U.S.-China Policy Update, June 13, 2023
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U.S.-China Policy Update, June 13, 2023

Brownstein Newsletter, June 13, 2023


What to Watch: June 12 - 19

Secretary Blinken to Travel to Beijing. Secretary of State Antony Blinken is planning to travel to Beijing on June 18-19 for meetings with senior PRC officials, the first visit to China by a U.S. Secretary of State since 2018. The long-anticipated diplomatic visit, originally agreed to between President Xi and President Biden in Nov. 2022, was delayed following the discovery of a Chinese surveillance balloon over North American airspace in early February. According to U.S. officials, Sec. Blinken will meet with China’s Foreign Minister, Qin Gang, among other senior CCP leaders. The State Department is also aiming to schedule a meeting between Sec. Blinken and President Xi, though U.S. sources familiar with the planning of the visit have said that meeting has not been confirmed. Sec. Blinken’s visit is part of a broader effort by the Biden administration to improve diplomatic ties with China. Sec. Blinken will likely raise the issue of the surveillance balloon, as well as recent reports of a China-operated spy base in Cuba when meeting with PRC officials. The visit also follows President Biden and other Five Eyes leaders issuing a particularly strong joint statement against economic coercion aimed toward China’s economic and trade practices on Jun. 9. Sec. Blinken spoke with Minister Gang on Jun. 14 ahead of the visit, where he reiterated the importance of maintaining open lines of communication with China’s government.

Chinese Spy Base in Cuba Draws Congressional Criticism. On June 10, unnamed Biden administration officials confirmed reports that China is operating a covert surveillance base in Cuba, noting that the base had been in operation since 2019 or earlier. The report conflicted with earlier statements by senior Biden administration officials, with National Security Council (NSC) spokesperson John Kirby saying the reports of a spy base were “not accurate.” Multiple bipartisan members of Congress issued statements in response to the report, with many criticizing the Biden administration’s handling of the report and track record on U.S.-China issues. Rep. Mike Gallagher (R-WI), chair of the Select Committee on China, said the administration was “deliberately misleading the American people ... in order to revive the counterproductive strategy of engagement.” Rep. Ritchie Torres (D-NY), a member of the China Committee, noted the report of the base was “sufficiently plausible to merit congressional oversight.” Sens. Mark Warner (D-VA) and Marco Rubio (R-FL), respective chair and ranking member of the Senate Intelligence Committee, issued a joint statement noting they were “deeply disturbed” by the report that “Havana and Beijing are working together to target the United States.”
Biden Administration to Extend Waiver on South Korean and Taiwanese Firms’ Operations in China. Alan Estevez, undersecretary of commerce for industry and security, noted the Biden administration planned to extend waivers allowing certain South Korean and Taiwanese semiconductor firms to export chips and chip-making equipment to China. Speaking at a Semiconductor Industry Association meeting, Under Secretary Estevez noted the waivers would be extended for the foreseeable future. The extension of the waivers is a concession in the Biden administration’s efforts to reduce China’s access to critical technologies, including semiconductors. It also follows criticisms from U.S. industry groups that recent U.S. trade policies aimed toward China would negatively impact the private sector in the United States, as well as in countries with significant technology industry ties to China, including South Korea, Japan and Taiwan.
Treasury Department Outlines Scope of Outbound Investment EO. On May 31, Assistant Secretary of the Treasury Paul Rosen noted in testimony before the Senate Banking Committee that a long-anticipated executive order (EO) to review outbound investments in China’s technology sector would most likely take the form of a pilot program to review American investments in semiconductors, AI and quantum computing. The statements confirm earlier reports that the order would likely be tailored to certain key industries with a significant risk of dual-use products being utilized for military purposes. Assistant Secretary Rosen did not give a timeline for release of the EO, which is unclear as the Biden administration continues to grapple with private sector concerns over the EO’s potential to stifle private investment in China’s economy.
Chinese Ship Passes by U.S. Destroyer in Taiwan Strait. On June 3, a Chinese warship passed by a U.S. Navy destroyer at a distance of approximately 150 yards in the Taiwan Strait. The Chinese ship overtook the U.S. destroyer and crossed its bow “in an unsafe manner,” according to a U.S. Indo-Pacific Command statement. Following the encounter, Secretary of Defense Lloyd Austin issued a statement reaffirming the U.S. commitment to defend countries in the Indo-Pacific region against “coercion and bullying,” addressing the Shangri-La Dialogue in Singapore. The June 3 dialogue was also attended by China’s Defense Minister, Li Shangfu, who refused an invitation to formally meet with Secretary Austin. Secretary Austin criticized Minister Shangfu in a statement given following the dialogue, noting that “a cordial handshake over dinner is no substitute for a substantive engagement.”
Ways and Means Committee to Mark Up Legislation Covering Taiwan Trade Agreements. The House Ways and Means Committee will mark up legislation focused on expediting and giving congressional oversight to U.S. trade negotiations with Taiwan on June 13. The legislation, introduced by bipartisan leaders of the House Ways and Means and Senate Finance committees, would formally approve the U.S.-Taiwan early harvest agreement struck on May 18 and impose transparency requirements on future U.S. trade engagement with the country, including in digital trade, agriculture, and environmental trade. Reps. Jason Smith (R-MO) and Richard Neal (D-MA) and Sens. Ron Wyden (D-OR) and Mike Crapo (R-ID), respective chairs and ranking members of the House Ways and Means and Senate Finance committees, said in a joint statement it was “imperative” that Congress act “to support this early agreement with Taiwan.” The members added that the bill would ensure “robust Congressional consultation and a vote of approval” on any future agreements.



Highlight Reel: May 29 - June 12

White House
U.S. Ready to Engage China in Arms Talks without Preconditions. In remarks to the Arms Control Association Annual Forum on June 2, National Security Advisor Jake Sullivan addressed U.S. strategy to modernize its nuclear capacity, respond to China’s growing arsenal and expressed willingness to enter negotiations with China’s leadership without preconditions. Sullivan characterized the growth of China’s nuclear arsenal as one of the “largest peacetime nuclear build-ups in history,” a buildup during which China has “declined to share the size and scope of its nuclear forces, or to provide launch notifications.” This change in policy represents a significant shift for the United States. Sullivan described the change as a “new approach to strengthen arms control and decrease nuclear risks in this changing nuclear age.” Sullivan included space, cyber and artificial intelligence (AI) concerns as part of the threat management policy and pointed to the Biden administration’s proposals for the responsible use of AI in military environments. Notably, Sullivan was careful to draw a line between “without preconditions” and “accountability” and promised to “hold nuclear powers accountable for reckless behavior” despite this policy. Sullivan mirrored Biden’s sentiment that the engagement policy would help “ensure that competition is managed, and that competition does not veer into conflict.”
Department of State
U.S. and Chinese Officials Meet in Beijing. On June 5, Assistant Secretary of State for East Asian and Pacific Affairs Daniel Kritenbrink and National Security Council Senior Director for China and Taiwan Affairs Sarah Beran met with Chinese foreign affairs officials in Beijing. The pair, joined by U.S. Ambassador to China Nicholas Burns, met with the Ministry of Foreign Affairs Executive Vice Foreign Minister Ma Zhaoxu and Director General of the North American and Oceanian Affairs Department Yang Tao. The State Department characterized the discussions as “candid and productive” and “as part of ongoing efforts to maintain open lines of communication and build on recent high-level diplomacy between the two countries.” The Chinese Foreign Ministry similarly described the meeting as a “candid, constructive, and fruitful communication.” Both sides drew attention to their differences, with China reaffirming its “solemn position on Taiwan” and the United States’ promising to “compete vigorously and stand up for U.S. interests and values.” The discussions marked the visit of the highest-ranking U.S. official to China since the United States’ shootdown of a Chinese spy balloon and the postponing of Department of State Secretary Anthony Blinken’s trip to Beijing in early February.
Department of the Treasury
U.S.-China Business Council Board of Directors Meets with Treasury Secretary. On June 8, the U.S.-China Business Council’s Board of Directors met with Treasury Secretary Janet Yellen to talk about the economic relationship between the United States and China. Yellen “recognized the importance of trade and investment with China given deep integration between the two economies, while acknowledging concerns around barriers to market access and its use of non-market tools,” according to the Treasury Department’s readout. “She also reaffirmed the U.S. economic approach to China, which remains focused on three primary objectives: securing vital interests pertaining to national security and human rights; pursuing healthy and mutually beneficial economic competition, in which China plays by international rules; and seeking bilateral cooperation on urgent global challenges, including on the macroeconomy, climate, and global debt.” Yellen’s meeting comes just one day after China’s ambassador to the United Sates, Xie Feng, met with the council’s board of directors. The Chinese Embassy’s readout from the meeting said that “a trade war had barely ended when industrial war and a technological war started,” in reference to recent moves to “de-risk” supply chains.
Department of Homeland Security
DHS Adds Two New Firms to China Forced Labor Embargo. Around one year after enforcement of the Uyghur Forced Labor Prevention Act (UFLPA) began, the U.S. Department of Homeland Security (DHS) added two People’s Republic of China (PRC)-based companies to the UFLPA Entity List. The UFPLA bans goods produced in Xinjiang or entities identified on the Entity List, from being imported into the United States. The companies include Xinjiang Zhongtai Chemical Co., LTD. and Ninestar Corporation, along with eight of its subsidiaries. There are now 22 companies on the UFLPA entity list. “The Forced Labor Enforcement Task Force will continue to hold companies accountable for perpetuating human rights violations in Xinjiang, Chair of the Forced Labor Enforcement Task Force, Under Secretary for Policy Robert Silvers said. “The use of forced labor offends our values and undercuts American businesses and workers. Forced labor is now a top-tier compliance issue, and businesses must know their supply chains. DHS and the Forced Labor Enforcement Task Force will continue their vigilant approach to implementing the Uyghur Forced Labor Prevention Act.”
Department of Defense
“Five Eyes” Group and Japan Agree on Anti-Coercion Economic Stance. On June 9, the governments of the “Five Eyes” group, Australia, Canada, New Zealand, the United Kingdom and the United States, plus Japan, released a Joint Declaration Against Trade-Related Economic Coercion and Non-Market Policies and Practices. While the declaration does not explicitly mention China, it conveys “serious concern over trade-related economic coercion and non-market policies and practices that undermine the functioning of and confidence in the rules-based multilateral trading system by distorting trade, investment, and competition and harming relations between countries.” Additionally, the group specifically expresses concerns with “the use of forced labor, including state-sponsored forced labor, in global supply chains” and “trade-related economic coercion.” The declaration demonstrates the countries’ commitment “to work together with all interested partners, to identify, prevent, deter, and address trade-related economic coercion and non-market policies and practices, including through multilateral institutions, such as the WTO.” The declaration comes as officials from the “Five Eyes” are in Paris at the Organization for Economic Co-operation and Development’s annual meeting.



On the Calendar: June 12 - June 19

House Ways and Means Committee
Markup of the United States-Taiwan Initiative on the 21st-Century Trade First Agreement Implementation Act; and other matters cleared for consideration
June 13, 10:00 a.m.
House Foreign Affairs Subcommittee on the Indo-Pacific
Achieving Peace Through Strength in the Indo-Pacific: Examining the FY 24 Budget Priorities
June 14, 10:00 a.m.
House Natural Resources Committee Hearing
How the Compacts of Free Association Support U.S. Interests and Counter the PRC’s Influence
June 14, 10:00 a.m.
House Foreign Affairs Committee
Assessing U.S. Efforts to Counter China’s Coercive Belt and Road Diplomacy
June 14, 2:00 p.m.
Private Sector
The Atlantic Council
Closer to Home: Bringing Supply Chains Back to the Americas
June 12, 4:30 p.m.
U.S.-China Lessons from Ukraine: Fueling More Dangerous Taiwan Tensions
June 16, 9:00 a.m.



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