RESEARCH: Economics and Trade REPORTS

The 13th Five-Year Plan
China is an important market for U.S. firms, but policies outlined in the 13th Five-Year Plan seek to create new Chinese competitors that will be able to challenge U.S. companies abroad while slowly closing market opportunities in China for U.S. and other foreign firms in important high-tech sectors such as biopharmaceuticals, robotics, and aviation. This staff report analyzes the 13th Five-Year Plan, the Chinese government’s most important strategy to address its economic, social, and environmental challenges over the next five years, focusing on key national targets (including subsequently announced localization and innovation targets), market access commitments, and its implications for the U.S. employment, innovation, and economic growth.
February 2017 Trade Bulletin
Highlights of this Month’s Edition: • Bilateral trade: The U.S. trade deficit declined to $347 billion in 2016, a 5.5 percent decrease year-on-year, due to weakened imports; U.S. service exports hit a record high, aided by increased Chinese tourism spending in the United States. • Bilateral policy issues: U.S. firms operating in China in 2016 report similar levels of profitability, but perceive a decline in the overall investment environment driven in part by concerns over China’s discriminatory and restrictive regulatory policies. • Quarterly review of China’s economy: China’s GDP growth hit 6.7 percent in 2016, supported by higher government spending and record bank lending; President Xi Jinping talks up globalization at Davos amid bleak exports. • Policy trends in China’s economy: Chinese government’s continued efforts to battle capital outflows are bearing fruit; China instructs Internet providers to end unauthorized VPN use and establishes funds for information infrastructure and development of domestic Internet companies. • Sector focus – Aluminum: U.S. government tightens antidumping and countervailing duties and launches a WTO case to fight China’s excess aluminum production.
Fentanyl: China’s Deadly Export to the United States
Mass quantities of fentanyl, a low-cost and highly potent synthetic drug, are being produced in China and brought illegally to the United States, contributing to a growing U.S. opioid crisis. The rise of fentanyl in the United States can be traced back to China’s large chemical and pharmaceutical industries, which manufacture vast quantities of the drug and its analogues to export to the western hemisphere with little regulatory oversight. This report examines how China’s illicit chemical production and inefficient U.S. and international counternarcotic efforts have contributed to dramatic increases in fentanyl-related deaths in the United States.
January 2017 Trade Bulletin
Highlights of this Month’s Edition •Bilateral trade: U.S. exports to China rise 14.1 percent year-on-year in November 2016, the largest increase since December 2013. Cumulative yearly trade with China and the U.S. goods trade deficit continue to decline year-on-year. •Bilateral policy issues: China launches complaint at the WTO against the United States and EU over market economy status; the United States challenges Chinese grain tariff rate quotas at the WTO; WTO talks to finalize the Environmental Goods Agreement collapsed, due in part to China’s last-minute submission of a new product list. •Policy trends in China’s economy: Capital outflows continue, forcing the Chinese government to spend down reserves and reinstitute capital controls to maintain the exchange rate; a new directive issued by the Chinese government prohibits social media sites from streaming videos on current events from non-government-approved sources.
Chinese Investment in the United States
The report examines the rapidly increasing foreign direct investment by China in the United States and how the unprecedented level of investment, especially in sensitive sectors, raises new considerations for lawmakers regarding U.S. national and economic security. This report was prepared for the Commission by the Rhodium Group.
December 2016 Trade Bulletin
Highlights of this Month’s Edition •Bilateral trade: U.S. exports to China jump 11.3 percent year-on-year in October 2016, leading to a smaller deficit. •Bilateral policy issues: At JCCT, China pledges to open entertainment sector to the United States, but U.S. concerns over Chinese biotechnology rules remain unaddressed. •Policy trends in China’s economy: China has passed a broad new cybersecurity law aimed at tightening government control over information flows and technology products, sparking complaints from foreign business and rights advocacy groups; Lou Jiwei replaced as Minister of Finance, raising concerns about China’s commitment to economic reform. • Sector focus – Singles’ Day and E-Commerce: Singles’ Day sets new record for online sales amid the continued rise of electronic transactions in China, offering new market opportunities for foreign firms.
November 2016 Trade Bulletin
Highlights of this Month’s Edition" • Bilateral trade: In the third quarter of 2016, the U.S. trade deficit declined year-on-year due to weakened imports; in the second quarter of 2016 U.S. service exports to China reach $10.8 billion, an 8 percent increase year-on-year. • Bilateral policy issues: China drops discriminatory aviation tax break; WTO rules against U.S. zeroing antidumping methodology; the United States advances WTO raw materials case against China. • Quarterly review of China’s economy: China’s GDP growth hit 6.7 percent for the third straight quarter; strong public investment, largely in real estate and infrastructure, has counterbalanced lower private sector investment and driven economic growth, but questions remain regarding the health of the underlying economy; RMB posts weakest rate against the dollar since 2010. • Policy trends in China’s economy: The CCP designates Xi Jinping as its “core” leader at the Sixth Plenum.
October 2016 Trade Bulletin
Highlights of this Month’s Edition: • Bilateral trade: U.S. deficit with China widens in August 2016 on higher imports, but cumulative deficit down year-to-date. • Bilateral policy issues: Under China’s presidency, leaders at the G20 Summit in Hangzhou pledged to strengthen macroeconomic policy coordination to maintain global growth, but failed to issue concrete proposals; the USTR is challenging China’s excessive government support for rice, corn, and wheat production at the WTO. • Policy trends in China’s economy: The decreasing efficiency of new credit, the speed with which China is accumulating debt, and the rise of nonperforming loans are contributing to China’s vulnerability to a banking crisis; McDonald’s and Yum! Brands to sell rights to operate in China as U.S. fast food restaurants face stagnant growth in China. • Sector focus – Rice, Corn, and Wheat: Chinese support for domestic farmers creates world’s largest stockpile of grain and may cost U.S. wheat farmers $650 million annually; U.S. rice farmers gain access to Chinese market for the first time; U.S. corn exports declined 91 percent from 2012 to 2015 as China blocked shipments of U.S. corn in 2014 and started diversifying its corn imports.
September 2016 Trade Bulletin
Highlights of this Month’s Edition: • Bilateral trade: The U.S. goods deficit with China continued to slow in July as growth in U.S. imports from China declined. • Bilateral policy issues: China hopes the G20 meeting focuses on maintaining economic growth and mobilizing funding for climate change and environmentally friendly growth. • Policy trends in China’s economy: The IMF warns of China’s rising debt levels in a new report; State Council approves plans for a Shenzhen-Hong Kong Stock Connect; China launches a $30 billion government-backed venture capital fund for industrial technology and pilots a limited program to allow SOE employees to own stocks. • Sector focus – Chinese distant water fishing: China’s distant water fishing fleet propped up by government subsidies that encourage excess capacity and overfishing, harming biodiversity.
August 2016 Trade Bulletin
Highlights of this Month’s Edition: • Bilateral trade: Weaker imports cause the U.S. goods deficit with China to fall 5.7 percent year-on-year in the first half of 2016; U.S. service exports to China reach record high, buoyed by high Chinese tourism spending in the United States. • Bilateral policy issues: The United States and the EU fault China for lack of transparency at the WTO and cite concerns over delayed Chinese economic reform; the United States argues against granting China automatic market economy status in December; USTR is challenging China’s raw materials export restrictions at the WTO. • Quarterly review of China’s economy: In the second quarter of 2016, GDP growth held steady from the previous quarter at 6.7 percent as Beijing again turned to stimulus measures to boost the economy. • Policy trends in China’s economy: Chinese government approves debt-for-equity swap trials despite reservations from major banks; news portals shut down for violating China’s original news reporting prohibition. • Sector focus – Market barriers to U.S. drugs, medical devices, and medical services: China’s aging population drives expansion in the health industry, but numerous market barriers limit access for U.S. firms.