[Congressional Record (Bound Edition), Volume 151 (2005), Part 5]
[Senate]
[Pages 6003-6004]
[From the U.S. Government Publishing Office, www.gpo.gov]




                   CHINA'S SPREADING GLOBAL INFLUENCE

  Mr. INHOFE. Mr. President, I rise for a second time in 8 days to 
update all of us on an issue of deepest importance. In my recent speech 
on China I delivered this past Monday, I detailed how China is indeed a 
growing threat. When the fragmented pieces of current events and 
policies are glued together, they form an alarming picture of the 
threat to our national security. I believe this threat is of the most 
serious order, and until we address it I will continue to draw 
America's attention to it.
  In 2000, Congress established the U.S.-China Security Economic Review 
Commission to act as the bipartisan authority on how our relationship 
with China affects our economy, industrial base, China's military and 
weapons proliferation, and our influence in Asia. I fear that the 
Commission's findings have largely been ignored.
  A major part of our economic relationship with China is the growing 
trade deficit. This deficit grew to $162 billion in 2004, by far the 
largest economic imbalance the United States has with any country. One 
potential key factor contributing to this imbalance is the 
undervaluation of the Chinese yaun. Through currency manipulation, 
China has been able to create an uneven economic playing field in its 
favor. Let's keep in mind this bipartisan commission worked on this for 
several years. The Commission recommends that Congress pursue 
legislation that will push the administration toward correcting these 
imbalances and for the U.S. Trade Representative and Department of 
Commerce to undertake an investigation of China's questionable economic 
practices. I think this is very sound advice. In fact, I voted last 
Wednesday to not table a Chinese currency manipulation amendment.
  China joined the World Trade Organization in December 2001. Their 
transition was to be overseen by the Transitional View Mechanism--TRM. 
Although China has made some progress in the areas of tariffs and other 
WTO commitments, they have consistently frustrated the TRM's ability to 
assess China's WTO compliance through lack of transparency. As the 
Commission recommends, the Bush administration must be encouraged to 
take action to preserve TRM's oversight and cooperate with other 
trading partners to create a cooperative effort to address China's 
shortfalls.
  Another problem area is that the Chinese Government has been listing 
State Owned Enterprises--SOEs--on international capital markets. These 
companies lack accountability standards that normally track the 
companies' cash flow. At least one Chinese SOE, China North Industries 
Corporation, has been sanctioned by the U.S. Government for 
proliferating illegal weapons technology. As the 2004 Commission report 
outlines:

       Without adequate information about Chinese firms trading in 
     international capital markets, U.S. investors may be 
     unwittingly pouring money into black box firms lacking basic 
     corporate governance structures, as well as enterprises 
     involved in activities harmful to U.S. security interests.

  Beyond dangerous investing, there are other security aspects to 
China's trade practices. The hard currency that China is gaining 
through its manipulative economy is buying foreign technology and 
modernizing their military. We used to be concerned about their nuclear 
capability, but now it is also conventional weaponry, as the Presiding 
Officer knows, since he sits on the Senate Armed Services Committee. We 
know China is pushing very hard to get the E.U. to remove their arms 
embargo. The embargo was put in place after the 1989 Tiananmen Square 
massacre to protest China's appalling human rights record. The E.U. 
c1aims that the embargo is no longer effective, but ignores the 
obvious--why lift the embargo without replacing it with a better one? 
Their solution, an informal ``code of conduct'', allows for no 
comprehensive enforcement. We can also expect E.U. technology to 
proliferate beyond China's borders, to countries that would gladly use 
it against the U.S. The E.U. does not consider this a strategic threat. 
In fact, President Chirac just demanded an early lifting of the 
embargo. However, the Commission reports:

       Access to more advanced systems and integrating 
     technologies from Europe would have a much more dramatic 
     impact on overall Chinese capabilities today than say five or 
     ten years ago. For fourteen years China has been unable to 
     acquire systems from the West. Analysts believe a resumption 
     of EU arms sales to China would dramatically enhance China's 
     military capability. If the EU arms embargo against China is 
     lifted, the U.S. military could be placed in a situation 
     where it is defending itself against arms sold to the PLA by 
     NATO allies.

  Think about this: we share military technology with our European 
allies and then find our security threatened and possibly our 
servicemen killed by this same technology. All this is made possible 
because China is exploiting economic grey areas to come up with the 
money to buy all this new technology. This is a critical issue to which 
Congress must respond to.
  Further, some experts believe that China's economic policy is a 
purposeful attempt to undermine the U.S. industrial base and likewise, 
the defense industrial base. Perhaps it is hard to believe that China's 
economic manipulation is such a threat to our Nation. In response, I 
would like to read from the book Unrestricted Warfare, written by two 
PLA--People's Liberation Army--senior colonels:

       Military threats are already no longer the major factors 
     affecting national security . . .

[[Page 6004]]

     traditional factors are increasingly becoming more 
     intertwined with grabbing resources, contending for markets, 
     controlling capital, trade sanctions and other economic 
     factors . . . the destruction which they do in the areas 
     attacked are absolutely not secondary to pure military wars.

  The book goes on to argue that the aggressor must ``adjust its own 
financial strategy'' and ``use currency revaluation'' to weaken the 
economic base and the military strength of the other country. This is 
the Chinese saying this, not some American commentator. You need to 
hear that in context of the U.S.-China Commission's statement:

       One of Beijing's stated goals is to reduce what it 
     considers U.S. superpower dominance in favor of a multipolar 
     global power structure in which China attains superpower 
     status on par with the United States.

  I think the picture is clear. We must link China's trading privileges 
to its economic practices. As China's No. 1 importing customer, 
accounting for 35 percent of total Chinese exports, we have the 
influence. As I said last Monday, a week ago, I agree that the way we 
handle an emerging China must be dynamic, but it must not be weak. The 
Commission puts it well:

       We need to use our substantial leverage to develop an 
     architecture that will help avoid conflict, attempt to build 
     cooperative practices and institutions, and advance both 
     countries' long-term interests. The United States has the 
     leverage now and perhaps for the next decade, but this may 
     not always be the case. We also must recognize the impact of 
     these trends directly on the domestic U.S. economy, and 
     develop and adopt policies that ensure that our actions do 
     not undermine our economic interests . . . the United States 
     cannot lose sight of these important goals, and must 
     configure its policies toward China to help make them 
     materialize . . . If we falter in the use of our economic and 
     political influence now to effect positive change in China, 
     we will have squandered an historic opportunity.

  The bipartisan U.S.-China Commission has been doing an outstanding 
job in translating how recent events affect our national security. I 
plan on giving two more speeches highlighting the Commission's 
findings, followed by a resolution to effect their conclusions. I hope 
America is listening.
  It is so similar to what we are facing right now and what we voted 
on, the fact that the European Union is subsidizing a company which 
would undermine the aerospace industry here in the United States. At 
the same time, if the European Union lifts the sanctions which they 
have right now, they would be doing essentially the same thing to our 
country.
  I yield the floor.

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