U.S. - China Policy Update, July 11, 2023
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U.S. - China Policy Update, July 11, 2023

Brownstein Newsletter, July 11, 2023


What to Watch: July 10 - 17

China Issues Restrictions on Critical Mineral Exports. On July 3, China’s Ministry of Commerce announced restrictions on the export of gallium and germanium-related products required for the manufacturing of semiconductors, fiber optics, solar panels and other technologies “in order to safeguard national security and interests.” Under the new restrictions, gallium and germanium suppliers will be prevented from exporting the products without a license granted on the basis of the product’s proposed end-user and use, among other factors. The restrictions come following reports that the Biden administration is considering imposing new restrictions on certain semiconductors and semiconductor products with AI applications to China. The announcement also came immediately before Secretary of the Treasury Janet Yellen’s visit to China on July 6, an overt signal that China’s government is willing to impose export restrictions on goods critical to U.S. national interests in response to U.S. restrictions on advanced technology exports to China. Given the enforcement of previous Chinese government-imposed export restrictions, it is likely the new restrictions will be applied most stringently to U.S. defense contractors, with it being less clear to what extent licenses will be granted for U.S. companies in non-defense sectors. The announcement has led to Congo state-owned Gecamines, Dutch-based Nyrstar and Russia-based Rostec, among other mining companies, to announce plans for increased production of the metals in response to the restrictions, which may lead to further diversification away from Chinese suppliers. However, the restrictions could also grant China greater leverage in trade negotiations with countries, particularly in the Indo-Pacific region whose domestic semiconductor industries depend on Chinese suppliers. China’s Ministry of Commerce noted the restrictions would come into effect on Aug. 1.
Senate Foreign Relations Committee to Hold Markup of Taiwan Tax Agreement. On July 13, the Senate Foreign Relations Committee will hold a markup of S. 1457, the Taiwan Tax Agreement Act of 2023. The bill would authorize the formation of a tax agreement between Taiwan and the United States, providing U.S. and Taiwanese companies relief from double taxation, among other measures. A bilateral tax agreement would allow Taiwanese companies greater access to the U.S. market and remove a deterrent to businesses seeking to relocate or expand between the two countries, potentially allowing for smaller Taiwan-based suppliers of TSMC and other semiconductor companies to expand their presence in the United States.
Secretary Blinken to Attend ASEAN Foreign Minister Meetings. Secretary of State Antony Blinken will travel to Indonesia on July 13–14 for meetings with foreign ministers from the Association of Southeast Asian Nations (ASEAN) member states, including Vietnam, Thailand, Singapore, the Philippines, Myanmar, Malaysia and Indonesia, a bloc critical to U.S. competition with China in the Indo-Pacific region. Assistant Secretary of State for East Asian and Pacific Affairs Daniel Kritenbrink noted Secretary Blinken will aim to address “an upward trend of unhelpful and coercive and irresponsible Chinese actions” during the meeting, adding that China’s unlawful maritime claims in the South China Sea and other coercive actions ran counter to the United States’ and its allies’ “shared view and vision for the region.” Kritenbrink also noted the State Department expected U.S. allies within ASEAN to “continue to downgrade Myanmar’s representation in the ASEAN ministerial and ... compel the regime to end its violence and return to a path of democracy.” Myanmar’s military regime has been a source of diplomatic tension between the United States and China, with the U.S. government pressuring Myanmar to implement democratic reforms and China’s foreign ministry issuing a statement of support for the regime in May 2023.
House to Consider Broad China-Related Amendments in NDAA Process. The House Rules Committee will meet on July 11 to set parameters for consideration of the House version of the Fiscal Year 2024 National Defense Authorization Act (NDAA). A rule on the NDAA is expected to be released in the late evening on July 11 with floor consideration beginning on July 12. We anticipate debate on the bill to include broad discussion over a wide range of topics related to economic and military competition with China. Members have submitted over 200 amendments directly related to China, including to: require an evaluation of the provision of defense support for Taiwan; prohibit federal operation or procurement of certain types of drones manufactured in China and other foreign countries of concern; require the president to develop a strategy to counter so-called “gray zone” operations and other types of hybrid warfare by China and other adversaries; require U.S. universities to report to the Secretary of Education significant donations by CCP-affiliated entities; impose sanctions on certain Chinese military companies and other entities; and require the president to release reports on entities involved in Uyghur human rights abuses and sanction included entities, among other amendments. Consideration of the bill on the House floor is expected to conclude by the end of the week.
China Select Committee to Hold Hearing on U.S. Businesses Operating in China. The Select Committee on the Strategic Competition Between the United States and the Chinese Communist Party will hold a hearing titled “Risky Business: Growing Peril for American Companies in China” on July 13. The committee will hear testimony from Piper Lounsbury, chief research and development officer of Strategy Risks; Shehzad Qazi, CEO of China Beige Book; and Desmond Shum, author and former husband of arrested Chinese billionaire Duan Weihong. The hearing follows recent criticisms by a number of Republican lawmakers of Warner Bros. Film Group, which included a map identified as including China’s nine-dash line in the trailer for the upcoming “Barbie” movie. Sens. Marsha Blackburn (R-TN) and Ted Cruz (R-TX) noted the inclusion of the nine-dash line was a form of censoring intended “to appease the Chinese Communist Party.” Rep. Mike Gallagher (R-WI), chair of the Select Committee on China, noted “the fact that a cartoonish, crayon-scribbled map seems to go out of its way to depict the PRC’s unlawful territorial claims illustrates the pressure that Hollywood is under to please CCP censors.” During the hearing members will likely raise the inclusion of the map, as well as broader issues related to Chinese economic coercion of U.S. companies operating within its borders.
Taiwan to Hold Annual Live-Fire Exercise. Taiwan’s military will hold its annual Han Kuang exercises from July 24–28, live-fire drills geared toward simulating responses to a potential Chinese military invasion, the most expansive training exercises performed by Taiwan’s military in preparation for an invasion. The live-fire training follows the tabletop wargame exercises held by the country in May, with reports indicating the exercises will include a simulated scenario in which Taiwan’s military airports and airstrips are rendered inoperable by enemy attacks, among other scenarios. Several Taiwanese officials have reported that China’s government has been waging a targeted misinformation campaign against Taiwan as part of its broader effort to destabilize Taiwan’s government, including by alleging that the Han Kuang exercises are a rehearsal of an escape plan for Taiwan’s president in the event of a Chinese invasion and illicitly funding Beijing-friendly candidates ahead of Taiwan’s 2024 presidential election. The American Institute in Taiwan, which serves as a de facto U.S. embassy in the absence of formal U.S. diplomatic relations with the country, has not issued a statement on the misinformation campaign.
U.S., China Agree to Increase Commercial Flights. On June 28, Assistant Secretary of State for East Asian and Pacific Affairs Daniel Kritenbrink noted during Secretary Blinken’s visit to China in June the United States and China agreed to increase commercial flights between the two countries. Kritenbrink noted Blinken and senior CCP officials agreed to examine “increasing in a phased manner the number of commercial flights” between the United States and China, which had decreased significantly during the COVID-19 pandemic. Kritenbrink also noted during his remarks that the State Department was examining reversing the imbalance between the number of Chinese students in the United States and U.S. students in China.



Highlight Reel: June 30 - July 10

Department of the Treasury
Treasury Secretary Yellen Travels to China. From July 6–9, Treasury Secretary Janet Yellen traveled to China to discuss the economic relationship between the United States and China. During her time in Beijing, Yellen met with Premier Li, Vice Premier He, Finance Minister Liu and People’s Bank of China Head Pan, among other senior officials. During a press conference in Beijing on July 8, Yellen said, “I communicated that President Biden and I seek a future of healthy economic competition between our countries.” In speaking about her meetings with senior officials, Yellen said, “we also spoke about national security and human rights” and “discussed areas where we can work together on global challenges.”
Yellen also emphasized the difference between “decoupling” and “diversifying critical supply chains or taking targeted national security actions.” During the trip, senior officials from China expressed concerns over recent U.S. sanctions and other potential restrictive economic policies. Yellen, in turn, expressed concerns with “non-market” and “coercive actions.” In speaking to the potential for an outbound investment executive order, Yellen said there is not a final decision and that any action would be “highly targeted” on certain industries.
As the second cabinet official to travel to China in the past month, Yellen’s trip comes at a time when the Biden administration is focused on improving U.S.-China relations. In late July, U.S. Climate Envoy John Kerry is expected to travel to China to engage in talks specifically focused on climate change.
Department of Defense
Deputy Secretary of Defense Travels to Hawaii to Discuss Securing the Indo-Pacific. On July 6, Deputy Secretary of Defense Kathleen Hicks visited the U.S. Indo-Pacific Command (USINDOPACOM) and U.S. Pacific Fleet (USPACFLEET) at Pearl Harbor. During the visit, Hicks “reaffirmed that the Department of Defense (DOD) is laser-focused on tackling the security challenge of the PRC,” according to a DOD press release. In addition to observing demonstrations of USINDOPACOM technology investments and programs, Hicks also met with “lawmakers and military officials on a broad span of topics related to U.S. force presence in Hawaii and National Defense Strategy (NDS) implementation.”
“USINDOPACOM leaders updated the Deputy Secretary on the command’s approach to implement the NDS via a robust theater posture; building warfare capabilities and resiliency; building technologically superior capabilities to maintain warfighting advantages in the near, mid and long term; and building stronger relationships with Allies, partners and friends.” The meetings and demonstrations focused specifically on steps to enhance security in the Indo-Pacific region.
Department of State
State Department Updates China Travel Advisory. The Department of State on June 30 updated its China Travel Advisory to warn about the “risk of wrongful detentions”. The State Department previously urged Americans to “reconsider travel” to China due to the risk of “arbitrary enforcement of local laws.” Although the advisory remains a level three, the new advisory marks a notable change, stating that “U.S. citizens traveling or residing in the PRC may be detained without access to U.S. consular services or information about their alleged crime. U.S. citizens in the PRC may be subjected to interrogations and detention without fair and transparent treatment under the law.” The level three travel advisory is only one step below the fourth and final travel advisory that would urge Americans to not travel to China. Hong Kong and Macau are subject to separate travel advisories, neither of which include a warning of possible wrongful detention.
United States Trade Representative
Deputy USTR Travels to Manila, Seoul. On June 30, 2023, Ambassador Sarah Bianchi, deputy United States trade representative, traveled to Manila, Philippines, and Seoul, South Korea. Both visits were designed to “discuss the importance of reaching a high standard agreement under the Trade Pillar of the Indo-Pacific Economic Framework (IPEF).” While in Manila, Ambassador Bianchi met with Executive Secretary of the Philippines Lucas Bersamin, Labor Undersecretary Benedicto Ernesto Bitonio Jr. and Department of Trade and Industry Undersecretary Perry Rodolfo, as well as private sector stakeholders. The ambassador thanked both the Philippines and Seoul for supporting the IPEF and engaging in negotiations.
Ambassador Bianchi “raised the importance of reaching a high-standard commitments on labor and environment in the IPEF.” The United States created the IPEF in 2022 with a goal “to contribute to cooperation, stability, prosperity, development, and peace within the region.” The 14-member countries have the option of joining the four IPEF pillars: “(1) Trade; (2) Supply Chains; (3) Clean Energy, Decarbonization, and Infrastructure; and (4) Tax and Anti-Corruption.” The meeting comes at a time when the United States is looking to strengthen economic partnerships in the region.



On the Calendar: July 10 - 7

House Select Committee on the Strategic Competition Between the United States and the Chinese Communist Party Hearing
Risky Business: Growing Peril for American Companies in China
July 13, 7:00 p.m.
House Education and the Workforce Subcommittee on Higher Education and Workforce Development Hearing
Exposing the Dangers of the Influence of Foreign Adversaries on College Campuses
July 13, 10:15 a.m.
Private Sector
The Hudson Institute
China Prepares for War: A Timeline
July 12, 11:00 a.m.
Wilson Center
No Water, No Food – Glacier Loss Threats to U.S. and Chinese Agriculture
July 13, 9:30 a.m.



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