The People’s Republic of China (China) has experienced rapid economic growth to become the world’s second largest economy while modernizing its industrial base and moving up the global value chain. However, much of this growth has been achieved in significant part through aggressive acts, policies, and practices that fall outside of global norms and rules (collectively, “economic aggression”). Given the size of China’s economy and the extent of its market- distorting policies, China’s economic aggression now threatens not only the U.S. economy but also the global economy as a whole.
In some respects, China has been transparent about its aggressive acts, policies, and practices. They are revealed in Chinese government documents, through behaviors of Chinese State actors, and from reports produced by business organizations, think tanks, and government agencies. Four categories of such economic aggression which are outside the scope of this report include:
Protect China’s Home Market From Imports and Competition: This category features high tariffs, non-tariff barriers, and other regulatory hurdles.
Expand China’s Share of Global Markets: Industrial policy tools include financial support to boost exports and the consolidation of State-Owned Enterprises into “national champions” that can compete with foreign companies in both the domestic and global markets. Chinese enterprises also benefit from preferential policies that lead to subsidized over capacity in China’s domestic market, which then depresses world prices and pushes foreign rivals out of the global market.
- Secure and Control Core Natural Resources Globally: China uses a predatory “debt trap”model of economic development and finance that proffers substantial financing to developing countries in exchange for an encumbrance on their natural resources and access to markets. These resources range from bauxite, copper, and nickel to rarer commodities such as beryllium, titanium, and rare earth minerals. This predatory model has been particularly effective in countries characterized by weak rule of law and authoritarian regimes.
- Dominate Traditional Manufacturing Industries: China has already achieved a leading position in many traditional manufacturing industries. It has done so in part through preferential loans and below-market utility rates as well as lax and weakly enforced environmental and health and safety standards.13 As the European Chamber of Commercehas documented: “For a generation, China has been the factory of the world.” By 2015, China already accounted for 28 percent of global auto production, 41 percent of global ship production, more than 50 percent of global refrigerator production, more than 60 percent of global production of color TV sets, and more than 80 percent of global production of air conditioners and computers.
In addition, China pursues two categories of economic aggression that are the focus of this report. These include:
- Acquire Key Technologies and Intellectual Property From Other Countries, Including the United States
- Capture the Emerging High-Technology Industries That Will Drive Future Economic Growth and Many Advancements in the Defense Industry
This report will document the major acts, policies, and practices of Chinese industrial policy used to implement these two strategies.
Read the full report HERE.