The U.S.-China Economic and Security Review Commission will release the Commission’s 2015 Annual Report to Congress on Wednesday, November 18, 2015. Copies of the full report will be available at this event hosted by the Chairman and Vice Chairman of the Commission starting at 9:00am in room 106 in the Dirksen Senate Office Building.
This Issue Brief examines the U.S. Navy’s recent freedom of navigation patrol in the South China Sea, and discusses what China, the United States, and the rest of the region might do next in the South China Sea. The last time U.S. military ships and aircraft sailed or flew within 12 nautical miles (nm) of Chinese-occupied features in the Spratly Islands was 2012. On October 27, however, a U.S. Navy guided missile destroyer conducted a freedom of navigation patrol within 12 nm of Subi Reef, a land feature on top of which China has built an artificial island. Reportedly, the patrol “was completed without incident,” though China’s navy sent two ships to monitor and issue warnings to the U.S. destroyer. The U.S. ship also conducted freedom of navigation operations within 12 nm of land features occupied by Vietnam and the Philippines.
The objective of the freedom of navigation patrol appears to have been to signal that the U.S government does not consider China to have sovereignty over the 12 nm area of sea adjacent to Subi Reef. Transforming a low-tide elevation into an artificial island does not entitle it to a territorial sea. The patrol did not make a statement about the validity of China’s sovereignty claim over Subi Reef itself.
In February 2015, China and Argentina announced prospective weapons sales and defense cooperation agreements extending beyond the scope of any made between China and a Latin American nation to date. These plans include Argentina’s purchase or coproduction of 14-20 fourth-generation fighter aircraft, at least 100 armored personnel carriers, and five naval vessels; enhanced military-to-military exchanges; and China’s construction in Argentina of a space tracking facility in conjunction with satellite imagery sharing. If fulfilled, these agreements would vastly surpass China’s previous regional arms exports in value and achieve several new benchmarks in the breadth, competitiveness, and technological sophistication of its regional arms sales; altogether representing a new phase in China-Latin America defense engagement. These developments would present several implications for U.S. objectives in the region: U.S. arms suppliers would likely see continued market share reduction, the United States may face a new regional security hazard, regional actors might alter their political stances or use Chinese arms in ways unfavorable to U.S. interests, and the Falkland Islands dispute might briefly and temporarily intensify. Despite the rapid growth and proximity of China’s regional defense engagements, however, they present no direct security threat to the United States.
Highlights of this Month’s Edition
• Bilateral trade: In September, the U.S. deficit in goods trade with China hit $36.3 billion, the highest monthly deficit on record; quarterly service imports from China reach highest level on record, weakening the U.S. trade in services surplus.
• Policy trends in China’s economy: Fifth Plenum sets course for the 13th Five-Year Plan; President Xi’s state visit to the UK nets expanded international role for the RMB.
• Quarterly review of China’s economy: China’s GDP grew 6.9 percent in third quarter; government moves to support the economy.
• Sector spotlight – Aluminum: Chinese subsidies and preferential policies have created overcapacity that has lowered global prices and eroded the profitability of the U.S. aluminum sector.
In April 2015, the U.S. Office of Naval Intelligence confirmed that China has deployed the YJ-18 antiship cruise missile (ASCM) on some People’s Liberation Army (PLA) Navy submarines and surface ships. The YJ-18’s greater range and speed than previous Chinese ASCMs, along with its wide deployment across PLA platforms, would significantly increase China’s antiaccess/area denial capabilities against U.S. Navy surface ships operating in the Western Pacific during a potential conflict. The YJ-18 probably will be widely deployed on China’s indigenously built ASCM-capable submarines and newest surface ships by 2020, and China could develop a variant of the YJ-18 to replace older missiles in its shore-based ASCM arsenal. This paper assesses the capabilities of the YJ-18 and describes the implications of its wide deployment for U.S. forces operating in the Western Pacific. The author exclusively used open source information and considered the capabilities of similar missiles to assess the likely characteristics of the YJ-18.
China’s strict regulation of entertainment imports, including foreign films, violates the country’s World Trade Organization (WTO) commitments, as determined in a 2007 WTO decision calling for China to open its film market to foreign films. After years of noncompliance and inaction, China partially opened its film market in 2012 following a deal with the United States. The deal allowed for the import of 34 films each year—up from the previous limit of 20 films—in exchange for a temporary suspension of further U.S. WTO actions against China’s film importation policies. During Chinese President Xi Jinping’s September 2015 visit to the United States, the Motion Picture Association of America and China Film Group reached two new film agreements, which could increase market access for foreign films in China. Based on recent history, however, promises that China will further open its film market should be viewed skeptically.
Chinese box office sales have increased alongside China’s standard of living, resulting in China surpassing Japan as the world’s second largest film market (behind the United States) in 2012. If global film market growth rates remain consistent over the next few years, many experts expect China to surpass the United States as the largest film market in the world as early as 2018. Hollywood relies on China’s film market for revenue, but the process to get films into China is arduous due to strict and opaque regulation of film imports. China’s regulations and processes for approving foreign films reflect the Chinese Communist Party’s position that art, including film, is a method of social control. As a result of these regulations, Hollywood filmmakers are required to cut out any scenes, dialogue, and themes that may be perceived as a slight to the Chinese government. With an eye toward distribution in China, American filmmakers increasingly edit films in anticipation of Chinese censors’ many potential sensitivities.
The U.S.-China Economic and Security Review Commission was created by the United States Congress in October 2000 with the legislative mandate to monitor, investigate, and submit to Congress an annual report on the national security implications of the bilateral trade and economic relationship between the United States and the People’s Republic of China, and to provide recommendations, where appropriate, to Congress for legislative and administrative action.