maritime 
domain really is where the economic action remains and will 
remain. And I am happy to get into that more in the discussion, 
but I think that really does underscore the importance of the 
hearing today.
    Second, while the Belt and Road Initiative is vague by 
design, I think it is very clear that China is increasingly 
dominant across the maritime supply chain. And it is dominant, 
not only as the last panel was pointing out, and as many of the 
Members have mentioned, China is dominant not only in the 
operational functions of that supply chain, but the production 
activities that sit behind those operational functions. So 
China has the world's largest shipping fleet in terms of number 
of vessels. It has the world's largest container port operator. 
It has the world's largest seafarer workforce. It also has the 
world's largest shipbuilder. And it has the world's largest 
port construction firms. It produces the most shipping 
containers.
    And certainly China's maritime rise is not an accident or 
just a byproduct of the fact that it is a very large country. 
But this is the result of longstanding state policies and 
generous financial support. So in 2008 there were no Chinese 
banks among the top 10 shipping finance providers in the world. 
A decade later Chinese banks are first and second in the world. 
Made in China 2025, which is often talked about in terms of its 
investments in AI and semiconductors and those types of things, 
also designates shipping technology as 1 of 10 priority 
sectors. So, again, this is not at all an accident.
    Third, you know, as many of the panelists mentioned before, 
China's maritime rise has broad implications for U.S. economic 
and strategic interests. And I think the U.S.-China trade war 
has illustrated some of these risks that the U.S. has. Mr. 
Lowenthal had mentioned, when the Trump administration proposed 
tariffs on shipping cranes, ship-to-shore cranes, ports in 
Baltimore, Virginia, and elsewhere asked for exemptions. And 
that is because U.S. companies haven't made these cranes for 
decades. And that all works in an environment in which the U.S. 
and China are partners and cooperating. But when we are 
shifting to a climate of increased competition, some of those 
risks emerge.
    And it is notable that a single Chinese company has 70 
percent of the global market for those ship-to-shore grants. 
And so something like ship-to-shore cranes can sound somewhat 
obscure in the context of a national security discussion. But I 
think it is not difficult to imagine how some of those maritime 
capabilities would benefit China in the event of a conflict. 
Surely China's massive shipbuilding industry also provides a 
latent capacity that could be harnessed to support military 
operations. Its network of ports, which includes lots of 
activities near major choke points, could provide flexibility 
to disrupt trade, as well as adapt to disruptions.
    But I do think that the main challenges today exist in this 
space between war and peace, often referred to as the grey 
zone. And so China's maritime activities are enhancing its 
intelligence capabilities. It is further complicating the 
operating environment for U.S. military and diplomatic 
operations overseas. And as we have seen, China also uses 
infrastructure as a diplomatic tool to win political 
concessions.
    And, of course, I should also mention there are plenty of 
Chinese maritime activities that are beneficial to the U.S. And 
this is part of the challenge. Surely the world needs more 
infrastructure, as long as that infrastructure is delivered 
properly and at the right standards, and the United States 
stands to benefit in terms of lower trade costs and growing 
foreign markets. There are certainly reasons to be concerned 
about whether China is meeting those standards through its Belt 
and Road Initiative.
    Finally, Congress does have a very important role to play, 
and I think encouraging and shaping a more strategic response 
to these developments. At the very least, China's Belt and Road 
Initiative should be a wakeup call, both for U.S. policies at 
home and abroad. At home, certainly, it makes sense to think 
about building stronger and more resilient U.S. capabilities, 
which will require investing in U.S. infrastructure, investing 
in vessels to fill gaps in the U.S. fleet, supporting research 
for advanced maritime technology, and also training the next 
generation of U.S. mariners.
    And abroad I think it is very important that the U.S. does 
more than criticize the Belt and Road. It needs to put forward 
its own positive economic vision. And I would be happy to talk 
about that more, as well. Thank you.
    [Mr. Hillman's prepared statement follows:]

                                 
Prepared Statement of Jonathan E. Hillman, Director, Reconnecting Asia 
        Project, Center for Strategic and International Studies
    Thank you, Chairman Maloney, Ranking Member Gibbs, and 
distinguished members of the subcommittee, for the opportunity to 
testify today on China's Maritime Silk Road.
    CSIS is tracking China's maritime activities with several 
initiatives. The Asia Maritime Transparency Initiative (AMTI) monitors 
developments in the East and South China Seas. The China Power Project 
has examined Beijing's naval modernization.\1\ The Stephenson Ocean 
Security Initiative has investigated China's fishing fleet.\2\ And the 
Reconnecting Asia Project, which I direct, is a leading source for 
facts and analysis on China's Belt and Road Initiative, including a 
database of over 14,000 infrastructure projects.\3\
---------------------------------------------------------------------------
    \1\ China Power Team, ``How is China Modernizing Its Navy?'' China 
Power, December 17, 2018, Updated October 2, 2019, https://
chinapower.csis.org/china-naval-modernization/.
    \2\ Gregory B. Poling, ``Illuminating the South China Sea's Dark 
Fishing Fleets,'' Stephenson Ocean Security Project, January 9, 2019, 
https://ocean.csis.org/spotlights/illuminating-the-south-china-seas-
dark-fishing-fleets/.
    \3\ ``Reconnecting Asia,'' Center for Strategic and International 
Studies, accessed October 11, 2019, https://reconasia.csis.org/.
---------------------------------------------------------------------------
    Drawing from these and other resources, I'd like to focus on four 
areas today. First, I'll put the origins of China's MSR into context 
and explain what about it matters and what can be misleading. Second, 
I'll describe China's increasing control of the maritime supply chain, 
which is a better framework for thinking of its maritime rise. Third, 
I'll summarize how these developments impact U.S. interests. Finally, 
I'll outline three areas for Congressional action.
          China's Maritime Silk Road: Advertising and Ambition
    Six years ago, Chinese president Xi Jinping announced the 
``Maritime Silk Road'' in a speech to the Indonesian parliament.\4\ A 
month earlier, he announced the ``overland Belt'' in a speech at 
Kazakhstan's Nazarbayev University. Collectively, these efforts became 
``One Belt, One Road,'' which was eventually simplified in English to 
the ``Belt and Road Initiative,'' or BRI. In the years since, the BRI 
has captivated the world's attention, leading to excitement among 
China's partners, concern among its competitors, and confusion across 
the board.
---------------------------------------------------------------------------
    \4\ Xi Jinping, ``Speech to the Indonesian Parliament,'' (speech, 
Jakarta, Indonesia, October 2, 2013), ASEAN-China Centre, https://
reconasia-production.s3.amazonaws.com/media/filer_public/88/fe/
88fe8107-15d7-4b4c-8a59-0feb13c213e1/speech_by_chinese_president_xi_
jinping_to_indonesian_parliament.pdf.
---------------------------------------------------------------------------
    Despite plenty of hype about new overland routes, the economic 
action will remain in the maritime domain. Chinese state media 
advertise logos of camel caravans, and Chinese officials quote Marco 
Polo, but overland connectivity across the Eurasian landmass remains 
comparatively weak for longstanding reasons. China-Europe train 
services, one of the most popular examples of overland improvement, are 
growing, but they are fueled by Chinese subsidies and face structural 
challenges.\5\ The vast majority of global trade, 90 percent by volume, 
travels by sea.\6\ Put simply, overland trade is not making an epochal 
comeback.
---------------------------------------------------------------------------
    \5\ Jonathan E. Hillman, ``The Rise of China-Europe Railways,'' 
Reconnecting Asia, March 6, 2018, https://www.csis.org/analysis/rise-
china-europe-railways.
    \6\ ``Shipping and World Trade,'' International Chamber of 
Shipping, accessed October 11, 2019, https://www.ics-shipping.org/
shipping-facts/shipping-and-world-trade.
---------------------------------------------------------------------------
    Like all aspects of China's BRI, the MSR has expanded since its 
announcement. It received only a passing reference in Xi's speech, 
which gave roughly as much attention to Indonesian folk songs. Chinese 
officials scrambled to provide structure and fill in the details. In 
2017, the Chinese government released a document that outlines three 
``blue passages'' that run from China to Africa and the Mediterranean, 
another to Oceania and the South Pacific, and a third through the 
Arctic to Europe.\7\ As I will explain, China is also pursuing 
activities beyond these routes, including much closer to the United 
States.
---------------------------------------------------------------------------
    \7\ ``Full text: Vision for Maritime Cooperation under the Belt and 
Road Initiative,'' XinhuaNet, June 20, 2017, http://www.xinhuanet.com/
english/2017-06/20/c_136380414.htm.
---------------------------------------------------------------------------
    The ``blue passage'' concept reveals the strengths and weaknesses 
of China's BRI more generally. It gives the illusion of form and 
structure to China's maritime activities. By going almost everywhere, 
it ensures that no foreign partner or interest group within or outside 
China will feel left out. The concept is just as flawed for management 
purposes as it is savvy for advertising. Making everything a priority 
means there are no priorities. It is not worth dwelling too much on 
these ``passages.'' What they do offer, however, is a vivid 
illustration of China's ambitions. As Washington talks about the Indo-
Pacific, Beijing is acting globally.
              China's Control of the Maritime Supply Chain
    The maritime supply chain is a better framework for examining 
China's activities. China is increasingly dominant not only in 
individual links of that supply chain, such as operating ports, but 
also in production activities behind this chain, such as building ports 
and manufacturing related equipment. This deeper maritime foundation 
brings commercial advantages during peacetime and could offer strategic 
advantages in the event of conflict.
    China has the world's largest shipping lenders, ship builder, 
shipping fleet (number of vessels), seafarer workforce, port 
construction firms, and container port operator. It also dominates a 
wide array of related maritime products and services, including having 
the world's largest shipping container producer, dredging fleet, ship-
to-shore crane producer, and crane truck producer, among other areas. 
Many of these superlatives only scratch the surface. Last year, for 
example, China led the world in all three categories of shipbuilding 
(largest orderbook, most newbuilding orders, largest number of 
deliveries).\8\
---------------------------------------------------------------------------
    \8\ ``Shipbuilding Annual Review 2019,'' BRS Group, accessed 
October 10, 2019, https://www.brsbrokers.com/assets/review_splits/BRS-
Review2019-01-Shipbuilding.pdf.
---------------------------------------------------------------------------
    China's maritime rise began well before the BRI was announced and 
has been assisted by state subsidies. In 2008, there were no Chinese 
banks among the top ten shipping finance providers.\9\ A decade later, 
Chinese banks were the first and second largest in the world.\10\ Made 
in China 2025, which aims to move China up the manufacturing value 
chain, designates shipping technology as one of ten priority sectors. 
Through this initiative, China aims to capture 50 percent of the global 
market for high-tech ships and 80 percent of the critical systems and 
equipment for those ships.\11\
---------------------------------------------------------------------------
    \9\ Henri d'Ambrieres, ``Ship Finance and Its Possible Impacts on 
Excess Capacity,'' (presentation to the OECD Council Working Party on 
Shipbuilding, November 9, 2015) OECD, https://www.oecd.org/sti/ind/
Item%202.2%20HDA%20Conseil_-
%20Impact%20of%20Ship%20Financing_Final.pdf.
    \10\ David Glass, ``Chinese Banks Top Lenders to Shipping,'' 
Seatrade Maritime News, September 17, 2018,http://www.seatrade-
maritime.com/news/asia/chinese-banks-top-lenders-to-shipping.html.
    \11\ ``Unofficial USCBC Chart of Localization Targets by Sector Set 
in the MIIT Made in China 2025 Key Technology Roadmap,'' The U.S. China 
Business Council, accessed October 11, 2019, https://www.uschina.org/
sites/default/files/2-2-
16%20Sector%20and%20Localization%20Targets%20for%20Made%20in%20China%202
025.pdf.
---------------------------------------------------------------------------
    These commercial activities could prove useful in the event of 
conflict. China's massive shipbuilding industry provides a latent 
capacity that could be harnessed to support military operations.\12\ 
Its investments in shipping technology, especially higher-end vessels 
and equipment, could make these capabilities more relevant to building 
naval vessels.\13\ History is filled with examples of civilian vessels 
and equipment being repurposed for strategic purposes. China is already 
doing this in the South China Sea.\14\
---------------------------------------------------------------------------
    \12\ Gabriel Collins and Michael C. Grubb, ``A Comprehensive Survey 
of China's Dynamic Shipbuilding Industry, `` (2008) CMSI Red Books. 9. 
https://digital-commons.usnwc.edu/cgi/
viewcontent.cgi?article=1000&context=cmsi-red-books.
    \13\ Andrew S. Erickson, ``Chinese Shipbuilding and Seapower: Full 
Steam Ahead, Destination Uncharted,'' Center for International Maritime 
Security, January 14, 2019, http://cimsec.org/chinese-shipbuilding-and-
seapower-full-steam-ahead-destination-uncharted/39383.
    \14\ Gregory B. Poling, ``Illuminating the South China Sea's Dark 
Fishing Fleets,'' Stephenson Ocean Security Project, January 9, 2019, 
https://ocean.csis.org/spotlights/illuminating-the-south-china-seas-
dark-fishing-fleets/. ``Reconnecting Asia,'' Center for Strategic and 
International Studies, accessed October 11, 2019, https://
reconasia.csis.org/.; Andrew S. Erickson, ``Chinese Shipbuilding and 
Seapower: Full Steam Ahead, Destination Uncharted,'' Center for 
International Maritime Security, January 14, 2019, http://cimsec.org/
chinese-shipbuilding-and-seapower-full-steam-ahead-destination-
uncharted/39383.
---------------------------------------------------------------------------
    China's network of ports has strategic utility as well. The global 
maritime network has four primary chokepoints, the closure of which 
would seriously impair global trade, and Chinese firms are investing or 
have ownership stakes in ports near all of them.\15\ This includes 
activities closer to the United States. A Chinese firm owns and is 
expanding Panama's largest port, which sits near the Caribbean end of 
the Panama Canal.\16\ Another Chinese firm operates a port at the 
Pacific end of the Panama Canal. If shipping is disrupted, China's 
broader network of ports could provide more flexibility to adapt and 
redirect trade.
---------------------------------------------------------------------------
    \15\ James Kynge et al., ``How China rules the waves,'' Financial 
Times, January 12, 2017, https://ig.ft.com/sites/china-ports/.
    \16\ ``China's Landbridge Group Purchases Largest Panamanian Port; 
Intends to Make it a Deep-Water Port,'' RWR Advisory Group, May 26, 
2016, https://www.rwradvisory.com/chinas-landbridge-group-purchases-
largest-panamanian-port-intends-to-make-it-a-deep-water%DB%9D-port/.
---------------------------------------------------------------------------
                    Implications for U.S. Interests
    Over a century ago, the U.S. naval strategist Alfred Mahan 
observed, ``Commercial value cannot be separated from military in sea 
strategy, for the greatest interest of the sea is commerce.'' \17\ 
These days, Mahan is quite popular among Chinese strategists. Just like 
the great powers that have come before it, China's maritime rise has 
broad economic and strategic implications.
---------------------------------------------------------------------------
    \17\ Alfred Thayer Mahan, Naval Strategy Compared and Contrasted 
with the Principles and Practice of Military Operations on Land 
(Boston: Little, Brown and Company, 1913), 302.
---------------------------------------------------------------------------
    To be sure, not all aspects of China's maritime activities are 
harmful. The world's infrastructure needs are far greater than what the 
BRI can provide, even in its most exaggerated form. Maritime projects 
chosen wisely and delivered properly can lower transport costs, improve 
productivity, and boost growth, all of which benefit the broader global 
economy. Done poorly, these projects weigh developing economies down 
with debt, stoke corruption, harm the environment, and ultimately 
destroy more value than they create.
    The United States has narrower commercial and economic interests at 
stake as well, as the U.S.-China trade war is now highlighting. Earlier 
this year, when the Trump administration proposed tariffs on ship-to-
shore cranes, ports in Baltimore, Virginia, and elsewhere objected. 
That's because U.S. companies have not made these cranes for decades. A 
single Chinese company, ZPMC, has captured an estimated 70 percent of 
the global market.\18\ If China achieves its industrial goals through 
Made in China 2025 and related efforts, the same could be said about a 
wider range of high-value manufacturing in the future.
---------------------------------------------------------------------------
    \18\ David J. Lynch, ``These Giant Cranes Show Why the Next Fight 
in the U.S.-China Trade War Could Be So Damaging,'' Washington Post, 
June 26, 2019, https://www.washingtonpost.com/business/economy/these-
giant-cranes-show-why-the-next-fight-in-the-us-china-trade-war-could-
be-so-damaging/2019/06/26/1e6f5d4c-975f-11e9-830a-
21b9b36b64ad_story.html.
---------------------------------------------------------------------------
    China also uses infrastructure projects for non-economic objectives 
at odds with U.S. political interests.\19\ It can dangle the prospect 
of financing to win political concessions, reward supporters, and gain 
control over port operations. These challenges are acute in developing 
economies, which often have few alternatives for investment, but are 
hardly confined to them. Chinese financing incentivized Hungary and 
Greece, for example, to weaken European Union statements on China's 
human rights record. At China's annual meeting with Central and Eastern 
European countries earlier this year, European participants proposed 
over 20 ports for Chinese investment.
---------------------------------------------------------------------------
    \19\ Jonathan E. Hillman, ``Influence and Infrastructure,'' Center 
for Strategic and International Studies, January 2019, https://csis-
prod.s3.amazonaws.com/s3fs-public/publication/
190123_Hillman_InfluenceandInfrastructure_WEB_v3.pdf.
---------------------------------------------------------------------------
    China's maritime activities also enhance its intelligence 
capabilities. Chinese firms are building more underseas cables, the 
critical links through which the vast majority of international data 
travels. Foreign ports have long been used as listening posts. Building 
them provides opportunities to install surveillance equipment or design 
backdoors for access. Modern ports, of course, are highly networked, 
and Chinese firms often provide IT systems as part of the overall 
package. These activities further complicate the operating environment 
for U.S. military vessels and U.S. government supply chains.
    Djibouti illustrates the challenge. Just miles from U.S. Africa 
Command headquarters, China has established its first military base on 
foreign soil. It also operates a multipurpose container terminal, is 
building a free trade zone, and has delivered other projects, including 
a big-ticket railway and telecommunications. Djibouti's debt is now 
dangerously high, and most of it is owed to China. Several U.S. 
officials and Members of Congress have warned against the prospect of 
China acquiring control of the Doraleh Container Terminal, which was 
nationalized in 2018 and is a critical hub in East Africa's trade.
    Ultimately, understanding the impacts of Chinese maritime projects 
on U.S. interests requires looking closely at individual projects. Not 
every project is economically important or strategically important. 
Some projects are built mainly for the short-term benefit of local 
elites and Chinese state-owned enterprises. It is also worth noting 
that China's vulnerabilities can grow with its global activities, 
especially in terms of protecting trade routes, bases, and ships.\20\ 
All of this underscores the value of a case-by-case approach.
---------------------------------------------------------------------------
    \20\ Zack Cooper, ``Security Implications of China's Military 
Presence in the Indian Ocean,'' Center for Strategic and International 
Studies, April 2, 2018, https://www.csis.org/analysis/security-
implications-chinas-military-presence-indian-ocean.
---------------------------------------------------------------------------
                            Recommendations
    Congress has a vital role to play in addressing these challenges. 
Three types of action it should consider include:

    1.  Develop a global database of infrastructure projects. After the 
9/11 terrorist attacks, the U.S. Department of Homeland Security was 
charged with mapping critical infrastructure globally. While non-state 
actors still present threats to critical infrastructure, China poses a 
different set of challenges as a leading financer, builder, and 
operator. The United States needs a comparable effort to map and track 
foreign infrastructure projects, especially maritime assets. This 
database would help the U.S. government pool intelligence, separate 
benign projects from harmful projects, set priorities, and use its 
resources more effectively, in concert with partners and allies.
    2.  Invest in U.S. maritime capabilities. China's rising control of 
the maritime supply chain, combined with pressure on the U.S.-China 
economic relationship, should encourage a closer look at potential U.S. 
vulnerabilities in these areas. Building stronger and more resilient 
U.S. capabilities will require investing in vessels to fill gaps in the 
current fleet, supporting research for advanced maritime technology, 
and training the next generation of U.S. mariners. Investing in U.S. 
capabilities also means supporting efforts to improve maritime and 
transportation infrastructure more broadly here at home.
    3.  Champion a U.S. global economic vision. Despite six years of 
missteps and broken promises, China's BRI remains attractive to much of 
the world because it speaks to the needs of most countries, 
particularly developing and emerging economies. This underscores the 
power of a positive economic vision. The United States needs to put 
forward its own positive economic vision, one that is defined not as a 
reaction to China, but on its own terms. Earlier this year, a CSIS Task 
Force, led by former U.S. Trade Representative Charlene Barshefsky and 
former U.S. National Security Advisor Stephen Hadley, proposed several 
recommendations to do this, including expanding on the principles that 
guide the ``Free and Open Indo-Pacific'' strategy.\21\
---------------------------------------------------------------------------
    \21\ Charlene Barshefsky et al., ``The Higher Road: Forging a U.S. 
Strategy for the Global Infrastructure Challenge,'' Center for 
Strategic and International Studies, April 2019, https://csis-
prod.s3.amazonaws.com/s3fs-public/publication/
190423_Hadley%20et%20al_HigherRoads_report_WEB.pdf.

    Mr. Maloney. I thank the gentleman.
    Mr. Becker?
    Mr. Becker. Chairman Maloney, Ranking Member Gibbs, members 
of the subcommittee, thank you for this opportunity to share my 
thoughts with you today on China's Maritime Silk Road and its 
implications for the U.S. Navy and the global maritime supply 
chain.
    I just want to note briefly that the views I express today 
are my own, and they are not those of CNA or the Department of 
Defense.
    As a result of China's Maritime Silk Road Initiative, 
Chinese state-owned firms have spent billions of dollars on 
maritime infrastructure. They now build and operate port 
facilities around the globe. And this raises a number of 
implications for the U.S. Navy and the U.S. Coast Guard.
    As a result of these investments, China is likely improving 
its ability to collect intelligence on U.S. ships and assets 
operating in ports overseas. These investments are also 
allowing China to develop the capabilities that could be used 
later, such as the capability to interfere with U.S. Navy 
repair or resupply operations, or the ability to deny U.S. Navy 
access to certain ports altogether in times of crisis.
    So first, just to provide some brief background, what are 
the most common types of Chinese presence in overseas port 
facilities? So fundamentally, Chinese state firms have expanded 
their presence in three ways: constructing new port facilities 
or upgrading existing infrastructure; purchasing stakes in port 
terminal operators; and operating port facilities directly.
    Second, Beijing has a record of using economic tools to 
advance foreign policy objectives, and I see three tools in 
particular that Chinese SOEs could use to influence activities 
in overseas ports. One is China's foreign direct investment, 
which Chinese SOE executives often argue can turn a foreign 
country into the next economic miracle, just as FDI did for 
China, for example. Another tool is debt. China has become a 
major creditor to many emerging economies, and several may have 
trouble servicing their debts in the near term.
    And a third is bribery, and we have already seen examples 
where Chinese executives have sought to channel money to 
foreign government officials and their family members in 
countries where they want to do business.
    So using these tools, who might shine a target? Well, 
first, as I just mentioned, we have already seen Chinese firms 
attempt to influence national level leaders and their family 
members with gifts of cash.
    A second target would be officials that run overseas ports, 
and this would include actors such as freight forwarding 
companies, husbanding agents, port captains, or port 
authorities. These are the individuals that know when ships 
arrive, where those ships dock, what they carry, where they 
store their cargo, and when that cargo gets picked up. So 
Chinese officials could potentially obtain useful information 
through these relationships.
    A third would be local leaders that control access to the 
area surrounding the port, and Chinese firms often seek to 
develop these areas as part of a larger, all-encompassing 
development model.
    And all this brings me to my most important issue: What 
might China do to affect U.S. Navy or U.S. Coast Guard port 
operations overseas? Again, I see four issues.
    First, I think it is worth noting that Chinese overseas 
expansion may create challenges for the U.S. Navy, regardless 
of whether or not this is China's intent. More Chinese commerce 
and Chinese activity means that in some locations the U.S. Navy 
or the U.S. Coast Guard may face more competition, with more 
ships vying for limited facilities.
    A second issue is that Chinese state firms may be able to 
collect intelligence on the movement and the location of U.S. 
Navy ships, ship maintenance requirements, combat readiness, 
and the procedures that the U.S. Navy uses for repair, 
resupply, and other activities while they are operating in 
foreign ports. Moreover, as Chinese firms work with Huawei and 
others on port IT infrastructure issues, this puts U.S. Navy 
communications and other information at risk, as well.
    Third, China could potentially pressure non-Chinese firms 
to give U.S. Navy or U.S. Coast Guard ships lower priority than 
they currently enjoy, thus slowing down services and 
potentially throwing ships off their schedules. To be clear, I 
don't have any examples of this happening to date, but given 
China's importance to the maritime industry, firms that provide 
services to the U.S. Navy may have enough commercial interests 
in China to be sensitive to these types of overtures.
    And then fourth, China could seek to restrict U.S. Navy 
access to ports where Chinese SOEs have a large presence in 
order to express their displeasure at U.S. activities.
    However, I have to say I do find such an action to be 
unlikely to date, primarily for two key reasons. First, it 
would certainly make other countries sit up and take notice at 
a time when countries are already concerned about ceding 
sovereignty to China. Second, and perhaps most importantly, 
U.S. Navy ships visiting these ports may provide intelligence 
collection opportunities. So China has an interest in those 
visits continuing.
    Regardless, responding to China's growing role in overseas 
maritime infrastructure will require careful consideration from 
the U.S. Navy and the U.S. Coast Guard about where, when, and 
how it operates in overseas ports in the future.
    Thank you.
    [Mr. Becker's prepared statement follows:]

                                 
  Prepared Statement of Jeffrey D. Becker, Ph.D.,\\ Research 
          Program Director, Indo-Pacific Security Affairs, CNA
---------------------------------------------------------------------------
    \\ The views I express in this testimony are my own and do 
not reflect the views of CNA, any of its sponsors or affiliates, the 
United States Navy, or the Department of Defense.
---------------------------------------------------------------------------
    Chairman Maloney, Ranking Member Gibbs, and Members of the 
Subcommittee: Thank you for this opportunity to share my thoughts with 
you on China's Maritime Silk Road and its implications for the global 
maritime supply chain.
    Announced during a speech to the Indonesian parliament in October 
2013, China's 21st Century Maritime Silk Road (MSR) is one half of Xi 
Jinping's signature ``Belt and Road Initiative,'' a program aimed at 
leveraging Chinese lending, investment, and technical expertise to 
construct infrastructure projects around the world.\1\ Through these 
projects, China seeks to connect trade paths across Europe and Central 
Asia, and sea routes between Southeast Asia and Africa.
---------------------------------------------------------------------------
    \1\ See Speech by Chinese President Xi Jinping to Indonesian 
Parliament, Jakarta, Indonesia, October 2, 2013, https://reconasia-
production.s3.amazonaws.com/media/filer_public/88/fe/
88fe8107-15d7-4b4c-8a59-0feb13c213e1/
speech_by_chinese_president_xi_jinping_
to_indonesian_parliament.pdf. The other half of the Belt and Road 
Initiative is the ``Silk Road Economic Belt'' which traverses Central 
and South Asia, connecting them to Europe.
---------------------------------------------------------------------------
    To be sure, Chinese state-owned enterprises (SOEs) had been 
involved in overseas port development projects before Xi's announcement 
of MSR in 2013. However, MSR has certainly accelerated this trend. 
Chinese SOEs have spent billions on maritime infrastructure and now 
build and operate port facilities around the globe.
    For example:

      China's port builders, such as China Communications 
Construction Company, the parent company of two state-owned enterprises 
(SOEs)--China Harbour Engineering Company (CHEC) and China Road and 
Bridge Corporation--ranks third on Engineering News-Record's list of 
the top 250 international contractors as of 2018.\2\
---------------------------------------------------------------------------
    \2\ ``ENR's 2018 Top 250 International Contractors,'' Engineering 
News-Record, August 2018, https://www.enr.com/toplists/2018-Top-250-
International-Contractors-1.
---------------------------------------------------------------------------
      According to People's Republic of China (PRC) Vice 
Minister of Transportation Liu Xiaoming, ``China [has] invested and 
constructed 42 ports in 34 countries and regions along the Belt and 
Road Initiative.'' \3\
---------------------------------------------------------------------------
    \3\ Liu Xiaoming, Promoting Pragmatic Cooperation in Sea Ports 
Along the Belt and Road, presentation given at the `16+1' Coordinating 
Secretariat Meeting on Maritime Issues, Szczecin, Poland, June 15, 
2018.
---------------------------------------------------------------------------
      Other analysts estimate that, in total, Chinese SOEs have 
equity stakes or concession agreements to operate port facilities in 
more than 70 ports worldwide.\4\
---------------------------------------------------------------------------
    \4\ See for example, Isaac B. Kardon, Testimony before the U.S.-
China Economic and Security Review Commission Hearing on ``A `World-
Class' Military: Assessing China's Global Military Ambitions,'' June 
20, 2019, p. 5.

    The emergence of Chinese companies as global port terminal owners 
and operators raises questions about the implications for the United 
States Navy (USN), United States Coast Guard, or United States Naval 
Ships (USNS) using those facilities. This issue received heightened 
attention after the government of Djibouti announced in early 2018 that 
it was terminating its agreement with the United Arab Emirates (UAE) 
terminal operator, DP World, to operate the Doraleh Container Terminal 
(DCT), effectively nationalizing the terminal.\5\ This raised concerns 
that the Djiboutian government would eventually sign an agreement with 
a Chinese firm to run that container terminal. In a March 2018 US House 
Armed Services Committee hearing, General Waldhauser (Commander, US 
Africa Command), articulated his concerns regarding the potential 
implications of a Chinese firm taking over operations at the port, and 
what that would mean for the USN, should the Chinese firm seek to 
leverage that position to impose restrictions on USN vessels:
---------------------------------------------------------------------------
    \5\ ``London Court Rules DP World Djibouti Contract `Valid and 
Binding'--Dubai Government,'' Reuters, August 2, 2018, https://
uk.reuters.com/article/uk-emirates-dp-wrld-djibouti/london-court-rules-
dp-world-djibouti-contract-valid-and-binding-dubai-government-
idUKKBN1KN1Cl.

        If the Chinese took over that port, the consequences could be 
        significant if there were some restrictions on our ability to 
        use that, because obviously the supplies that come in not only 
        take care of Camp Lemonnier and other places inside the 
        continent, it is a huge activity there . . .\6\
---------------------------------------------------------------------------
    \6\ Travis J. Tritten, ``China May Try to Control Key US Military 
Port in Africa, General Says,'' Washington Examiner, March 6, 2018, 
https://washingtonexaminer.com/china-may-try-to-control-key-us-
military-port-in-africa-general-says.

    My comments on China's MSR and its implications for the global 
maritime supply chain focus on one aspect of this question in 
particular, namely the growing role of China's SOEs in overseas ports, 
and the implications of this trend for the United States and the U.S. 
Navy. In doing so, I address three important questions to consider when 
seeking to understand how China's growing role in overseas ports might 
---------------------------------------------------------------------------
affect USN activities and operations:

      What are the most prevalent forms of Chinese presence in 
overseas maritime port infrastructure?
      What tools might China employ when seeking to influence 
activities in ports overseas, and what actors might China target to do 
so?
      What actions could Chinese state-owned enterprises 
potentially take to adversely affect USN activities and operations in 
overseas ports?

    The remainder of my comments examines each of these three questions 
in detail.
 1. What are the most prevalent forms of Chinese presence in overseas 
                     maritime port infrastructure?
    In general, Chinese SOEs have expanded their presence in overseas 
port facilities in three ways: by constructing new port facilities or 
upgrading existing infrastructure, by purchasing ownership stakes in 
port terminal operators, and by operating port facilities. Each of 
these types of presence is examined below.
Chinese construction of port infrastructure
    Chinese SOEs build a wide range of maritime facilities, 
constructing new terminals and upgrading existing infrastructure. In 
some cases, Chinese firms win contracts through competitive tenders. In 
Tanzania's Port of Dar-es-Salaam, for example, the World Bank provided 
roughly $345 million to improve the port, and awarded CHEC a $154 
million contract through open bidding to design and build a roll-on/
roll-off terminal and improve berths 1 through 7.\7\
---------------------------------------------------------------------------
    \7\ World Bank, ``Dar es Salaam Maritime Gateway Project: Fact 
Sheet,'' World Bank, July 2, 2017, www.worldbank.org/en/country/
tanzania/brief/dar-es-salaam-maritime-gateway-project-fact-sheet; World 
Bank, ``Procurement Notices-Dar es Salaam Maritime Gateway Project,'' 
World Bank, 2014, http://projects.worldbank.org/procurement/
noticeoverview?id=OP00029170⟨=en
&print=Y; ``Tanzania Signs $154 Million Contract with Chinese Firm to 
Expand Main Port,'' Reuters, June 10, 2017, https://www.reuters.com/
article/us-tanzania-ports/tanzania-signs-154-million-contract-with-
chinese-firm-to-expand-main-port-idUSKBN1910RU; ``Tanzania Inks Deal to 
Expand Dar es Salaam Port,'' World Maritime News, 2017, https://
worldmaritimenews.com/archives/222503/tanzania-inks-deal-to-expand-dar-
es-salaam-port/.
---------------------------------------------------------------------------
    In other cases, however, Chinese companies benefit through support 
from the Chinese State and secure contracts because Chinese banks 
provide loans that require buying and hiring from China. In China's 
development of the Doraleh Multi-Purpose Port in Djibouti for example, 
China's Export-Import (Exim) Bank, the only bank designated by the PRC 
to offer government concessional loans and preferential export buyers' 
credit (credit provided to foreign companies to buy Chinese goods and 
services), provided credits to the China Merchants-Djiboutian joint 
venture firm that developed the port.\8\ Not only did more preferred 
credits make this deal more attractive to China Merchant's Djiboutian 
partners, it also likely provided financial incentives to the China 
State Construction Engineering Corporation, which built the port, and 
the firm Shanghai Zhenhua, which supplied the ports' cranes.\9\
---------------------------------------------------------------------------
    \8\ China Merchants Group, ``Djibouti Project (Jibuti Xiangmu: Xing 
Gang Zhi lu, Shuzi Zai Tiaodong;),'' China Merchants Group, February 7, 
2017, www.cmhk.com/main/a/2017/b07/a32755_32845.shtml.
    \9\ Gao Jianghong, `` `Shekou Model 4.0' Arrives in Djibouti, China 
Merchants `Flying Geese' Model Goes Abroad,'' (`Shekou Moshi 4.0' Luodi 
Jibuti; Zhaoshangju Yanxing Chuhai;), 21st Century Business Herald, 
July 5, 2017, http://epaper.21jingji.com/html/2017-07/05/
content_65726.htm.
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Partial Chinese ownership of port infrastructure
    In addition to building, Chinese state-owned firms own an 
increasing amount of maritime port infrastructure worldwide. Much of 
this infrastructure is owned by two SOEs. The first, COSCO Shipping 
Ports, was the world's fifth largest terminal operator by twenty-foot 
equivalent unit (TEU) in 2017, and the third largest container ship 
owner following the completion of its acquisition of Orient Overseas 
Container Lines in 2018.\10\ COSCO has equity investments in 18 ports 
located in 13 countries, including the US (Seattle and Long Beach).\11\ 
The second, China Merchants Port Holdings, was the world's sixth 
largest terminal operator by TEU in 2017.\12\ The company has a 
presence in 23 ports in 16 countries, including Taiwan.\13\
---------------------------------------------------------------------------
    \10\ Drewry Maritime Research, Global Container Terminal Operators 
Annual Review and Forecast, 2018, p. 18; Michael Angell, ``Port Report: 
Cosco Shipping Wraps Up First Year with Orient Overseas Intl. Results 
Under Belt,'' Freight Waves, April 1, 2019, https://
www.freightwaves.com/news/maritime/port-report-cosco-ooil-2018-results.
    \11\ COSCO Shipping Ports, Overseas Terminals, https://
ports.coscoshipping.com/en/Businesses/Portfolio/#OverseasTerminals; 
COSCO Shipping Ports Limited, Annual Report 2018, March 2019, p. 33, 
https://ports.coscoshipping.com/en/Investors/IRHome/FinancialReports/; 
Lloyd's Maritime Intelligence, One Hundred Ports 2018, p. 12, https://
lloydslist.maritimeintelligence.informa.com/one-hundred-container-
ports-2018. As part of its purchase of Orient Overseas International 
Ltd., COSCO Shipping acquired a container terminal in Long Beach, 
California. However, COSCO sold the facilities to a consortium led by 
Macquarie Infrastructure Partners in order to address U.S. security 
concerns. See Jia Tianqiong and Han Wei, ``Cosco Unit to Sell U.S. Long 
Beach Container Terminal,'' Caixin Global, May 1, 2019, https://
www.caixinglobal.com/2019-05-01/cosco-unit-to-sell-us-long-beach-
container-terminal-101410715.html.
    \12\ Tim Power, ``The Rise of Chinese Global Terminal Operators,'' 
Drewry, July 12, 2017, https://www.drewry.co.uk/AcuCustom/Sitename/DAM/
008/Rise_of_Chinese_Global_
Terminal_Operators.pdf. A TEU is used to measure a ship's cargo 
carrying capacity. The dimensions of one TEU are equal to that of a 20-
foot shipping container.
    \13\ China Merchants Port Holdings, Annual Report 2018, March 2019, 
p. 5, http://www.cmport.com.hk/enTouch/investor/Reports.aspx.
---------------------------------------------------------------------------
    When Chinese firms purchase ownership in a foreign port facility, 
they often do so by establishing a joint venture company with the host 
government, often through the local port authority. The host government 
will continue to own the land and the core port facilities, but will 
lease parts of the port to the joint venture (or the Chinese firm 
directly) through a concession agreement--a contract in which a port 
authority transfers operating rights to build, finance, own, and 
operate a facility, returning it to the state after a specific time 
period.\14\ Concession agreement lengths vary. While many are for 30 
years, some are longer, particularly when large amounts of capital 
investment are needed to give the company time to recoup its 
investment. For example, in 2013, China Merchants acquired 23.5 percent 
of Port de Djibouti SA, the joint venture between China Merchants and 
the Djiboutian Ports Authority, which owns both the Doraleh Multi-
Purpose Port and the Port of Djibouti.\15\ The joint venture will 
reportedly be in effect for 99 years.\16\
---------------------------------------------------------------------------
    \14\ Joseph Botham, ``Concession Choices,'' Port Strategy (2014), 
http://hfw.com/downloads/HFW-Port-Strategy-Concession-choices-Article-
July-2014.pdf; Jeffrey Becker, Erica Downs, Ben DeThomas and Patrick 
DeGategno, China's Presence in the Middle East and Western Indian 
Ocean: Beyond Belt and Road, (Arlington: VA, Center for Naval 
Analyses), February 2018, DRM-2018-U-018309-Final2, p. 86.
    \15\ China Merchants Holdings, ``Acquisition of 23.5% Interests in 
Joint Venture in Djibouti, Voluntary Announcement,'' Hong Kong Stock 
Exchange, 2012, http://www.hkexnews.hk/listedco/listconews/SEHK/2012/
1230/LTN20121230025.pdf.
    \16\ Gao Jianghong, `` `Shekou Model 4.0' Arrives in Djibouti.''
---------------------------------------------------------------------------
Chinese firms operating port infrastructure
    In other cases, Chinese firms not only own a stake in the port 
terminal operator, but also operate the port, either directly or 
through a joint venture partner in which they are the majority owner. 
They are responsible for purchasing and maintaining cranes and other 
container ship handling equipment, hiring labor, managing customer 
relations, and running day-to-day terminal operations. Labor is likely 
to be local, though foreign managers may be parties to the agreement 
that allows the Chinese firm in question to operate the facility.\17\
---------------------------------------------------------------------------
    \17\ Becker, et. al., China's Presence in the Middle East and 
Western Indian Ocean: Beyond Belt and Road, p. 92.
---------------------------------------------------------------------------
    Chinese SOEs are now responsible for running port terminal 
operations in multiple locations, including Sri Lanka, Pakistan, and 
the UAE. For example, China Merchants owns 85 percent of the Colombo 
International Container Terminal, and also operates it through a 99-
year lease.\18\ A Chinese state firm (China Overseas Port Holdings) 
also manages the port of Gwadar directly, having taken the 40-year 
concession from the Port of Singapore Authority (PSA) in 2013, 
following PSA's decision to give up the lease.\19\ In 2016, a 
subsidiary of COSCO Shipping Ports signed a 35-year concession 
agreement with Abu Dhabi Ports to acquire the right to develop, manage, 
and operate Khalifa Port Container Terminal no. 2.\20\ COSCO Shipping 
Ports began operating that terminal in December 2018.\21\
---------------------------------------------------------------------------
    \18\ Sri Lanka Ports Authority, ``Agreements Signed to Construct 
Colombo Port Expansion Project's South Container Terminal,'' Sri Lanka 
Ports Authority, November 9, 2011, http://portcom.slpa.lk/
news_events_324.asp. Additionally, China Merchants is likely in charge 
of the port's long-term development and strategic operations, given 
that the CEOof Colombo International Container Terminals is Jack Huang, 
who is also the deputy general manager (international)of China 
Merchants Holdings (International), and that seven of the 10 of Colombo 
International Container Terminal's board members are Chinese. See 
Colombo International Container Terminals, ``Management/Executive 
Committee,'' http://www.cict.lk/management-executive-commitee.php; 
``Jack Huang-Director/CEO-Colombo International Container Terminals,'' 
LinkedIn, https://hk.linkedin.com/in/jack-huang-906b3617; Colombo 
International Container Terminals, ``Board of Directors,'' http://
www.cict.lk/directors.php.
    \19\ Ministry of Ports & Shipping and Gwadar Port Authority, 
``Gwadar Port & CPEC: A Presentation to Parliamentary Committee on 
CPEC,'' National Assembly of Pakistan, November 28, 2015, http://
www.na.gov.pk/cpec/sites/default/files/presentations/
Parliamentary%20Commitee
%20on%20CPECNew.pdf.
    \20\ COSCO Shipping Ports Limted, ``Discloseable Transaction: 
Concession Agreement in Relation to Khalifa PortContainer Terminal 2,'' 
Hong Kong Stock Exchange, September 28, 2016, http://www.hkexnews.hk/
listedco/listconews/SEHK/2016/0928/LTN20160928374.pdf.
    \21\ ``COSCO, Abu Dhabi Ports Open New Terminal at Khalifa Port,'' 
World Maritime News, December 10, 2018, https://worldmaritimenews.com/
archives/266410/cosco-abu-dhabi-ports-open-terminal-at-khalifa-port/
---------------------------------------------------------------------------
 2. What tools might China employ when seeking to influence activities 
    in ports overseas, and what actors might China target to do so?
Potential tools of Chinese influence
    Beijing has a track record of using the economic tools at its 
disposal to advance its foreign policy objectives.\22\ Consequently, it 
is not unreasonable to think that China might deploy those tools in 
such a way as to influence national and local leaders with authority 
over and access to ports. Potential sources of influence at China's 
disposal to achieve this goal include investments, the provision of 
funds through loans, cash gifts, and bribery. Each is discussed below.
---------------------------------------------------------------------------
    \22\ See for example, Peter Harrell, Elizabeth Rosenberg, and 
Edoardo Saravalle, China's Use of Coercive Economic Measures, Center 
for a New American Security, June 11, 2018, https://www.cnas.org/
publications/reports/chinas-use-of-coercive-economic-measures; Evan A. 
Feigenbaum, ``Is Coercion the New Normal in China's Economic 
Statecraft?,'' Marco Polo, July 15, 2017, https://marcopolo.org/
coercion-new-normal-chinas-economic-statecraft/.
---------------------------------------------------------------------------
            Investment
    One tool China may use to expand its influence in overseas port 
facilities is the provision of foreign direct investment, which Chinese 
SOE officials often tout as having the potential to dramatically reform 
a country's future, just as China has done over the past four decades. 
This approach is likely to be most effective when directed at officials 
from countries where capital is scarce, such as Djibouti, the Maldives, 
or Sri Lanka. One can see the appeal of this approach in statements 
such as those made by the president of China Merchants Group, who 
stated that ``we [China Merchants] are in the process of making the 
country [Djibouti] the `Shekou of East Africa'--a hub for regional 
shipping, logistics and trade,'' referring to the Chinese village of 
Shekou in Shenzhen, which rose to become a global commercial logistics 
hub.\23\ China's ambassador to Oman, Yu Fulong, argued that ``over the 
past 30-plus years, China has developed a host of competitive 
industries and with the help of the Belt and Road Initiative, Oman can 
harness these strengths so as to promote a diversified economic 
development.'' \24\
---------------------------------------------------------------------------
    \23\ Deng Yangzi, ``CMG Wants to Make African Port of Djibouti `New 
Shekou','' China Daily, March 7, 2017, http://www.chinadaily.com.cn/
bizchina/2017-03/07/content_28455386.
    \24\ ``Oman Wants to Be China's Key Partner in Belt and Road 
Initiative, China Envoy,'' Xinhua, July 1, 2015, http://
www.xinhuanet.com/english/2015-07/01/c_134373592.htm.
---------------------------------------------------------------------------
    Noticeably absent from these arguments, however, is any recognition 
of the fact that both countries lack other factors that were critical 
to China's success, including a large and educated workforce, easy 
access to large markets, and a stable international regional 
environment. Nonetheless, the promise to dramatically change the 
trajectory of a country's development is undoubtedly attractive to 
leaders of developing countries, and likely provides the Chinese 
government with significant leverage in negotiating the terms of 
investments.
            Loans and debt traps
    Another tool through which Beijing may seek to influence port 
activities is using debt owed to Chinese financial institutions as a 
bargaining chip. China has emerged as a major creditor to many emerging 
economies, lending roughly $40 billion annually through its Exim Bank 
and the China Development Bank.\25\ Countries such as Nigeria and Sri 
Lanka, where Chinese SOEs own or operate port facilities, have been 
among China's top borrowers over the past few years, accepting loans 
from China to finance activities, including infrastructure development, 
government operations, and debt payments.\26\ Other developing 
countries where Chinese firms are currently undertaking massive 
infrastructure projects, such as Kenya, Tanzania, and South Africa, 
have been major borrowers from China as well. Over time, the 
accumulation of debts may also provide China with opportunities to 
expand its presence into port facilities in these countries as well.
---------------------------------------------------------------------------
    \25\ David Dollar, ``United States-China Two-way Direct Investment: 
Opportunities and Challenges,'' Journal of Asian Economics 50, June 
2017, https://www.sciencedirect.com/science/article/pii/
S1049007817300830.
    \26\ Ibid.
---------------------------------------------------------------------------
    Several countries may have trouble servicing their debts in the 
near term. According to a 2018 study published by the Center for Global 
Development, 23 countries are at risk of debt distress as a result of 
borrowing from China. These countries include Djibouti, whose port 
infrastructure is important to USN logistics operations for Naval 
Forces Africa and Naval Forces Central Command. These also include Sri 
Lanka and the Maldives, both of which are USN partner nations in the 
increasingly important Indian Ocean region, where the US has important 
equities.\27\
---------------------------------------------------------------------------
    \27\ John Hurley, Scott Morris, and Gailyn Portelance, Examining 
the Debt Implications of the Belt and Road Initiative from a Policy 
Perspective, Center for Global Development Policy Paper 121, March 
2018, https://www.cgdev.org/sites/default/files/examining-debt-
implications-belt-and-road-initiative-policy-perspective.pdf. See also 
Becker, et. al., China's Presence in the Middle East and Western Indian 
Ocean: Beyond Belt and Road.
---------------------------------------------------------------------------
    Moreover, when the Djiboutian government nationalized the Doraleh 
Container Terminal, the Chinese-Djiboutian joint venture Port de 
Djibouti SA, which owned a stake in the container terminal along with 
the Dubai firm DP World, could no longer meet the requirements of its 
loan from China Merchants, the Chinese partner in the joint venture. 
Therefore, in April 2019, it was reported that China Merchants will 
provide Port de Djibouti SA with another $144 million in debt 
refinancing, possibly further adding to its debt burden, and 
potentially setting China Merchants up to expand its stake in Port de 
Djibouti SA at a later date.\28\
---------------------------------------------------------------------------
    \28\ Michael Angell, ``Port Report: China Merchants Rejiggers Debt 
for Djibouti Free-trade Zone After Doraleh Container Terminal Seized,'' 
Freight Waves, April 30, 2019, https://www.freightwaves.com/news/
maritime/port-report-china-merchants-ports-djibouti.
---------------------------------------------------------------------------
    China has employed various approaches when dealing with borrowers 
who cannot repay their loans.\29\ In some cases, China has engaged in 
loan forgiveness or loan restructuring in order to provide new loans to 
allow borrowers to avoid default. Other times, China has conducted 
debt-for-equity swaps, allowing Chinese firms to acquire equity stakes 
in infrastructure projects that Chinese banks helped finance. For 
example:
---------------------------------------------------------------------------
    \29\ Ibid.

      When the government of Djibouti could not provide its 
share of the funding for the Ethiopia-Djibouti Railway, it sold a 10 
percent stake in the joint venture that manages the railway to the 
China Civil Engineering Construction Corporation.\30\
---------------------------------------------------------------------------
    \30\ International Monetary Fund, Djibouti Selected Issues, IMF 
Country Report No. 16/249, 2016, http://www.imf.org/external/pubs/ft/
scr/2016/cr16249.pdf; Zhang Yuxue, ``Why is Africa's First 
Transnational Electrified Railway Using a Complete Set of `Chinese 
Standards'?'' (Feizhou diyi tiao kuaguo dianqihua tielu weihe yong 
quantao `Zhongguo biaojun';), Caijing, October 21, 2016, http://
www.caijingmobile.com/top/2016/10/21/288773_2_4.html.
---------------------------------------------------------------------------
      In 2016, the Sri Lankan government proposed using debt-
for-equity swaps to reduce its debt burden, which allowed China 
Merchants Group to purchase an 85 percent stake in the concession that 
operates the Hambantota port.\31\
---------------------------------------------------------------------------
    \31\ For Sri Lanka's proposal of debt-for-equity swaps, see Ben 
Blanchard, ``Sri Lanka Requests Equity Swap for Some of Its $8 bln 
China Debt,'' Reuters, April 9, 2016, https://www.reuters.com/article/
china-sri-lanka/sri-lanka-requests-equity-swap-for-some-of-its-8-bln-
china-debt-idUSL3N17B1BR.
---------------------------------------------------------------------------
      In 2019, the Kenyan newspaper Daily Nation reported it 
had obtained a leaked copy of the agreement between China and Kenya for 
the construction of the Mombasa-Nairobi Standard Gauge Railway Project. 
According to Kenyan media, the contract states that China could take 
possession of the port of Mombasa should the Kenyan National Railway 
Corporation default on its $2.2 billion repayments to China's Exim 
Ban.\32\
---------------------------------------------------------------------------
    \32\ William Niba, ``Will Kenya's Mombasa port be taken over by the 
Chinese?,'' Radio France International, January 15, 2019, http://
en.rfi.fr/africa/20190114-kenya-mombasa-port-china-debt-default.

    While Chinese SOEs employing debt-for-equity swaps such as these 
still appear infrequently, the example of Hambantota, and the potential 
for China to do something similar in Kenya, suggests that Beijing is 
not opposed to employing this tool to obtain greater influence in 
overseas ports.
            Cash gifts and bribes
    Chinese officials and executives have already sought to influence 
foreign officials abroad with gifts of cash. China Harbour Engineering 
Company (CHEC) is a case in point. The company has a history of 
channeling money to foreign government officials and their families in 
countries where it is doing or seeking to do business. For example:

      In 2009, the World Bank barred the China Communications 
Construction Company and all of its subsidiaries, including CHEC, from 
engaging in any road and bridge projects financed by the World Bank 
from January 2009 to January 2017 as a result of engaging in fraud 
while working on a World Bank-funded road project in the 
Philippines.\33\
---------------------------------------------------------------------------
    \33\ World Bank, ``World Bank Applies 2009 Debarment to China 
Communications Construction Company Limited for Fraud in Philippines 
Road Project,'' World Bank, July 29, 2011, http://www.worldbank.org/en/
news/press-release/2011/07/29/world-bank-applies-2009-debarment-to-
china-communications-construction-compamy-limited-for-fraud-in-
philippines-roads-project.
---------------------------------------------------------------------------
      Before the January 2015 presidential elections in Sri 
Lanka, at least $7.6 million was transferred from CHEC's bank account 
at the South African Standard Bank to affiliates of then Sri Lankan 
President Mahinda Rajapaksa's presidential re-election campaign.\34\ 
While campaign contributions are not illegal, funding for a political 
party from a foreign entity does constitute external interference in 
local affairs, raising the possibility of charges of money 
laundering.\35\
---------------------------------------------------------------------------
    \34\ Maria Abi-Habib, ``How China Got Sri Lanka to Cough Up a 
Port,'' New York Times, June 25, 2018, https://www.nytimes.com/2018/06/
25/world/asia/china-sri-lanka-port.html.
    \35\ ``Chinese Firm in Sri Lanka Admits to Funding Rajapaksa 
Foundation,'' Economynext, July 12, 2018, https://economynext.com/
Chinese_firm_in_Sri_Lanka_admits_
funding_Rajapaksa_family_foundation-3-11200.html.
---------------------------------------------------------------------------
      In January 2018, Bangladesh's finance minister, Abul 
Muhith, said that CHEC had been blacklisted for offering bribes to 
government officials. According to Muhith, CHEC offered the bribes 
after it secured a contract to expand a highway: ``They have already 
got the contract. I think [they offered a bribe] only to please 
[officials] so that they [the company] can misappropriate money.'' \36\
---------------------------------------------------------------------------
    \36\ ``No Job for China Harbour in Future,'' The Daily Star, 
January 17, 2018, https://www.thedailystar.net/frontpage/no-job-china-
harbour-future-1520917.

    CHEC is not the only Chinese SOE involved in port activities 
accused of bribing foreign officials and their families. In 2012, the 
China Merchants Port Holdings' controlled joint venture with the Sri 
Lanka Ports Authority in Colombo (Colombo International Container 
Terminals) donated nearly 20 million rupees to a foundation run by 
Pushpa Rajapaksa, who is the wife of Basil Rajapaksa, the younger 
brother of former President Rajapaksa. A representative from the joint 
venture stated that the donation was for housing for the poor. However, 
the joint venture did not supervise how the cash was used after it was 
donated.\37\
---------------------------------------------------------------------------
    \37\ ``Chinese Firm in Sri Lanka Admits to Funding Rajapaksa 
Foundation.''
---------------------------------------------------------------------------
Potential targets of Chinese influence
    Given the tools described above, should Beijing seek to hinder USN 
access to a port with a Chinese terminal operator, or affect its 
activities while in port, Chinese officials would likely seek to 
influence different actors at both the national and local levels within 
the host country. The most obvious targets for such Chinese influence 
would include national-level leaders and their families, local port 
authority personnel, and local-level officials.
            National leaders and their families
    Chinese officials and business executives would likely try to 
influence senior leaders, particularly heads of state who appreciate 
China's role in building national infrastructure, especially after 
overtures to other countries were rebuffed. For example, Djibouti's 
president, Ismail Omar Guelleh, has stated that he views China as his 
country's only long-term development partner, noting, ``the reality is 
that no one but the Chinese offers a long-term partnership in 
Djibouti.'' \38\
---------------------------------------------------------------------------
    \38\ ``Ismail Omar Guelleh: Nobody Other Than the Chinese Offers a 
Long-term Partnership in Djibouti (Ismail OmarGuelleh: Personne d'autre 
que les Chinois n'offre un partenariat a long terme a Djibouti),'' 
Jeune Afrique, April 4,2017, http://www.jeuneafrique.com/mag/421096/
politique/ismail-omar-guelleh-personne-dautre-chinois-noffre-
partenariat-a-long-terme-a-djibouti/.
---------------------------------------------------------------------------
    The Chinese might also target family members of national leaders, 
especially if they also occupy leadership positions. Again, the example 
of Djibouti is instructive. President Guelleh's daughter, Haibado 
Guelleh, is his top economic adviser and a Chinese speaker. She is 
responsible for implementing Djibouti's long-term development plan, 
``Vision 2035,'' and likely plays a role in negotiating Chinese debt-
financed infrastructure projects.\39\ President Guelleh's half-brother, 
Saad Omar Guelleh, is also the director general of Port de Djibouti SA, 
a major source of income for the country and the presidency.\40\
---------------------------------------------------------------------------
    \39\ ``Djibouti Legislative Elections,'' IHS Markit, March 8, 2018, 
https://ihsmarkit.com/research-analysis/Djibouti-legislative-
elections.html.
    \40\ ``Ismail Omar Guelleh Governs Family-style with Kadra, Naguib, 
Saad and Co,'' Africa Intelligence, June 18, 2015, https://
www.africaintelligence.com/ion/insiders/djibouti/2015/06/19?ismail-
omar-guelleh-governs-family-style-with-kadra-naguib-saad-and-co/
108078596-be1; ``General Manager Message.''
---------------------------------------------------------------------------
            Port authorities
    Officials responsible for running local port authorities are also 
likely to be targets of Chinese influence, should China seek to 
influence port operations abroad. In general, a port authority decides 
who enters and exits a port. It controls the pilots and tugs that 
assist large ships when entering and leaving a port, allocates ships to 
berths, and is responsible for port storage. In short, port authorities 
know when ships, including USN and U.S. Coast Guard vessels, arrive at 
port, where they dock, what they carry, where they store cargo, and 
when that cargo gets picked up.\41\
---------------------------------------------------------------------------
    \41\ Becker, et. al., China's Presence in the Middle East and 
Western Indian Ocean: Beyond Belt and Road, p. 96.
---------------------------------------------------------------------------
    Chinese officials could potentially obtain sensitive information 
through relationships that state-owned Chinese port terminal operators 
have established with local port authorities. For example, COSCO 
Shipping Ports and AD Ports, a company established by the Abu Dhabi 
government, are both stakeholders in a joint venture company that has a 
concession to build, operate, and manage the Khalifa Port Container 
Terminal no. 2 in the UAE.\42\ AD Ports is the port authority for 10 
ports in total, including Fujairah Terminals.\43\ The U.S. Navy 
stations roughly 5,000 military personnel at several facilities 
throughout the UAE, including at Fujairah.\44\ Moreover, because 
Fujairah lies outside the Persian Gulf, it serves as an important 
logistics link should the Strait of Hormuz be closed. This strategic 
positioning could make Fujairah an important target should China seek 
to affect US activities in foreign ports.
---------------------------------------------------------------------------
    \42\ COSCO Shipping Ports Limted, Concession Agreement In Relation 
to Khalifa Port Container Terminal 2.
    \43\ Abu Dhabi Digital Government, ``Abu Dhabi Ports,'' Abu Dhabi 
Digital Government, https://www.abudhabi.ae/portal/public/en/
departments/adports; ``ADPC to Manage and Operate Zayed Port from 
2014.''
    \44\ ``The United Arab Emirates (UAE): Issues for U.S. Policy,'' 
Congressional Research Service Report, May 3, 2019, https://fas.org/
sgp/crs/mideast/RS21852.pdf, pg. 19.
---------------------------------------------------------------------------
    Combined with the recent expansion in China-UAE relations, 
including increased Chinese investment in the country, it is not 
impossible to think that PRC state actors could potentially make use of 
the established connections between COSCO Shipping and UAE port 
authority personnel to obtain information on the movement of personnel, 
supplies, and material related to USN personnel stationed in the 
country.
            Local leaders
    In Sri Lanka and elsewhere, Chinese actors may also attempt to 
single out not just national level leaders but also local government 
officials. While local officials may not have the direct access to port 
operations that officials within the local ports authorities do, they 
do have the authority to provide Chinese actors with access to areas 
surrounding the ports. Chinese firms, as part of MSR projects, are also 
often seeking to develop port-adjacent regions into special economic 
development zones as part of an all-encompassing ``port-zone-city'' 
development model. These port-adjacent areas could provide additional 
opportunities for intelligence collection on activities within the 
port.
    Chinese investment in the city of Duqm, Oman, is one example that 
may be worth monitoring in this regard. In an effort to diversify its 
economy away from oil and natural gas, which account for roughly 60 
percent of its exports, the government of Oman is seeking to develop 
the city of Duqm into a commercial and logistics hub.\45\ In pursuing 
this goal, Muscat has partnered with Oman Wanfang, a consortium of 
private Chinese companies, to develop the China-Oman Industrial Park 
within the Duqm Special Economic Zone (SEZ).\46\ According to Yahya bin 
Said al Jabri, the chairman of the Special Economic Zone Authority in 
Duqm, the SEZ will attract $10 billion of investment by 2022.\47\
---------------------------------------------------------------------------
    \45\ Asian Infrastructure Investment Bank, Duqm Port Commercial 
Terminal and Operational Zone Development Project.
    \46\ Ibid.
    \47\ ``Oman-China Deal for $10-bn Industrial City,'' Oman Daily 
Observer, May 23, 2016; A.E. James, ``Chinese Firms Commit $3.1 Billion 
Investment in Duqm Free Zone,'' Times of Oman, April 22, 2017, http://
timesofoman.om/article/107373/Oman/Chinese-firms-commit-$31billion-
investment-in-Duqm-free-zone.
---------------------------------------------------------------------------
    Currently, no Chinese firms are involved in the operation of the 
Port of Duqm, as the July 2015 joint venture between the government of 
Oman and a Belgian consortium to manage the port for 28 years remains 
in effect.\48\ However, Chinese firms under the Oman Wanfang consortium 
are seeking to develop the surrounding areas, and, given the amount of 
funding that could potentially be invested in the SEZ, this project 
could provide China with leverage to gain a foothold in the port, or 
cultivate influence among local-level government officials surrounding 
the port facilities.
---------------------------------------------------------------------------
    \48\ ``Overview,'' Port of Duqm, https://www.portduqm.com/About/
Port-of-Duqm.html.
---------------------------------------------------------------------------
3. What actions could Chinese state firms potentially take to adversely 
        affect USN activities and operations in overseas ports?
    Given the influence that Chinese SOEs have accrued in port 
facilities worldwide, how might China potentially influence USN port 
operations and activities in overseas ports? The following section 
identifies four ways in which this might occur.
Growing competition over access to facilities
    First, it is worth noting that China's growing presence in overseas 
ports may create additional challenges for the U.S. Navy regardless of 
whether this is China's intent. China's MSR initiative has led to a 
dramatic increase in both Chinese overseas investments and Chinese 
citizens living and working in Asia, the Middle East, Africa, and 
throughout the Indian Ocean region. As a result, these expanding 
Chinese interests have led not only to an increased Chinese civilian 
presence, but also to an increased military presence, as China's 
military goes abroad to protect its national interests. This increased 
Chinese civilian and military presence abroad means that in certain 
locations, the USN is likely to face greater competition for access to 
ports and port facilities, potentially making it more difficult for the 
USN to gain access at certain times.
    Port Khalifa may be one example where this may occur. In Port 
Khalifa, COSCO began operating a new container terminal in December 
2018 and has already stated that it is seeking to make it a regional 
transshipment hub, diverting Chinese ships from other ports in the 
region. Should COSCO be successful, the increased port traffic in and 
around Port Khalifa could potentially create delays for USN ships 
seeking to use those port facilities as well.
Collecting intelligence on USN assets operating in foreign ports
    Another issue that cannot be avoided is the opportunity for the PRC 
to improve its intelligence collection capabilities against USN assets 
operating in foreign ports. Chinese SOEs, like COSCO and China 
Merchants, are intimately tied to the Chinese state, and their 
positions as port operators could allow them to collect intelligence on 
the movement and location of USN ships and other assets, USN ship 
maintenance requirements, ship combat readiness, and the tactics, 
techniques, and procedures (TTPs) that the USN uses for repair, 
resupply, and other activities while in foreign ports. Such concerns 
are not without merit; as noted above, actors like China Harbour 
Engineering Company have reportedly been accused of seeking to bribe 
officials abroad. Moreover, when describing the negotiations for the 
Hambantota port, Nihal Rodrigo, a former Sri Lankan foreign secretary 
and ambassador to China, noted that intelligence sharing between China 
and Sri Lanka was ``an integral, if not public, part of the deal.'' 
\49\ Mr. Rodrigo also characterized the Chinese position during the 
negotiations as ``We [China] expect you [Sri Lanka] to let us know who 
is coming and stopping here [Hambantota].'' \50\
---------------------------------------------------------------------------
    \49\ Maria Abi-Habib, ``How China Got Sri Lanka to Cough Up a 
Port.''
    \50\ Ibid.
---------------------------------------------------------------------------
    Moreover, as SOEs such as COSCO work with Huawei to replace and 
redesign IT infrastructure in places such as the Greek port of Piraeus, 
it puts USN communication and other information at risk as well.\51\ 
Finally, if Chinese SOEs are not positioned to obtain that information 
directly, local actors at those ports may feel compelled to provide 
China with privileged information in return for financial benefits or 
outright bribes, or to avoid punitive Chinese actions. This information 
would have multiple benefits, improving China's ability to counter 
future USN operations, while allowing the People's Liberation Army 
(PLA) to learn about USN TTPs, thus potentially improving the PLA 
Navy's own operations.
---------------------------------------------------------------------------
    \51\ See for example Piraeus Port Authority SA, ``Piraeus Port 
Authority SA Assigns to Huawei Technologies SA the Project of 
Modernizing Its Network Infrastructure,'' Hellenic Shipping News, 
January 26, 2018, https://www.hellenicshippingnews.com/piraeus-port-
authority-sa-assigns-to-huawei-technologies-sa-the-project-of-
modernizing-its-network-infrastructure/; Christopher R. O'Dea, ``Asia 
Rising: Ships of State?'' Naval War College Review: Vol. 72: No. 1, 
Article 5, p. 83.
---------------------------------------------------------------------------
``Slow-rolling'' work for USN ships at Chinese-operated ports
    Chinese firms could also affect USN operations directly, 
potentially using their economic leverage to encourage firms providing 
services to the USN at the port to slow down repair or resupply 
operations, or to provide USN ships lower priority than they currently 
enjoy. To be clear, I have seen no evidence of this to date. However, 
given that seven of the top 10 busiest ports in the world by throughput 
are in China, it is not unreasonable to think that a growing number of 
firms that contract to conduct work for the USN at overseas ports may 
also have commercial interests in China, or may subcontract portions of 
that work to firms that do.\52\
---------------------------------------------------------------------------
    \52\ Lloyd's Maritime Intelligence, One Hundred Ports 2018, p. 12.
---------------------------------------------------------------------------
Actively restricting USN access to port facilities
    When might China seek to restrict USN or USNS access to ports 
facilities run by Chinese SOEs? Hypothetically, if relations between 
the two countries continue to deteriorate, China could seek to restrict 
USN access as a response to a US action that it perceives as hostile--
such as a USN warship visit to Taiwan--or even as an escalatory step 
should a serious crisis occur between the two countries in the East 
China Sea, South China Sea, or elsewhere.\53\ Such an action would not 
be taken lightly, as doing so would certainly mark the start of a much 
more confrontational period in US-China relations with the associated 
political and economic ramifications. Nor would it go unnoticed in 
countries where concerns about ceding sovereignty as a result of 
China's growing footprint continue to gain traction.
---------------------------------------------------------------------------
    \53\ I am not aware, however, of Chinese analysts discussing this 
as a possible tactic for use in the context escalation and crisis 
control more. See for example Alison A. Kaufman and Daniel M. Hartnett, 
Managing Conflict: Examining Recent PLA Writings on Escalation Control, 
(Arlington: VA, Center for Naval Analyses), February 2016, DRM-2015-U-
009963-Final3.
---------------------------------------------------------------------------
    China would likely face political pushback from the host country as 
well. For example, while China may be best positioned to restrict U.S. 
Navy access where it has significant economic leverage, such as 
Djibouti, or controls port operations, such as Piraeus, both Djibouti 
and Greece would have strong incentives to avoid being pulled into such 
a confrontation. Djibouti, for example, would potentially stand to lose 
some of the $130 million it earns annually from allowing US partners 
and allies such as France, Japan, and Italy to operate in its 
territory, should some of those countries decide to reevaluate their 
presence there. Greece, meanwhile, could potentially be subject to 
political and economic pressure from other NATO or EU member states.
    Restricting USN access to port facilities would be even more 
difficult in locations where Chinese firms are not the sole or majority 
equity shareholder, as Chinese SOEs would face a range of actors at the 
local level with incentives to avoid being pulled into a conflict. In 
Port Said, Egypt, for example, where COSCO Shipping Ports owns a 20 
percent stake in the Suez Canal Container Terminal, other parties to 
the joint venture include the Dutch firm APM Terminals (the majority 
shareholder and operator), the Suez Canal Authority, the National Bank 
of Egypt, and private Egyptian investors. All would likely want to 
avoid being drawn into the middle of a conflict between the US and 
China.\54\
---------------------------------------------------------------------------
    \54\ APM Terminals, ``About Us: Port Said,'' APM Terminals, http://
www.apmterminals.com/en/europe/port-said/about-us.
---------------------------------------------------------------------------
    Finally, one may argue that China has an interest in continuing to 
allow USN ships to frequent Chinese-controlled port facilities, as such 
visits provide ample opportunities for intelligence collection. In the 
near term, therefore, it may be more likely that the USN decides to 
limit its visits to certain ports owned or operated by Chinese SOEs to 
mitigate these growing operational security concerns. For example, 
following the news that the Shanghai municipal government-owned firm, 
Shanghai International Port Group, had won the concession to operate 
the container terminal in the Israeli port city of Haifa for 25 years 
beginning in 2021, Israeli media reported that US officials had 
expressed concern about continuing U.S. Navy activities there, to 
include a ``Sense of the Senate'' statement within the Senate's 
National Defense Authorization Act for Fiscal Year 2020, stating that 
the US Senate ``has an interest in the future forward presence of 
United States naval vessels at the Port of Haifa in Israel but has 
serious security concerns with respect to the leasing arrangements of 
the Port of Haifa as of the date of the enactment of this Act.'' \55\ 
Former Chief of Naval Operations Admiral Gary Roughhead described 
possible concerns by noting:
---------------------------------------------------------------------------
    \55\ ``To Authorize Appropriations for Fiscal Year 2020 for 
Military Activities of the Department of Defense, for Military 
Construction, and For Defense Activities of the Department of Energy, 
to Prescribe Military Personnel Strengths for Such Fiscal Year, and for 
Other Purposes,'' S1790, 116 Cong., 1st Sess (2019), pp. 607.

        The Chinese port operators will be able to monitor closely US 
        ship movements, be aware of maintenance activity, and could 
        have access to equipment moving to and from repair sites and 
        interact freely with our crews over protracted periods. 
        Significantly, the information systems and new infrastructure 
        integral to the ports and the likelihood of information and 
        electronic surveillance systems jeopardize US information and 
        cybersecurity.\56\
---------------------------------------------------------------------------
    \56\ Quoted in Michael Wilner, ``U.S. Navy May Stop Docking in 
Haifa After Chinese Take Over Port,'' Jerusalem Post, December 15, 
2018, https://www.jpost.com/Israel-News/US-Navy-may-stop-docking-in-
Haifa-after-Chinese-take-over-port-574414.

    As China's roles and presence in overseas port operations continue 
to expand, the U.S. Navy is having to adapt to a more challenging 
operational security environment; one in which it is more likely to 
interact with Chinese military and civilian assets and personnel even 
when calling on ports located in partner and ally countries. Moreover, 
port investments by Chinese state-owned firms occurring today could 
allow them to develop capabilities that the Chinese state could 
leverage in the future, including the capability to hinder USN repair 
and resupply operations, or potentially even restrict USN access to 
select locations. Responding to these challenges will require careful 
consideration about where, when, and how the U.S. Navy operates in 
---------------------------------------------------------------------------
overseas ports.

    Mr. Maloney. Thank you, Mr. Becker.
    Ms. Walsh?
    Ms. Walsh. Thank you, Chairman Maloney, Ranking Member 
Gibbs, distinguished members of the subcommittee. I would like 
to add my condolences to the earlier panel. I was hoping maybe 
to get to meet Congressman Cummings. So my loss, as well as 
yours.
    This is an important topic, one that doesn't get as much 
attention as I think it warrants, in my own view. So I commend 
the committee for focusing on this topic.
    I have to note, as well, these represent my personal views, 
and not those of the U.S. Government, Department of Defense.
    I will give you the bottom line upfront. The United States 
and China are in a geostrategic and economic competition in 
which development of the ocean economy, also referred to as a 
maritime or blue economy, will play a critically important--and 
particularly from a maritime, commercial, and naval technology 
point of view--important role. This competition will determine 
the future of the global maritime supply chain.
    China has a comprehensive long-term strategy, vision, 
policies, and plans to develop the ocean economy, both at home 
and abroad. The United States does not.
    The OECD in 2016 put out an important report on the ocean 
economy in 2030, noting that the ocean economy makes a 
significant contribution to the overall economy, saying that in 
2010 the ocean economy contributed $1.5 trillion, and by 2030 
estimating that $3 trillion will be value-added growth. This 
important strategic sector is particularly important in an age 
of global trade, investment, and innovation, maritime industry 
expansion, demographic shifts towards coastal zones, climate 
change, and an emerging and growing naval contest between the 
United States and China.
    How and where the ocean economy develops will determine the 
future of the global maritime industry, affecting key aspects 
such as infrastructure and transportation, where the source and 
centers of maritime innovation will emerge, and which countries 
will dominate in determining maritime law, policy, processes, 
and, as mentioned earlier, technical standards, hardware, 
software, and environmental measures and others, both on land 
and at sea.
    Two important global trends that I would like to focus on 
here that are fueling development of the ocean economy 
globally, and that are sure to impact the global maritime 
supply chain are, first, the expanding numbers and types of 
special economic zones, or SEZs, that include specialized 
maritime industrial-themed development zones; and then 
secondly, a related concept of developing maritime clusters, or 
innovation ecosystems, that are designed to spur maritime, 
industrial, and also blue economic growth, technological 
innovation, and doing so in a more sustainable way.
    China is at the forefront of both of these global trends.
    The U.N. Conference on Trade and Development, in its annual 
report on world investment, had a special section on special 
economic zones because is, as UNCTAD put it, explosive growth 
in the use of special economic zones around the world. China 
alone accounts for over 2,500 of all the world's SEZs, nearly 
half of the worldwide total, and then more than half of those 
that are in developing countries.
    China has also pioneered a new form of special economic 
zone that is focused on enhancing maritime, both commercial and 
naval, capabilities by establishing a specialized and pilot 
blue economy development zone, the first being Qingdao, China, 
but also now establishing these along China's long coastline. 
Within the Qingdao blue economic development zone they also 
have what they call Blue Silicon Valley, the idea being clearly 
to advance innovation in the marine and maritime sector.
    In addition, China's blue economy development zones are 
strategically located with military and defense industrial 
interests in mind. As you have noted, commonly understood, 
China's long-term economic and technological development model 
remains based on dual-use, combined, and what they call now 
military-civil fusion of technology development and innovation 
that is intended for both commercial and defense purposes. This 
strategic approach applies to the maritime sector as well, and 
will affect how and the degree to which U.S. and Chinese 
maritime stakeholders can engage, whether in China or overseas, 
and as part of the global maritime supply chain.
    Under the Maritime Silk Road Initiative, China has expanded 
its efforts to promote overseas SEZs, including overseas blue 
economy zones and other blue cooperative programs. As noted in 
the previous panel, in the recent New York Times article, for 
instance, China has leased an entire province in the Solomon 
Islands for development of a special economic zone, though it 
is not clear what industrial or military purposes it plans to 
use it for. But the vehicle is a special economic zone, which 
is an important part of China's own development, and part of 
the allure or attraction of Chinese foreign investment 
overseas.
    In mid-2017 Beijing announced a new ``Vision for Maritime 
Cooperation'' which built upon the 2015 ``Belt and Road Action 
Plan.'' I commend both of these documents to you, to the 
committee; they are both in English, easy to understand. Note 
that the maritime vision, in particular, has a whole litany of 
development projects, including what it calls blue passages, 
blue economic corridors, blue partnerships, blue carbon 
programs--all, of course, with maritime themes--in addition to 
overseas blue economic zones.
    In cooperation, as their plan is, with neighboring regional 
and international partners that stretch across almost all of 
the globe, all of the Indo-Pacific, and stretching into the 
Mediterranean, the Arctic, and, importantly, as well, into the 
deep ocean. Thank you.
    [Ms. Walsh's prepared statement follows:]

                                 
    Prepared Statement of Kathleen A. Walsh, Associate Professor of 
         National Security Affairs, U.S. Naval War College \1\
---------------------------------------------------------------------------
    \1\ These views are based in part on research conducted for a 
forthcoming volume on strategic implications of China and the blue 
economy, as well as ongoing research and presentations on this topic 
dating back to 2013.
---------------------------------------------------------------------------
    Mr. Chairman, Ranking Member and distinguished Members of the 
Subcommittee, thank you for the opportunity to appear before you to 
discuss the topic of China's Maritime Silk Road (MSR) initiative and 
implications for the global maritime supply chain. This is an important 
topic, but one that has not received as much detailed attention as it 
warrants, in my view. So I commend the committee for its focus on this 
topic. Please note that these remarks represent my personal views and 
not official views of the U.S. government.
    Taking a cue from military practice, here is the bottom line up 
front: The United States and China are in a geo-strategic and economic 
competition in which development of the ocean economy (also referred to 
as the ``maritime'' or ``blue'' economy) will play a critically 
important role, particularly in terms of maritime (both commercial and 
naval) technology innovation advances. This competition will determine 
the future of the global maritime supply chain.
                           The Ocean Economy
    According to The Ocean Economy in 2030, a 2016 report by the 
Organization for Economic Cooperation and Development (OECD): ``The 
ocean economy makes a significant contribution to the economy--over 
USD1.5 trillion in value-added in 2010. . .and by 2030, the ocean 
economy is likely to more than double'' to an estimated $3 trillion.\2\ 
This growing strategic sector is particularly important in an age of 
global trade, investment, and innovation, maritime industry expansion, 
demographic shifts toward coastal zones, climate change, and an 
emerging naval contest between the United States and China. How and 
where the ocean economy develops will determine the future of the 
global maritime industry, affecting key aspects such as infrastructure 
and transportation, where the source and centers of maritime innovation 
will emerge, and which countries will dominate in deciding maritime 
law, policy, processes, and technical standards (on hardware, software, 
environmental measures and more), both on land and at sea.
---------------------------------------------------------------------------
    \2\ OECD. The Ocean Economy in 2030 (Paris: OECD Publishing, 
2016).The ocean economy is sometimes also called the ``maritime'' or 
``marine'' or ``blue'' economy. All of these terms include some degree 
of maritime industrial development, technological innovation, 
sustainable development, and environmental conservation as economic 
elements and as parts of an ecosystem. According to the OECD, ``the 
ocean economy represents the sum of the economic activities of emerging 
ocean-based industries (i.e. renewable energy) and established ones 
(i.e. capture fisheries), together with the goods and services of 
marine ecosystems. . .'' OECD, ``The Ocean Economy and Innovation: 
Promoting Sustainable Seas and Oceans with Innovation,'' STI in Focus, 
Directorate for Science, Technology and Innovation (April 2017), http:/
/www.oecd.org/sti.
---------------------------------------------------------------------------
    Two important global trends fueling development of the ocean 
economy and sure to impact the global maritime supply chain are: 1) the 
expanding numbers and types of Special Economic Zones (SEZs) around the 
globe, including specialized maritime industrial-themed development 
zones; and 2) the related concept of developing maritime clusters or 
innovation ecosystems designed to spur ``blue'' economic growth and 
technological innovation in more sustainable ways. China is at the 
forefront of both global trends.
     Global Expansion of Special Economic Zones Promoting Economic 
                              Development
    The United Nations Conference on Trade and Development (UNCTAD) 
published its annual World Investment Report (WIR) 2019, which 
emphasized the economic importance of special economic zones. The 
report shows ``explosive growth in the use of special economic zones 
(SEZs) as key policy instruments to the attraction of investment for 
industrial development.'' \3\
---------------------------------------------------------------------------
    \3\ United Nations Conference on Trade and Development (UNCTAD), 
World Investment Report: Special Economic Zones (New York, NY: United 
Nations Publications, June 2019), p. iv. (Hereafter WIR 2019).
---------------------------------------------------------------------------
    As calculated in WIR 2019, worldwide (in 147 countries) there are 
more than 5,000 SEZs, with 1,000 of these established in the past 
decade and 500 more currently in planning stages.\4\ This growth has 
taken place largely since the late 1990s, when there were less than 
1,000 SEZs across the globe. China, alone, accounts for 2,543 of all 
SEZs, or nearly half (47%) of the worldwide total and more than half 
(53%) of those in developing countries (counting 13 planned zones but 
not China's many smaller-sized industrial or science parks and some of 
its more specialized zones within zones).\5\
---------------------------------------------------------------------------
    \4\ WIR 2019., p. xii.
    \5\ Ibid., pp. 135-143.
---------------------------------------------------------------------------
    As the WIR 2019 notes, SEZs ``are widely used in most developing 
and many developed economies. Within these geographically delimited 
areas governments facilitate industrial activity through fiscal and 
regulatory incentives and infrastructure support.'' \6\ The report 
notes that the United States has 262 SEZs, which represents the highest 
number among developed economies.\7\ In the United States, SEZs mainly 
take the form of foreign trade or customs-free zones and ``are created 
at the instigation of local organizations rather than the federal 
Government''.\8\
---------------------------------------------------------------------------
    \6\ Ibid., p. xii.
    \7\ Ibid., pp. 152-3.
    \8\ Ibid., p. 153.
---------------------------------------------------------------------------
    The development of SEZs represents generally a top-down or 
government-driven effort to foster industrial development and can be 
effective in drawing domestic and foreign investment to economically 
and strategically critical sectors. Establishing an SEZ provides no 
assurance of economic success, but such zones can help spur investment, 
industry and innovation that might otherwise be slow to develop or be 
inefficiently dispersed or disconnected geographically.
    The WIR 2019 notes that Beijing estimates its 156 high-tech 
development zones (HTDZs), for instance, have ``contributed $1.42 
trillion to China's GDP, or 11.5 per cent of the economy'' in 2017 with 
high levels of research and development expenditures to total 
production value as well as being responsible for a large fraction of 
China's overall patent activity, though such Chinese economic data is 
often suspect.\9\ What is clear is that China's economic rise over the 
past 40 years is due in part to China's extensive and continually 
experimental approach to SEZ development.
---------------------------------------------------------------------------
    \9\ Ibid., p. 134.
---------------------------------------------------------------------------
    For example, China has pioneered a novel form of SEZ focused on 
enhancing maritime--including commercial and naval--capabilities by 
establishing a specialized pilot Blue Economy Development Zone in 
Qingdao, China in 2011. Qingdao is located on the Shandong Peninsula 
southeast of Beijing and is the location of the PLA Navy's Northern 
Theater headquarters. Within Qingdao's Blue Economy Development Zone, 
planners also designated what they call a ``Blue Silicon Valley'' or 
maritime industry-focused cluster aimed at advancing marine science and 
technology.
    Beijing has since approved additional Blue Economy Development 
Zones along its long coastline, from Dalian (the northern port home of 
China's first aircraft carrier) to Tianjin, Shanghai, Xiamen, coastal 
sites in Hebei, Jiangsu, Zhejiang and Guangxi Provinces as well as 
Zhanjiang in Guangdong Province--the purported starting point for 
China's Maritime Silk Road and also headquarters of the PLA Navy's 
Southern Theater headquarters.
    In addition to being coastal centers for development of commercial 
maritime industry, China's planned Blue Economy Development Zones noted 
above are strategically located with military and defense industrial 
interests in mind. As has become commonly understood, China's long-term 
economic and technological development model remains based on a dual-
use, combined, ``military-civil fusion'' of technology innovation 
intended for both commercial and defense purposes. This strategic 
approach applies to the maritime sector as well and will affect how, 
and the degree to which, US and Chinese maritime stakeholders can 
engage, in China or overseas, as part of a global maritime supply 
chain.
    As in other countries, China's blue economy concept includes 
promotion of sustainable maritime development and marine conservation 
as part of an innovation ecosystem. But foreign researchers note that 
marine environmental concerns as part of China's maritime and blue 
economy development plans typically rank as a distant last priority 
following innovation and industrial development goals, which Chinese 
researchers also acknowledge. Yet, the ``blue'' sustainable development 
component remains attractive to local officials as well as those in 
developing countries open to or seeking Chinese assistance in 
establishing blue economy development zones of their own.
    In fact, bilateral government-government ``partnerships zones'' are 
becoming popular among developing countries, including partnership 
zones established with and by China. These zones complement China's own 
China Overseas Cooperation Zones (COCZs), established as of 2006 and of 
which 20 have been verifiably established, most (7) located in 
Southeast Asia, with four each in Russia across across Africa, among 
other locations.\10\
---------------------------------------------------------------------------
    \10\ Ibid., p. 157.
---------------------------------------------------------------------------
    China is a prominent actor, in fact, in developing overseas SEZs of 
various sorts, including zones with maritime importance. The WIR 2019 
notes that, ``The first instance of Chinese involvement in the 
establishment of SEZs in Africa was in 1999, when China signed an 
agreement with Egypt to develop an industrial zone in the Suez Canal 
area. In 2006, as part of the implementation of its 11th five-year 
plan, China announced the development of 50 SEZs overseas, seven of 
which were to be in Africa. Subsequently, as Chinese investment and 
interest in Africa deepened, plans were announced for several 
additional zones to be built with Chinese support. For instance, China 
signed an agreement with Djibouti in 2016 to build an FTZ [free trade 
zone] as part of the Belt and Road Initiative; the first phase of the 
zone was launched in 2018. This 10-year project, costing $3.5 billion, 
is to create Africa's largest FTZ, spanning 4,800 ha. The zone will be 
managed by a joint venture comprising the Government of Djibouti as the 
majority shareholder and three Chinese companies: the China Merchants 
Group, Dalian Port Authority and IZP. Involvement by Chinese 
development companies has also been reported in Algeria, Angola, 
Ethiopia, Kenya, Mauritius, Nigeria, Rwanda and Zambia, among others.'' 
\11\ It was not lost on the United States and other naval and maritime 
powers that China also has built its first overseas military base (a 
naval support facility) in Djibouti, next to a major port and not far 
from the U.S. military's own base.
---------------------------------------------------------------------------
    \11\ Ibid., pp. 149-150.
---------------------------------------------------------------------------
    Under the Maritime Silk Road initiative, China has expanded its 
efforts to promote overseas SEZs, including overseas Blue Economy Zones 
and other ``blue'' cooperative programs, as discussed below.
     US & International Ocean/Maritime Clusters of Innovation and 
                Sustainable ``Blue'' Economy Development
    The comprehensive OECD study, The Ocean Economy in 2030, concludes 
by recommending a focus for future SEZ development on sustainable 
development, noting that ``the sustainable development agenda 
increasingly drives MNEs' [multinational enterprises'] strategic 
decisions and operations. . .'' \12\ The WIR 2019 report shares this 
advice, noting that new SEZs focused on meeting sustainable development 
goals (SDGs) represent a relatively new trend and promising development 
model.\13\
---------------------------------------------------------------------------
    \12\ OECD. The Ocean Economy in 2030, p. xiv.
    \13\ WIR 2019, p. 205.
---------------------------------------------------------------------------
    This dynamic has already begun to emerge in the maritime realm in 
the form of ocean- or maritime-oriented innovation clusters, many of 
which include emphasis on sustainable development efforts. According to 
a World Ocean Council White Paper, there are already dozens of (over 
40) ocean or maritime industry clusters in development around the 
globe, including in the United States and China.
    As defined by the World Ocean Council (WOC), ``Ocean/Maritime 
Clusters are geographic concentrations of similar or related maritime 
firms--such as shipping, seafood, marine technology, and/or port 
operations--that share common markets, technologies, worker skill 
needs, and are often linked by buyer-supplier relationships and operate 
in close interactions with another directly and through multiple 
networks.'' \14\ As noted, many of these clusters also include a focus 
on sustainable development. Ocean/maritime clusters are often found 
within or near SEZs.
---------------------------------------------------------------------------
    \14\ Hansen, Eric Rolf, et al., Ocean/Maritime Clusters: Leadership 
and Collabortion for Ocean Sustainable Development and Implementing the 
Sustainable Development Goals. World Ocean Council White Paper, 
Economic Transformations Group & World Oceans Council, 2018, p. 4.
---------------------------------------------------------------------------
    These ocean or maritime industry clusters, whether planned (as in 
China) or forming organically (as is often the case in the United 
States), seek to enhance prospects for investment, industrial 
development, and innovation in a fashion similar to that found in 
Silicon Valley's networked cluster of ICT industry firms and related 
organizations. This innovation ecosystem model concept promotes 
continuous and sustainable (in this case, maritime) industry 
development through establishment of formal and informal networks among 
the area's varied stakeholders, setting up opportunities for both 
competition and cooperation to ensure a thriving business environment, 
both literally and figuratively.
    The WOC maritime clusters report concludes, in fact, that, ``the 
way forward is a focus on business growth and investment opportunities 
for responsible, sustainable ocean use (sometimes referred to as the 
`Blue Economy' and 'Blue Growth'), which considers the intersection of 
ocean economic benefits, environmental health and societal value in 
policies and best practices. . .Ocean/Maritime Clusters can lead ocean 
sustainable development and realize economic benefits.'' \15\ In other 
words, maritime clusters ought to focus not only on promoting industry 
and innovation but also on more environmentally friendly, sustainable 
development-oriented practices such that today's profits don't lead to 
tomorrow's marine ecological disaster.
---------------------------------------------------------------------------
    \15\ Hansen, et al., p. 3.
---------------------------------------------------------------------------
    The development of innovative maritime clusters that also promote 
environmental sustainability is an area in which the United States is 
likely to be more competitive with other countries, particularly China 
and developing economies, where environmental laws, regulations and 
practices are less established or advanced. In this regard, US maritime 
stakeholders could learn much from European countries, too, where 
environmental policies are prompting innovative approaches to maritime 
development and use of marine space. Yet, the United States presently 
lacks a clear strategy for sustainable development of the maritime 
sector, relying instead mainly on local and state leaders to foster 
enhanced maritime trade through investment, innovation and 
sustainability with only limited federal attention to the ocean economy 
overall.
    China, alternatively, in addition to having experimented with 
development of SEZs for four decades, already has a vision and plans 
for all of the above and is implementing its plans both domestically 
and internationally, the latter as part of Xi Jinping's Maritime Silk 
Road initiative. A European Council on Foreign Relations April 2018 
study determined, for instance, that ``Europe should emulate China's 
blue economy as an engine of growth and wealth and encourage innovation 
to respond to well-funded Chinese industrial and R&D policies.'' \16\ 
In short, Beijing is ahead of the rest of the world in conceiving a 
national and international strategy to leverage ocean/maritime/blue 
economy opportunities and could reap significant, first-mover 
commercial and defense industrial as well as technological advantages 
as a result. If so, China's efforts could quickly shape the global 
maritime supply chain in surprising and strategically complicated ways 
for the United States and our allies, partners and friends across the 
globe.
---------------------------------------------------------------------------
    \16\ Mathieu Duchatel and Alexandre Sheldon Duplaix, Blue China: 
Navigating the Maritime Silk Road to Europe,'' European Council on 
Foreign Relations Policy Brief--Summary (ECFR/ECFR/255, April 2018).
---------------------------------------------------------------------------
China's Maritime Silk Road, Maritime Vision & Action Plan
    In 2013, Xi Jinping introduced China's Maritime Silk Road as part 
of a larger ``One Belt, One Road'' strategic initiative (see Figure 1, 
bottom dotted line below).
Figure 1: ``1 Belt, 1 Road'': ``New Silk Road Economic Belt, 21st 
Century Maritime Silk Road'' (Xinhua, 2013)

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    As explained by PRC State Councilor Yang Jiechi in 2015, ``The 21st 
Century Maritime Silk Road will present a rich and colorful program of 
cooperation. In addition to maritime transport and resource 
development, it will involve research, environmental protection, 
tourism, disaster reduction and prevention, law enforcement cooperation 
and people-to-people exchanges on the sea. Not only will it look at the 
development of the blue economy and building of oceanic economic 
demonstration zones offshore, it will also build onshore industrial 
parks, marine science and technology parks and training bases for 
ocean-related personnel. Not only will we go utilizing the oceanic 
resources, we will also protect well our oceanic environment. Not only 
should we deliver a good life to our people along the coast, we should 
also bring about an interconnected development of the hinterland and 
coastal regions to achieve common prosperity.'' \17\ These are hefty 
promises and ambitious plans. While it's unclear if China can achieve 
these aims, it's fairly certain Beijing will try.
---------------------------------------------------------------------------
    \17\ China Ministry of Foreign Affairs, Press Release (March 28, 
2015), http://www.fmprc.gov.cn/mfa_eng/zxxx_662805/t1249761.shtml
---------------------------------------------------------------------------
    The inclusion of ``development of the blue economy'' in Xi's MSR 
initiative is significant. Though China's blue economy development 
efforts date back formally to the Hu Jintao era (2002-2012/13), 
Beijing's initial enthusiasm for this development concept as a means of 
spurring China's domestic maritime economy and dual commercial and 
naval technology innovation efforts appeared to wane for a time, 
becoming mired in bureaucratic rivalries or technology transfer 
challenges and other matters. Xi's inclusion of the blue economy in the 
MSR appears to have revitalized the idea as an attractive means of 
promoting foreign direct investment and foreign maritime technology 
transfer in China's blue economy development zones but also, perhaps 
primarily, through China's development of overseas blue economy 
development zones.
    Where China has found it harder in some ways to continue to attract 
US and other foreign ocean researchers, scientists, venture 
capitalists, entrepreneurs, academics, businesses, and other innovative 
actors to China, the MSR envisions China building a network of overseas 
BE development zones along the MSR as a means of achieving the same 
foreign technology transfers while emphasizing the opportunities such 
zones also provide local overseas economies and communities, presenting 
such development zones as a ``win-win'' deal.
    In mid-2017, Beijing announced a new Vision for Maritime 
Cooperation, which built on Xi Jinping's Belt and Road Action Plan 
announced in 2015.\18\ These two documents, in particular, provide a 
blueprint of China's plans to develop an integrated global maritime 
industrial production, supply and technological development chain 
across the MSR.
---------------------------------------------------------------------------
    \18\ See, respectively, ``Vision for Maritime Cooperation under the 
Belt and Road Initiative,'' Xinhua News Agency (June 20, 2017), http://
news.xinhuanet.com/english/2017-06/20/c_136380414.htm; and One Belt One 
Road Action Plan. Beijing: Xinhua News Agency, March 2015. Both 
documents were available in English-language translations.
---------------------------------------------------------------------------
    China's vision and action plans clearly outline how Beijing seeks 
to develop an overseas network of maritime industrial zones and 
innovative maritime clusters that are integrated with China's domestic 
maritime sector. This ocean economy network is being built, in part, 
through development of what Beijing has termed ``Blue Passages", ``Blue 
Economic [cross-border regional] Corridors,'' ``Blue Partnerships", 
``Blue Carbon Programs", and the aforementioned ``Blue Economic Zones'' 
in cooperation with neighboring, regional and international 
partners.\19\ These plans cover most of the globe, including all of the 
Indo-Pacific, stretching into the Mediterranean through to the Artic 
and into the deep ocean.
---------------------------------------------------------------------------
    \19\ Regional Economic Zones include, or instance, the Beibu Gulf 
Economic Zone; there are thus far six Regional ``Blue'' (Economic) 
Corridors (on land & sea), including the China-Pakistan Economic 
Corridor (CPEC), Bangladesh-China-India-Myanmar, China-Indochina 
Peninsula, New Eurasian Land Bridge, China-Mongolia-Russia, and China-
Central Asia-West Africa; ``Blue Partnerships'' exist with the European 
Union and some island states; and various ``Blue Passages'' are 
envisioned connecting China's domestic ocean economy to those 
elsewhere, namely: China-Oceania-South Pacific, China-Indian Ocean-
Africa-Mediterranean Sea, and others (including one passage that seeks 
to connect China to the Arctic).
---------------------------------------------------------------------------
    China has advanced also the related concept of building a digital 
or ``Information Silk Road'' aimed at connecting maritime 
infrastructure and networking blue development efforts along the MSR. 
The 2015 Belt and Road Action Plan proposes, for instance, a range of 
development programs: ``cross-border optical cables and other 
communication trunk line networks'' (transcontinental submarine & 
satellite); plans to ``form an infrastructure network connecting all 
sub-regions in Asia'' as well as prioritizing facilities and network 
``connectivity"; standardized transportation, maritime, customs, 
logistics, info-technology and technical standards; promotion of 
``green and low-carbon infrastructure construction and operation 
management"; and the establishment of maritime cooperation centers and 
other collaborative efforts in ocean engineering, exploration, 
environmental protection industries, hydropower, and more.
    Xi's 2017 Maritime Vision further advises that ``Countries along 
the Road are encouraged to enhance cooperation through pairing sister 
ports and forging port alliances. Chinese enterprises will be guided to 
participate in the construction and operation of ports. Projects for 
the planning and construction of submarine cables will be jointly 
advanced to improve connectivity in international communications.''
    Finally, the 2017 Vision also offers planning assistance in 
promoting a full range of blue economy activities, noting: ``China is 
prepared to provide technical assistance to countries along the Road in 
drafting plans for sustainably utilizing marine resources. Enterprises 
are encouraged to participate in marine resource utilization in a 
responsible way. . .China will join in efforts by countries along the 
Road in establishing industrial parks for maritime sectors and economic 
and trade cooperation zones, and promote the participation of Chinese 
enterprises in such endeavors. Demonstration projects for developing 
the Blue Economy will be implemented and developing countries along the 
Road will be supported in mariculture to improve livelihoods and 
alleviate poverty. China will also work with countries along the Road 
in developing marine tourism routes and high-quality tourism products, 
and in setting up mechanisms for tourism information sharing.''
    Thus, in the case of maritime competition, China's strategic 
intentions under Xi's leadership are clear, and much of the PRC's basic 
long-term development plans publicly available to assess. The challenge 
for analysts and officials, therefore, lies more in determining 
whether, why, how far, and how fast China might succeed--or not--in 
implementing its ambitious plans. In conceiving its MSR initiative and 
network of ocean/maritime/blue economy zones and clusters, China's 
strategic head start provides a competitive advantage but one that will 
not necessarily be maintained, particularly if the United States and 
its allies and partners decide to implement a strategy and plan(s) of 
our own to contend in this strategically critical space.
    Given China's clear rejection under Xi's leadership of Western, 
liberal-democratic values as well as the Trump administration's 
adoption of tariffs as a means to compel change in Chinese trade and 
investment activities, the growing geo-strategic and economic 
competition between China and much of the rest of the developed world 
is intensifying. It is unclear if the US and Chinese economies will be 
``decoupled", as suggested by some White House officials. But the 
intensifying strategic competition is, at the very least, likely to 
complicate and slow future development of the global maritime supply 
chain, which could evolve into separate industrial spheres of 
influence. In that case, China's head start in terms of strategic 
development of an ocean economy at home and abroad could prove more 
challenging.
Advances in the Ocean/Blue Economy in the United States
    In trying to understand China's innovation efforts and blue economy 
endeavors, I have conducted a modest amount of research in the United 
States and Europe to get a better idea of how these activities compare. 
In the United States, my outreach efforts indicate that ocean and blue 
economy activities remain largely local- or state-led initiatives 
driven by area entrepreneurs and officials seeking to leverage existing 
as well as emerging, start-up maritime enterprises and innovative 
opportunities. This primarily bottom-up (rather than top-down driven) 
approach to innovation is characteristic of how the United States 
historically has developed innovative opportunities, networks and 
clusters and represents an important comparative advantage. In this 
respect, maritime innovation in the United States appears to be robust 
and dynamic.
    At the same time, however, as ocean/maritime/blue economies 
continue to grow and expand around the United States, the federal 
government can playing an important supporting role to local ocean/
maritime/blue innovation efforts by providing data and other 
information on the totality of these local efforts, regular analyses of 
these activities, and by providing some amount of funding to assist 
local actors to better understand how they fit into the larger 
picture--domestically and globally--as well as how they might find 
opportunities to engage within and outside their region, whether 
through business ventures, research collaborations, or federal R&D 
opportunities.
    The federal government also can play an important role in 
collecting data to help officials better understand and leverage local, 
regional and national economic centers of maritime innovation. Such 
efforts are already taking place. Though often under the national 
radar. For instance, local-level efforts to understand what 
stakeholders already or potentially could be involved in regional 
ocean/maritime/blue economy clusters are occurring and local parties 
are working to connect stakeholders to one another through business, 
academic and government-sponsored conferences, workshops, contact 
lists, and more. In the absence of a national-level strategy, these 
laudable local-level efforts are occurring in an often ad-hoc manner 
and/or by parties with an interest in only a section(s) of the maritime 
economy, which means opportunities are being lost. Also, information on 
potential stakeholders as well as a systemic understanding and analyses 
of strategic implications are likely to be incomplete.
    Such local, ad-hoc, or area-specific efforts are also very unlikely 
to provide national leaders with a clear understanding of how 
competitive the United States is--or is not--in maritime development 
and innovation vis-a-vis other countries, particularly China. If the 
United States wishes to ensure the global maritime supply chain remains 
one in which U.S. researchers, enterprises, policy, technologies and 
standards play a leading and essential role, then a more strategic and 
systemic approach is needed to understand changes to the global 
maritime supply chain, and particularly the role played by ocean/
maritime/blue economy and innovation zones and clusters being formed 
across the United States and internationally.
Recommendations for a Strategic Way Ahead
    There is much that Congress can do to support the United States' 
leadership in ocean science, maritime industry, blue technology, marine 
conservation and sustainable maritime development, all of which will 
impact the global maritime supply chain as well as Coast Guard and U.S. 
Navy development and acquisition efforts. Below are a few ideas for the 
Committee's consideration.

      The United States needs a comprehensive strategy focused 
on how to both facilitate and leverage development of the ocean or blue 
economy at home and abroad.
         The Trump administration in 2018 revoked the Obama-era 
National Ocean Policy, replacing it with a brief Executive Order 
focused on ``ocean-related matters'' that mentions in the body 
``environmental'' interests and ``sustainable use'' substantively only 
once, each, and ``innovation'' not at all.\20\ Under new, joint 
leadership of the Office of Science and Technology Policy (OSTP) and 
Council of Environmental Quality (CEQ), the latter initiative appears 
to be a low priority for the current administration. This observation 
is supported by the brief section on ``oceans'' in the White House 
budget R&D memo that directs ``Departments and agencies should 
prioritize new and emerging technologies and collaborative approaches 
to efficiently map, explore, and characterize the resources of the U.S. 
exclusive economic zone. . .[and] should also focus on processing and 
making publically available data that characterize natural resources 
and human activities and on R&D that improves understanding of and 
supports effective responses to changes in the ocean system''.\21\ This 
narrow scope and limited efforts effectively represent a strategic step 
backward in meeting US national security, economic, technological and 
sustainable development interests.
---------------------------------------------------------------------------
    \20\ Executive Order 13840, entitled ``Ocean Policy to Advance the 
Economic, Security and Environmental Interests of the United States", 
was issued June 19, 2018 and overrides Obama-era policies establishing 
the National Ocean Policy. See Executive Office of the President, 
``Executive Order 13840,'' The Federal Register (June 19, 2018) 83 
FR29431, pp. 29431-29434
    \21\ Executive Office of the President, ``Memorandum for the Heads 
of Executive Departments and Agencies on Fiscal Year 2021 
Administration Research and Development Budget Priorities'' (August 30, 
2019), https://www.whitehouse.gov/wp-content/uploads/2019/08/FY-21-RD-
Budget-Priorities.pdf.
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         While the United States' advantage in innovation stems mainly 
from local community and state-level, bottom-up, entrepreneurial 
activities, a national strategy for development of the ocean or blue 
economy can facilitate and help coordinate such efforts to ensure 
local-level advances also serve national economic and defense 
requirements.
      Congress should continue to support ocean science 
research and, if necessary, mandate a comprehensive ocean economy 
strategy (per above) to guide national priorities. Ocean science, 
technology engineering and math (O-STEM) educational support starting 
at K-12 programs and carrying through to graduate education and federal 
laboratory research, is essential, particularly where these programs 
engage with other actors as part of ocean/maritime zones and clusters.
      Congress can authorize executive departments and agencies 
to develop and facilitate adoption of export control policies, 
processes and expertise specific to the expanding and increasingly 
global maritime industry sector.
         Ocean science and research is by nature a global enterprise, 
including work by and with Chinese scientists and researchers; maritime 
innovation and technology development, however, must be carefully 
protected in the face of decades of Chinese efforts to exploit foreign 
technology transfers. US ocean/maritime/blue economy actors are 
becoming increasingly engaged around the globe. At the same time that 
we must find ways to leverage the maritime S&T and R&D that is taking 
place around the country and across the globe, doing so involves 
inherent risks, particularly when interacting with Chinese and other 
foreign counterparts. That is not a reason not to engage, but cause to 
do so strategically while taking care to protect intellectual property 
and other U.S. assets--for instance, by applying hard lessons learned 
in assisting emerging ocean/maritime/blue economy and innovation 
clusters across the United States in establishing strong export control 
and technology transfer expertise and corporate or university research 
policies before problems arise.
         Just as other countries seek to secure a presence in our 
Silicon Valley in order to be on the ground where computer software and 
other new technologies are being developed, the United States should 
encourage an American presence in overseas ocean/maritime clusters and 
blue economy zones so as to ensure US companies and researchers have 
knowledge of, and familiarity with, what maritime industry developments 
and ocean innovations are occurring elsewhere around the globe and in a 
timely fashion; US federal R&D labs should also focus on understanding 
what implications are arising from these emerging ocean/maritime 
centers.
      More specifically, Congress could support research--
particularly field research--aimed at gaining a deeper understanding of 
whether, how effectively, and how quickly China's MSR network and 
related maritime industrial and innovation plans are being implemented.
         Many research institutions around the world are trying to 
analyze and assess China's MSR. These laudable efforts exist far and 
wide but are typically intermittent and generally lack a consistent, 
long-term or comprehensive focus. Congress might usefully provide 
funding for a public repository of such information and analyses, which 
would aid US and allied research efforts into China's near- and long-
term MSR activities. Earlier this year, I recommended the U.S. Navy 
establish (or support) a dedicated Blue Century Initiative Institute as 
a research center and repository of information and analysis on the 
developing concept of an ocean/maritime/blue economy in order to aid 
its own strategic and innovative endeavors. Such a one-stop public 
research institute and library also could serve--or be leveraged by--
the U.S. Coast Guard. If any such center were to be established, it 
should include a focus on technological innovation but also on 
sustainable development dynamics to ensure that any work takes into 
account the full range of commercial and military maritime advances 
that are possible as well as ensure a sustainable ecosystem of maritime 
innovation develops to serve near- and long-term US economic and 
national security interests.
      At a minimum, Congress can support research specific to 
development of blue technology. As this subcommittee noted in its May 
2018 hearing, `` `Blue technology' is a term that describes a wide 
swath of technologies and systems that support, sustain, and integrate 
the U.S. and global ocean economy. Accordingly, systems and 
technologies such as autonomous vehicles, sensors (both remote and in 
situ), ocean observation platforms, and hydrographic services, among 
many others fall under the term. The integration of advanced blue 
technologies could improve operational efficiencies and the Coast 
Guard's mission performance. . .improved understanding of the maritime 
environment, and optimal deployment and use of conventional Coast Guard 
assets (e.g., cutters, aircraft, small boats, etc.).'' \22\ Blue 
technology holds promise far beyond traditional maritime industries 
and, thus, represents a worthwhile focus for U.S. scientific research 
funding.
---------------------------------------------------------------------------
    \22\ Subcommittee on Coast Guard and Maritime Transportation of the 
Committee on Transportation and Infrastructure, ``Hearing on Blue 
Technologies: Use of New maritime Technologies to Improve Efficiency 
and Mission Performance'' (Washington, DC: Government Printing Office, 
May 6, 2018), p. iv.
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      Finally, as many before me have advised, Congress should 
ratify the United Nations Convention on the Law of the Sea (UNCLOS) so 
that the United States can be a constructive and driving force in 
shaping critical decisions made or influenced at this important 
international legal forum (and to which China is a member). If Congress 
determines ratifying UNCLOS is not in the U.S. interest, then it is 
advisable for the United States to initiate an alternative or follow-on 
treaty or forum to address the future sustainability and use of the 
world's oceans.

    Thank you for your invitation. I stand ready to provide answers to 
any questions you might have.

    Mr. Maloney. I thank you, Ms. Walsh. I will now proceed to 
Members' questions. Under the 5-minute rule I recognize myself 
for 5 minutes.
    Ms. Walsh, I am struck by your testimony. I agree 
wholeheartedly with the point you are making. But can you tease 
that out for me a little bit?
    When you talk about the geostrategic and economic 
competition, and you point out rightly the range and scope of 
it, this is unlike the competition we have with other major 
countries. Right?
    I mean this is not the same as the global competition we 
have with Japan, or the global competition we have with 
Germany, or even the pressure on our manufacturing sectors or 
other industries like shipbuilding that we might find with 
other emerging economies or nations.
    Talk about how it is different, and particularly how it 
depends for its orientation, for its success to date, on the 
authoritarian model that the Chinese have embraced, despite 30 
years of economic policy and trade policy and wishful thinking 
on behalf of American policymakers that the Chinese are moving 
closer to our model, but instead, if anything, seem to be 
accelerating away from it.
    Can you just talk about how that competition is central to 
what we see with the Maritime Silk Road, with One Belt, One 
Road more broadly, with the Digital Silk Road, and with all of 
its components?
    Ms. Walsh. Sure. Thank you, Congressman, for your question.
    I remember when I first saw the map of the Belt and Road. I 
was shocked, honestly. I have studied China since 1990, so 
quite a long time, and that is something I never thought I 
would see from a Chinese paper or government product.
    That said, I think that Xi Jinping's China is a very 
different China than what we have seen in the past. I think 
there was reason, I think, that we could engage with China in 
the past. It was following along, or wanting to be part of the 
international global order, which is based on, as you note, the 
fundamental rule of law, of Western liberal democratic ideals. 
I think Xi Jinping's China is fundamentally different.
    And I think it has taken some time to understand that Xi 
Jinping has a very different view of the international global 
order. And I was one of the first, I think, to say China is a 
revisionist power. Under Xi, China does want to remake the 
international order in a more Chinese model approach. This is 
fundamentally different, and much more concerning than the 
China of the past.
    This China of old has the same, you know, industrial 
policies, 5-year plans, long-term plans. That hasn't changed. 
But what has changed is that China wants to remake and revise 
the international order, which gets down to that fundamental 
difference between a Communist-led China, a Communist Party-led 
China, and what the international community, U.S. and others, 
have set up, which relies on the rule of law.
    Mr. Maloney. And when you say revise and remake, another 
word would be to displace the United States. What is your view 
of that?
    Ms. Walsh. I would agree with that now. I would not have, 
you know, 7, 8 years ago, before Xi. I think that was a 
different China. I think that we--our strategy may have fit 
them, but I think our strategy has to adjust to a new and more 
aggressive China.
    Mr. Maloney. And so is it fair that we should--when we talk 
about displacing, we are not just talking about displacing us 
economically from a particular industry, or even from a 
particular region. We are talking about displacing our global 
economic model with a different one. Isn't that right? One led 
by China.
    And is it fair that we should understand the components of 
One Belt, One Road, Maritime Silk Road, Digital Silk Road all 
as component elements of a larger strategy to displace the 
United States and its market-based, rules-based system with a 
Chinese authoritarian model?
    Ms. Walsh. Yes, I would agree with that. But I would also 
caution, as I have before and with others, that this is Xi 
Jinping's China. I am not convinced that this is going to be 
China of the future, necessarily. It is the China we need to 
deal with, obviously. We need a new strategy, but----
    Mr. Maloney. Ms. Walsh, Xi Jinping has made clear that he 
has no intentions of going anywhere. Isn't that fair? Do you 
know something I don't about the next Chinese leader? Because I 
think the next Chinese leader is Xi Jinping.
    Ms. Walsh. All right. I would just caution----
    Mr. Maloney. Isn't that right?
    Ms. Walsh [continuing]. That, as a strategist, you want to 
be prepared for the potential of change to happen. And if that 
were to happen, we want to have that in mind if we were to 
develop a long-term strategy----
    Mr. Maloney. I couldn't agree more. In fact, that is why we 
are holding this hearing, one of the reasons.
    But you would agree that hope isn't a strategy, right?
    Ms. Walsh. No----
    Mr. Maloney. You would agree that we have something to say 
about whether we are confronted with this China or the China we 
had hoped for, the China we hope to see in the future.
    Mr. Hillman, I only have a few seconds left, but I know you 
made the point about cooperation with China. None of us wants a 
purely confrontational relationship with the Chinese. Some of 
us feel as though we are being pushed in that direction 
aggressively, and we better be prepared for it. Is it possible 
to cooperate our way through this global competition?
    Are we overstating the risks of what we are talking about 
here today?
    Are we being too alarmist?
    Mr. Hillman. So I think you do have to think through what 
the risks are, and then you plan toward those. And so I don't 
think that that has been alarmist at all. I think we are having 
a healthy reassessment of what interdependence has meant for 
us. And so I think looking at the maritime dimension of that 
certainly makes sense.
    I do think that there is more we can do, in terms of our 
analysis, to separate things that are threatening from things 
that are benign, or harmless, or sort of white elephant 
projects. So to give you an example with ports, not every port 
is some Trojan horse Chinese naval facility.
    But being able to go through that takes--you need to have 
information about who is involved and what the port looks like, 
and there is an art to it. And, you know, our Government needs 
to be doing more of that to separate these harmful activities 
from the ones that are OK and can be encouraged.
    Mr. Maloney. I thank the gentleman.
    Mr. Gibbs?
    Mr. Gibbs. Thank you. Ms. Walsh, you talked about how you 
were surprised when you saw the map. I believe it is this map 
[indicating a document], where there are 92 countries that have 
formally endorsed the Belt and Road project. And, of course, 
most of them are in Asia, some in Africa, a few in South 
America.
    But it is interesting when we talk about choke points, you 
know, the Panama Canal, the Suez Canal, the Strait of Hormuz--
oh, the Persian Gulf, Panama, and those countries around the 
Red Sea and, of course, in the Middle East are all colored red. 
So they are all part of the Belt and Road project.
    Obviously, today, our U.S. Navy, you know, keeps those 
areas open. But I guess I am just thinking with the initiatives 
that China is doing, they probably could cause havoc without a 
military action, because they got their foot in the door. They 
control--they make investments there. So it could be political, 
it could be a mechanical thing, you know, the assets of the 
infrastructure.
    So, I mean, what is the course moving forward?
    Ms. Walsh. Well, as my colleague said, I would advocate, as 
you are talking about here, we need a comprehensive strategy to 
deal with this.
    China's hard power ports and capabilities that they are 
building literally at sea and on land, that is hard power. We 
know about their navy and commercial shipbuilding.
    It is also soft power, which is the part I think you may be 
getting at, too, which is, you know, you develop a special 
economic zone. That is attractive to a lot of countries around 
the world. You come in with money and infrastructure loans and 
so on. The blue economy is an important soft power asset that 
China has and we don't. That is something that countries will 
want, its maritime industry, jobs, innovation, or at least 
promised, and also sustainable industry and innovation. That is 
a soft power tool that will expand that map, I expect.
    And then finally, as you note, coercion. We have seen China 
use economic coercion in the past. I expect they will continue 
to do this. And once you have both the land-based assets and 
control, and the willingness to use it, and then you expand 
that out to sea, I think that is a whole different way of 
looking at power and presence that we are not ready yet to deal 
with.
    Mr. Gibbs. Now, most of these countries that are on this 
list are not really allies of ours. Some are: South Korea, 
Israel, Jordan, Panama.
    So, you know, I guess I am just kind of wondering what is 
happening here. The carrot approach that China is using by 
bringing in dollars, capital investment, they are just buying 
into it, it doesn't matter? Or, you know----
    Ms. Walsh. I think we need a holistic strategy. You know, 
much of what I heard in the previous panel--and I often hear--
is whole-of-Government, but it really is a defense-oriented, 
military-oriented allies and partners strategy. I think that is 
insufficient.
    I think it needs to be economic, diplomatic, innovative, 
and, of course, also military, defense, security. But it is--
whole-of-Government is too simplistic. It has to be holistic. 
To me that means we need a comprehensive strategy, and we need 
somebody to run that, whether it is one person or one 
institute, one organization to focus on this, because it is too 
much for any of us.
    Mr. Gibbs. I agree. And, you know, I am glad you held this 
hearing, Chairman, just to bring this to light, because I don't 
think most people really understand what is going on.
    I think a lot of American citizens understand that China--
we have a lot of challenges with China and, you know, what we 
are going through with the trade war. I think maybe President 
Trump has got it right, that we have been financing a lot of 
stuff in China, and now overseas. Maybe we get the trade done, 
we get some equilibrium there, because this is not sustainable, 
I think, for the future of our country, for our national 
security. So----
    Ms. Walsh. The first thing, though, we need to understand, 
the scope and the details, I think, and having a way to do 
that, so that officials and others can really understand, and 
then come up with a strategy.
    Mr. Gibbs. And I guess, just closing, right now we still 
are the superpower. We project our power to promote peace 
around the world--basically, the aircraft carrier groups. And I 
know China is trying to build their capacity that way, too. So 
I think that is a concern.
    It is economic, like I said earlier, plus it is military. 
Put the two together, and that is what makes it a strong force. 
So we have to be prepared for that.
    So I have nothing else. I yield back and I think we are 
probably done.
    Mr. Maloney. I thank the gentleman. Given the lateness of 
the hour, we will be concluding.
    I want to thank the panel. I also just want to underscore a 
couple of closing points.
    We saw recently, in fact, with respect to the Solomon 
Islands, that they severed diplomatic relations with Taiwan, 
further isolating Taiwan diplomatically. I think that serves a 
pretty good example of how these issues get linked, and how it 
becomes pretty impossible to resist other areas of Chinese 
influence internationally when you are so interwoven, and how 
dependent our participation in this competition is, on the 
point Mr. Hillman made, that we assume a certain model of what 
we are dealing with. I think you made this point as well, Ms. 
Walsh.
    I thank my colleagues on the other side of the aisle for 
the bipartisan remarks today, because I want to close by 
pointing out that a lot of us feel that, for 40 years, both 
parties have participated in a bipartisan way with a strategy 
towards China that is starting to show real limitations. Maybe 
it is not forever. Maybe it is dependent on the current regime, 
but it is real.
    And I think we are beginning to see in a robust, bipartisan 
way a reassessment on Capitol Hill. That is going to stretch 
across a lot of different areas of jurisdiction, and the whole 
of Government certainly sums it up.
    But it is not just Government, is it? It is also the 
American private sector. It is also the American not-for-profit 
sector. It is also our academic institutions. Those are all 
elements of the Chinese strategy. And we need to enroll those 
sectors in our strategy, as well. We prefer to have them not 
under the control of the Government, but the important role 
they play is evident when you see the way China is executing on 
its global strategy through all those areas and more.
    So with that I want to thank the panel. I thank my 
colleagues.
    And I will ask unanimous consent that the record of today's 
hearing remain open until such time as the witnesses provide 
answers to any questions that may have been submitted to them 
in writing. Not sure there were any, but if there are.
    Further, I ask unanimous consent that the record remain 
open for 15 days for any additional comments and information 
submitted by Members or witnesses to be included in the record 
of today's hearing.
    Without objection, so ordered.
    If no other Members have anything to add, then the 
subcommittee will stand adjourned.
    [Whereupon, at 4:53 p.m., the subcommittee was adjourned.]



                       Submissions for the Record

                              ----------                              

  Prepared Statement of Hon. Sam Graves, a Representative in Congress 
     from the State of Missouri, and Ranking Member, Committee on 
                   Transportation and Infrastructure
    Thank you, Chairman Maloney.
    As a farmer and a Congressman whose district is bounded by the 
Missouri and Mississippi Rivers, I understand the necessity of access 
to international markets.
    Since 90 percent of international trade moves by sea, access to 
those markets requires access to maritime transportation.
    China clearly understands the importance of controlling the levers 
of maritime transportation and has set up a government-backed 
initiative to ensure it can control trade through the Pacific basin and 
between the Pacific and Europe.
    As the Committee's Ranking Member and as a Member of the Armed 
Services Committee, I am concerned that the trade network they are 
establishing through ship construction and operation, and 
infrastructure investment can also be used by China's military.
    I looked forward to hearing from the witnesses about the impact of 
China's Maritime Silk Road Initiative on U.S. maritime trade, as well 
as the ability of China to project forces through the Pacific basin.
    Mr. Chairman, thank you for holding this hearing today.

                                 
Letter of October 17, 2019, from Scott N. Paul, President, Alliance for 
 American Manufacturing, Submitted for the Record by Hon. Sean Patrick 
                                Maloney
                                                  October 17, 2019.
Hon. Sean Patrick Maloney,
Chairman,
Subcommittee on Coast Guard and Maritime Transportation, U.S. House 
        Committee on Transportation and Infrastructure, 2331 Rayburn 
        House Office Building, Washington, DC.
Hon. Bob Gibbs,
Ranking Member,
Subcommittee on Coast Guard and Maritime Transportation, U.S. House 
        Committee on Transportation and Infrastructure, 2446 Rayburn 
        House Office Building, Washington, DC.

RE: Comments regarding the October 17th Subcommittee on Coast Guard and 
Maritime Transportation's Hearing on China's Maritime Silk Road 
Initiative: Implications for the Global Maritime Supply Chain

    Dear Chairman Maloney and Ranking Member Gibbs:
    The Alliance for American Manufacturing appreciates the opportunity 
to submit these comments regarding the October 17th hearing on China's 
Maritime Silk Road Initiative: Implications for the Global Maritime 
Supply Chain. This hearing comes at a critical time, as the United 
States wrestles with the economic and national security implications of 
the deterioration of domestic manufacturing capacity in a wide range of 
industries, including shipbuilding. At the same time, China's 
increasingly aggressive posture abroad has focused increased attention 
on its mercantilist policies and unfair trade practices that distort 
markets and create global overcapacity, and the implications this has 
for the U.S. economy and global security.
    The American Shipbuilding Industry: American shipbuilding led the 
world in the decades after World War II, and as recently as 1975 U.S. 
shipyards built over 75 commercial vessels in a year. But a combination 
of subsidized foreign competition and underinvestment by U.S. 
policymakers led to steep reductions in production, falling to less 
than five ships in 1990. The United States is now responsible for less 
than a half of a percent of global commercial shipbuilding.\1\
---------------------------------------------------------------------------
    \1\ Klein, A. (2015, September 1). Decline in U.S. Shipbuilding 
Industry: A Cautionary Tale of Foreign Subsidies Destroying U.S. Jobs. 
Retrieved October 14, 2019, from http://www.enotrans.org/article/
decline-u-s-shipbuilding-industry-cautionary-tale-foreign-subsidies-
destroying-u-s-jobs/.
---------------------------------------------------------------------------
    Japan, South Korea and China have heavily subsidized their 
shipbuilding industries for years, giving them a massive competitive 
advantage over U.S. commercial shipbuilders. In recent congressional 
testimony Mark Buzby, Administrator of the Maritime Administration, 
stated that this has ``virtually eliminated the ability for U.S. 
shipyards to compete in the global market,'' locking the shipyards that 
produce large merchant-type ships ``into a downward spiral of 
decreasing demand and an increased divergence between domestic and 
foreign shipbuilding productivity and pricing.'' \2\
---------------------------------------------------------------------------
    \2\ U.S. Maritime and Shipbuilding Industries: Strategies to 
Improve Regulation, Economic Opportunities and Competitiveness: Hearing 
before the Committee on Transportation and Infrastructure, Subcommittee 
on Coast Guard and Maritime Transportation, House, 116th Cong. (2019) 
(Testimony of Mark Buzby, Administrator, Maritime Administration). 
Retrieved October 15, 2019, from https://www.transportation.gov/
testimony/us-maritime-and-shipbuilding-industries-strategies-improve-
regulation-economic.
---------------------------------------------------------------------------
    Economic and National Security Concerns: This erosion of our 
shipbuilding base has far-reaching implications for our national 
security. In times of crisis, the Navy relies on a mix of government-
owned and commercial ships to assist with sealift activity. According 
to a recent report by the Center for Strategic and Budgetary 
Assessments, the Department of Defense is currently short 200,000 
square feet of sealift capacity and would need another 1,900 mariners 
to be able to undertake extended operations, while much of the existing 
capacity is approaching obsolescence.\3\ Meanwhile, the commercial 
fleet, long an asset that could be relied upon to assist the military 
in times of need, struggles in the face of subsidized competition from 
abroad. The continued deterioration of our domestic shipbuilding and 
commercial shipping capacity threatens the ability of our commercial 
fleet to step up in an emergency.
---------------------------------------------------------------------------
    \3\ Walton, T., Boone, R., & Schramm, H. (2019). Sustaining The 
Fight: Resilient Maritime Logistics For A New Era. Center for Strategic 
and Budgetary Assessments. Retrieved October 11, 2019, from https://
csbaonline.org/uploads/documents/Resilient_Maritime_Logistics.pdf.
---------------------------------------------------------------------------
    The erosion of commercial shipbuilding also contributes to concerns 
about our defense supply chain. According to a 2018 Pentagon report, 
our defense industrial base has lost over 20,500 firms since 2000. The 
report highlights that manufacturers in the shipbuilding supply chain 
``were among the hardest hit by the global shift in the industrial base 
over the last 20 years.'' \4\ In some cases this has led to an alarming 
lack of redundancy, forcing the Navy to rely on a single domestic 
supplier for critical inputs. According to Mike Petters, President and 
CEO of Huntington Ingalls Industries--the largest military shipbuilder 
in the United States--over half of their suppliers are the sole source 
of certain parts and services.\5\
---------------------------------------------------------------------------
    \4\ Interagency Task Force in Fulfillment of Executive Order 13806. 
(2018). Assessing and Strengthening the Manufacturing and Defense 
Industrial Base and Supply Chain Resiliency of the United States. 
Retrieved October 11, 2019, from https://media.defense.gov/2018/Oct/05/
2002048904/-1/-1/1/ASSESSING-AND-STRENGTHENING-THE-MANUFACTURING-AND-
DEFENSE-INDUSTRIAL-BASE-AND-SUPPLY-CHAIN-RESILIENCY.PDF.
    \5\ Cameron, D. (2012, May 9). Shipbuilder warns Pentagon cuts 
could hike costs. Retrieved October 15, 2019, from https://
www.marketwatch.com/amp/story/guid/C5E73647-2699-4A71-AAA4-
449036AC494D.
---------------------------------------------------------------------------
    In addition to its national security significance, the American 
maritime industry is an important driver of our economy. All told, the 
industry supports 650,000 jobs and contributes over $150 billion to the 
economy.\6\ But these figures belie the precarious position of our 
commercial shipbuilding industry. According to the Eno Center for 
Transportation, shipbuilding, which directly employed 180,000 workers 
in 1980, was on track to employ as many as 250,000 Americans in 2013 
had it maintained its share of the labor market. Instead, the rapid 
movement of shipbuilding activity overseas has reduced employment to 
110,000.\7\
---------------------------------------------------------------------------
    \6\ U.S. Maritime Workforce Grows to 650,000. (2019, April 4). 
Retrieved October 15, 2019, from https://www.maritime-executive.com/
article/u-smaritime-workforce-grows-to-650-000.
    \7\ Maritime Administration. (2015). The Economic Importance of the 
U.S. Shipbuilding and Repairing Industry. Retrieved, October 15, 2019, 
from https://www.maritime.dot.gov/sites/marad.dot.gov/files/docs/
resources/3641/maradeconstudyfinalreport2015.pdf.
---------------------------------------------------------------------------
    While this hurts the communities where shipyards are located, its 
impact is felt all along the supply chain. Suppliers of everything from 
steel to propulsion systems to a wide range of services sell to U.S. 
shipbuilders. With that supply chain in mind, shipbuilding supports 
nearly 290,000 jobs through indirect and induced activity, including 
nearly 30,000 in manufacturing.\8\ For example, just last year the 
largest container ship built in the U.S., the Daniel K. Inouye, was 
completed. It used over 13,000 tons of steel plate in its structure, 
all produced at ArcelorMittal plate facilities in the United States.\9\
---------------------------------------------------------------------------
    \8\ ibid
    \9\ Largest U.S. containership Daniel K. Inouye built with 
ArcelorMittal USA plate. (2018, December 7). ArcelorMittal. Retrieved 
October 14, 2019, from https://usa.arcelormittal.com/news-and-media/
our-stories/2018/dec/12-07-2018.
---------------------------------------------------------------------------
    China's Aggressive Moves into the Maritime Industry: While 
commercial shipbuilding initially shifted from the U.S. to competitors 
in other countries, China has moved rapidly to grow its footprint in 
this sector. For years, we have seen the destructive impact of China's 
state-led capitalism on our domestic manufacturing sector, and its 
ripple effects on thousands of communities across our nation. Between 
2001--when China entered the World Trade Organization--and 2017, 3.4 
million U.S. jobs were lost or displaced because of our massive 
bilateral trade deficit with China.\10\ This economic carnage has been 
fueled by predatory trade practices and disruptive economic policies, 
including heavy subsidization of state-owned enterprises and other 
firms that Beijing has deemed strategically important for its own 
security and economic interests.
---------------------------------------------------------------------------
    \10\ Scott, R., & Mokhiber, Z. (2018). The China toll deepens. 
Economic Policy Institute. Retrieved October 15, 2019, from https://
www.epi.org/publication/the-china-toll-deepens-growth-in-the-bilateral-
trade-deficit-between-2001-and-2017-cost-3-4-million-u-s-jobs-with-
losses-in-every-state-and-congressional-district/
---------------------------------------------------------------------------
    China's state-led capitalism has led to leaps in global market 
share and massive global overcapacity in a wide range of industries, 
from steel to aluminum to solar panels. Shipbuilding is no exception. 
Since 2000, when China accounted for about five percent of global 
production, its shipbuilding sector has grown immensely, now accounting 
for 43 percent of the global market.\11\ With the inclusion of ocean 
engineering equipment and high-end vessels in its Made in China 2025 
plan, the Chinese government has made clear its intention to continue 
to use heavy intervention to support its shipbuilding and maritime 
industries.
---------------------------------------------------------------------------
    \11\ Colton, T., & Huntzinger, L. V. (2002). A Brief History of 
Shipbuilding in Recent Times. Center for Naval Analyses. Retrieved 
October 15, 2019, from https://www.cna.org/CNA_files/PDF/
D0006988.A1.pdf.
    Moss, T. (2019, July 2). China to Weld Its Biggest Shipbuilders 
Into Single State-Run Giant. Wall Street Journal. Retrieved October 15, 
2019, from https://www.wsj.com/articles/china-to-weld-its-biggest-
shipbuilders-into-single-state-run-giant-11562067663
---------------------------------------------------------------------------
    Conclusion: This is a critical time for our domestic shipyards. The 
recent growth in U.S. energy exports offers a unique opportunity to 
cultivate a vigorous shipbuilding industry to meet our maritime 
commerce and security needs while also providing a boost to our 
economy. It makes no sense to exchange one foreign dependency for 
another, but that is precisely what is happening. Just as the shale gas 
boom has reduced our dependence on foreign energy, we have grown almost 
completely dependent on other nations for the ships necessary to export 
liquefied natural gas (LNG). There is currently bipartisan legislation, 
the Energizing American Shipbuilding Act, that would help reverse this 
by requiring a portion of LNG and crude oil exports to be transported 
on U.S.-built and U.S.-crewed vessels. Passage of this legislation 
would be an important step to restoring the health of our commercial 
shipbuilding sector.
    Our competitors around the globe have invested heavily in their 
shipbuilding industries. Decades of promises broken by China to reform 
its state-led capitalism, to reduce industrial overcapacity and to 
curtail unfair trade practices lay bare the increased need to 
strengthen our own key industries. It is time we give serious 
consideration to how we foster a robust and resilient shipbuilding 
sector, ready to meet the demands of the modern maritime industry. 
Strengthening our shipyards will not only bolster a neglected part of 
our national defense, it will support thousands of shipbuilding jobs 
and even more throughout the supply chain.
    Thank you for the opportunity to submit these comments regarding 
the Subcommittee on Coast Guard and Maritime Transportation's hearing 
on China's Maritime Silk Road Initiative: Implications for the Global 
Maritime Supply Chain.
        Sincerely,
                                             Scott N. Paul,
                    President, Alliance for American Manufacturing.

                                
   Joint Statement of Kathryn Waldron, Fellow, National Security and 
Cybersecurity, R Street Institute and Kristen Nyman, Government Affairs 
 Specialist, National Security and Cybersecurity, R Street Institute, 
         Submitted for the Record by Hon. Sean Patrick Maloney
    Chairman Maloney, Ranking Member Gibbs and members of the 
subcommittee:
    Thank you for holding this important hearing on China's Maritime 
Silk Road Initiative: Implications for the Global Maritime Supply 
Chain. This statement is offered by scholars from the R Street 
Institute's National Security and Cybersecurity team who have studied 
supply chain security extensively. The R Street Institute is a 
nonprofit, nonpartisan public policy research organization whose 
mission is to engage in research and outreach to promote free markets 
and limited, effective government.
    China's Belt and Road Initiative (BRI) is an ambitious 
infrastructure development strategy to create a vast global 
transportation and shipping network aimed at increasing Chinese 
economic trade. First proposed by President Xi Jinping in 2013, the 
21st Century Maritime Silk Road is the sea-based component of this 
strategy ``. . .designed to extend from China's coast to Europe through 
the South China Sea and the Indian Ocean in one route, and from China's 
coast through the South China Sea to the South Pacific in the other.'' 
\1\ In practical terms, this has led to increased Chinese investment in 
building and operating ports throughout the world.
---------------------------------------------------------------------------
    \1\ National Development and Reform Commission, ``Vision and 
Actions on Jointly Building Silk Road Economic Belt and 21st-Century 
Maritime Silk Road,'' Ministry of Foreign Affairs and Ministry of 
Commerce of the People's Republic of China with State Council 
authorization, March 28, 2015. http://en.ndrc.gov.cn/newsrelease/
201503/t20150330_669367.html.
---------------------------------------------------------------------------
    While many countries were initially eager to embrace Chinese 
investment in their infrastructure, concerns over increased public debt 
have led former partners to shelve development projects.\2\ But an 
inequitable reaping of the economic benefits isn't the only reason some 
countries are skeptical of the BRI. Indeed, China's development of a 
modern, maritime silk road also has problematic cybersecurity 
implications. The two main concerns are supply chain risks for ports 
that dock U.S. ships and cyber risks that would derive from a Chinese 
``digital silk road.''
---------------------------------------------------------------------------
    \2\ Amanda Erikson, ``Malaysia cancels two big Chinese projects, 
fearing they will bankrupt the country,'' The Washington Post, Aug. 21, 
2018. https://www.washingtonpost.com/world/asia_pacific/malaysia-
cancels-two-massive-chinese-projects-fearing-they-will-bankrupt-the-
country/2018/08/21/2bd150e0-a515-11e8-b76b-d513a40042f6_story.html; 
Nyshka Chandran, ``Fears of excessive debt drive more countries to cut 
down their Belt and Road investments,'' CNBC, Jan. 17, 2019. https://
www.cnbc.com/2019/01/18/countries-are-reducing-belt-and-road-
investments-over-financing-fears.html.
---------------------------------------------------------------------------
           Supply Chain Risks for Ports that Dock U.S. Ships
    The first concern is that Chinese-built or -operated ports present 
a national security risk for U.S. or NATO ships docked overseas. Just 
last year, Shanghai International Port Group, a Chinese company, 
announced plans to take over management of the Israeli port of Haifa. 
American stakeholders quickly raised national security concerns over 
the Chinese-Israeli deal. Former U.S. ambassador to Israel Dan Shapiro 
stated that ``to have a Chinese company operate a port of a close ally 
potentially poses a significant challenge and maybe a risk for US Navy 
operations.'' \3\ Retired U.S. admiral Gary Roughead also pointed out 
that Chinese port management could allow their intelligence agencies to 
better anticipate U.S. naval activities. But ship movement isn't the 
only information the Chinese could access: ``Significantly, the 
information systems and new infrastructure integral to the ports and 
the likelihood of information and electronic surveillance systems 
jeopardize U.S. information and cybersecurity,'' Roughhead warned.\4\ 
The potential for hostile foreign governments to access proprietary and 
sensitive military intelligence is of grave concern to U.S. domestic 
security, and Congress would do well to address this supply chain 
vulnerability.
---------------------------------------------------------------------------
    \3\ Raphael Ahren, ``Has Israel made a huge mistake letting a 
Chinese firm run part of Haifa port?'' The Times of Israel, Dec. 20, 
2018. https://www.timesofisrael.com/has-israel-make-a-huge-mistake-
letting-achinese-firm-run-part-of-haifa-port/.
    \4\ David Brennan, ``Chinese Deal to Take Over Key Isreali Port May 
Threaten U.S. Naval Operations, Critics Say,'' Newsweek, Sept. 14, 
2018. https://www.newsweek.com/chinese-deal-take-over-key-israeli-port-
may-threaten-us-naval-operations-1121780.
---------------------------------------------------------------------------
    Physical access to ports is not the only maritime supply chain risk 
involved. China's construction of a ``digital silk road'' might pose an 
even greater risk to the U.S. supply chain. Just as the 21st century 
version of the maritime silk road manifested itself as Chinese 
investment in physical infrastructure, the digital silk road would 
promote Chinese investment in digital infrastructure.
              ``Digital Silk Road'' Supply Chain Concerns
    Recent speeches from Xi Jinping and other government officials have 
pushed Chinese cybersecurity firms to invest in countries where BRI 
development projects are underway.\5\ Their goal, according to Vice-
Minister of Information Technology Chen Zhaoxiong, is to build ``a 
community of common destiny in cyberspace.'' \6\ A cyber community of 
this magnitude fostered by China should raise alarms for anyone in 
favor of protecting free speech. China's ``Great Firewall'' reveals the 
Chinese Communist Party's (CCP) need to maintain operational control of 
any cyber community.\7\ Authoritarian-leaning countries that embrace 
Chinese investment in their ports, like Malaysia and Vietnam, may also 
embrace China's exporting of its surveillance technology and policies 
of authoritarian censorship and Internet control.\8\
---------------------------------------------------------------------------
    \5\ Kieran Green, ``Securing the Digital Silk Road,'' Center for 
Advanced China Research, Feb. 11, 2019. https://www.ccpwatch.org/
single-post/2019/02/11/Securing-the-Digital-Silk-Road.
    \6\ Staff, ``China talks of building a `digital Silk Road,' '' The 
Economist, May 31, 2018. https://www.economist.com/china/2018/05/31/
china-talks-of-building-a-digital-silk-road.
    \7\ Bloomberg News, ``The Great Firewall of China,'' The Washington 
Post, Nov. 5, 2018. https://www.washingtonpost.com/business/the-great-
firewall-of-china/2018/11/05/5dc0f85a-e16d-11e8-ba30-
a7ded04d8fac_story.html.
    \8\ Ralph Jennings, ``Chinese Get Chances to Invest in Vietnam 
Despite Political Rifts,'' Voice of America, Dec. 17, 2018. https://
www.voanews.com/east-asia/chinese-get-chances-invest-vietnam-despite-
political-rifts.
---------------------------------------------------------------------------
    Countries more resistant to Chinese-style authoritarianism may also 
struggle to contain the cybersecurity of their digital ecosystem as 
Chinese software and hardware becomes more pervasive. The fear that 
Chinese companies will incorporate backdoors into telecom systems for 
CCP exploitation has already been a topic of fierce debate thanks to 
the Huawei situation.
    While certain U.S. policymakers may want to bar China from the 
global digital system entirely, it is simply too late. The digital 
fabric is too intertwined for any separation to be viable. Unlike the 
United States, the rest of the world has not shown willingness to ban 
Chinese companies. Therefore, without allied consensus, we must assume 
there are no safe systems in cyberspace. Whether a given port is 
attached to an ocean or a computer, policymakers must keep in mind that 
China will be keeping a keen eye on everything flowing through it, be 
it ships or information.
    An outright ban-and-sanction plan is infeasible, at least in the 
long term, in our digitally interconnected reality. The U.S. government 
does, however, have certain recourses to mitigate supply chain cyber 
risks.
                         Policy Recommendations
    In order to address maritime supply chain risks, the United States 
and its allies will have to carefully vet the arrangements they make 
with regard to port operation and production. The United States should 
promote economic competition, clearing any trade barriers that impede 
American companies from bidding on international construction projects. 
In countries where American companies do not have the capacity to make 
competitive bids on construction projects, the United States should 
look for alternative diplomatic opportunities to counterbalance China's 
political influence and encourage allies to do the same. U.S. 
policymakers should also continue to point out the strings attached to 
Chinese investment. Finally, as ports become increasingly automated, 
the United States should work with international standard-setting 
organizations and local governments to ensure appropriate cybersecurity 
controls are built into port cybersystems.
    As a prescription for the larger supply chain issue at hand, the 
government should consider implementing these strategies on a broader 
scale. Promoting market competition will allow friendlier producers to 
enter markets currently dominated by Chinese companies. One of the main 
issues with Huawei, for instance, is that they are one of the only 
companies on the path to providing 5G.
    Another strategy is working with standard-setting organizations, 
like the International Organization for Standardization, to limit 
Chinese influence and ensure fair standard-setting, rather than 
regulations that would benefit any one country's products or production 
methods.
    Collaborating with America's allies to collectively confront bad 
actors is crucial to ensuring companies with bad practices face enough 
pressure to change their behavior.
    Regardless of the strategic path it chooses, one thing is certain: 
The United States will have to take decisive action in order to prevent 
China from gaining outsized influence over the global supply chain and 
growing from its present nefarious state to an even more dangerous one.
    We thank the committee for recognizing the importance of addressing 
supply chain vulnerabilities. If we can be of any assistance to members 
of the committee, please feel free to contact us or our colleagues at 
the R Street Institute.

                                 
Statement of the United Steelworkers, Submitted for the Record by Hon. 
                          Sean Patrick Maloney
    Dear Chairman Maloney and Ranking Member Gibbs:
    On behalf of the 850,000 members we represent, the United 
Steelworkers (USW) appreciates the opportunity to submit these comments 
in regard to the October 17th hearing on ``China's Maritime Silk Road 
Initiative: Implications for the Global Maritime Supply Chain.'' This 
hearing is an important step in highlighting the reduction of the 
domestic maritime industry and the economic and national security 
threat that looms from lack of investment in the commercial and naval 
maritime industry.
                    Who we represent in the industry
    The USW represents workers across various sectors and crafts in the 
shipbuilding industry. Our members produce, build, and refurbish 
vessels and vessel components that are crucial to our national economy 
and security. From building and refurbishing Naval vessels at Newport 
News Shipyard in Newport News, VA, to manufacturing engines for the 
Coast Guard at Fairbanks Morse in Beloit, WI, to milling iron and steel 
across the country, our members provide essential domestic manufactured 
products throughout the supply chain.
    American workers benefit when the country supports a domestic 
shipbuilding industry that can compete globally. For example, 
Fincantieri Bay Shipbuilding and The Interlake Steamship Company 
recently cut the first piece of steel for the construction of a new 
bulk material transport ship in Sturgeon Bay, WI. The steel was sourced 
from ArcelorMittal's Burns Harbor steelworks location and represents a 
complete life cycle for domestic material and manufacturing. It is the 
company's first ship built since 1981 and the first bulk ship designed 
and built for the Great Lakes since 1983.\1\
---------------------------------------------------------------------------
    \1\ https://fincantierimarinegroup.com/8-14-2019/
---------------------------------------------------------------------------
                       The shift of shipbuilding
    America and its workers once led the world in shipbuilding. A 
little more than thirty years ago the US was building most of the 
world's fleets.\2\ Today, America ranks nineteenth in the world for 
commercial shipbuilding, accounting for approximately 0.35 percent of 
global new construction.\3\ This happened as other countries subsidized 
shipbuilding while the US stood idle.
---------------------------------------------------------------------------
    \2\ Associated Press, Shipyard Closing Reflects Decline of a U.S. 
Industry, Los Angeles Times, August 8, 1985
    \3\ https://www.rita.dot.gov/bts/sites/rita.dot.gov.bts/files/
publications/maritime_trade_
and_transportation/2007/html/table_07_02.html
---------------------------------------------------------------------------
    The playing field is no longer level and US shipbuilders are unable 
to compete in a global market of subsidized builders. Foreign builders 
who capitalized on state subsidies have seized market share at the 
detriment of the U.S. industry. In 2007, South Korea had 37 percent of 
global ship construction, Japan had 27 percent, and China had 21 
percent. Today, China has 43 percent, Korea has 27 percent, and Japan 
has 24 percent.\4\
---------------------------------------------------------------------------
    \4\ https://www.brsbrokers.com/assets/review_splits/BRS-Review2019-
01-Shipbuilding.pdf
---------------------------------------------------------------------------
    With this shift in the global shipbuilding market, the American 
workforce has sustained substantial losses. In 1980, there were 
approximately 180,000 shipbuilding and repairing jobs.\5\ According to 
the most recent US Economic Census that number has fallen 40 percent to 
approximately 105,000.\6\ The economic impact of those job losses 
reaches further than just the shipbuilders. The Department of 
Transportation estimates that there have been roughly 400,000 indirect 
jobs lost that supported the industry and its workers.\7\
---------------------------------------------------------------------------
    \5\ https://www.princeton.edu/ota/disk3/1983/8302/830206.PDF
    \6\ https://www.marad.dot.gov/wp-content/uploads/pdf/
MARAD_Econ_Study_Final_
Report_2013.pdf
    \7\ https://www.marad.dot.gov/wp-content/uploads/pdf/
MARAD_Econ_Study_Final_
Report_2013.pdf
---------------------------------------------------------------------------
        China Growth and Implications for the domestic industry
    As indicated above, the People's Republic of China has increased 
its market share in the global shipbuilding industry over the last 
couple decades. In a 2014 report, the Chamber of Commerce of the 
European Union highlighted that the shipbuilding industry in China had 
significant overcapacity issues. Much like other significant 
manufacturing industries like steel, glass, paper, aluminum and fiber 
optics this overcapacity impacts private industries ability to 
capitalize and remain competitive.\8\
---------------------------------------------------------------------------
    \8\ https://www.europeanchamber.com.cn/en/publications-
overcapacity-in-china
---------------------------------------------------------------------------
    In the last year China's shipbuilding industry has gone through 
significant mergers eliminating domestic competition, and now the 10 
largest of China's remaining 117 shipyards built roughly three quarters 
of the country's ships last year. Shipping technology, one of 10 high-
tech sectors covered by the government's Made in China 2025 industrial-
upgrade blueprint has seen significant consolidation in China but that 
has not led to decreased production. Last year, two of the largest 
Chinese state operated firms CSIC and CSSC together produced $74.4 
billion in revenue and $1.1 billion in profit and are now slated to 
merge.\9\
---------------------------------------------------------------------------
    \9\ https://www.wsj.com/articles/china-to-weld-its-biggest-
shipbuilders-into-single-state-run-giant-11562067663?mod=article_inline
---------------------------------------------------------------------------
    Similar to concerns by the Rail Security Alliance (RSA) regarding 
the impact of China State Owned Enterprise (SOE) CRRC in the Australian 
rail market, the domestic commercial shipbuilding industry could face 
complete collapse without more aggressive intervention. RSA highlights 
that in less than 10 years, CRRC effectively decimated the freight rail 
sector, forcing the four domestic suppliers out of business and out of 
the rail market which left only CRRC standing. Today, almost no 
meaningful Australian passenger or freight rolling stock manufacturing 
exists--CRRC's Australia footprint is almost exclusively that of an 
assembler of Chinese-made parts and a financier of purchases from 
CRRC.\10\
---------------------------------------------------------------------------
    \10\ https://homeland.house.gov/imo/media/doc/Testimony-Olson.pdf
---------------------------------------------------------------------------
                   Implications on national security
    Shipbuilding for the U.S. Navy and Coast Guard is the largest 
single use of American steel for military and homeland defense with 
steel making up about half of a warship's weight. A 100,000-ton 
aircraft carrier, for example, requires about 48,000 tons of steel.\11\
---------------------------------------------------------------------------
    \11\ http://archive.fortune.com/magazines/fortune/fortune_archive/
2002/07/22/326287/index.htm
---------------------------------------------------------------------------
    The shrinking capacity of commercial shipbuilding has a lasting 
effect on our national security and ability of the aging sealift fleet 
to assist Navy in times of need. The reduced capacity leads to concerns 
with the supply chain for military defense ship building and a lack of 
innovation efforts in the industry. The Pentagon has reported a loss of 
over 20,500 firms supplying manufacturing of shipbuilding components 
since 2000.\12\ According to the Vice Chief of Naval Operations and 
other Naval leaders, the current Naval fleet of 275 ships is overworked 
and under maintained and an expansion of Naval shipbuilding is 
needed.\13\ Without action, the Chinese will saturate and control the 
shipbuilding market much like they have attempted and successfully done 
in other industries.
---------------------------------------------------------------------------
    \12\ https://media.defense.gov/2018/Oct/05/2002048904/-1/-1/1/
ASSESSING-AND-STRENGTHENING-THE-MANUFACTURING-AND-DEFENSE-INDUSTRIAL-
BASE-AND-SUPPLY-CHAIN-RESILIENCY.PDF
    \13\ https://news.usni.org/2017/02/08/vcno-moran-navy-is-less-
ready-because-were-too-small
---------------------------------------------------------------------------
                               Conclusion
    A vibrant and re-emerging American shipbuilding industry is vital 
to the nation's security and workforce. It is time to seriously 
consider policy and legislative solutions to invigorate competitive 
domestic shipbuilding that meets the demands of merchant and military 
needs given the uncompetitive advantages state owned enterprises in 
China and elsewhere have in global maritime ship construction. 
Investment in domestic shipbuilding will boost our economy, American 
workforce, and national security. The USW urges the Committee to 
undertake bipartisan efforts to address these industry issues 
prioritizing the American worker, American manufacturing, and American 
security and defense.



                                Appendix

                              ----------                              


   Questions from Hon. Sean Patrick Maloney to Chad Sbragia, Deputy 
 Assistant Secretary of Defense for China, Office of the Secretary of 
                                Defense

    Question 1. Do you believe that the number of mariners we currently 
have (under 12,000) is enough to effectively surge and mobilize our 
existing sealift fleet in a timely and efficient manner for the 
duration of a conflict?
    Answer. I believe we have enough mariners to maintain an initial 
rapid sealift push; however, over the long term, I do not believe we 
have sufficient numbers of mariners. The Maritime Administration 
(MARAD) estimates the United States would require an additional 2,000 
mariners in the case of an extended conflict. We continually work to 
stress and test our capabilities. On September 16, 2019, the U.S. 
Transportation Command ordered the largest Turbo activation of Sealift 
Ships since 2003 to stress-test the ability to deploy quickly the cargo 
ships required for a large-scale armed force deployment and materiel 
movement. This no-notice exercise involved 33 vessels located on the 
Atlantic, Pacific, and Gulf Coasts, 6 from the Navy's Military Sealift 
Command (MSC) and 27 from the U.S. Department of Transportation's MARAD 
Ready Reserve Force (RRF). (Reference the MARAD Administrator's 
National Defense Transportation Association (NDTA) 2019 remarks). There 
were no issues with crewing the ships for this short-duration exercise; 
however, longer-term employment would be an issue.

    Question 2. How significantly do mariners impact our national 
security and execution of the National Defense Strategy?
    Answer. Mariners are extremely important to our ability to execute 
the National Defense Strategy. They are the ones who would crew the 
ships that would deliver our lethal force around the globe at the time 
and place of our choosing. Without them, we cannot project power, 
respond to crisis, or sustain operations.

    Question 3. What domestic agreements can we improve to ensure 
access to required maritime capabilities and capacities, and what 
foreign partners can we work closer with to further our maritime 
access?
    Answer. Continuing to support and strengthen the Jones Act is 
essential to keeping our maritime fleet alive. We must look to expand 
business opportunities for U.S. vessels to make them more commercially 
viable. Additionally, ensuring compliance with cargo preference laws, 
the Maritime Administration (MARAD) is currently working with the 
Defense Logistics Agency and forward-based Military Service commands to 
ensure they are in compliance with cargo preference laws. Another area 
is continuing support for the development and retention of mariners, 
such as the President's March 2019 Executive Order that allows military 
mariners to transfer their time, training, and skills to commercial 
positions.

   Questions from Hon. Rick Larsen to Chad Sbragia, Deputy Assistant 
   Secretary of Defense for China, Office of the Secretary of Defense

    Question 1. Can you expand on the relationship between the People's 
Liberation Army (PLA) and ``One Belt, One Road'' (OBOR) and how it will 
affect U.S. national security?
    Answer. China is competing for access and influence at the global 
level. This past August I met with counterparts from China's military 
for a brief on China's 2019 National Defense White Paper, which they 
explained defines China's national defense aims, including 
``safeguard[ing] China's overseas interests.'' The White Paper 
identifies a need to build China's far seas forces and a need for 
``overseas logistical facilities.'' China's Science of Military 
Strategy, an authoritative military document published in 2013, 
indicates its military strategists have also long been concerned with 
safeguarding China's maritime industry and the ability of Chinese ships 
to transit strategic sea lines of communication. China's policymakers 
may believe that by leading with economic and technology exchanges in 
their interactions with partnering countries, China can subsequently 
generate opportunities for defense cooperation or military access. For 
example, in 2017, the People's Liberation Army (PLA) Navy deployed its 
Navy Task Group 150 on a cruise from Shanghai to Europe, not 
coincidentally along the pathway of the Maritime Silk Road. Along the 
way, Task Group 150 made numerous goodwill port calls and conducted at-
sea exercises with One-Belt One-Road partnering nations.

    Question 2. What is the Department of Defense doing to counter 
partner nation's reliance and dependence on Chinese maritime 
investments?
    Answer. Allies and partners provide an asymmetric advantage China 
cannot match, and are a key element of our National Defense Strategy. 
We are working closely with our partners to share best practices, 
understand implications and comprehensive costs, and provide high-
standard alternatives to Chinese maritime investments through 
initiatives, including: (1) the Maritime Security Initiative, which 
builds partners' ability to conduct maritime security and maritime 
domain awareness operations and advances interoperability; (2) enhanced 
engagement in the Pacific Islands, including Key Leader Engagements, 
ship visits and shiprider agreements, financial support to Compact 
States, and $7 million in Foreign Military Financing in 2018.

    Question 3. What are the national security implications of the 
Chinese port in Djibouti?
    Answer. China is aggressively seeking opportunities for military 
access and basing. The People's Liberation Army (PLA) Navy has argued 
in its publications for a long-term strategy to obtain bases overseas, 
using methods such as constructing, purchasing, and long-term leases to 
obtain rights in foreign ports. The national security implications of 
China's first overseas military facility in Djibouti, in operation 
since late 2017, located on the Bab-el-Mandeb Strait in the Red Sea, 
are threefold: the operational advantage for China's future use of 
force in the region, use as a testbed to perfect its global deployments 
and future basing, and the increased resource requirements on the 
United States and partner nations to compete. International press 
reporting has indicated China is seeking to expand its military basing 
and access in the Middle East, Southeast Asia, and the western Pacific, 
and may be considering additional locations in Africa. In the Arctic, 
civilian research could also support a strengthened Chinese military 
presence. China's maritime infrastructure activities can also be 
leveraged to exert political influence over countries. China holds 80 
percent of Djibouti's debt, increasing risk of China's outsized 
influence over Djiboutian affairs.

    Question 4. Do you believe the current number of U.S. mariners 
(under 12,000) is enough to effectively surge and mobilize our existing 
sealift fleet in a timely and efficient manner for the duration of a 
conflict?
    Answer. [See response to question 1 from Hon. Maloney above.]

    Question 4a. follow-up: How significantly do mariners impact our 
national security and execution of the National Defense Strategy?
    Answer. [See response to question 2 from Hon. Maloney above.]

    Question 5. What domestic agreements can we improve to ensure 
access to required maritime capabilities and capacities, and what 
foreign partners can we work closer with to further our maritime 
access?
    Answer. [See response to question 3 from Hon. Maloney above.]

Questions from Hon. Sean Patrick Maloney to Lieutenant General Giovanni 
       K. Tuck, Director for Logistics, J4, Joint Chiefs of Staff

    Question 1. What are the implications of China expanding its 
control and influence in and around ports frequented by U.S. flagged 
ships? Specifically, emerging 5G infrastructure capabilities?
    Answer. There are many implications, along with 2nd, 3rd and 4th 
order effects. Access to ports can be limited or removed. Access to 
ships can also become more costly, be reduced, or even eliminated. 
Security of our data and systems are also at risk. Our data that 
transits Chinese IT infrastructure and systems can be used to bolster 
Chinese AI and decrease our competitive edge. Additionally, the Chinese 
may be able to drive up market prices when they effectively own the 
majority of the ports and ships, and container operations.

    Question 2. What types of trade and security investments should the 
U.S. make in the areas covered by China's Maritime Silk Road 
initiative? How might these investments promote American commerce?
    Answer. This question is not in J4's expertise to answer. Defer to 
Commerce Department.

    Question 3. Does the military have a role in a Whole of Government 
approach to compete with China's Maritime ambitions?
    Answer. Yes. While the Maritime Silk Road Initiative is primarily a 
geopolitical and economic initiative, the military does play a role in 
the area of competition. For the Chinese, it provides options for 
increased PLA presence through extended sustainment nodes. For the 
U.S., the challenge becomes political-military in nature--how do we 
maintain access for force projection and sustainment. I meet quarterly 
with the Whole of Government Logistics Committee to discuss ways we can 
work together better. For the military's part, the DOD must maintain 
sufficient capacity and capability to ensure we are able to execute the 
NDS. The military can also continue freedom of navigation of the seas 
and continue to use ports, and invest in our relationships with our 
partner and ally nations.

    Question 4. Do we have the critical capacity in the Pacific to be 
able to address activity in the South China Sea?
    Answer. The joint logistics enterprise must be postured with the 
right capability and capacity at the right locations in order to 
effectively support multi-domain and distributed operations. 
USINDOPACOM is critically dependent on tactical airlift and sealift 
capacity, which expands options for force design and maneuver. 
Increased tactical airlift and sealift capacity further increase 
survivability as it becomes more difficult for an adversary to counter 
a highly maneuverable joint force. These tactical lift assets play just 
as important a role as strategic lift assets in ensuring our ability to 
create a resilient and agile logistics network. Significant and 
sustained investment in munitions is needed to reduce risk to current 
and future strategic readiness. Statement by Admiral Davidson, 
Commander of USINDOPACOM before SASC, 12 February 2019.

Questions from Hon. Rick Larsen to Lieutenant General Giovanni K. Tuck, 
           Director for Logistics, J4, Joint Chiefs of Staff

    Question 1. Can you expand on the relationship between the People's 
Liberation Army (PLA) and ``One Belt, One Road'' (OBOR) and how it will 
affect U.S. national security?
    Answer. This question is not in J4's expertise to answer. Defer to 
the Intel community.

    Question 2. What is the Department of Defense doing to counter 
partner nation's reliance and dependence on Chinese maritime 
investments?
    Answer. This question is not in J4's expertise to answer. Defer to 
OSD.

    Question 3. What are the national security implications of the 
Chinese port in Djibouti?
    Answer. A response was not received at the time of publication.

    Question 4. Do you believe the current number of U.S. mariners 
(under 12,000) is enough to effectively surge and mobilize our existing 
sealift fleet in a timely and efficient manner for the duration of a 
conflict?
    Answer. I believe we have enough mariners to maintain an initial 
rapid sealift push, however, over the long term, I do not believe we 
have sufficient numbers of mariners. Maritime Administration (MARAD) 
estimates we are short nearly 2000 mariners. We continually work to 
stress and test our capabilities. On September 16, 2019, the U.S. 
Transportation Command ordered the largest Turbo activation of Sealift 
Ships since 2003 to stress-test the ability to quickly deploy the cargo 
ships required for a large scale armed force deployment and materiel 
movement. This no-notice exercise involved 33 vessels located on the 
Atlantic, Pacific and Gulf Coasts, six from the Navy's Military Sealift 
Command (MSC) and 27 from the U.S. Department of Transportation's MARAD 
Ready Reserve Force (RRF). (Reference MARAD Administrator's NDTA 2019 
remarks). There were no issues with crewing the ships for this short 
duration exercise, however longer term employment will be an issue.

    Question 4a. follow-up: How significantly do mariners impact our 
national security and execution of the National Defense Strategy?
    Answer. Mariners are the lifeblood that allow us to execute the 
National Defense Strategy. They are the ones who crew the ships that 
deliver our lethal force around the globe at the time and place of our 
choosing. Without them, we cannot project power, respond to crisis, nor 
sustain operations.

    Question 5. What domestic agreements can we improve to ensure 
access to required maritime capabilities and capacities, and what 
foreign partners can we work closer with to further our maritime 
access?
    Answer. Continuing to support and strengthen the Jones Act is 
essential to keeping our maritime fleet alive. We must look to expand 
business opportunities for U.S. vessels to make them more commercially 
viable. Additionally, ensuring compliance with cargo preference laws, 
MARAD is currently working with DLA and forward based service commands 
to ensure they are in compliance. Another area is continuing support 
for the development and retention of mariners, such as President's 
March 2019 Executive Order that allows military mariners to transfer 
their time, training and skills to commercial jobs.

Questions from Hon. Anthony G. Brown to Lieutenant General Giovanni K. 
        Tuck, Director for Logistics, J4, Joint Chiefs of Staff

    Question 1. The USGC recently announced that they are ``doubling 
down on Oceania'' with plans to homeport three of its newest fast-
response cutters in Guam within the next two years. How is the USGC 
maintaining readiness is its domestic focused missions as it devotes 
more resources to overseas operations?
    Answer. This question is not in J4's expertise to answer. Defer to 
USCG.

    Question 2. As the Coast Guard continues to expand operations 
overseas, is it being properly reimbursed by the Department of Defense 
for missions that fall primarily in the Department of Navy's 
jurisdiction?
    Answer. This question is not in J4's expertise to answer. Defer to 
USCG.

   Questions from Hon. Sean Patrick Maloney to Carolyn Bartholomew, 
Chairwoman, United States-China Economic and Security Review Commission

    Question 1. How, if at all, could federal agencies improve trade 
and security programs and policies to promote American commerce in the 
regions covered by China's Maritime Silk Road initiative?
    Answer. It is vital that the United States take significant steps 
to expand our presence in regions covered by China's Maritime Silk 
Road. Those steps must be economic, diplomatic, security-focused, and 
political. As China expands its global footprint, we must focus on 
strengthening our relationships with allies, partners, and friends, and 
further develop relationships with other countries.
    I commend the Congress for its work in developing and passing the 
BUILD Act, which is an important step toward strengthening and 
modernizing U.S. international development finance. Fully funded, the 
BUILD Act will notably more than double our development finance lending 
capacity through the establishment of the new U.S. International 
Development Finance Corporation. Congress should also reauthorize and 
fund the Ex-Im Bank.
    Additionally, the Commission recommended in our 2018 Annual Report 
that:

        Congress create a fund to provide additional bilateral 
        assistance for countries that are a target of or vulnerable to 
        Chinese economic or diplomatic pressure, especially in the 
        Indo-Pacific region. The fund should be used to promote digital 
        connectivity, infrastructure, and energy access. The fund could 
        also be used to promote sustainable development, combat 
        corruption, promote transparency, improve rule of law, respond 
        to humanitarian crises, and build the capacity of civil society 
        and the media.

    Enhancing U.S. security commitments in the Indo-Pacific is another 
important pillar of promoting U.S. commerce along the Maritime Silk 
Road. To that end, the Commission recommends in our 2019 Annual Report 
that:

        Congress support the implementation of the Indo-Pacific 
        Security Initiative to align U.S. budgetary commitments with 
        national security objectives and build the confidence of allies 
        concerning U.S. commitment to security in the Indo-Pacific 
        region.

    Question 2. To what extent do U.S. maritime security programs also 
promote American commerce in the regions covered by China's Maritime 
Silk Road initiative?
    Answer. Security of sea lanes, including those in the Indo-Pacific, 
is vital to U.S. commercial interests. In 2016, for example, more than 
14 percent of U.S. maritime trade and an estimated one-third of all 
global shipping passed through the South China Sea.\1\ U.S. maritime 
security programs support an environment that enables American commerce 
to be safely conducted abroad.
---------------------------------------------------------------------------
    \1\ CSIS, ``How Much Trade Transits the South China Sea?'' October 
20, 2019.

      United States Maritime Administration Office of 
International Activities: Maritime Administration's Office 
International Activities works with U.S. carriers and shippers to 
improve maritime transport relations abroad and to ensure U.S. 
carriers' transport of U.S. international trade cargoes in a secure, 
safe, and competitive transportation environment.\2\ The office 
facilitates U.S. carriers' access to foreign trade cargoes and 
``negotiates reciprocal foreign market access treatment for U.S. 
carriers in international trade.'' \3\ The United States maintains 
maritime agreements with two countries along the ``Maritime Silk 
Road,'' China and Vietnam.\*\ \4\
---------------------------------------------------------------------------
    \2\ U.S. Department of Transportation, ``Office of International 
Activities.'' https://www.maritime.dot.gov/economic-security/office-
international-activities.
    \3\ U.S. Department of Transportation, ``Office of International 
Activities.'' https://www.maritime.dot.gov/economic-security/office-
international-activities.
    \*\ The U.S.-China Maritime Agreement addresses U.S. carriers' 
rights to open branch offices throughout China and assures China of 
continued open access to U.S. markets. Likewise, the agreement between 
the United States and Vietnam allows U.S. carriers to open wholly owned 
subsidiaries in Vietnam, thus eliminating the Vietnamese monopoly of 
maritime trade in the region and strengthening economic relations. U.S. 
Department of Transportation, ``Office of International Activities.'' 
https://www.maritime.dot.gov/economic-security/office-international-
activities.
    \4\ U.S. Department of Transportation, ``International 
Agreements.'' https://www.maritime.dot.gov/economic-security/
international-agreements.
---------------------------------------------------------------------------
      Maritime Security Program (MSP): MSP provides the U.S. 
military access to privately owned U.S.-flag ships ready to support the 
logistic needs of the U.S. government should a crisis occur abroad. The 
14 U.S. commercial shipping companies currently participating in MSP 
are provided $4.99 million per ship to make their designated ships 
available to the U.S. government in times of war or national 
emergency.\5\ MSP currently has access to 60 cargo ships among the 14 
U.S. commercial shipping companies. U.S.-flagged ships participating in 
MSP carry about two percent of U.S. foreign trade.\6\
---------------------------------------------------------------------------
    \5\ U.S. Government Accountability Office, DOT Needs to 
Expeditiously Finalize the Required National Maritime Strategy for 
Sustaining U.S.-Flag Fleet, August 2018, 1. https://www.gao.gov/assets/
700/694006.pdf; U.S. Department of Transportation, ``Maritime Security 
Program.'' https://www.maritime.dot.gov/national-security/strategic-
sealift/maritime-security-program-msp.
    \6\ U.S. House of Representatives Sub-Committee on Coast Guard and 
Maritime Transportation, Hearing on State of the United States' 
Merchant Fleet in Foreign Commerce, written testimony of David T. 
Matsuda, September 29, 2010. https://www.transportation.gov/testimony/
state-united-states%E2%80%99-merchant-fleet-foreign-commerce-0.
---------------------------------------------------------------------------
      Maritime Security Initiative (MSI): MSI--established by 
the 2016 National Defense Authorization Act (NDAA)--builds the maritime 
capacity of U.S. partners to enhance information-sharing, 
interoperability, and multinational maritime cooperation.\7\ Under the 
2019 NDAA, MSI was renamed the Indo-Pacific MSI and extended through 
December 2025, and its scope was expanded to include South Asia.\8\ As 
part of MSI, the United States engages in military domain awareness 
activities with partners around the world--including the Philippines, 
Vietnam, Indonesia, Malaysia, Thailand, India, Sri Lanka, and 
Bangladesh--to monitor risks to their maritime interests while 
promoting freedom of navigation and maritime commerce.\9\
---------------------------------------------------------------------------
    \7\ U.S. Department of Defense, Indo-Pacific Strategy Report: 
Preparedness, Partnerships, and Promoting a Networked Region, June 1 
2019, 49. http://www.airforcemag.com/DocumentFile/Documents/2019/
DOD%20Indo-Pacific%20Strategy%20Report.PDF.
    \8\ U.S. Department of Defense, Indo-Pacific Strategy Report: 
Preparedness, Partnerships, and Promoting a Networked Region, June 1 
2019, 49. http://www.airforcemag.com/DocumentFile/Documents/2019/
DOD%20Indo-Pacific%20Strategy%20Report.PDF.
    \9\ U.S. Department of Defense, Indo-Pacific Strategy Report: 
Preparedness, Partnerships, and Promoting a Networked Region, June 1 
2019, 49. http://www.airforcemag.com/DocumentFile/Documents/2019/
DOD%20Indo-Pacific%20Strategy%20Report.PDF.
---------------------------------------------------------------------------

  Questions from Hon. Rick Larsen to Carolyn Bartholomew, Chairwoman, 
      United States-China Economic and Security Review Commission

    Question 1. What U.S. companies have been or are currently involved 
in either operation, technical advice, or in construction on any BRI 
projects, as contractors or subcontractors?
    Answer. The Commission covered BRI's implications for U.S. economic 
interests in its 2018 Annual Report (Chapter 3, Section 1, ``Belt and 
Road Initiative,'' see attached under ``U.S. Economic Interests''). The 
report found that several major U.S. companies are participating in BRI 
projects (see table below) but that opportunities for U.S. and other 
foreign companies may dwindle in the long term as Chinese companies 
become more competitive in sectors currently dominated by Western 
multinationals. Although Beijing has been careful to emphasize BRI's 
openness to foreign companies, the initiative does not provide a level 
playing field for U.S. and other foreign companies to compete with 
Chinese firms. Most Chinese-financed BRI projects are not open tender 
and are awarded to Chinese contractors, relegating foreign companies to 
partnering with Chinese companies as subcontractors.

            Select U.S. Firms Participating in BRI \\
------------------------------------------------------------------------
                   Firm                             Participation
------------------------------------------------------------------------
AECOM.....................................  Partnerships in engineering,
(Engineering, procurement, and               procurement, and
 construction).                              construction (EPC): In May
                                             2017, AECOM signed a
                                             memorandum of understanding
                                             with Chinese construction 3-
                                             D printing company WinSun.
                                             Under the agreement, the
                                             companies will explore
                                             opportunities to
                                             collaborate on 3D printing
                                             for building design and
                                             construction projects,
                                             particularly in the Middle
                                             East, for a three-year
                                             period.\1\
                                            In January 2018, AECOM was
                                             selected by China
                                             Communications Construction
                                             Company to provide site
                                             supervision services for
                                             the stations, viaducts,
                                             tunnels, and depots of the
                                             East Coast Rail Link
                                             project in Malaysia.
Black & Veatch............................  Partnerships in EPC: In
(Engineering, procurement, and               October 2017, Black &
 construction).                              Veatch and China Tianchen
                                             Engineering Corporation
                                             (TCC) signed a memorandum
                                             of understanding to
                                             cooperate on developing
                                             gas, chemical, and
                                             fertilizer infrastructure
                                             projects throughout Asia,
                                             including in Indonesia,
                                             Thailand, Vietnam,
                                             Singapore, Burma,
                                             Bangladesh, Pakistan,
                                             Kazakhstan, and
                                             Tajikistan.\2\
Caterpillar...............................  Supplying construction
(Engineering, procurement, and               machinery: In 2016,
 construction).                              Caterpillar released a
                                             white paper on its ``vision
                                             and commitment for the
                                             shared success of [BRI]''
                                             in which the company
                                             outlined potential areas of
                                             cooperation with Chinese
                                             companies in BRI countries,
                                             including partnering on
                                             infrastructure projects and
                                             providing project finance.
                                             In September 2017
                                             Caterpillar CEO Jim Umpleby
                                             said the company ``[is]
                                             working with Chinese SOEs
                                             in 20 [BRI] countries on
                                             projects ranging from
                                             roads, ports, mines and oil
                                             fields.'' This includes
                                             supplying machinery,
                                             training, and maintenance
                                             services to China
                                             Communications Construction
                                             Company for the renovation
                                             of the Zhrobin-Bobruisk
                                             expressway in Belarus,
                                             which was completed in July
                                             2016.
                                            In November 2017,
                                             Caterpillar and Chinese SOE
                                             China Energy Investment
                                             Corporation signed a five-
                                             year strategic cooperation
                                             framework agreement
                                             outlining future agreements
                                             for mining equipment sales
                                             and rentals, technology
                                             applications and product
                                             support provided by
                                             Caterpillar.
                                            Financing: Caterpillar is
                                             providing project finance
                                             for Chinese companies to
                                             boost BRI sales, according
                                             to company executives. The
                                             company does not disclose
                                             data for such lending.
Fluor.....................................  Partnerships in EPC: Lu
(Engineering, procurement, and               Yaming, general manager of
 construction).                              Fluor China, noted in a May
                                             2017 interview with an
                                             energy industry publication
                                             that Fluor and a Chinese
                                             EPC company were recently
                                             awarded a project for a gas-
                                             fired power plant in the
                                             Middle East. ``We're also
                                             working on a project in
                                             Indonesia that has been
                                             fueled by [BRI] and we have
                                             a number of very exciting
                                             prospects in the pipeline
                                             in other countries. All of
                                             these projects have Chinese
                                             investment or use Chinese
                                             financing,'' he said.
                                             Information on these
                                             projects is not available
                                             on the company's website or
                                             in other news reports.
Honeywell.................................  Partnerships in EPC: In May
(Engineering, procurement, and               2017, Honeywell signed a
 construction).                              partnership agreement with
                                             China's Wison Engineering
                                             Ltd. to jointly provide
                                             methanol-to-olefin
                                             technologies and EPC
                                             services to customers
                                             outside of China,
                                             particularly in countries
                                             included in BRI.\3\
General Electric (GE).....................  Supplying power equipment:
(Engineering, procurement, and               In 2016, GE received $2.3
 construction).                              billion in orders for
                                             natural gas turbines and
                                             other power equipment from
                                             Chinese EPC firms to
                                             install overseas, including
                                             in Pakistan, Bangladesh,
                                             Kenya, and Laos. In 2014,
                                             GE received $400 million in
                                             orders from Chinese firms
                                             for equipment to install
                                             overseas. According to GE
                                             China CEO Rachel Duan,
                                             ``Africa is the market
                                             offering the greatest
                                             market potential for GE and
                                             Chinese EPC firms, followed
                                             by the Middle East, South
                                             Asia, Southeast Asia, and
                                             Latin America.''
                                            Financing: In November 2017,
                                             GE Energy Financial
                                             Services and China's Silk
                                             Road Fund signed a
                                             cooperation agreement to
                                             launch an energy
                                             infrastructure investment
                                             platform to invest in power
                                             grid, renewable energy, and
                                             oil and gas infrastructure
                                             in BRI countries.
                                             Separately, Jay Ireland,
                                             CEO of GE Africa, said in
                                             2016 that the company had
                                             set up a $1 billion
                                             infrastructure fund to help
                                             finance projects in Africa.
                                             According to Mr. Ireland,
                                             one-third of Chinese EPC
                                             companies' equipment orders
                                             with GE in 2016 were
                                             destined for projects in
                                             Africa.
Citigroup.................................  Financial services:
(Financial services)                         Citigroup provides a range
                                             of financial services
                                             (i.e., mergers and
                                             acquisitions, cash
                                             management, trade finance,
                                             and hedging) to Chinese
                                             firms and multinational
                                             corporations operating in
                                             58 BRI countries.
                                            In June 2015, Bank of China
                                             launched the first public
                                             bond issue to fund BRI
                                             projects, raising $3.55
                                             billion. Citigroup was one
                                             of four global financial
                                             services companies that led
                                             the deal alongside Bank of
                                             China. In April 2018,
                                             Citigroup signed
                                             memorandums of
                                             understanding with Bank of
                                             China and China Merchants
                                             Bank to strengthen
                                             cooperation on supporting
                                             clients' investments and
                                             projects related to BRI.
Goldman Sachs.............................  Financing: In September
(Financial services)                         2016, Goldman Sachs--along
                                             with Bank of China, DBS
                                             Bank, and Standard
                                             Chartered--formed a working
                                             group to support the
                                             development of a
                                             standardized ``Silk Road
                                             bond'' that can be traded
                                             internationally to help BRI
                                             countries tap a wider
                                             source of funds.
------------------------------------------------------------------------
\\ Updated as of October 2018.
\1\ AECOM's move is part of a trend for large infrastructure firms to
  acquire specialist additive manufacturing technology. AECOM, ``AECOM
  Signs Memorandum of Understanding with Winsun to Collaborate on 3D
  Printing for Building Design and Construction,'' May 18, 2017; Global
  Construction Review, ``Aecom Forms Alliance with Chinese 3D Printer
  WinSun,'' May 19, 2017.
\2\ TCC Vice President Deng Zhaojing said in the company's press
  release, ``Black & Veach's reputation and experience in the global
  contracting and oil and gas sectors will help TCC create compelling
  international EPC solutions for our clients. This partnership is one
  that will allow us to continue to expand our operations in other parts
  of the world in line with China's One Belt, One Road Initiative.''
  Black & Veatch, ``Black & Veatch and China's TCC to Target Gas,
  Chemical and Fertilizer Projects,'' October 12, 2017.
\3\ According to Honeywell's press release, ``The agreement combines
  Honeywell UOP's advanced technologies with Wison's strong EPC service
  capability, allowing them to help customers further improve olefin
  production capacity while reducing energy consumption and production
  costs.'' Honeywell, ``Wison Engineering to Collaborate with Honeywell
  UOP on International Methanol to Olefin Projects,'' May 25, 2017.
 Source: Various; compiled by Commission staff:
 Citigroup, ``Citigroup Continues Momentum for Supporting Clients on
  Belt and Road Initiative,'' April 20, 2018; William Hennelly,
  ``Caterpillar's Tractors Helping Power Belt and Road,'' China Daily,
  March 10, 2018; Rajesh Kumar Singh and Brenda Goh, ``Caterpillar
  Drives Sales on China's New Silk Road,'' Reuters, March 4, 2018;
  AECOM, ``AECOM to Provide Site Supervision Services for Malaysia's
  East Coast Rail Link Project,'' January 8, 2018; Reuters, ``General
  Electric, China's Silk Road Fund to Launch Energy Investment
  Platform,'' November 9, 2017; Caterpillar, ``Caterpillar and China
  Energy Investment Corporation Establish Strategic Cooperative
  Relationship,'' November 8, 2017; Alun John, ``Want a Job in
  Kazakhstan or Elsewhere on New Silk Road? Citi Might Have a Role for
  You,'' South China Morning Post, September 25, 2017; Matthew Miller,
  ``Citigroup Targets Belt and Road to Boost China Revenue,'' Reuters,
  September 22, 2017; The Oil & Gas Year, ``Fluor Flourishes in China,''
  May 17, 2017; Keith Bradsher, ``U.S. Firms Want in on China's Global
  `One Belt, One Road' Spending,'' New York Times, May 14, 2017; Jing
  Shuiyu, ``Recovering Caterpillar Set to Fly with Its Chinese
  Partners,'' China Daily, April 25, 2017; Yang Ziman, ``Caterpillar
  Seeks to Deepen Ties with Chinese Companies,'' China Daily Asia,
  December 9, 2016; Cai Xiao, ``GE Reaps Belt and Road Dividend,'' China
  Daily, October 25, 2016; Brian Spegele, ``GE Rides the Coattails of
  China's Global Dream,'' Wall Street Journal, October 16, 2016; Liz
  Mak, ``Global Bankers Pledge Expertise to Foster Standardized Silk
  Road Bond,'' South China Morning Post, September 9, 2016; Caterpillar,
  ``The Belt and Road Ahead: Caterpillar's Vision and Commitment for
  Shared Success,'' 2016; Frances Yoon, ``Update 1--Bank of China Raises
  USD 3.55 Bn for Silk Road Push,'' Reuters, June 25, 2015; Jennifer
  Hughes, ``Bank of China Set for Four-Currency Bond Sale,'' Financial
  Times, June 23, 2015.


    Question 2. How could the U.S. participate in standard-setting 
bodies like the International Maritime Organization (IMO) and 
International Organization for Standardization (ISO) to mitigate the 
global adoption of Chinese technology standards? How can the U.S. be a 
significant voice in this conversation?
    Answer. The best way for the United States to have a voice is to be 
present. The U.S. approach to standard setting is industry-led, while 
China has a more top-down approach. The U.S. government often supports 
and coordinates with private sector-led initiatives, but because U.S. 
companies do not receive subsidies from the U.S. government to 
participate in standard setting, U.S. perspectives can be 
underrepresented. The American National Standards Institute (ANSI), a 
non-profit organization, is the sole U.S. representative to the 
ISO.\10\ The National Institute of Standards and Technology (NIST), 
which is part of the U.S. Department of Commerce, provides input to 
ANSI activities and in April 2019 signed a MOU with ANSI reaffirming 
the importance of a coordinated national strategy to support the 
development of standards.\11\
---------------------------------------------------------------------------
    \10\ American National Standards Institute, ``ISO Programs 
Overview.''
    \11\ American National Standards Institute, ``ANSI and NIST Sign 
New Memorandum of Understanding.'' May 3, 2019.
---------------------------------------------------------------------------
    In the 2019 Annual Report, the Commission recommended that

        Congress direct the National Science Foundation, in 
        coordination with other agencies, to conduct a study on the 
        impact of the activities of Chinese government, state-sponsored 
        organizations, or entities affiliated or supported by the state 
        in international bodies engaged in developing and setting 
        standards for emerging technologies. The study should examine 
        whether standards are being designed to promote Chinese 
        government interests to the exclusion of other participants.

    Question 3. Can you elaborate on the benefits of U.S. federal 
investment in the infrastructure of overseas ports or encouraging U.S. 
companies to invest in international ports?
    Question 3a follow-up: What role can the federal government play in 
these efforts?
    Answer. The Overseas Private Investment Corporation (OPIC) and the 
new Development Finance Corporation encourage U.S. companies' 
investments in overseas infrastructure projects, including ports, by 
providing financing through loans and guaranties. In May 2019, for 
example, OPIC announced plans to invest $50 million in a new marine 
terminal in the Port of Poti in Georgia. Most recently, the premier of 
Malaita province in the Solomon Islands said the United States has 
pledged to support the development of a port in the Solomon Islands, 
exemplifying how U.S. investment in overseas ports can both support the 
infrastructure development needs of partner countries as well as 
advance U.S. interests in the Indo-Pacific.
    In addition to providing development finance, Washington can work 
with allied and partner countries to ensure the procurement processes 
for overseas port projects are open, transparent, fair, and align with 
international best practices, such as the provisions of the WTO 
Government Procurement Agreement.

    Question 4. To what extent do U.S. maritime security programs also 
promote American commerce abroad?
    Answer. Security of sea lanes, including those in the Indo-Pacific, 
is vital to U.S. commercial interests. In 2016, for example, more than 
14 percent of U.S. maritime trade and an estimated one-third of all 
global shipping passed through the South China Sea.\12\ U.S. maritime 
security programs support an environment that enables American commerce 
to be safely conducted abroad.
---------------------------------------------------------------------------
    \12\ CSIS, ``How Much Trade Transits the South China Sea?'' October 
20, 2019.

      United States Maritime Administration Office of 
International Activities: Maritime Administration's Office 
International Activities works with U.S. carriers and shippers to 
improve maritime transport relations abroad and to ensure U.S. 
carriers' transport of U.S. international trade cargoes in a secure, 
safe, and competitive transportation environment. \13\ The office 
facilitates U.S. carriers' access to foreign trade cargoes and 
``negotiates reciprocal foreign market access treatment for U.S. 
carriers in international trade.'' \14\ The United States maintains 
maritime agreements with two countries along the ``Maritime Silk 
Road,'' China and Vietnam.\*\ \15\
---------------------------------------------------------------------------
    \13\ U.S. Department of Transportation, ``Office of International 
Activities.'' https://www.maritime.dot.gov/economic-security/office-
international-activities.
    \14\ U.S. Department of Transportation, ``Office of International 
Activities.'' https://www.maritime.dot.gov/economic-security/office-
international-activities.
    \*\ The U.S.-China Maritime Agreement addresses U.S. carriers' 
rights to open branch offices throughout China and assures China of 
continued open access to U.S. markets. Likewise, the agreement between 
the United States and Vietnam allows U.S. carriers to open wholly owned 
subsidiaries in Vietnam, thus eliminating the Vietnamese monopoly of 
maritime trade in the region and strengthening economic relations. U.S. 
Department of Transportation, ``Office of International Activities.'' 
https://www.maritime.dot.gov/economic-security/office-international-
activities.
    \15\ U.S. Department of Transportation, ``International 
Agreements.'' https://www.maritime.dot.gov/economic-security/
international-agreements.
---------------------------------------------------------------------------
      Maritime Security Program (MSP): MSP provides the U.S. 
military access to privately owned U.S.-flag ships ready to support the 
logistic needs of the U.S. government should a crisis occur abroad. The 
14 U.S. commercial shipping companies currently participating in MSP 
are provided $4.99 million per ship to make their designated ships 
available to the U.S. government in times of war or national 
emergency.\16\ MSP currently has access to 60 cargo ships among the 14 
U.S. commercial shipping companies. U.S.-flagged ships participating in 
MSP carry about two percent of U.S. foreign trade.\17\
---------------------------------------------------------------------------
    \16\ U.S. Government Accountability Office, DOT Needs to 
Expeditiously Finalize the Required National Maritime Strategy for 
Sustaining U.S.-Flag Fleet, August 2018, 1. https://www.gao.gov/assets/
700/694006.pdf; U.S. Department of Transportation, ``Maritime Security 
Program.'' https://www.maritime.dot.gov/national-security/strategic-
sealift/maritime-security-program-msp.
    \17\ U.S. House of Representatives Sub-Committee on Coast Guard and 
Maritime Transportation, Hearing on State of the United States' 
Merchant Fleet in Foreign Commerce, written testimony of David T. 
Matsuda, September 29, 2010. https://www.transportation.gov/testimony/
state-united-states%E2%80%99-merchant-fleet-foreign-commerce-0.
---------------------------------------------------------------------------
      Maritime Security Initiative (MSI): MSI--established by 
the 2016 National Defense Authorization Act (NDAA)--builds the maritime 
capacity of U.S. partners to enhance information-sharing, 
interoperability, and multinational maritime cooperation.\18\ Under the 
2019 NDAA, MSI was renamed the Indo-Pacific MSI and extended through 
December 2025, and its scope was expanded to include South Asia.\19\ As 
part of MSI, the United States engages in military domain awareness 
activities with partners around the world--including the Philippines, 
Vietnam, Indonesia, Malaysia, Thailand, India, Sri Lanka, and 
Bangladesh--to monitor risks to their maritime interests while 
promoting freedom of navigation and maritime commerce.\20\
---------------------------------------------------------------------------
    \18\ U.S. Department of Defense, Indo-Pacific Strategy Report: 
Preparedness, Partnerships, and Promoting a Networked Region, June 1 
2019, 49. http://www.airforcemag.com/DocumentFile/Documents/2019/
DOD%20Indo-Pacific%20Strategy%20Report.PDF.
    \19\ U.S. Department of Defense, Indo-Pacific Strategy Report: 
Preparedness, Partnerships, and Promoting a Networked Region, June 1 
2019, 49. http://www.airforcemag.com/DocumentFile/Documents/2019/
DOD%20Indo-Pacific%20Strategy%20Report.PDF.
    \20\ U.S. Department of Defense, Indo-Pacific Strategy Report: 
Preparedness, Partnerships, and Promoting a Networked Region, June 1 
2019, 49. http://www.airforcemag.com/DocumentFile/Documents/2019/
DOD%20Indo-Pacific%20Strategy%20Report.PDF.
---------------------------------------------------------------------------

   Questions from Hon. Sean Patrick Maloney to Jonathan E. Hillman, 
     Director, Reconnecting Asia Project, Center for Strategic and 
                         International Studies

    Question 1. How, if at all, could federal agencies improve trade 
and security programs and policies to promote American commerce in the 
regions covered by China's Maritime Silk Road initiative?
    Answer. China's Belt and Road is a web of bilateral arrangements, 
including trade deals. Rather than replicate this approach, the United 
States needs to start thinking multilaterally and regionally about 
trade. The United States should also make environmental sustainability 
a higher priority in its ``Free and Open Indo-Pacific'' strategy. This 
is a priority issue for countries in the region and one in which U.S. 
companies have a comparative advantage over Chinese companies.

    Question 2. How can the United States leverage its existing 
maritime infrastructure to compete with Chinese State-Owned 
Enterprises, and where do we need to make significant investments?
    Answer. The United States should continue to maintain and invest in 
its own port facilities, including roads, railways, and other 
supporting infrastructure. The American Society of Engineers gave U.S. 
ports a C+ rating in its most recent review. Exact estimates vary, but 
most underscore the need for additional investment to maintain and 
modernize navigation channels and build road and rail connections.

   Questions from Hon. Rick Larsen to Jonathan E. Hillman, Director, 
   Reconnecting Asia Project, Center for Strategic and International 
                                Studies

    Question 1. Mr. Hillman, you've discussed how a closer look at 
China's control of the maritime supply chain might provide a better 
sense of China's maritime strategy. Where else in China's foreign 
policy should we look to better understand their intentions?
    Answer. Another key area that deserves further examination is the 
nature of the relationships between Chinese companies and the Chinese 
communist party. A more granular understanding of specific companies, 
and their relative influence and obligations, would be helpful in 
shedding light on China's intentions. CSIS will be pursuing research in 
this area in the coming months, including in the maritime domain.

    Question 2. In your testimony, you highlight China's leadership in 
all three categories of shipbuilding (largest orderbook, most 
newbuilding orders, largest number of deliveries) last year. What can 
the federal government do to improve U.S. shipbuilding capacity to 
compete with China in the global market?
    Answer. I have not yet studied this area in great enough detail to 
offer policy advice.

    Question 3. What are some ways the U.S. can ensure our military and 
commerce remain undeterred by ongoing development of Chinese state-
owned enterprises?
    Answer. Two examples of positive proactive U.S. action are the 
airport in Greenland that could have become a Chinese facility and 
instead was financed by Greenland, and the renegotiation of a port 
project in Myanmar that resulted in the scope of work being reduced and 
the overall cost dropping from $7.3 billion to $1.3 billion. In the 
first case, the U.S. worked closely with a NATO ally, and in the second 
case it provided technical assistance to a developing country. The 
United States could build on these examples in other geographies, in 
coordination with partners and allies.

    Question 4. Can you elaborate on your proposal to establish a 
federal database of global infrastructure projects, particularly 
maritime assets? How would this database inform the United States' 
infrastructure development, national security and economic strategy on 
China?
    Question 4a follow-up: How else can the U.S. expand current efforts 
to increase transparency around Belt and Road Initiative projects?
    Answer. This database would give the United States more accurate 
picture of ground reality and help it set strategic priorities. Many 
projects are announced but not completed. Not all projects are 
threatening to U.S. interests. There are certain types of 
infrastructure and certain geographic areas that we cannot allow China 
to dominate, given our own national security and economic interests. 
Using this database, the United States could conduct an internal 
assessment to identify those projects that are vital to U.S. economic 
and security interests. Resources could be mobilized to counter malign 
projects, while projects that pose little or no risk to U.S. interests 
could be encouraged and allowed to proceed.

 Questions from Hon. Sean Patrick Maloney to Jeffrey D. Becker, Ph.D., 
     Research Program Director, Indo-Pacific Security Affairs, CNA

    Question 1. Noting the Chinese strategy of building port facilities 
on either end of the Panama Canal, are there other strategic straits 
where the Chinese have adopted a similar strategy?
    Answer. Chinese maritime investments in Panama have been increasing 
for decades. For example, the Hong Kong-based firm Hutchinson Ports now 
owns a majority stake in the company that manages and operates both the 
port of Cristobal on the Panama Canal's Atlantic side and the port of 
Balboa on the Canal's Pacific side.\1\ Moreover, in 2017, the state-
owned China Communications Construction Company began work to expand 
the Panama Colon Container Port at Margarita Island on the Canal's 
Atlantic side.\2\ The Chinese firms Shanghai Gorgeous and Landbridge 
Group wholly own and finance the company that will operate it upon 
completion.\3\
---------------------------------------------------------------------------
    \1\ ``Hutchinson Ports PPC--Cristobal,'' Hutchinson Ports--Our 
Ports, https://hutchisonports.com/en/ports/world/panama-ports-company-
port-of-cristobal-ppc-cristobal/.
    \2\ GCR Staff, ``Chinese Firm Starts Work on $1bn Panamanian 
Megaport,'' Global Construction Review, June 12, 2017, http://
www.globalconstructionreview.com/news/chinese-firm-starts-w7rk-1bn-
panama7nian-meg7aport/.
    \3\ Panama Colon Container Port, ``About Us,'' https://
www.pccp.com.pa/pccp/index.php/quienes-somos/pccp. My thanks to Chris 
Cairns in helping to prepare this information.
---------------------------------------------------------------------------
    In addition to Panama, however, Chinese state firms have built a 
similar type of presence in maritime infrastructure along many of the 
world's more important maritime chokepoints. For example, at the 
Malacca Strait, through which transits most of China's import oil, the 
Chinese state-owned firm COSCO Shipping Ports operates port facilities 
at Singapore's Pasir Panjang terminal, while Hutchison Ports operates 
facilities at Malaysia's Port Klang.\4\ COSCO also owns a stake in the 
port terminal operator which operates Port Said at the northern 
entrance to the Suez Canal, while the Chinese firm China Overseas Port 
Holdings Company both owns and operates the Port of Gwadar in Pakistan, 
which is roughly 600km east of the Strait of Hormuz.\5\ Meanwhile 
China's first overseas military base, located in Djibouti, sits on the 
strategically important Bab El Mandeb Strait, while the Chinese state-
owned China Merchant Port Holdings operates the Doraleh Multipurpose 
Port, which is located adjacent to China's base.\6\
---------------------------------------------------------------------------
    \4\ ``Our Ports--Westports Malaysia,'' Hutchinson Ports, https://
hutchisonports.com/en/ports/world/westports-malaysia-westports/; 
Jeffrey Becker, Erica Downs and Ben DeThomas, China's Presence in the 
Middle East and Western Indian Ocean: Beyond Belt and Road, (Arlington, 
VA: Center for Naval Analyses, February 2019), https://www.cna.org/
CNA_files/PDF/DRM-2018-U-018309-Final2.pdf, pp. 88.
    \5\ Becker, Downs and DeThomas, China's Presence in the Middle East 
and Western Indian Ocean, pp. 88.
    \6\ Erica Downs, Jeffrey Becker and Patrick deGategno, China's 
Military Support Facility in Djibouti: The Economic and Security 
Dimensions of China's First Overseas Base, (Arlington, VA: Center for 
Naval Analyses, 2017), https://www.cna.org/cna_files/pdf/DIM-2017-U-
015308-Final3.pdf.

    Question 2. What is the likelihood that one of these ports run by a 
Chinese SOE is going to become the next overseas Chinese naval base 
(i.e. the next Djibouti)?
    Answer. The Chinese military has been given responsibility to 
protect China's growing overseas interests, including its growing 
reliance on imported oil from the Middle East, its overseas foreign 
investments, and the growing number of Chinese citizens living abroad. 
However, the Chinese military will need to improve its ability to 
operate far from Chinese home ports to protect those interests, and 
this is difficult to do without having dedicated overseas military 
facilities.
    It is difficult to know with exact certainty the location of 
China's next overseas base. However, as these overseas interests 
continue to expand, it is very likely that China will seek to establish 
additional overseas facilities that will improve its ability to protect 
those interests.
    For example, China may seek to replicate the benefits from its base 
in Djibouti by establishing a second base on the eastern side of the 
Indian Ocean in locations such as Cambodia or Myanmar.\7\ China has 
long had strong military and economic ties to the Cambodian government, 
and while Cambodia's constitution prohibits the presence of foreign 
military bases in Cambodian territory, ties between the two militaries 
have grown more exclusive in the past few years.\8\ In 2016, China and 
Cambodia conducted their first-ever bilateral military exercise (Golden 
Dragon). The following year, the Cambodian government cancelled their 
annual Ankor Sentinel bilateral exercise with the United States, which 
was to be the 8th iteration of the exercise. In November 2018 U.S. Vice 
President Pence reportedly sent a letter to Cambodian Prime Minister 
Hun Sen, expressing U.S. concerns over the possibility that China may 
establish a base in the country.\9\
---------------------------------------------------------------------------
    \7\ See for example, Li Jian, Chen Wenwen and Jin Jing, ``Overall 
Situation of Sea Power in the Indian Ocean and the Expansion in the 
Indian Ocean of Chinese Sea Powers (Yinduyang Haiquan Geju yu Zhongguo 
Haiquan de Yinduyang Kuozhan; [Chinese characters omitted]),'' Pacific 
Journal 22, no. 5 (2014), 74-75, http://www.cssn.cn/zzx/wztj_zzx/
201406/t20140630_1235402.shtml.
    \8\ Article 53, Constitution of the Kingdom of Cambodia 1993 (rev. 
2008), Constitute, https://www.constituteproject.org/constitution/
Cambodia_2008?lang=en.
    \9\ Joshua Lipes and Sovannarith Keo (translated), ``Cambodia's PM 
Hun Sen Denies Reports of Plans For Chinese Naval Base,'' Radio Free 
Asia, November 19, 2018, https://www.rfa.org/english/news/cambodia/
base-11192018155126.html.
---------------------------------------------------------------------------
    Other potential locations for China's next overseas military 
facility include Sri Lanka, where the Chinese state firm China 
Merchants Port Holdings owns a majority stake in the concession 
agreement to operate the port of Hambantota, or the Pakistani port of 
Gwadar, where the Chinese firm China Overseas Ports Holding Company 
owns the rights to directly operate the port for a period of 40 
years.\10\
---------------------------------------------------------------------------
    \10\ Becker, Downs and DeThomas, China's Presence in the Middle 
East and Western Indian Ocean, pp. 88.

    Question 3. How, if at all, could federal agencies improve trade 
and security programs and policies to promote American commerce in the 
regions covered by China's Maritime Silk Road initiative?
    Answer. While important, policy recommendations to promote American 
commerce are beyond my area of expertise.
    With regard to security programs, I believe that the threat of PRC 
intelligence collection on U.S. Navy and Coast Guard activities and 
operations in Chinese-operated overseas ports is an important and 
growing concern, and both the U.S. government and military may wish to 
take additional steps to mitigate these concerns. For example, while 
the current process for vetting firms providing logistics services to 
the U.S. Navy and Coast Guard in foreign ports focuses predominately on 
cost, it would also be prudent to have providers vetted with an eye 
towards assessing the extent to which such firms have ties to the 
Chinese Party-State or military, and the potential implications of 
those relationships.
    Despite this new operating environment, however, it is important 
that the U.S. Navy and Coast Guard continue to operate globally and 
conduct port visits, engagement activities, and other aspects of 
maritime diplomacy, which remain important to their missions.

 Questions from Hon. Rick Larsen to Jeffrey D. Becker, Ph.D., Research 
          Program Director, Indo-Pacific Security Affairs, CNA

    Question 1. How can the United States leverage its existing 
maritime infrastructure to compete with Chinese State-Owned 
Enterprises, and where do we need to make significant investments?
    Answer. While I agree that this is an important question, I believe 
this question is beyond my area of expertise to answer.

    Question 2. Your written testimony details the impact of the 
significant investment by Chinese SOEs in global maritime 
infrastructure, particularly in port construction and operations. How 
can the U.S. work multilaterally to pressure China to open up maritime 
industries and put constraints on state owned enterprises?
    Answer. It is important to recognize that not all Chinese 
investments in overseas maritime infrastructure constitute a risk to 
U.S. national security. Treating all investments as risks merely drains 
vital resources. When Chinese firms operate in a transparent manner 
consistent with international legal rules and norms, many investment 
projects have the potential to satisfy demand in underserved locations.
    The first step, therefore, is to identify which Chinese investment 
projects may constitute a risk to U.S. national security, or a risk to 
the security of U.S. partners or allies. Such risks may arise as a 
result of the project's location, the role of certain Chinese firms 
with a history of engaging in corruption, or a lack of transparency 
regarding the details of the project.
    Identifying which projects are of critical concern will allow the 
U.S. government to concentrate its efforts on what is most important, 
and avoid wasting resources.
    Second, any successful effort will require careful coordination and 
cooperation with U.S. partners and allies. The United States will need 
to work with like-minded partner nations by sharing information 
regarding projects of concern, and providing high quality investment 
alternatives, as well as professional legal and technical advice to 
countries involved in Belt and Road projects to help improve 
transparency and legal accountability within the process.

    Question 3. Could China restrict U.S. Navy access to ports operated 
by Chinese state firms?
    Answer. If relations between the two countries continue to 
deteriorate, China could potentially seek to restrict USN access as a 
response to a U.S. action that it perceives as hostile, or even as an 
escalatory step should a serious crisis occur between the two countries 
in the East China Sea, South China Sea, or elsewhere.\11\ Doing so, 
however, would carry a number of costs for China. Such an action would 
certainly be noted in other counties where concerns about ceding 
sovereignty to China as a result of its growing footprint continue to 
gain traction. China would likely face political pushback from the host 
country as well. For example, while China may be best positioned to 
restrict U.S. Navy access in locations where it has significant 
economic leverage, such as Djibouti, or controls port operations, such 
as Piraeus, both Djibouti and Greece would have strong incentives to 
avoid being pulled into a U.S.-China confrontation.
---------------------------------------------------------------------------
    \11\ I am not aware, however, of Chinese analysts discussing this 
as a possible tactic for use in the context escalation and crisis 
control more. See for example Alison A. Kaufman and Daniel M. Hartnett, 
Managing Conflict: Examining Recent PLA Writings on Escalation Control, 
(Arlington: VA, Center for Naval Analyses, February 2016), DRM-2015-U-
009963-Final3.
---------------------------------------------------------------------------
    Finally, one may argue that China has an interest in having USN 
ships continue to frequent Chinese-controlled port facilities, as such 
visits provide ample opportunities for intelligence collection.

   Questions from Hon. Sean Patrick Maloney to Kathleen A. Walsh,\1\ 
   Associate Professor of National Security Affairs, U.S. Naval War 
                                College
---------------------------------------------------------------------------

    \1\ The views expressed here are those of the author alone and do 
not represent official views of the US Government, Department of 
Defense, US Navy or Naval War College.
---------------------------------------------------------------------------
    Question 1. How, if at all, could federal agencies improve trade 
and security programs and policies to promote American commerce in the 
regions covered by China's Maritime Silk Road initiative?
    Answer. The most immediately useful way to promote US trade and 
commerce but in a way that also addresses US national security concerns 
would be to establish, or support establishment of, a resource for up-
to-date information and objective analysis on China's Maritime Silk 
Road (MSR) initiative. Such information is currently available broadly 
from various private-sector resources such as think tanks, research 
organizations, foundations, and academia in the United States and 
abroad.\2\ What is missing, however, is an easily accessible, 
comprehensive, and single up-to-date database of information on MSR 
initiatives that is provided in a way that would best serve US 
industries' needs, particularly in the maritime and broader ``blue'' 
sectors.
---------------------------------------------------------------------------
    \2\ In addition to CSIS' Reconnecting Asia Program, other public 
databases that are or have been offered in the past include those by 
the Council on Foreign Relations, American Enterprise Institute (China 
Global Investment Tracker), the East West Institute, and the Mercator 
Institute for China Studies (MERICS), among others. However, to my 
knowledge, none of these focus exclusively on the Maritime Silk Road 
and maritime concerns, opportunities and costs specifically nor at the 
level of detail likely of interest to the US maritime industry.
---------------------------------------------------------------------------
    For instance, if a US enterprise is interested in possibly 
investing in or establishing a presence near an MSR project(s) or 
maritime cluster overseas, where might they get such information? 
Oftentimes companies will seek such assistance from Commerce or State 
Department programs, guidance and expertise. But such information is 
commonly available mainly at the country or regional level; such a 
large, long-term, cross-country initiative as the MSR likely makes 
gaining such information a difficult and extensive endeavor, one made 
more difficult due to the necessary reliance on the PRC government for 
MSR data, program information and policies. Having access to a trusted, 
US Government-vetted, open source resource on the MSR and its 
implications (both risks and opportunities) for US businesses could 
provide a value-added, one-stop electronic resource for enterprises of 
any size, anywhere seeking global, regional or country-level investment 
or trade opportunities while at the same time providing readily 
accessible information on the potential risks involved as well as ways 
to counter those risks (e.g., technology transfer and intellectual 
property protections and export control best practices). Making such 
information readily available to firms of any size and anywhere around 
the country who are potentially interested in the MSR (or MSR-related 
enterprises seeking to invest in the United States' maritime or blue 
sectors) could promote US trade and commerce but in a more security-
conscious manner. (This sort of information public service is the basis 
for the initiative mentioned in my testimony with a specific focus on 
supporting the emerging ocean or blue economy.) Such an MSR-specific 
data and information resource would be useful in the event that the MSR 
begins to fulfill Beijing's ambitions or, alternatively, if the MSR 
fails (saving US firms from investing in or with failed, failing or 
too-risky programs).
    A related, if less ambitious, idea is to mandate a US federal 
agency or agencies provide an annual report on the MSR that details 
issues such as maritime developments across the MSR, outlining any 
barriers to US trade and investment along the MSR or challenges faced 
broadly by US firms seeking to participate, providing indications of 
progress toward development of new maritime technology, standards, 
infrastructure and innovation (e.g., 5G as applied to maritime industry 
sectors), an assessment of financial tools, risks and costs (i.e., MSR-
related leases, loans, and specifics on debt), indications (or lack 
thereof) of China's development and export of its blue economy concept 
through its various announced ``blue'' passages, corridors, carbon 
programs, etc., as well as an overview of environmental impacts from 
MSR development, among other potentially useful input to an annual 
assessment related to development of the MSR and conducted over time.

    Question 2. How can the United States leverage its existing 
maritime infrastructure to compete with Chinese State-Owned 
Enterprises, and where do we need to make significant investments?
    Answer. If issues arising from the development of the blue economy, 
from ocean science, and development of offshore wind energy (the main 
areas that have come up in my research on the blue economy) reflect the 
broader maritime sector, then US maritime infrastructure is in 
important ways out of date and currently lacking modern capabilities 
while at the same time is being challenged by the growing and costly 
impact of climate change. Leveraging existing, aging maritime 
infrastructure is likely to be an insufficient approach to deal with 
growing competition from China and elsewhere in maritime and blue 
endeavors, meaning that significant investment in maritime 
infrastructure (e.g., ports, shipbuilding facilities, ocean science 
facilities, etc.) and the expertise to build and sustain it are 
essential for continued development of the ocean/blue/maritime economy 
in the United States.
    At the same time, the United States' existing maritime 
infrastructure, while in need of significant investment to modernize 
ports, rails, bridges, highways, telecommunications, etc., nevertheless 
serves as a competitive advantage vis-a-vis China and other developing 
countries in terms of already existing, being geographically clustered, 
market driven and increasingly connected intellectually and 
innovatively through emerging ocean or blue economy development 
efforts. Federal, state and local investments in the hardware (modern 
infrastructure programs) are likely to enhance and accelerate the 
equally important ``software'' that drives maritime innovation 
clusters--the collaborative and synergistic sharing and pursuit of new 
ideas, innovations, and scientific invention that can come from a 
cluster of ocean science, technology, engineering, research, commercial 
enterprises, and environmental interests. Similar to how Silicon Valley 
formed around a leading university (Stanford), drew on the nearby 
community of scientists, researchers, engineers and businesses to drive 
innovation, and was supported in part by federal government programs, 
funding, and requirements, the maritime/ocean/blue sector has begun to 
expand cross-maritime community collaboration and form new networks or 
clusters of cooperation, development and innovation on maritime 
concerns. These bottom-up behaviors reflect the strength of the United 
States' market economy but can be assisted by government (such as 
through continued STEM funding), particularly if expanded and geared 
more specifically to ocean-, maritime-, and new blue-themed science, 
technology, engineering and environmental science careers.
    Lastly, it is important that the United States modernize its 
maritime infrastructure (in both hard and soft terms) in order to 
ensure that we do not become overly dependent on ``Chinese technology, 
standards, equipment or engineering knowhow'', the establishment of 
which is the aim of China's own Made in China 2025 strategy and has 
long been an objective of PRC science and technology development 
strategy and policies.
    As explained by the OECD, ``The strategy Made in China 2025 aims to 
encourage Chinese technology, standards, equipment and engineering 
knowhow, which can also be adopted within the BRI in competition with 
advanced economies trying to do the same thing: i.e. to win business 
and lock-in future projects through sound benefit/cost outcomes.'' \3\
---------------------------------------------------------------------------
    \3\ OECD, ``China's Belt and Road Initiative in the Global Trade, 
Investment and Finance Landscape,'' OECD Business and Finance Outlook 
2018 (Paris: OECD, 2018), p. 22. https://www.oecd.org/finance/Chinas-
Belt-and-Road-Initiative-in-the-global-trade-investment-and-finance-
landscape.pdf.
---------------------------------------------------------------------------
    If the United States is to remain a leader in technology and 
standard development in the broader maritime sector (both commercial 
and military/naval), significant investment is necessary in maritime 
infrastructure to ensure US science, technology, engineering, defense 
and business interests are involved in developing and innovating high-
tech standards and intellectual property that exceeds, or at the very 
least is competitive with, PRC-developed technology standards, 
engineering and equipment. Because both the United States and the 
People's Republic of China rely on commercial-sector technology 
advances to serve defense technology requirements (and vice versa), 
development of a modern maritime industry is a critically strategic 
area of competition worthy of federal R&D investment.
    While playing a distinct role from that of the PRC Government, the 
US government nevertheless has an important role to play in ensuring 
that maritime infrastructure is modernized and continues to provide 
opportunities for more competitive and capable maritime science, 
technology, engineering and commerce, all of which serves the national 
innovation and defense enterprise.

    Questions from Hon. Rick Larsen to Kathleen A. Walsh, Associate 
     Professor of National Security Affairs, U.S. Naval War College

    Question 1. I'm eager to hear more about the application of 
maritime clusters and blue technology development. As you may know, 
Washington state have a robust cluster, called Washington Maritime 
Blue, that fosters productive collaboration and competition for ocean 
economy companies and agencies.
    a.What are some ways the public sector benefits from investment in 
maritime clusters?
    Answer. I have had the opportunity to discuss development of 
Washington state's Maritime Blue cluster with experts and plan to 
conduct field research following an event tentatively scheduled there 
next July. As such, I am somewhat familiar with Washington state's 
efforts to develop a Maritime Blue cluster and am impressed by the 
program's aims and progress made to date. This is an initiative that is 
worth monitoring and is likely to serve as a model for other states or 
regions.
    As indicated in my answers above, one of the most important 
benefits to the public sector from investment in maritime clusters is 
likely to be to the defense enterprise (in the maritime case, mainly 
naval development). Where maritime clusters emerge and promote 
opportunities for innovation and invention, this will serve US defense 
interests by enhancing scientific, technological and engineering 
knowhow, maritime or naval capabilities, and through development of 
leading edge products, standards, and practices applicable on the 
water, underwater and above the water. This emphasis on investment in 
maritime development will aid the United States in its strategic 
competition with a rapidly capable Chinese/PLA Navy, China's economic 
challenge, as well as with high-tech developments across the MSR.
    The development of maritime clusters also is likely to promote 
jobs, support more advanced technical skills (leading to higher paying 
jobs), expand university programs, and open new trade and investment 
opportunities. Where maritime clusters are able to develop an 
innovation ecosystem, the whole is likely to be larger than the sum of 
the parts, providing a sustainable cycle of development, which serves 
the public's interest overall.
    An important element of an ocean or blue economy is the concept of 
an ecosystem. In the United States, we have learned the lesson that it 
pays (literally and figuratively) to consider the environment when also 
pursuing for-profit endeavors; sustainable development serves long-term 
industry interests, market development, as well as innovation by 
ensuring the environment not only does not repel families and visitors 
where environmental hazards and damage exist but, in fact, serves to 
promote business by attracting more people (i.e., investors, tourists, 
academic researchers, students and others) to a particular geographic 
region known as an environmentally pleasant place to live, work or 
visit. Thus, to the extent that maritime clusters are successful in 
developing and promoting more innovative but also sustainable and 
conservation-oriented policies, practices and technologies, the general 
public will be served by having a cleaner environment and drinking 
water while US industry will gain a competitive advantage in domestic 
and global markets. Having learned this hard lesson ahead of other 
countries still in the throes of fast-paced economic development 
provides the United States with a head start and competitive advantage 
in pursuing more sustainable, environmentally friendly and profitable 
approaches to economic, particularly maritime, development.

    Question 2. In your testimony, you detail the Trump 
Administration's lack of a focused blue technology and blue economy 
plan following last year's rollback of the National Ocean Policy, 
established under President Obama. What are the consequences of the 
administration's inaction, particularly as China continues to increase 
investments in this field?
    a. What would it take to make the U.S. blue economy more robust and 
able to compete with the Chinese?
    b. Could you propose some strategies or areas of investment in the 
ocean economy sector that could leverage areas of expertise in our 
federal agencies?
    Answer (2a.-2b.). Despite the federal government reversal on 
pursuing a national strategy to develop the ocean/blue economy under 
the Trump administration, regional, state and local efforts continue. 
The lack of a national strategy, however, means that these local 
efforts are not well coordinated, could prove wasteful or redundant, 
and likely are missing out on opportunities that having a national 
strategy and focused federal effort can illuminate and support.
    The Trump administration recently has taken initial steps toward 
supporting ocean/blue economy development by hosting a November 2019 
White House meeting on ocean science research and development (R&D). 
But this initiative has come three years into a first term and, in my 
view, represents the minimum that is required to address US ocean and 
maritime interests. In the absence of an influential US interagency 
policy process and development of a national strategy coordinated with 
US allies and partners around the globe, the United States is missing 
opportunities for development and ceding influence over international 
ocean/blue/maritime development matters to other powers, particularly 
China. As China prioritizes maritime/ocean/blue economy development as 
a strategic industry sector with civil and military applications, the 
United States' efforts to do the same are lacking and rely largely on 
local officials, funds, resources and political will. Without clear and 
consistent strategic guidance, established programs or sustained 
financial support as well as collective expertise from the federal 
government (beyond programs administered by the National Oceanographic 
and Atmospheric Administration [NOAA] and the Naval Undersea Warfare 
Center), the effect is akin to engaging in a major competition with one 
arm tied behind our back.
    In addition to supporting a public service information database on 
the ocean/blue economy and/or MSR (addressed above) that would be 
designed to provide critical and timely information on what the United 
States, China and other states are doing to develop their ocean/
maritime/blue economies, the federal government can sustain and expand 
funding programs for ocean science research, exploration, technology 
development and engineering, and related educational and training 
programs to promote ocean/maritime/blue development, innovation and 
careers. Given the relative newness of the blue economy concept and 
importance of maritime innovation clusters to the local, state and 
national economies, government support for research into these new 
aspects of maritime development (that promote blue and innovative, 
industrially and environmentally sustainable solutions) should be a 
priority so that we better understand these dynamics and how to 
leverage them to achieve improved outcomes. Non-partisan, government-
sponsored public reports on what efforts across the United States and 
beyond have worked or have failed and why would be a valuable public 
service; trusted information and analysis on China's ocean/blue/
maritime and MSR-related development efforts and their importance for 
US and allied trade, commerce and security interests is essential and 
could serve to counter China's influence by providing accurate, timely 
and comprehensive information on its activities. For instance, if 
China's various ``blue'' initiatives connected to the MSR do not 
enhance marine conservation but, instead, exacerbate environmental 
concerns, this information will be essential to US businesses and 
others with a potential interest in participating (or not) in the MSR.
    Given the United States' long history and experience in fostering 
technology innovation, as maritime innovation clusters and the ocean/
blue economies develop, federal agencies could usefully provide data 
indicators and a collection of case studies and best practices that 
other states, regions or countries might use in developing their own 
ocean/blue economies and maritime innovation clusters by building on 
market-based dynamics (in contrast to China's more statist, top-down, 
SEZ-model approach to development). To the extent that we can document 
the reasons for the success (or failure) of any US innovative and 
sustainable maritime/ocean/blue economy development efforts or those of 
other states, we can share those insights with allies, partners, 
friends and others around the world while also influencing development 
of this strategically vital sector at home and abroad.

    Question 3. Is ratification of UNCLOS still a strategic imperative, 
and what would you say to our colleagues in the Senate to convince 
them?
    Answer. Yes, ratification of UNCLOS is a strategic imperative given 
the opportunity costs incurred by not being at the table as the 
People's Republic of China attempts to re-interpret the customary 
maritime law upon which the UNCLOS was drafted as well as re-
interpreting UNCLOS provisions in ways that enhance PRC maritime claims 
(i.e., Exclusive Economic Zone or EEZ boundaries) at the expense of 
freedom of navigation in the Indo-Pacific region and around the globe.
    Despite denials, it is clear that the People's Liberation Army Navy 
(PLAN) operates as if China's claim of a made-up Nine-Dash Line 
encompassing almost all of the South China Sea is a sovereign maritime 
boundary, in contravention of UNCLOS.\4\ But without having a seat at 
the table at which these matters are addressed and potentially re-
interpreted by the convention's now largest United Nations Security 
Council power (PRC) puts the United States and also our allies, 
partners and friends at a disadvantage--in trying to enforce the rules 
and their interpretation in an international convention to which we are 
not a formal party. An added impact and opportunity cost is the United 
States' and others' (parties other than China), capability to conduct 
ocean scientific research in the South China Sea region, given the 
risks, uncertainties and exorbitant costs that would be involved in 
doing so.
---------------------------------------------------------------------------
    \4\ It is through discussions over several years with Chinese 
academics, researchers and military experts that it has become clear to 
me that the PLAN effectively treats the Nine-Dash Line as a sovereign 
maritime boundary.
---------------------------------------------------------------------------
    China is also leading an effort attempting to change the long-
accepted understanding under UNCLOS and maritime customary law of what 
constitutes territorial and international waters and states' rights 
therein, in order to claim sovereign rights out to 200 nautical miles 
of an EEZ and, for instance, to exclude foreign military access near 
China's shores. Such an interpretation if applied globally would cover 
and close off much of the world's maritime area and make international 
trade and security based on freedom of navigation principles difficult 
to maintain. Yet China does not apply this revisionary interpretation 
to maritime areas beyond the South China Sea, presumably because that 
would constrain China's own access in other parts of the world, such as 
along the US coastline, in the Arctic, and elsewhere. It would be more 
effective for the United States to counter this sort of inconsistent 
stance on the part of a powerful UNCLOS member if we were also a member 
of the Convention and upheld its principles as a member of good 
standing.
    Beyond maritime boundary re-definitions, China and other states are 
pursuing claims to the seabed, as allowed under UNCLOS. As a non-party, 
the United States is not engaging in this internationally sanctioned 
arena of exploration and resource extraction and therefore has limited 
impact on the rules, practices and restrictions that govern this 
activity. As modern science, technology and engineering allow greater 
exploitation of the seabed, this issue is likely to become of greater 
interest and possible concern than in the past.
    US ratification of UNCLOS has long been recommended by US military 
leaders due to US interests in the maritime domain and in the principle 
of freedom of navigation that is essential to global trade and 
security. To the extent that the United States Senate has concerns with 
regards to any particular provision(s) in the Convention, it is likely 
that these can be addressed as part of the ratification process. In 
short, it is better for the United States to be inside the Convention 
working to ensure UNCLOS works for US interests and those of our 
allies, partners and friends than to remain nearly isolated on the 
outside complaining about what China and other UNCLOS members decide. 
As more time passes, the risk increases of China being successful in 
reinterpreting key provisions in which the United States has an 
interest, as do our allies, partners and friends.

    Question 4. Are Chinese telecommunications firms such as Huawei or 
ZTE involved in port construction projects? If so, does this create any 
additional concerns for national security?
    Answer. I do not know, offhand, if either Huawei or ZTE is involved 
in port construction projects and would have to research this question, 
but I certainly would like to know. This is one of the reasons why I 
have recommended (see first answer to Representative Maloney and 
testimony) a one-stop MSR-focused (or broader ocean/blue economy) 
database that would provide such answers to anyone, anywhere, at any 
time interested in knowing this sort of basic, generally publicly 
available information along with information on what concerns the US 
government has, any export policies or sanctions that might apply, and 
best practices on how to deal with IPR and technology transfer 
concerns, etc. Informed investing, decisionmaking and policymaking is 
in the US interest for commercial, technology and security reasons and, 
in the Information Age, certainly can be facilitated to better serve 
these interests.
    Were Huawei, ZTE or other Chinese telecom enterprises to be 
involved in port construction projects along the MSR, in the United 
States or elsewhere outside the PRC, this could pose potential trade 
and security risks. US Government concerns based on investigations 
about these firms' technologies, products, policies, practices and 
their connections to and cooperation with the Chinese Communist Party 
mandates make these companies' involvement in strategically vital port 
facilities potentially worrisome in terms of raising concerns about 
technology transfers, espionage, unfair competition and possible state 
subsidies.
    In addition, the strategies and plans related to China's MSR vision 
(see Appendix) indicate that overseas SEZs, industrial parks, other 
types of development zones, etc. (places and bases) are expected to be 
connected to and networked with the Chinese Mainland via 
telecommunications hardware and software, likely provided by these (and 
perhaps other) Chinese enterprises. According to China's 2017 Vision 
for Maritime Cooperation:

        ``China will join in efforts by countries along the Road in 
        establishing industrial parks for maritime sectors and economic 
        and trade cooperation zones, and promote the participation of 
        Chinese enterprises in such endeavors . . .

        Efforts are needed to strengthen international maritime 
        cooperation, improve shipping service networks among countries 
        along the Road, and to jointly establish international and 
        regional shipping centers. Countries along the Road are 
        encouraged to enhance cooperation through pairing sister ports 
        and forging port alliances. Chinese enterprises will be guided 
        to participate in the construction and operation of ports. 
        Projects for the planning and construction of submarine cables 
        will be jointly advanced to improve connectivity in 
        international communications . . .

        Information networks will be improved in countries along the 
        Road by jointly building a system with broad coverage for 
        information transmission, processing, management and 
        application, a system for information standards and 
        specifications, and a network security system, thus providing 
        public platforms for information sharing.''--2017 Vision for 
        Maritime Cooperation (full text in Appendix)

    The 2015 Action Plan also outlines specific initiatives aimed at 
connecting Chinese and MSR maritime facilities, ports, energy 
infrastructure, and regional, transcontinental submarine optical 
cables:

        ``Facilities connectivity is a priority area for implementing 
        the Initiative. On the basis of respecting each other's 
        sovereignty and security concerns, countries along the Belt and 
        Road should improve the connectivity of their infrastructure 
        construction plans and technical standard systems, jointly push 
        forward the construction of international trunk passageways, 
        and form an infrastructure network connecting all sub-regions 
        in Asia, and between Asia, Europe and Africa step by step. At 
        the same time, efforts should be made to promote green and low-
        carbon infrastructure construction and operation management, 
        taking into full account the impact of climate change on the 
        construction.

        With regard to transport infrastructure construction, we should 
        focus on the key passageways, junctions and projects, and give 
        priority to linking up unconnected road sections, removing 
        transport bottlenecks, advancing road safety facilities and 
        traffic management facilities and equipment, and improving road 
        network connectivity. We should build a unified coordination 
        mechanism for whole-course transportation, increase 
        connectivity of customs clearance, reloading and multimodal 
        transport between countries, and gradually formulate compatible 
        and standard transport rules, so as to realize international 
        transport facilitation. We should push forward port 
        infrastructure construction, build smooth land-water 
        transportation channels, and advance port cooperation; increase 
        sea routes and the number of voyages, and enhance information 
        technology cooperation in maritime logistics. We should expand 
        and build platforms and mechanisms for comprehensive civil 
        aviation cooperation, and quicken our pace in improving 
        aviation infrastructure.

        We should promote cooperation in the connectivity of energy 
        infrastructure, work in concert to ensure the security of oil 
        and gas pipelines and other transport routes, build cross-
        border power supply networks and power-transmission routes, and 
        cooperate in regional power grid upgrading and transformation.

        We should jointly advance the construction of cross-border 
        optical cables and other communications trunk line networks, 
        improve international communications connectivity, and create 
        an Information Silk Road. We should build bilateral cross-
        border optical cable networks at a quicker pace, plan 
        transcontinental submarine optical cable projects, and improve 
        spatial (satellite) information passageways to expand 
        information exchanges and cooperation.''--2015 Vision & Actions 
        on Jointly Building Silk Road Economic Belt and 21st-Century 
        Maritime Silk Road (a.k.a. Belt and Road Action Plan (full text 
        in Appendix, document 2)

    As such, US technology and security concerns raised by such Chinese 
companies could expand to third-party states (including potentially 
allies and partners) and across the region, thereby becoming much more 
difficult to counter or protect against. Moreover, to the extent that 
the MSR is successful in developing, connecting and networking overseas 
development zones, the technology hardware and software as well as 
communications channels that are used could become the regional and 
global standard; this outcome is more likely if Chinese 
telecommunications firms and products dominate MSR-related contracts, 
investments, and trade and if US firms are excluded from competing or 
ill-prepared to do so.
                  appendix: 2 prc government documents
1. Vision for Maritime Cooperation under the Belt and Road Initiative 
(June 2017) [http://english.www.gov.cn/archive/publications/2017/06/20/
content_
281475691873460.htm]

2. Vision and Actions on Jointly Building Silk Road Economic Belt and 
21st-Century Maritime Silk Road (March 2015) (a.k.a. Belt and Road 
Action Plan) [http://en.ndrc.gov.cn/newsrelease/201503/
t20150330_669367.html]

Note: each highlighted by Walsh for relevant maritime/blue economy 
matters of interest.

[The two PRC Government documents in the appendix to Ms. Walsh's 
responses to questions for the record are retained in committee files. 
Ms. Walsh has also provided web links to these documents; see above.]