China’s Recent Trade Measures and Countermeasures: Issues for Congress

Changes from September 20, 2021 to December 10, 2021

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China’s Recent Trade Measures and
~~September 20~~December 10, 2021 , 2021
Countermeasures: Issues for Congress
Karen M. Sutter
Since early 2020, the government of the People’s Republic of China (PRC or China) has adopted Since early 2020, the government of the People’s Republic of China (PRC or China) has adopted
Specialist in Asian Trade Specialist in Asian Trade
a set of interrelated laws and measures that seek to enhance the government’s control over a wide a set of interrelated laws and measures that seek to enhance the government’s control over a wide
and Finance and Finance
range of commercial activity, within and outside of China. These measures signal the range of commercial activity, within and outside of China. These measures signal the

government’s growing assertiveness in advancing and aligning China’s national economic government’s growing assertiveness in advancing and aligning China’s national economic
security tools to seek global economic, technology, and military leadership, and relatedly, control security tools to seek global economic, technology, and military leadership, and relatedly, control

of core technologies and global supply chains. China’s measures include extraterritorial reach of core technologies and global supply chains. China’s measures include extraterritorial reach
and also aim at countering trade and national security policy tools and actions that the United States and other governments and also aim at countering trade and national security policy tools and actions that the United States and other governments
have applied toward China, such as sanctions, export controls, and foreign investment review. While China’s measures have applied toward China, such as sanctions, export controls, and foreign investment review. While China’s measures
mirror certain U.S. authorities in form, the government is applying its tools differently in ways that highlight core distinctions mirror certain U.S. authorities in form, the government is applying its tools differently in ways that highlight core distinctions
in the operating conditions and tenets of the economic, political, and legal systems in the United States and China. China’s in the operating conditions and tenets of the economic, political, and legal systems in the United States and China. China’s
measures pressure U.S. and other firms to abide by China’s policies and laws in ways that contravene U.S. authorities. Some measures pressure U.S. and other firms to abide by China’s policies and laws in ways that contravene U.S. authorities. Some
of China’s actions appear to be aimed at pressuring U.S. and foreign firms to work around U.S. and foreign government of China’s actions appear to be aimed at pressuring U.S. and foreign firms to work around U.S. and foreign government
authorities and potentially violate U.S. and foreign laws by penalizing firms that contravene China’s measures. Many of authorities and potentially violate U.S. and foreign laws by penalizing firms that contravene China’s measures. Many of
China’s measures provide for retaliation in an apparent effort to codify and legitimize the Chinese government’s propensity China’s measures provide for retaliation in an apparent effort to codify and legitimize the Chinese government’s propensity
for trade retaliation and brinkmanship and the use of economic coercive measures to advance its economic and political for trade retaliation and brinkmanship and the use of economic coercive measures to advance its economic and political
objectives, often arguably in violation of global trade rules and norms.objectives, often arguably in violation of global trade rules and norms.
These recent measures are part of a broader effort by China’s leader Xi Jinping since 2014 to build out China’s national These recent measures are part of a broader effort by China’s leader Xi Jinping since 2014 to build out China’s national
security authorities to establish broad justification, jurisdiction, and mechanisms for China’s national security-related actions security authorities to establish broad justification, jurisdiction, and mechanisms for China’s national security-related actions
on trade, investment, and other economic activity. Central to China’s efforts are new measures that promote data sovereignty on trade, investment, and other economic activity. Central to China’s efforts are new measures that promote data sovereignty
by expanding data localization requirements and placing data under new trade authorities, such as by expanding data localization requirements and placing data under new trade authorities, such as ~~e xport~~export controls and controls and
security review requirements for Chinese firms listing or operating overseas. These measures appear to enhance the Chinese security review requirements for Chinese firms listing or operating overseas. These measures appear to enhance the Chinese
government’s control over foreign data (e.g., personal identifying and health information), intellectual property (IP), government’s control over foreign data (e.g., personal identifying and health information), intellectual property (IP),
technology, and research that is transferred to or developed in China and increase the potential risks to the United States technology, and research that is transferred to or developed in China and increase the potential risks to the United States ~~o f~~of
U.S. government, commercial, and academic activities in these areas. Relatedly, China in its 14th Five-Year Plan (2021-25)U.S. government, commercial, and academic activities in these areas. Relatedly, China in its 14th Five-Year Plan (2021-25) is is
seeking to extend the reach of its judicial decisions extraterritorially, including in the United States, in ways that might seeking to extend the reach of its judicial decisions extraterritorially, including in the United States, in ways that might
undermine U.S. authorities. China is challenging certain U.S. decisions and the scope of certain authorities in the United undermine U.S. authorities. China is challenging certain U.S. decisions and the scope of certain authorities in the United
States and other foreign legal and regulatory systems that appear aimed at limiting the scope and reach of U.S. authorities States and other foreign legal and regulatory systems that appear aimed at limiting the scope and reach of U.S. authorities
over Chinese firms, including in trade, investment, IP, and antitrust matters. At a strategic level, the Chinese government is over Chinese firms, including in trade, investment, IP, and antitrust matters. At a strategic level, the Chinese government is
developing alternative trade, currency, and geospatial platforms to those controlled or influenced by the United States.developing alternative trade, currency, and geospatial platforms to those controlled or influenced by the United States.
The Chinese government says it is pursuing a policy of technology independence, but its approach involves sustaining its The Chinese government says it is pursuing a policy of technology independence, but its approach involves sustaining its
access to U.S. and foreign technology, capabilities, research, and talent. China’s policy statements notwithstanding, China access to U.S. and foreign technology, capabilities, research, and talent. China’s policy statements notwithstanding, China
appears to be using its new measures to gain access and control over advanced technology and capabilities from the United appears to be using its new measures to gain access and control over advanced technology and capabilities from the United
States and U.S. allies and partners. Chinese firms, such as Huawei, are restructuring themselves and their foreign States and U.S. allies and partners. Chinese firms, such as Huawei, are restructuring themselves and their foreign
partnerships, arguably to avert U.S. national security restrictions and access U.S. technology, IP, research, and talent. China’s partnerships, arguably to avert U.S. national security restrictions and access U.S. technology, IP, research, and talent. China’s
industrial policies continue to require U.S. and other foreign firms to transfer advanced capabilities to China, using structures industrial policies continue to require U.S. and other foreign firms to transfer advanced capabilities to China, using structures
that place these firms’ IP, R&D, and technology under China’s authorities and control. China’s announcements of that place these firms’ IP, R&D, and technology under China’s authorities and control. China’s announcements of
“indigenous” breakthroughs are silent on the persistent ties to U.S. and foreign technology and talent that China seems to be “indigenous” breakthroughs are silent on the persistent ties to U.S. and foreign technology and talent that China seems to be
leveraging to make many of these gains, including through research and open-source technology collaboration that China is leveraging to make many of these gains, including through research and open-source technology collaboration that China is
increasingly pursuing as alternative paths in response to U.S. trade and investment controls. increasingly pursuing as alternative paths in response to U.S. trade and investment controls.
Congress has actively sought to address its economic-related concerns about China through legislation, reports, and hearings. Congress has actively sought to address its economic-related concerns about China through legislation, reports, and hearings.
As the Biden Administration frames the U.S.-China relationship as one of “strategic competition,” Congress might examine As the Biden Administration frames the U.S.-China relationship as one of “strategic competition,” Congress might examine
the Executive Branch’s response to China so far to determine whether additional approaches and tools, as well as enhanced the Executive Branch’s response to China so far to determine whether additional approaches and tools, as well as enhanced
trade policy focus and bureaucratic agility, are needed to address China’s new trade measures and countermeasures, and the trade policy focus and bureaucratic agility, are needed to address China’s new trade measures and countermeasures, and the
broader challenges that China’s approach may pose for the United States. Congress might consider how China’s measures broader challenges that China’s approach may pose for the United States. Congress might consider how China’s measures
affect U.S. policies and authorities and whether follow-on legislation or policy actions are needed. Congress might examine affect U.S. policies and authorities and whether follow-on legislation or policy actions are needed. Congress might examine
how legal challenges to U.S. government authorities by Chinese firms in U.S. courts could constrain U.S. government policy how legal challenges to U.S. government authorities by Chinese firms in U.S. courts could constrain U.S. government policy
action and narrow the scope of U.S. authorities as they pertain to China. Congress also could consider how the United States action and narrow the scope of U.S. authorities as they pertain to China. Congress also could consider how the United States
might work with like-minded countries to enforce and shape new global trade rules, initiate new arrangements, and act jointly might work with like-minded countries to enforce and shape new global trade rules, initiate new arrangements, and act jointly
to impose consequences and counter specific Chinese trade policies, actions, and behaviors of mutual concern. to impose consequences and counter specific Chinese trade policies, actions, and behaviors of mutual concern.
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Introduction
This report assesses a set of interrelated trade laws, regulations, and policies that the government This report assesses a set of interrelated trade laws, regulations, and policies that the government
of the People’s Republic of China (PRC or China) has adopted since 2020 that are designed to of the People’s Republic of China (PRC or China) has adopted since 2020 that are designed to
enhance its control over a wide range of commercial activity, within and outside of China, and to enhance its control over a wide range of commercial activity, within and outside of China, and to
counter the reach of certain economic and national security-related policies and authorities of the counter the reach of certain economic and national security-related policies and authorities of the
United States and other governments. China, for example, has adopted a new law on export United States and other governments. China, for example, has adopted a new law on export
controls and related technology catalogues, new measures on the security review of foreign controls and related technology catalogues, new measures on the security review of foreign
investment, measures to create and operationalize a list of “unreliable entities,” “blocking investment, measures to create and operationalize a list of “unreliable entities,” “blocking
measures,” and a related anti-sanctions law, measures,” and a related anti-sanctions law, al all of which seek to broadly limit the extraterritorial of which seek to broadly limit the extraterritorial
applications of U.S. and other foreign laws and policies of concern to China. The Chinese applications of U.S. and other foreign laws and policies of concern to China. The Chinese
government also has drafted regulations that seek to enhance its control over critical materials government also has drafted regulations that seek to enhance its control over critical materials
such as rare earth elements (REEs), as such as rare earth elements (REEs), as ~~wel~~ well as data and scientific research. (Seeas data and scientific research. (See “New Laws and
Regulations” below.) below.)
These new measures are rooted in broader initiatives to strengthen the Chinese government’s These new measures are rooted in broader initiatives to strengthen the Chinese government’s
national economic security authorities and levers of control. The measures also amplify and national economic security authorities and levers of control. The measures also amplify and
reinforce China’s use of market restrictions and economic coercion to pressure governments, reinforce China’s use of market restrictions and economic coercion to pressure governments,
firms, and individualsfirms, and individuals to comply with China’s various political, economic, and technology to comply with China’s various political, economic, and technology
demands. In several instances, these laws, regulations, and policies aim to counter policy tools demands. In several instances, these laws, regulations, and policies aim to counter policy tools
and actions that the U.S. and other governments apply toward China, such as sanctions, export and actions that the U.S. and other governments apply toward China, such as sanctions, export
controls, and foreign investment review. Specific language in many of the measures attempt to controls, and foreign investment review. Specific language in many of the measures attempt to
pressure U.S. and foreign commercial actors to work around, or otherwise pressure U.S. and foreign commercial actors to work around, or otherwise ~~potential y~~potentially violate, violate,
U.S. laws by penalizing companies that contravene China’s measures. U.S. laws by penalizing companies that contravene China’s measures.
This report also discusses how China is using policy and legal actions in IP, antitrust, and This report also discusses how China is using policy and legal actions in IP, antitrust, and
technical standards to strengthen its influence and authorities in ways that could technical standards to strengthen its influence and authorities in ways that could ~~chal enge~~challenge the the
United States and other countries.1 China’s actions in these areas United States and other countries.1 China’s actions in these areas ~~chal enge~~challenge current global rules current global rules
and norms, expose potential gaps in authorities, and, given China’s role as a top trader, could and norms, expose potential gaps in authorities, and, given China’s role as a top trader, could
~~potential y~~potentially erode the current global trading system and the World Trade Organization (WTO), erode the current global trading system and the World Trade Organization (WTO),
more broadly. Details in China’s 14th Five-Year Plan, which sets national economic development more broadly. Details in China’s 14th Five-Year Plan, which sets national economic development
priorities for 2021 to 2025, and policy statements, including those by China’s leader Xi Jinping, priorities for 2021 to 2025, and policy statements, including those by China’s leader Xi Jinping,
show that China is intensifying its push for global acceptance of its rules, laws, and technical show that China is intensifying its push for global acceptance of its rules, laws, and technical
standards overseas. Another area of focus is China’s development of secure supply chains and standards overseas. Another area of focus is China’s development of secure supply chains and
alternative trade, currency, and technology platforms that could alternative trade, currency, and technology platforms that could ~~al ow~~allow China greater leeway to China greater leeway to
work around or work around or ~~chal enge~~challenge trade and development restrictions associated with U.S. dollar-based trade and development restrictions associated with U.S. dollar-based
sanctions. sanctions.
The report looks at the countermeasures China is using in response to U.S. government The report looks at the countermeasures China is using in response to U.S. government
restrictions and how they may test and exploit potential gaps in U.S. authorities and WTO rules restrictions and how they may test and exploit potential gaps in U.S. authorities and WTO rules
and where expanded or new multilateral trade rules, agreements, and actions may be needed. and where expanded or new multilateral trade rules, agreements, and actions may be needed.
Chinese firms are Chinese firms are ~~chal enging~~challenging U.S. restrictions in U.S. courts and restructuring commercial and U.S. restrictions in U.S. courts and restructuring commercial and
technology partnerships, including U.S. export controls. In its 14th Five-Year Plan, China is technology partnerships, including U.S. export controls. In its 14th Five-Year Plan, China is

1 A technical standard is process or technical specifications designed to improve the quality, security and compatibility 1 A technical standard is process or technical specifications designed to improve the quality, security and compatibility
of various goodsof various goods and services. Standardsand services. Standards can involve specifications or technologies on which other can involve specifications or technologies on which other ~~tech nologies~~technologies or or
methods willmethods will evolve, potentially locking in certain advantages, dependencies, and technical trajectories for those who evolve, potentially locking in certain advantages, dependencies, and technical trajectories for those who
contribute and set the standard. Setting common standards can provide significant economic, industry, and trade contribute and set the standard. Setting common standards can provide significant economic, industry, and trade
benefits, but can also determine which technologies become dominant and provide advantages to certain firms well benefits, but can also determine which technologies become dominant and provide advantages to certain firms well
placed to produce to the standards. Seeplaced to produce to the standards. See John Seaman, “John Seaman, “ China and the NewChina and the New Geopolitics of Geopolitics of ~~T echnical~~Technical Standardization,” Standardization,”
French Institute of International Relations, January 27, 2020. French Institute of International Relations, January 27, 2020.
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China’s Countermeasures to U.S. Economic Policy Actions and Authorities

prioritizing prioritizing expanded research ties with foreign companies and universities; the localization of expanded research ties with foreign companies and universities; the localization of
foreign research and development (R&D) in China; and, the transfer of foreign IP and technology foreign research and development (R&D) in China; and, the transfer of foreign IP and technology
to China in sectors prioritized in its industrial policies such as to China in sectors prioritized in its industrial policies such as Made in China 2025.2.2
Concerns about the risks that China’s statist economic and technology practices and the related Concerns about the risks that China’s statist economic and technology practices and the related
asymmetric structure of commercial ties may pose to U.S. national interests have been building asymmetric structure of commercial ties may pose to U.S. national interests have been building
for over 15 years in the executive branch, Congress, and the U.S. business community. Since for over 15 years in the executive branch, Congress, and the U.S. business community. Since
2016, the U.S. Congress has sought to address these growing concerns about China’s trade 2016, the U.S. Congress has sought to address these growing concerns about China’s trade
policies and practices through a broad range of new legislation, hearings, and reports. New policies and practices through a broad range of new legislation, hearings, and reports. New
~~legislation~~ legislation has sought to strengthen U.S. technology supply chains and government export control has sought to strengthen U.S. technology supply chains and government export control
and investment review authorities to address concerns about dual use technology licensing to and investment review authorities to address concerns about dual use technology licensing to
China and China’s state-directed acquisition of U.S. companies with sensitive capabilities. China and China’s state-directed acquisition of U.S. companies with sensitive capabilities.
Congressional reports have assessed the risks and policy options to address concerns about Congressional reports have assessed the risks and policy options to address concerns about
China’s role in U.S. China’s role in U.S. ~~federal y~~federally funded research and U.S. communications infrastructure, and risks funded research and U.S. communications infrastructure, and risks
created by China’s market protections, role of the state in the economy, and technology transfer created by China’s market protections, role of the state in the economy, and technology transfer
practices of concern. Relatedly, the national security assessments of both the Trump and Biden practices of concern. Relatedly, the national security assessments of both the Trump and Biden
Administrations warn about China’s trajectory and prioritize concerns about China as a strategic Administrations warn about China’s trajectory and prioritize concerns about China as a strategic
competitor.3 Similar concerns have been building in other countries, particularly those that have competitor.3 Similar concerns have been building in other countries, particularly those that have
suffered from China’s economic coercive tactics and have advanced commercial, technology, and suffered from China’s economic coercive tactics and have advanced commercial, technology, and
research capabilities at stake. There is ongoing concern among some in the executive branch and research capabilities at stake. There is ongoing concern among some in the executive branch and
Congress about the ways in which U.S. commercial and investment ties may be supporting Congress about the ways in which U.S. commercial and investment ties may be supporting
China’s policies of concern. The salience of these concerns has focused attention on how the China’s policies of concern. The salience of these concerns has focused attention on how the
Biden Administration is approaching trade, investment, and technology issues with respect to Biden Administration is approaching trade, investment, and technology issues with respect to
China and in partnership with like-minded partner countries. In this context, this report raises China and in partnership with like-minded partner countries. In this context, this report raises
issues and considerations about how China’s new measures and countermeasures might issues and considerations about how China’s new measures and countermeasures might ~~chal enge~~
challenge U.S. national interests—including the legislationU.S. national interests—including the legislation and policies the U.S. government has already and policies the U.S. government has already
put in place—in ways that could require sustained U.S. policy attention, agility, and resolve, as put in place—in ways that could require sustained U.S. policy attention, agility, and resolve, as
~~wel~~ well as potentialas potential U.S. and multilateralU.S. and multilateral counter responses. counter responses.
Broader Context of China’s New Measures
China’s recent trade measures that it has enacted since 2020 are part of a broader effort by China’s recent trade measures that it has enacted since 2020 are part of a broader effort by
China’s leader Xi Jinping since 2014 to build out and strengthen China’s national security China’s leader Xi Jinping since 2014 to build out and strengthen China’s national security
authorities that establish broad justification, scope, reach, and mechanisms for China’s national authorities that establish broad justification, scope, reach, and mechanisms for China’s national
security-related actions on trade, investment, and other economic activity. China has been security-related actions on trade, investment, and other economic activity. China has been
embarked on a longer-standing effort to build out an interrelated set of national security-related embarked on a longer-standing effort to build out an interrelated set of national security-related
authorities that include laws and regulations on counterespionage (2014)4, national security and authorities that include laws and regulations on counterespionage (2014)4, national security and

~~2 See CRS~~ 2 See CRS In Focus IF11684, In Focus IF11684, China’s 14th Five-Year Plan: A First Look, by Karen M. Sutter and Michael D. , by Karen M. Sutter and Michael D.
SutherlandSutherland and CRSand CRS In FocusIn Focus IF10964, IF10964, “Made in China 2025” Industrial Policies: Issues for Congress, by Karen M. , by Karen M.
Sutter. Sutter.
3 “Interim National Security Strategic Guidance,” 3 “Interim National Security Strategic Guidance,” Office of the White House, March 3, 2021; “National Security Office of the White House, March 3, 2021; “National Security
Strategy of the United States of America,” Office of the White House, December 18, 2017. Strategy of the United States of America,” Office of the White House, December 18, 2017.
4 4 Counterespionage Law of the People’s Republic of China, November 1, 2014, http://news.xinhuanet.com/, November 1, 2014, http://news.xinhuanet.com/
politics/2014-11/01/c_1113074346.htm (Chinese); https://www.chinalawtranslate.com/en/anti-espionage/ (unofficial politics/2014-11/01/c_1113074346.htm (Chinese); https://www.chinalawtranslate.com/en/anti-espionage/ (unofficial
English translation). English translation).
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China’s Countermeasures to U.S. Economic Policy Actions and Authorities

counterterrorism (2015)5, criminal law (2015)6, cybersecurity and foreign nongovernmental counterterrorism (2015)5, criminal law (2015)6, cybersecurity and foreign nongovernmental
organizations (2016),7 oversight of lawyers and law firms (2016 and 2018),8 standardization organizations (2016),7 oversight of lawyers and law firms (2016 and 2018),8 standardization
(2018),9 and encryption (2019).10 These laws and regulations require companies, organizations, (2018),9 and encryption (2019).10 These laws and regulations require companies, organizations,
and individuals—both foreign and domestic—to cooperate with the Chinese state in national and individuals—both foreign and domestic—to cooperate with the Chinese state in national
security matters, affecting a range of economic activities and technology issues.11 security matters, affecting a range of economic activities and technology issues.11
Since 2014, China’s leader Xi Jinping has made several speeches that show how he is developing Since 2014, China’s leader Xi Jinping has made several speeches that show how he is developing
concepts of national security and law to advance China’s national interests, concepts of national security and law to advance China’s national interests, ~~domestical y and~~
~~global y~~domestically and globally. China’s emerging concept of national security under Xi Jinping includes traditional and . China’s emerging concept of national security under Xi Jinping includes traditional and
nontraditional elements, defensive and offensive measures, and an interplay of domestic and nontraditional elements, defensive and offensive measures, and an interplay of domestic and
global factors. Xi’s concept of “global factors. Xi’s concept of “~~overal~~ overall national security” discusses economic security as the national security” discusses economic security as the
foundation of China’s security, and the interplay between China’s economic development and foundation of China’s security, and the interplay between China’s economic development and
security as one of five key relationships. The concept includes China’s “right to develop,” a security as one of five key relationships. The concept includes China’s “right to develop,” a
principle that Chinese officials often invoke in response to U.S. sanctions and other restrictions principle that Chinese officials often invoke in response to U.S. sanctions and other restrictions
affecting trade, investment, and collaboration.12affecting trade, investment, and collaboration.12
Two speeches by Xi Jinping in spring 2018 emphasize China’s efforts to promote and secure Two speeches by Xi Jinping in spring 2018 emphasize China’s efforts to promote and secure
control over core technologies, research, and innovation. In an April 2018 speech at China’s control over core technologies, research, and innovation. In an April 2018 speech at China’s
National Cybersecurity and Informatization Work Conference, Xi emphasized developing and National Cybersecurity and Informatization Work Conference, Xi emphasized developing and

controlling core technologies as “important instruments of the state.”13 In a May 2018 address to 5 5 National Security Law of the People’s Republic of China, July 1, 2015, , July 1, 2015,
https://www.chinalawtranslate.com/en/2015nsl/ (unofficial English translation); https://www.chinalawtranslate.com/en/2015nsl/ (unofficial English translation); Counter-Terrorism Law of the
People’s Republic of China, December 27, 2017, https://www.chinalawtranslate.com/en/counter-terrorism-law-2015/ , December 27, 2017, https://www.chinalawtranslate.com/en/counter-terrorism-law-2015/
(unofficial English translation). (unofficial English translation).
6 6 Criminal Law of the People’s Republic of China, Amended on September 1, 2015. , Amended on September 1, 2015.
7 7 Cybersecurity Law of the People’s Republic of China, Effective June 1, 2017, , Effective June 1, 2017,
https://www.newamerica.org/cybersecurity-initiative/digichina/blog/translation-cybersecurity-law-peoples-republic-https://www.newamerica.org/cybersecurity-initiative/digichina/blog/translation-cybersecurity-law-peoples-republic-
china/ (unofficial English translation); china/ (unofficial English translation); The People’s Republic of China’s Law on the ~~Managem ent~~Management of the Activities of Overseas Nongovernmental of
~~Overseas Nongovernm ental~~ Organizations, https://chinadevelopmentbrief.cn/reports/the-peoples-republic-of-chinas-, https://chinadevelopmentbrief.cn/reports/the-peoples-republic-of-chinas-
law-on-the-managementlaw-on-the-management -of-the-activities-of-overseas-ngos-within-mainland-china/ (unofficial English translation). -of-the-activities-of-overseas-ngos-within-mainland-china/ (unofficial English translation).
8 8 Measures for the Administration of Law Firms; Ministry of Justice of the People’s Republic of China, amended on ; Ministry of Justice of the People’s Republic of China, amended on
September 6, 2016, and effective November 1, 2016, http://www.gov.cn/gongbao/content/2016/content_5109321.htmSeptember 6, 2016, and effective November 1, 2016, http://www.gov.cn/gongbao/content/2016/content_5109321.htm
(Chinese language);(Chinese language); ~~Adm inistrative Measures~~ Administrative Measures for the Practice of Law by Lawyers,, as amendedas amended on September 18, 2016, on September 18, 2016,
http://www.gov.cn/gongbao/content/2016/content_5113014.htmhttp://www.gov.cn/gongbao/content/2016/content_5113014.htm (Chinese language); as amended on December 5, (Chinese language); as amended on December 5,
2018; http://www.moj.gov.cn/government_public/content/20182018; http://www.moj.gov.cn/government_public/content/2018 -12/13/gggs_44271.html (Chinese language).-12/13/gggs_44271.html (Chinese language).
9 9 Standardization of Law of the People’s Republic of China, effective January 1, 2018, , effective January 1, 2018,
https://www.cfstc.org/en/2932583/2968817/index.html (unofficial English translation). https://www.cfstc.org/en/2932583/2968817/index.html (unofficial English translation).
10 10 Cryptography Law of the People’s Republic of China, effective January 1, 2020, , effective January 1, 2020,
http://www.npc.gov.cn/npc/c30834/http://www.npc.gov.cn/npc/c30834/201910/6f7be7dd5ae5459a8de8baf36296bc74~~201910/6f7be7dd5ae545 9a8de8baf36296bc74~~.shtml (Chinese language). .shtml (Chinese language).
11 Murray Scot 11 Murray Scot ~~T anner~~Tanner, “Beijing’s New National Intelligence Law: From Defense to Offense,” , “Beijing’s New National Intelligence Law: From Defense to Offense,” Lawfare, July 20, 2017; , July 20, 2017;
“China Adds“China Adds ~~Broad New~~ Broad New Definitions to Counter-Espionage Law,” Definitions to Counter-Espionage Law,” Reuters, December 6, 2017; “China Enacts Broad , December 6, 2017; “China Enacts Broad
Counter-Counter-~~T errorism~~Terrorism Law,” Client Alert, Covington, January 5, 2016; Steve Dickinson, “ Law,” Client Alert, Covington, January 5, 2016; Steve Dickinson, “ China Cybersecurity: No Place China Cybersecurity: No Place
to Hide,” Harris Bricken, October 11, 2020; Siodhbhrato Hide,” Harris Bricken, October 11, 2020; Siodhbhra Parkin, “Parkin, “ How China RegulatesHow China Regulates Foreign Non-Governmental Foreign Non-Governmental
Organizations,” SupChina,Organizations,” SupChina, ~~August~~ August 8, 2019; Laney Zhang, “8, 2019; Laney Zhang, “ China: Multiple Areas of Criminal LawChina: Multiple Areas of Criminal Law ~~Changing~~ Changing under under
NewNew ~~Amendment~~ Amendment,” Global,” Global Legal Monitor, Library of Congress LawLegal Monitor, Library of Congress Law Library, FebruaryLibrary, February 26, 2021; “26, 2021; “ Revised Measures Revised Measures
on Lawon Law Firms Further CurbFirms Further Curb Independence of Chinese Lawyers,” China Human Rights Briefing, Chinese Human Rights Independence of Chinese Lawyers,” China Human Rights Briefing, Chinese Human Rights
Defenders, October 3, 2016; Changhao Wei, “Defenders, October 3, 2016; Changhao Wei, “ Legislation Review:Legislation Review: China to Revamp Standardization System,” NPC China to Revamp Standardization System,” NPC
Observer, May 17, 2017; “Observer, May 17, 2017; “~~T he~~The Grand “Finale” of China’s Encryption Law,” Hogan Lovells, November Grand “Finale” of China’s Encryption Law,” Hogan Lovells, November ~~20 19.~~
2019. 12 Jude Blanchette, “Ideological Security as National Security,” CSIS12 Jude Blanchette, “Ideological Security as National Security,” CSIS Report, December 2, 2020. Blanchette translates Report, December 2, 2020. Blanchette translates
~~T ang~~Tang Aijun, “Ideological Security in the Framework of the Overall National Security Outlook,” Aijun, “Ideological Security in the Framework of the Overall National Security Outlook,” Socialism Studies, May , May
2019. 2019.
13 “Xi Jinping’s April 20 [2018] Speech at the National Cybersecurity and Informatization Work Conference,” Congressional Research Service Congressional Research Service

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~~controlling core technologies as “important instruments of the state.” 13 In a May 2018 address to~~
the Chinese Academies of Sciences and Engineering, Xi said that “the initiatives of innovation the Chinese Academies of Sciences and Engineering, Xi said that “the initiatives of innovation
and development must be securely kept in our own hands.”14 Relatedly, China is pressing for and development must be securely kept in our own hands.”14 Relatedly, China is pressing for
global acceptance of its domestic authorities and global acceptance of its domestic authorities and ~~potential y~~potentially an extraterritorial reach of its courts’ an extraterritorial reach of its courts’
decisions. In a November 2020 speech at the Party Central Committeedecisions. In a November 2020 speech at the Party Central Committee'’s Work Conference on the s Work Conference on the
Comprehensive Rule of Law, Xi Comprehensive Rule of Law, Xi ~~cal ed~~called for promoting Chinese law in matters involving foreign for promoting Chinese law in matters involving foreign
parties, including overseas, and for coordinating China’s promotion of domestic and foreign-parties, including overseas, and for coordinating China’s promotion of domestic and foreign-
related rule of law efforts.15 related rule of law efforts.15
These measures also seek to advance China’s economic security goals as clarified in China’s 14th These measures also seek to advance China’s economic security goals as clarified in China’s 14th
Five-Year Plan for 2021-2025, which China’s legislature approved on March 11, 2021. The new Five-Year Plan for 2021-2025, which China’s legislature approved on March 11, 2021. The new
plan seeks to advance China’s national economic security interests through specific trade and plan seeks to advance China’s national economic security interests through specific trade and
investment actions. It investment actions. It ~~specifical y~~specifically mentions the use of market restrictions and China’s mentions the use of market restrictions and China’s One Belt,
One Road global networks to foster Chinese-controlled supply chains. It also global networks to foster Chinese-controlled supply chains. It also ~~cal s~~calls for sharpening for sharpening
China’s use of antitrust, IP, and technical standards tools, both China’s use of antitrust, IP, and technical standards tools, both ~~domestical y~~domestically and overseas.16 and overseas.16
China’s leaders seek to secure supply chains and boost self-sufficiency in agriculture, energy, China’s leaders seek to secure supply chains and boost self-sufficiency in agriculture, energy,
technology, and industry, while leveraging China’s control over global supply chokepoints.17 In technology, and industry, while leveraging China’s control over global supply chokepoints.17 In
an April 2020 speech, Xi an April 2020 speech, Xi ~~cal ed~~called for China to build production and supply chains that are for China to build production and supply chains that are
“independently controllable, secure and reliable” to ensure industrial and national security.18 Xi “independently controllable, secure and reliable” to ensure industrial and national security.18 Xi
said China should “tighten international production chains’ dependence on China, forming a said China should “tighten international production chains’ dependence on China, forming a
powerful countermeasure and deterrent capability.”19 Xi also powerful countermeasure and deterrent capability.”19 Xi also ~~cal ed~~called for developing and leveraging for developing and leveraging
control of core technologies—in sectors such as high speed rail, telecommunications and power control of core technologies—in sectors such as high speed rail, telecommunications and power
equipment, and new energy—and localizing technology and critical production in China. equipment, and new energy—and localizing technology and critical production in China.
China’s new trade measures codify and seek to legitimize China’s new trade measures codify and seek to legitimize ~~longstanding~~long-standing practices of economic practices of economic
coercion and tit-for-tat trade retaliation that the Chinese government regularly uses to advance coercion and tit-for-tat trade retaliation that the Chinese government regularly uses to advance
both economic and political objectives. The Chinese government has stepped up its use of both economic and political objectives. The Chinese government has stepped up its use of
economic coercion and retaliation against its major trading partners—including the United States, economic coercion and retaliation against its major trading partners—including the United States,
the European Union, Australia, and Canada—as it develops these tools. the European Union, Australia, and Canada—as it develops these tools. ~~Additional y, China is~~

~~13 “Xi Jinping’s April 20 [2018] Speech at the National Cybersecurity and Informatization Work Conference,”~~
Additionally, China is using ad hoc boycotts and trade restrictions against several major trading partners and the use of sanctions that arguably reflect China’s undermining of the rules-based global trading system. Unofficial English translation, New America Foundation Blog,Unofficial English translation, New America Foundation Blog, April 30, 2018.April 30, 2018.
14 “China Focus: Xi Calls for Developing China into World Science and 14 “China Focus: Xi Calls for Developing China into World Science and ~~T echno logy~~Technology Leader,” Xinhua, May 29, 2019. Leader,” Xinhua, May 29, 2019.
15 “On the Study and Implementation of General Secretary Xi Jinping15 “On the Study and Implementation of General Secretary Xi Jinping'’s Important Speech at the Central Committees Important Speech at the Central Committee'’s s
Work Conference on Comprehensive Rule of Law,” Commentator Article, Work Conference on Comprehensive Rule of Law,” Commentator Article, People’s Daily, November 20, 2020. , November 20, 2020.
16 “16 “~~T he~~The 14th Five Year Plan and 2035 Long- 14th Five Year Plan and 2035 Long-~~T erm~~Term Development Objectives,” Development Objectives,” Xinhua, March 11, 2021, , March 11, 2021,
http://www.xinhuanet.com/fortune/2021-03/13/c_1127205564.htm. See CRShttp://www.xinhuanet.com/fortune/2021-03/13/c_1127205564.htm. See CRS In FocusIn Focus IF11684, IF11684, China’s 14th Five-
Year Plan: A First Look, by Karen M. Sutter and Michael D. Sutherland. , by Karen M. Sutter and Michael D. Sutherland.
17 17 Proposal of the Central Committee of the Communist Party of China on Formulating the Fourteenth Five -Year Plan
for National ~~Econom ic~~Economic and Social ~~Developm ent~~Development and the Long -term Goals for 2035 (adopted at the Fifth Plenary (adopted at the Fifth Plenary
SessionSession of the 19th Central Committee of the Communist Party of China on October 29, 2020), of the 19th Central Committee of the Communist Party of China on October 29, 2020), Xinhua News Agency, ,
November 3, 2020, http://www.xinhuanet.com/politics/zywj/2020November 3, 2020, http://www.xinhuanet.com/politics/zywj/2020 -11/03/c_1126693293.htm; -11/03/c_1126693293.htm; Report on the
~~Im plem entation~~Implementation of the 2019 Plan for National ~~Econom ic~~Economic and Social Development and on the 2020 Draft Plan for
National ~~Econom ic~~Economic and Social ~~Developm ent~~Development, delivered at the delivered at the ~~T hird~~Third Session of the Session of the ~~T hirteenth~~Thirteenth National People’s National People’s
CongressCongress on May 22, 2020; National Development and Reform Commission of the PRC, as publishedon May 22, 2020; National Development and Reform Commission of the PRC, as published by by Xinhua News
Agency, http://www.xinhuanet.com/english/download/nationaleconomic.pdf, http://www.xinhuanet.com/english/download/nationaleconomic.pdf . .
18 Xi Jinping, “Certain Major Issues in the National Medium and Long- 18 Xi Jinping, “Certain Major Issues in the National Medium and Long-~~T erm~~Term Economic and Social Development Economic and Social Development
Strategy),” Strategy),” Qiushi Journal, October 31, 2020. Unofficial English translation available at , October 31, 2020. Unofficial English translation available at
https://cset.georgetown.edu/research/xi-jinping-certain-major-issues-for-our-national-medium-to-long-term-economic-https://cset.georgetown.edu/research/xi-jinping-certain-major-issues-for-our-national-medium-to-long-term-economic-
and-social-developmentand-social-development --strategy/. strategy/.
19 Ibid. 19 Ibid.
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link to page 24 link to page link to page 24 link to page 5759 China’s Countermeasures to U.S. Economic Policy Actions and Authorities

~~using ad hoc boycotts and trade restrictions against several major trading partners and the use of~~
~~sanctions that arguably reflect China’s undermining of the rules-based global trading system.~~
China’s actions target certain foreign officials, researchers, and institutions to try to deter China’s actions target certain foreign officials, researchers, and institutions to try to deter
criticism of Chinese policies and promote acquiescence to China’s economic and political criticism of Chinese policies and promote acquiescence to China’s economic and political
demands. (See demands. (See “Ad Hoc Trade Measures and Economic Coercion”” below below andand Table A-1.) .)
China’s recent measures also aim to counter specific trade and investment restrictions that the China’s recent measures also aim to counter specific trade and investment restrictions that the
U.S. government has imposed on China and certain PRC entities since 2018. To address China’s U.S. government has imposed on China and certain PRC entities since 2018. To address China’s
industrial policies that seek civilian and military technology leadership through discriminatory industrial policies that seek civilian and military technology leadership through discriminatory
trade, investment, and technology practices of concern, the Trump Administration, encouraged by trade, investment, and technology practices of concern, the Trump Administration, encouraged by
many in Congress, sought to curtail U.S. technology transfer to China through measures that many in Congress, sought to curtail U.S. technology transfer to China through measures that
increased scrutiny of academic ties, strengthened foreign investment review and export control increased scrutiny of academic ties, strengthened foreign investment review and export control
authorities, banned U.S. investment in firms tied to China’s military, and invoked Section 301 of authorities, banned U.S. investment in firms tied to China’s military, and invoked Section 301 of
the U.S. Trade Act of 1974.20 The Trump Administration declared a national emergency in May the U.S. Trade Act of 1974.20 The Trump Administration declared a national emergency in May
2019 regarding securing the U.S. information and communications technology and services 2019 regarding securing the U.S. information and communications technology and services
supply chain (an Executive Order that President Trump renewed in May 2020, and that President supply chain (an Executive Order that President Trump renewed in May 2020, and that President
Biden renewed in May 2021, see below)—and banned PRC firms Huawei, China Mobile, and Biden renewed in May 2021, see below)—and banned PRC firms Huawei, China Mobile, and
China Telecom from the U.S. market and encouraged other countries to follow suit.21China Telecom from the U.S. market and encouraged other countries to follow suit.21
The U.S. government, in response to direction from Congress, has sought to restrict certain dual- The U.S. government, in response to direction from Congress, has sought to restrict certain dual-
use exports to China, based on human rights and related use exports to China, based on human rights and related ~~surveil ance~~surveillance concerns, as concerns, as ~~wel~~ well as U.S. as U.S.
imports found to be tied to forced labor practices involving workers from Xinjiang.22 Relatedly, imports found to be tied to forced labor practices involving workers from Xinjiang.22 Relatedly,
the U.S. government has also sanctioned some Chinese government officials for their role in the U.S. government has also sanctioned some Chinese government officials for their role in
human rights violations in Xinjiang23human rights violations in Xinjiang23 and has imposed sanctions related to the Chinese and has imposed sanctions related to the Chinese
government’s actions in Hong Kong. (See “The Changing Role of Hong Kong” below.) government’s actions in Hong Kong. (See “The Changing Role of Hong Kong” below.)
In May 2021, the Biden Administration renewed the May 2019 Trump Administration Executive In May 2021, the Biden Administration renewed the May 2019 Trump Administration Executive
Order 3873 with its Order 3873 with its Notice on the Continuation of the National Emergency with Respect to
Securing the Information and Communications Technology and Services Supply Chain. In June . In June
2021, the Biden Administration issued a revised Executive Order restricting U.S. capital market 2021, the Biden Administration issued a revised Executive Order restricting U.S. capital market
investments in certain named Chinese companies identified as being tied to China’s military, but investments in certain named Chinese companies identified as being tied to China’s military, but
omitted some military-tied firms that had been previously identified by the Department of omitted some military-tied firms that had been previously identified by the Department of

~~20 See CRS~~ Defense and included in the November 2020 Trump Administration Executive Order.24 Also in 20 See CRS In Focus IF11284, In Focus IF11284, U.S.-China Trade Relations, by Karen M. Sutter; CRS, by Karen M. Sutter; CRS In Focus IF11627, In Focus IF11627, U.S. Export
Control ~~Reform s~~Reforms and China: Issues for Congress, by Ian F. Fergusson, by Ian F. Fergusson ~~and~~ and Karen M. Sutter; CRSKaren M. Sutter; CRS In FocusIn Focus IF10952, IF10952,
CFIUS Reform Under FIRRMA, by James, by James K. Jackson and Cathleen D. CiminoK. Jackson and Cathleen D. Cimino -Isaacs. -Isaacs.
21 “Executive Order on Securing 21 “Executive Order on Securing the Information and Communications the Information and Communications ~~T echnology~~Technology and Services Supply Chain and Services Supply Chain ,” May ,” May
15, 2019; “15, 2019; “ ~~T ext~~Text of a Notice on the Continuation of the National Emergency on Securing the Information and of a Notice on the Continuation of the National Emergency on Securing the Information and
Communications Communications ~~T echnology~~Technology and Services Supply and Services Supply ~~Chain~~ Chain,” May 13, 2020; “,” May 13, 2020; “ Notice on the Continuation of the National Notice on the Continuation of the National
Emergency with Respect to SecuringEmergency with Respect to Securing the Information and Communications the Information and Communications ~~T echnology~~Technology and Services Supply and Services Supply Chain,” Chain,”
May 11, 2021. May 11, 2021.
22 “Addition of Certain Entities to the Entity List,” Bureau of Industry and Security, U.S. Department of Commerce, 22 “Addition of Certain Entities to the Entity List,” Bureau of Industry and Security, U.S. Department of Commerce,
October 9, 2019; “October 9, 2019; “ Xinjiang Uyghur Autonomous Region WRO Frequently AskedXinjiang Uyghur Autonomous Region WRO Frequently Asked Questions,” U.S.Questions,” U.S. Customs and Customs and
Border Protection, https://www.cbp.gov/trade/programs-administration/forced-labor/xinjiang-uyghur-autonomous-Border Protection, https://www.cbp.gov/trade/programs-administration/forced-labor/xinjiang-uyghur-autonomous-
region-wro-frequently-asked-questions; “region-wro-frequently-asked-questions; “ Fact Sheet: NewFact Sheet: New U.S. Government Actions on Forced Labor in Xinjiang,” U.S. Government Actions on Forced Labor in Xinjiang,”
Office of the White House, June 24, 2021. See CRSOffice of the White House, June 24, 2021. See CRS Report R46631, Report R46631, Section 307 and U.S. ~~Im ports~~Imports of Products of
Forced Labor: Overview and Issues for Congress, coordinated by Cathleen D. Cimino-Isaacs and CRS, coordinated by Cathleen D. Cimino-Isaacs and CRS Report R46750, Report R46750,
~~Hum an~~Human Rights in China and U.S. Policy: Issues for the 117th Congress, by , by ~~T homas~~Thomas Lum and Michael A. Lum and Michael A. ~~W eber~~Weber. .
23 U.S. Department of the 23 U.S. Department of the ~~T reasury~~Treasury Press Release, Press Release, ~~T reasury~~Treasury Sanctions Chinese Government Officials in Connection Sanctions Chinese Government Officials in Connection
with Seriouswith Serious Human RightsHuman Rights ~~Abuse~~ Abuse in Xinjiang, March 22, 2021, at https://home.treasury.gov/news/press-in Xinjiang, March 22, 2021, at https://home.treasury.gov/news/press-
releases/jy0070releases/jy0070. 24 “Executive Order on Addressing the Threat from Securities Investments that Finance Certain Companies of the People’s Republic of China,” June 3, 2021. .
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~~Defense and included in the November 2020 Trump Administration Executive Order.24 Also in~~
June 2021, the Biden Administration rescinded three Trump Administration Executive Orders that June 2021, the Biden Administration rescinded three Trump Administration Executive Orders that
would have restricted would have restricted ~~specifical y~~specifically named PRC social media platforms from operating in the named PRC social media platforms from operating in the
United States, and replaced these actions with a new Executive Order that directs the U.S. United States, and replaced these actions with a new Executive Order that directs the U.S.
government over the next year to examine potential data security risks, including potential risks government over the next year to examine potential data security risks, including potential risks
that PRC firms may pose.25 In response to China’s industrial policies and trade and economic that PRC firms may pose.25 In response to China’s industrial policies and trade and economic
coercion, the executive branch and Congress have also worked to secure critical U.S. supply coercion, the executive branch and Congress have also worked to secure critical U.S. supply
chains and are considering additional support to critical U.S. sectors such as semiconductors and chains and are considering additional support to critical U.S. sectors such as semiconductors and
U.S. research and development more broadly.26 U.S. research and development more broadly.26
Attempts to Create Parity with U.S. Authorities
China’s new trade measures attempt to create parity with the United States by mirroring certain China’s new trade measures attempt to create parity with the United States by mirroring certain
U.S. authorities and practices in areas such as export controls, foreign investment review, and U.S. authorities and practices in areas such as export controls, foreign investment review, and
sanctions, even though the Chinese government arguably already has broad authorities in these sanctions, even though the Chinese government arguably already has broad authorities in these
areas. The U.S. government has intensified its use of policy tools in these areas over the past areas. The U.S. government has intensified its use of policy tools in these areas over the past
several years to try to constrain and address Chinese behaviors of concern in commerce and several years to try to constrain and address Chinese behaviors of concern in commerce and
technology.27 While some aspects of China’s new laws and regulatory mechanisms might look technology.27 While some aspects of China’s new laws and regulatory mechanisms might look
similar to those in the United States, in practice the two countries apply these trade tools similar to those in the United States, in practice the two countries apply these trade tools
differently and in ways that highlight core differences in the operating conditions and tenets of the differently and in ways that highlight core differences in the operating conditions and tenets of the
economic and legal systems in the United States and China. economic and legal systems in the United States and China.
Key Distinctions in China and U.S. Tenets and Systems
A key distinction involves the role of the state—the PRC government, the Communist Party of A key distinction involves the role of the state—the PRC government, the Communist Party of
China (CPC), and the People’s Liberation Army (PLA)—in China’s economy and business China (CPC), and the People’s Liberation Army (PLA)—in China’s economy and business
ecosystem, which blurs lines between China’s government authorities and business operations. ecosystem, which blurs lines between China’s government authorities and business operations.
The Chinese state is directly involved in advancing China’s national economic development and The Chinese state is directly involved in advancing China’s national economic development and
related industrial policy goals and in promoting national corporate champions, sometimes setting related industrial policy goals and in promoting national corporate champions, sometimes setting
commercial terms and influencing corporate decision-making.28 This overlap between commercial terms and influencing corporate decision-making.28 This overlap between
government and business interests has become increasingly blurred since 2006, with the government and business interests has become increasingly blurred since 2006, with the
enactment of China’s Medium- and Long-Term Plan in Science in Technology (2006-2020), as enactment of China’s Medium- and Long-Term Plan in Science in Technology (2006-2020), as

~~24 “Executive Order on Addressing the T hreat from Securities Investments that Finance Certain Companies of the~~
~~People’s Republic of China,” June 3, 2021.~~
~~25 President T rump~~the Chinese government has reenergized the role of industrial planning and state financing to advance its goals through commercial or quasi-commercial actors.29 The Chinese government has 25 President Trump issued three related Executive Orders that sought to address the potential national security risks issued three related Executive Orders that sought to address the potential national security risks
includingincluding those involving data with regardthose involving data with regard to PRC firms operating in the United States. On Augustto PRC firms operating in the United States. On August 6, 2020, former 6, 2020, former
President President ~~T rump~~Trump issued issued E.O. 13942 and E.O. 13943 to address the threats posed by E.O. 13942 and E.O. 13943 to address the threats posed by ~~T ikT ok~~TikTok and WeChat under and WeChat under
Executive Order 13873, issuedExecutive Order 13873, issued on May 15, on May 15, ~~2 019~~2019, that declared a national emergency with respect to the information , that declared a national emergency with respect to the information
and communications technology and services supply chain. On January 5, 2021and communications technology and services supply chain. On January 5, 2021, President President ~~T rump~~Trump issued E.O. 13971 to issued E.O. 13971 to
addressaddress the threat posed by applications and other software the threat posed by applications and other software ~~Application s~~Applications and Other Software Developed or Controlled and Other Software Developed or Controlled
by Chinese Companies. In May 2021 President Biden renewedby Chinese Companies. In May 2021 President Biden renewed E.O. 13971. In June 2021 President Biden rescinded E.O. 13971. In June 2021 President Biden rescinded
E.O. 13942 and E.O. 13943 E.O. 13942 and E.O. 13943 ~~issued~~ and issued a new a new Executive Order on Protecting ~~Am ericans~~Americans’ Sensitive Data from ~~Fo reign~~ Foreign
Adversaries. .
26 “Executive Order on America’s Supply Chains,” Office of the White House, February 21, 2021; 26 “Executive Order on America’s Supply Chains,” Office of the White House, February 21, 2021; ~~See~~see, for example, , for example,
United States Innovation and Competition Act of 2021United States Innovation and Competition Act of 2021, S. 1260. S. 1260.
27 See 27 See ~~CRS~~ CRS In Focus IF11284, In Focus IF11284, U.S.-China Trade Relations, by Karen M. Sutter. , by Karen M. Sutter.
28 Mark Wu, “28 Mark Wu, “~~T he~~The ‘China, Inc.’ Challenge to Global ‘China, Inc.’ Challenge to Global ~~T rade~~Trade Governance,” Governance,” Harvard International Law Journal, Vol. 57, , Vol. 57,
(2016): 1001-1063. (2016): 1001-1063.
29 Cong Cao, Richard P. Suttmeier, and Denis Fred Simon, “China’s 15-Year Science and Technology Plan,” Physics Today, December 2006; The National Medium- and Long-Term Program for Science and Technology Development Congressional Research Service Congressional Research Service

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China’s Countermeasures to U.S. Economic Policy Actions and Authorities

~~the Chinese government has reenergized the role of industrial planning and state financing to~~
~~advance its goals through commercial or quasi-commercial actors.29 The Chinese government has~~
supplemented forms of direct state ownership with hybrid forms of state control that involve supplemented forms of direct state ownership with hybrid forms of state control that involve
channeling state funding through government guidance funds and venture capital and private channeling state funding through government guidance funds and venture capital and private
equity firms.30 The CPC has strengthened its representation and influence within firms through equity firms.30 The CPC has strengthened its representation and influence within firms through
the establishment and reinvigoration of corporate Party Committees, changes to companies’ the establishment and reinvigoration of corporate Party Committees, changes to companies’
Articles of Association, and influence through supervisory boards and trade unions that Articles of Association, and influence through supervisory boards and trade unions that ~~fal~~ fall under under
state control.31 While the number of state control.31 While the number of ~~formal y~~formally declared state firms managed by the central declared state firms managed by the central
government has been declining due to corporate consolidation, arguably the financial and policy government has been declining due to corporate consolidation, arguably the financial and policy
influence of the Chinese state has been expanding into a wider array of sectors and companies influence of the Chinese state has been expanding into a wider array of sectors and companies
through these hybrid models, particularly in strategic and advanced technology sectors.32 through these hybrid models, particularly in strategic and advanced technology sectors.32
Within this context, the Chinese government frequently distorts the commonly accepted premise Within this context, the Chinese government frequently distorts the commonly accepted premise
and use of economic and trade policy tools by other governments to promote market competition and use of economic and trade policy tools by other governments to promote market competition
because of how it applies these tools to seek particular advantages for China’s industry and because of how it applies these tools to seek particular advantages for China’s industry and
national champions.33 The Chinese government is not an independent or impartial market national champions.33 The Chinese government is not an independent or impartial market
regulator, and has direct financial and policy interests in the market segments and companies in regulator, and has direct financial and policy interests in the market segments and companies in
which it invests and favors. China uses an interplay of trade and investment protections combined which it invests and favors. China uses an interplay of trade and investment protections combined
with targeted market openings to incentivize the transfer of foreign technology and advanced with targeted market openings to incentivize the transfer of foreign technology and advanced
production capabilities to China and Chinese entities.34 Increasingly, China is turning to data production capabilities to China and Chinese entities.34 Increasingly, China is turning to data
controls as controls as ~~wel~~ well as IP, technical standards, procurement, and antitrust tools to advance these as IP, technical standards, procurement, and antitrust tools to advance these
interests. The Chinese government also enjoys informal influence in setting market conditions interests. The Chinese government also enjoys informal influence in setting market conditions
and corporate-level terms.35 Unlike the United States, in which the legal and regulatory system and corporate-level terms.35 Unlike the United States, in which the legal and regulatory system

~~29 Cong Cao, Richard P. Suttmeier, and Denis Fred Simon, “China’s 15 -Year Science and T echnology Plan,”~~ ~~Physics~~
~~Today, December 2006;~~ ~~The National Medium - and Long-Term Program for Science and Technology Developm ent~~
(2006- 2020), State Council of the People’s Republic of China, https://www.itu.int/en/, State Council of the People’s Republic of China, https://www.itu.int/en/~~IT U-~~
ITU-D/Cybersecurity/Documents/National_Strategies_Repository/China_2006.pdfD/Cybersecurity/Documents/National_Strategies_Repository/China_2006.pdf . .
30 Barry Naughton, 30 Barry Naughton, The Rise of China’s Industrial Policy 1978 to 2020, Universidad Nacional Autonoma de Mexico, , Universidad Nacional Autonoma de Mexico,
2021 (See Chapters 4 and 5); Ngor Luong, Zachary Arnold, and Ben Murphy, “2021 (See Chapters 4 and 5); Ngor Luong, Zachary Arnold, and Ben Murphy, “ Understanding Chinese Government Understanding Chinese Government
GuidanceGuidance Funds:Funds: An Analysis of Chinese-LanguageAn Analysis of Chinese-Language Sources,”Sources,” Center for Security and Emerging Center for Security and Emerging ~~T echnology~~Technology, March , March
2021; Yifei Gong,2021; Yifei Gong, Peiyue Li, and Ziqiao Shen, “Peiyue Li, and Ziqiao Shen, “ Research on Operating Efficiency of Government Industry Guidance Research on Operating Efficiency of Government Industry Guidance
Funds,”Funds,” Theoretical ~~Econom ics~~Economics Letters, February 2020. February 2020.
31 Jennifer Hughes, 31 Jennifer Hughes, “China’s Communist Party Writes Itself Into Company Law,” R“China’s Communist Party Writes Itself Into Company Law,” Reuters, August 14, 2017; Scott , August 14, 2017; Scott
Livingston, “Livingston, “~~T he~~The Chinese Communist Party Targets the Private Sector,” CSIS, October 2020; Christopher Balding and Chinese Communist Party Targets the Private Sector,” CSIS, October 2020; Christopher Balding and
Donald Clarke, “Who Owns Huawei?;”Donald Clarke, “Who Owns Huawei?;” April 19, 2017, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3372669. April 19, 2017, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3372669.
32 “State-Owned Enterprise Policy Reform,” 32 “State-Owned Enterprise Policy Reform,” ~~T he~~The China Dashboard, Asia Society Policy Institute and the Rhodium China Dashboard, Asia Society Policy Institute and the Rhodium
Group, Winter 2020 (Note: China’s National Bureau of Statistics data on SOEsGroup, Winter 2020 (Note: China’s National Bureau of Statistics data on SOEs does not include data for stock does not include data for stock
companies or other types of ventures that involve SOEs or are state financed or tied. Seecompanies or other types of ventures that involve SOEs or are state financed or tied. See Edimon Ginting and Kaukab Edimon Ginting and Kaukab
Naqvi, Reforms, Opportunities, and ChallengesNaqvi, Reforms, Opportunities, and Challenges for State-Owned Enterprises,” Asian Development Bank, July 2020, for State-Owned Enterprises,” Asian Development Bank, July 2020,
pp. 190-224); Karen Jinrong Liu, Xiaoyan Lu, Junshengpp. 190-224); Karen Jinrong Liu, Xiaoyan Lu, Junsheng Zhang, and Zhang, and ~~Yin g~~ Ying Zheng, “Zheng, “ State-Owned Enterprises in China: State-Owned Enterprises in China:
A ReviewA Review of 40 Years of Research and Practice,” of 40 Years of Research and Practice,” China Journal of Accounting Research, Volume 13, Issue Volume 13, Issue 1, March 1, March
2000; Lingling Wei, “China’s Xi Ramps Up Control of Private Sector,” 2000; Lingling Wei, “China’s Xi Ramps Up Control of Private Sector,” The Wall Street Journal, December 10, 2020; , December 10, 2020;
Scott Livingston, “Scott Livingston, “~~T he~~The New Challenges of Communist Corporate Governance,” CSIS New Challenges of Communist Corporate Governance,” CSIS Brief, January 15, 2021. Brief, January 15, 2021.
33 China’s national champions are firms that have a dominant or leadership position in China’s market and receive 33 China’s national champions are firms that have a dominant or leadership position in China’s market and receive
certain government support, preferences, and market protections. They are not always formally depicted as such but in certain government support, preferences, and market protections. They are not always formally depicted as such but in
certain instances they are identified to play particular roles in China’s economic and industrialcertain instances they are identified to play particular roles in China’s economic and industrial policy plans. U.S. policy plans. U.S.
Chamber of Commerce, “Competing Interests in China’s Competition Law Enforcement: China’s Anti-Monopoly Law Chamber of Commerce, “Competing Interests in China’s Competition Law Enforcement: China’s Anti-Monopoly Law
Application and the Role of Industrial Policy,” August 2014. Application and the Role of Industrial Policy,” August 2014.
34 James McGregor, “China’s Drive for ‘Indigenous Innovation’: A Web of Industrial Policies,” U.S. Chamber of 34 James McGregor, “China’s Drive for ‘Indigenous Innovation’: A Web of Industrial Policies,” U.S. Chamber of
Commerce and APCO Worldwide,Commerce and APCO Worldwide, ~~July~~ July 2010. 2010.
35 Jeremie Waterman and 35 Jeremie Waterman and ~~T ami~~Tami Overby, “China’s Approval Process for Inbound Foreign Direct Investment: Impact on Overby, “China’s Approval Process for Inbound Foreign Direct Investment: Impact on
Market Access, National Treatment and Transparency,” U.S. Chamber of Commerce, November 11, 2012. Congressional Research Service Congressional Research Service

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aims to protect individual rights, including from government interference, the regulatory and legal aims to protect individual rights, including from government interference, the regulatory and legal
system in China is oriented toward protecting and advancing the interests of the state.36 system in China is oriented toward protecting and advancing the interests of the state.36
China’s actions introduce new considerations for U.S. policies, laws, and regulations because the China’s actions introduce new considerations for U.S. policies, laws, and regulations because the
CPC has strong levers of influence among its top firms and controls the court system in China, CPC has strong levers of influence among its top firms and controls the court system in China,
making it difficult for U.S. companies to seek similar redress in China. China’s state support for making it difficult for U.S. companies to seek similar redress in China. China’s state support for
its companies in U.S. legal proceedings could disadvantage U.S. firms if this role, and the broader its companies in U.S. legal proceedings could disadvantage U.S. firms if this role, and the broader
asymmetries in the U.S. and China economic and legal systems, is not acknowledged and asymmetries in the U.S. and China economic and legal systems, is not acknowledged and
addressed.37 addressed.37
New Laws and Regulations
The Chinese government has drafted and enacted a series of laws and measures since January The Chinese government has drafted and enacted a series of laws and measures since January
2020 that strengthen its control over economic activity in areas that it considers important to 2020 that strengthen its control over economic activity in areas that it considers important to
China’s economic competitiveness and national security and that align with Xi Jinping’s concepts China’s economic competitiveness and national security and that align with Xi Jinping’s concepts
of national security and the priorities set in China’s 14th Five-Year Plan. These laws and measures of national security and the priorities set in China’s 14th Five-Year Plan. These laws and measures
also focus on the government’s control over data, IP, research, and critical supply chains and also focus on the government’s control over data, IP, research, and critical supply chains and
technologies that it could leverage to advance its interests over the United States and other technologies that it could leverage to advance its interests over the United States and other
countries. These laws and measures are interrelated and, in many instances, cross-reference countries. These laws and measures are interrelated and, in many instances, cross-reference
specific provisions to create overlapping policies of market barriers and government controls.specific provisions to create overlapping policies of market barriers and government controls.
Some of the new laws and measures include reciprocity provisions and determine applicability Some of the new laws and measures include reciprocity provisions and determine applicability
according to whether China is party to particular international agreements. These provisions according to whether China is party to particular international agreements. These provisions
might signal how China could try to justify particular unilateral actions, press for membership in might signal how China could try to justify particular unilateral actions, press for membership in
multilateralmultilateral organizations that currently exclude China, or pursue alternative agreements or organizations that currently exclude China, or pursue alternative agreements or
mechanisms. Provisions in the Ministry of Commerce’s blocking measures (Articles 3 and 13), mechanisms. Provisions in the Ministry of Commerce’s blocking measures (Articles 3 and 13),
for example, discuss that the measures do not apply with regard to treaties and international for example, discuss that the measures do not apply with regard to treaties and international
agreements to which China is a party.38 Article 36 of China’s new Data Security Law agreements to which China is a party.38 Article 36 of China’s new Data Security Law ~~cal s~~calls for for
China to handle foreign judicial or law enforcement requests for data according to relevant China to handle foreign judicial or law enforcement requests for data according to relevant

~~Market Access, National T reatment and T ransparency,” U.S. Chamber of Commerce, November 11, 2012.~~
36 Pittman P. Potter, “36 Pittman P. Potter, “ The Chinese Legal System: Continuing Commitment to the Primacy of State Power,” The Chinese Legal System: Continuing Commitment to the Primacy of State Power,” The China
Quarterly, February 12, 2009; Jamie P. Horsley, “, February 12, 2009; Jamie P. Horsley, “ Party Leadership and Rule of Law in the Xi Jinping Era: What Does Party Leadership and Rule of Law in the Xi Jinping Era: What Does
an Ascendant Chinese Communist Party Mean for China’s Legal Development?,” an Ascendant Chinese Communist Party Mean for China’s Legal Development?,” ~~T he~~The Brookings Institution, Brookings Institution,
September 2019; Moritz Rudolf, “September 2019; Moritz Rudolf, “ Xi Jinping Xi Jinping ~~T hought~~Thought on the Rule of Law: on the Rule of Law: ~~New Substance~~ New Substance in the Conflict of Systems in the Conflict of Systems
with China,” Stiftung Wissenschaft undwith China,” Stiftung Wissenschaft und Politik, SWP Comment, April 2021. Politik, SWP Comment, April 2021.
37 37 ~~T he~~The opacity of China’s system can make it hard to secure evidence, prolong litigation, and impose significant costs opacity of China’s system can make it hard to secure evidence, prolong litigation, and impose significant costs
on U.S.on U.S. investors asserting their rights. State backinginvestors asserting their rights. State backing and support for Chinese firms in U.S.and support for Chinese firms in U.S. courts couldcourts could create create
potential asymmetric advantages in their resources over U.S. counterparts. Even when a U.S.potential asymmetric advantages in their resources over U.S. counterparts. Even when a U.S. entity is directed and entity is directed and
controlled by an SOEcontrolled by an SOE parent, it has proven difficult (but not impossible) to legally establish connectivity. In U.S. parent, it has proven difficult (but not impossible) to legally establish connectivity. In U.S.
litigation since 2014, the Aviation Industry Corporation of China (AVIC)litigation since 2014, the Aviation Industry Corporation of China (AVIC) has tried to deny direct ties to its U.S. has tried to deny direct ties to its U.S.
affiliates and twice tried to assert immunity under the Foreign Sovereignaffiliates and twice tried to assert immunity under the Foreign Sovereign Immunities Act (Immunities Act ( P.L. 94-583) to thwart P.L. 94-583) to thwart
commercial litigation despite China’s World commercial litigation despite China’s World ~~T rade~~Trade Organization accession commitment that its state firms would Organization accession commitment that its state firms would
operate on a commercial basis.operate on a commercial basis. AVIC’sAVIC’s actions put the evidence burdenactions put the evidence burden on the U.S. party to show how the China parent on the U.S. party to show how the China parent
is tied to its U.S.is tied to its U.S. affiliates and why PRC affiliates and why PRC ~~st ate~~state firms should firms should not have immunity in commercial deals. Seenot have immunity in commercial deals. See ~~CRS~~ CRS In Focus In Focus
IF11803, IF11803, U.S. Capital Markets and China: Issues for Congress, by Michael D. Sutherland and Karen M. Sutter Jamie , by Michael D. Sutherland and Karen M. Sutter Jamie
P. Horsley, “Party Leadership and RuleP. Horsley, “Party Leadership and Rule of Lawof Law in the Xi Jinping Era: What Does an Ascendant Chinese Communist in the Xi Jinping Era: What Does an Ascendant Chinese Communist
Party Mean for China’s Legal Development?,” Global China Report, Party Mean for China’s Legal Development?,” Global China Report, ~~T he~~The Brookings Institution, September 2019. Brookings Institution, September 2019.
38 China’s Ministry of Commerce, MOFCOM Order No. 1 of 38 China’s Ministry of Commerce, MOFCOM Order No. 1 of ~~2 021~~2021 on Rules on Counteracting Unjustified Extra- on Rules on Counteracting Unjustified Extra-
territorial Application of Foreign Legislation and Other Measures,” January 9, 2021, territorial Application of Foreign Legislation and Other Measures,” January 9, 2021,
http://english.mofcom.gov.cn/article/policyrelease/questions/202101/20210103029708.shtml (English), http://english.mofcom.gov.cn/article/policyrelease/questions/202101/20210103029708.shtml (English),
http://www.mofcom.gov.cn/article/b/c/202101/20210103029710.shtml (Chinese). http://www.mofcom.gov.cn/article/b/c/202101/20210103029710.shtml (Chinese).
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agreements to which China is a party, or in accordance with the principles of equality and agreements to which China is a party, or in accordance with the principles of equality and
reciprocity.39 reciprocity.39
Export Control Law
In October 2020, the Standing Committee of China’s legislature, the National People’s Congress In October 2020, the Standing Committee of China’s legislature, the National People’s Congress
(NPC), passed a new Export Control Law that went into effect on December 1, 2020.40 The law (NPC), passed a new Export Control Law that went into effect on December 1, 2020.40 The law
includes several new provisions that aim to create a Chinese policy counterweight to the U.S. includes several new provisions that aim to create a Chinese policy counterweight to the U.S.
government’s use of export control authorities to restrict the transfer of U.S. dual-use technology government’s use of export control authorities to restrict the transfer of U.S. dual-use technology
to China. The law includes provisions for retaliatory action (Article 48) and extraterritorial to China. The law includes provisions for retaliatory action (Article 48) and extraterritorial
jurisdiction (Article 44).41 The United States and other governments—such as those in Japan jurisdiction (Article 44).41 The United States and other governments—such as those in Japan
Taiwan, and Europe—have tightened China’s access to sensitive technology through strengthened Taiwan, and Europe—have tightened China’s access to sensitive technology through strengthened
export control authorities and licensing practices over the past two years. In November 2020, for export control authorities and licensing practices over the past two years. In November 2020, for
example, the European Union and the European Commission reached agreement on new example, the European Union and the European Commission reached agreement on new
measures that enhance their ability to address emerging dual-use technologies, including cyber-measures that enhance their ability to address emerging dual-use technologies, including cyber-
~~surveil ance~~surveillance technologies that pose a risk to national and international security, including technologies that pose a risk to national and international security, including
protecting human rights.42 Relatedly, there has been a marked upswing over the past year in the protecting human rights.42 Relatedly, there has been a marked upswing over the past year in the
number of countries that have sought to ban or impose conditions on the participation of China’s number of countries that have sought to ban or impose conditions on the participation of China’s
telecommunications firm Huawei in their 5G networks, particularly in Europe.43 telecommunications firm Huawei in their 5G networks, particularly in Europe.43
The PRC Export Control Law gives the Chinese government new policy tools and justifications The PRC Export Control Law gives the Chinese government new policy tools and justifications
to deny and impose terms on foreign commercial transactions—both inside and outside of to deny and impose terms on foreign commercial transactions—both inside and outside of
China—on the grounds of China’s national security and national interest (Articles 12 and 13). China—on the grounds of China’s national security and national interest (Articles 12 and 13).
The Chinese government The Chinese government ~~traditional y~~traditionally has sought to direct, condition, and restrict foreign has sought to direct, condition, and restrict foreign
investment and imports in ways that advance its own national industrial goals, although there investment and imports in ways that advance its own national industrial goals, although there
have been prominent examples of China controlling the export of strategic commodities, such as have been prominent examples of China controlling the export of strategic commodities, such as
coke, fluorspar, and rare earth elements.44 The law gives the government new rationales and coke, fluorspar, and rare earth elements.44 The law gives the government new rationales and

39 Data Security Law of the People39 Data Security Law of the People'’s Republic of China, Adopted on June 10, 2021, Enters into force on September 1, s Republic of China, Adopted on June 10, 2021, Enters into force on September 1,
2021, http://www.npc.gov.cn/npc/c30834/202106/7c9af12f51334a73b56d7938f99a788a.shtml (in Chinese). 2021, http://www.npc.gov.cn/npc/c30834/202106/7c9af12f51334a73b56d7938f99a788a.shtml (in Chinese).
40 40 ~~T he~~The law realizes a law realizes a ~~longstanding~~long-standing Chinese government goal of elevating and consolidating ministry Chinese government goal of elevating and consolidating ministry -level export -level export
control authorities under one national-level legal and policy framework. Seecontrol authorities under one national-level legal and policy framework. See http://www.xinhuanet.com/2020-http://www.xinhuanet.com/2020-
10/18/c_1126624518.htm (Chinese text and https://www.cov.com/ 10/18/c_1126624518.htm (Chinese text and https://www.cov.com/
/media/files/corporate/publications/file_repository//media/files/corporate/publications/file_repository/~~prc_export_control_law_ 2020_10_cn_en_covington~~prc_export_control_law_2020_10_cn_en_covington.pdf (unofficial .pdf (unofficial
English translation). English translation).
41 See 41 See ~~CRS~~ CRS In Focus IF11627, In Focus IF11627, U.S. Export Control Reforms and China: Issues for Congress, by Ian F. Fergusson and , by Ian F. Fergusson and
Karen M. Sutter. Karen M. Sutter.
42 “Commission Welcomes Agreement on the Modernisation of EU Export Controls,” European Commission Press 42 “Commission Welcomes Agreement on the Modernisation of EU Export Controls,” European Commission Press
Release,Release, November 9, 2020. November 9, 2020.
43 Mark Scott, “How 43 Mark Scott, “How ~~T rump~~Trump Won Over Europe on 5G, Cutting China Out,” Won Over Europe on 5G, Cutting China Out,” Politico, February 4, 2021; Laurens , February 4, 2021; Laurens
Cerulus,Cerulus, “Germany Falls in Line with EU on Huawei,”“Germany Falls in Line with EU on Huawei,” Politico, April 23, 2021. , April 23, 2021.
~~44 T he~~44 The United States won two separate World United States won two separate World ~~T rade~~Trade Organization ( Organization (~~WT O~~WTO) cases against China in 2009 and 2014 ) cases against China in 2009 and 2014
regardingregarding its export restraints on certain raw materials including fluorspar, tungsten, and select rare earth elements its export restraints on certain raw materials including fluorspar, tungsten, and select rare earth elements
(REEs). In response to these rulings, China vertically integrated its industry under(REEs). In response to these rulings, China vertically integrated its industry under state firms such as Minmetals and state firms such as Minmetals and
usedused production quotas to control REEs in China. “production quotas to control REEs in China. “~~WT O~~WTO Case Challenges Case Challenges China’s Export Restraints on Raw Materials China’s Export Restraints on Raw Materials
Inputs, Inputs, ~~UST R~~USTR, June, June 2009; “2009; “ DS431: China—Measures Related to the Exportation of Rare Earths, DS431: China—Measures Related to the Exportation of Rare Earths, ~~T ungsten~~Tungsten and and
Molybdenum,” Molybdenum,” ~~WT O~~WTO Dispute Settlement, https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds431_e.htm Dispute Settlement, https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds431_e.htm ; Wang ; Wang
Zhuoqiong, “Government Approves Rare Earth Conglomerates,” Zhuoqiong, “Government Approves Rare Earth Conglomerates,” China Daily, August, August 6, 2014. Also see CRS6, 2014. Also see CRS Report Report
R42510, R42510, China’s Rare Earth Industry and Export ~~Regim e: Econom ic~~Regime: Economic and Trade ~~Im plications~~Implications for the United States, by , by
Wayne M. Morrison and Rachel Y. Wayne M. Morrison and Rachel Y. ~~T ang~~Tang. .
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processes to impose terms on transactions among firms, within joint ventures and other processes to impose terms on transactions among firms, within joint ventures and other
partnerships, and on exports and offshore transactions (Articles 3 and 44) (partnerships, and on exports and offshore transactions (Articles 3 and 44) (seesee Table 1). .
Key factors in the issuance of export licenses include not only the particular technology, end use, Key factors in the issuance of export licenses include not only the particular technology, end use,
and end user, but also an entity’s “credit” rating, highlighting how the scope of China’s and end user, but also an entity’s “credit” rating, highlighting how the scope of China’s
implementation of its authorities are implementation of its authorities are ~~potential y~~potentially much broader than how the U.S. government and much broader than how the U.S. government and
other countries apply export controls in narrow instances that involve national security. The other countries apply export controls in narrow instances that involve national security. The
Chinese government may seek to leverage and enhance the emerging role of China’s corporate Chinese government may seek to leverage and enhance the emerging role of China’s corporate
social credit system as a policy tool to influence corporate activity.45 The law authorizes the social credit system as a policy tool to influence corporate activity.45 The law authorizes the
government to impose export controls in retaliation for other countries’ actions (Article 48), to government to impose export controls in retaliation for other countries’ actions (Article 48), to
impose temporary (up to two years) export controls on items not on a control list (Article 9), and impose temporary (up to two years) export controls on items not on a control list (Article 9), and
to broadly justify actions with several open-ended clauses. The law also includes provisions that to broadly justify actions with several open-ended clauses. The law also includes provisions that
press for China’s participation in international discussions, regimes, and rulemaking on export press for China’s participation in international discussions, regimes, and rulemaking on export
controls according to the principles of equality and reciprocity (Articles 6 and 32), a sign that controls according to the principles of equality and reciprocity (Articles 6 and 32), a sign that
China could become more active in trying to set global rules and norms that advantage China.46 China could become more active in trying to set global rules and norms that advantage China.46
Table 1. Key Provisions of China’s Export Control Law
~~Ef ective~~Effective December 1, 2020 December 1, 2020
ARTICLE 2 ARTICLE 2
Defines Defines controlled items to include dual-use items, to include dual-use items, ~~military items,~~ military items, nuclear itemsnuclear items and other goods, and other goods,
technologies,technologies, ~~services~~ services and itemsand items relating to the maintenance of national security and national relating to the maintenance of national security and national
interests,interests, and performanceand performance of nonproliferation and other international obligations of nonproliferation and other international obligations
ARTICLE 3 ARTICLE 3
Defines Defines transfer to include any transaction outside the PRC orto include any transaction outside the PRC or involving foreign organizations or involving foreign organizations or
individuals (implying it includes transactions inside China that involve foreign entities) individuals (implying it includes transactions inside China that involve foreign entities)
ARTICLE 4 ARTICLE 4
Defines Defines control list to include lists, to include lists, catalogues, and directories catalogues, and directories
ARTICLE 5 ARTICLE 5
Defines Defines export control authorities to include a consultative mechanismto include a consultative mechanism of State Council and of State Council and
Central Military CommissionCentral Military Commission units that performunits that perform export control functions export control functions
ARTICLES 6 & 32 ARTICLES 6 & 32
~~Cal~~ Call forfor strengthening ~~international~~ international cooperation and participating in global rules related to related to
export controls; cooperating and communicating with other countries and international organizations export controls; cooperating and communicating with other countries and international organizations
in accordance with international treaties concluded or ratified by China or on the in accordance with international treaties concluded or ratified by China or on the basis of
principles of equality and reciprocity
ARTICLE 7 ARTICLE 7
Encourages companies to work through Encourages companies to work through industry groups and chambers of commerce to to
performperform export control duties export control duties
ARTICLES 8 & 9 ARTICLES 8 & 9
Mention Mention both country and ~~product~~ product lists and determinations s
ARTICLE 9 ARTICLE 9
~~Al ows~~ Allows for for temporary controls (up to 2 years (up to 2 years in duration) forin duration) for products not on a control list
ARTICLES 12 & 13 ARTICLES 12 & 13
State that State that license decisions ~~wil~~ will consider consider national security and the national interest.. Other Other
factors include: international commitments;factors include: international commitments; type of export; sensitivity of the items;type of export; sensitivity of the items; destination destination
country or region of the export; end users and end use; country or region of the export; end users and end use; credit record of the entities; and of the entities; and other
factors provided in China’s laws and administrative regulations provided in China’s laws and administrative regulations
ARTICLE 14 ARTICLE 14
Includes provisions Includes provisions for for internal compliance systems and and general licenses
ARTICLE 16 ARTICLE 16
Includes provisions Includes provisions for end-users and end-use; includes for end-users and end-use; includes restrictions on altering end-use
ARTICLES 34-40 ARTICLES 34-40
Outline Outline fines and actions in response to various types of violations in response to various types of violations

45 China’s Corporate Social Credit System is a network of national and provincial data-sharing initiatives and legal 45 China’s Corporate Social Credit System is a network of national and provincial data-sharing initiatives and legal
provisions provisions ~~wit h~~with the common goal of regulating corporate behavior in China. See the common goal of regulating corporate behavior in China. See ~~CRS~~ CRS In FocusIn Focus IF11342, IF11342, China’s
Corporate Social Credit System , by Michael D. Sutherland. , by Michael D. Sutherland.
46 See 46 See ~~CRS~~ CRS Insight IN11524, Insight IN11524, China Issues New Export Control Law and Related Policies, by Karen M. Sutter, and , by Karen M. Sutter, and
CRSCRS In FocusIn Focus IF11627, IF11627, U.S. Export Control ~~Reform s~~Reforms and China: Issues for Congress,, by Ian F. Fergussonby Ian F. Fergusson and Karen and Karen
M. Sutter. M. Sutter.
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ARTICLE 44 ARTICLE 44
Scopes jurisdiction to include Scopes jurisdiction to include transfers that occur outside of China
ARTICLE 45 ARTICLE 45
Addresses Addresses trade and transfer via trade and transfer via China’s ~~bonded~~ bonded zones (a separate area in China with special (a separate area in China with special
trade policies,trade policies, particularly those related to customs clearance) particularly those related to customs clearance)
ARTICLE 48 ARTICLE 48
Provides justification for Provides justification for tit-for-tat retaliatory action: :
“If any country or region abuses export control measures to endanger the national security and national
interests of the People’s Republic of China, the People’s Republic of China may, based on the actual situation,
take reciprocal ~~measures~~ measures against that country or region.”
Source: Export Control Law of China, effective December Export Control Law of China, effective December 1, 2020, available at 1, 2020, available at
http://www.xinhuanet.com/2020-10/18/c_1126624518.htm (in Chinese). http://www.xinhuanet.com/2020-10/18/c_1126624518.htm (in Chinese).
Note: CRS has CRS has bolded key provisions. key provisions.
Catalogue of Prohibited and Restricted Technologies
To buttress the new export law, China’s Ministry of Commerce and Ministry of Science and To buttress the new export law, China’s Ministry of Commerce and Ministry of Science and
Technology, on August 28, 2020, amended the Technology, on August 28, 2020, amended the Catalogue of Technologies Prohibited or
Restricted from Export to impose new controls in a range of technological areas.47 The catalogue to impose new controls in a range of technological areas.47 The catalogue
had last been updated in 2008. Many of the covered technologies are prioritized in China’s had last been updated in 2008. Many of the covered technologies are prioritized in China’s
national industrial plans for key sectors, such as aerospace, medical equipment, and advanced national industrial plans for key sectors, such as aerospace, medical equipment, and advanced
manufacturing. Other technologies relate to emerging geospatial, autonomous systems, and manufacturing. Other technologies relate to emerging geospatial, autonomous systems, and
artificial artificial ~~intel igence~~ intelligence capabilities with a wide range of applications, including China’s BeiDou capabilities with a wide range of applications, including China’s BeiDou
~~satel ite~~ satellite navigation system, as navigation system, as ~~wel~~ well as technologies for autonomous vehicles.48(as technologies for autonomous vehicles.48(SeeSee Table 2.) The .) The
Chinese government prohibits or restricts foreign investment in many of these areas, while Chinese government prohibits or restricts foreign investment in many of these areas, while
simultaneously seeking technology transfer in these areas through foreign partnerships and simultaneously seeking technology transfer in these areas through foreign partnerships and
acquisitions. acquisitions.
The timing of the catalogue update in August 2020 and, in particular, the addition of information The timing of the catalogue update in August 2020 and, in particular, the addition of information
technologies and algorithms used in social media platforms to the catalogue may reflect an effort technologies and algorithms used in social media platforms to the catalogue may reflect an effort
by the Chinese government to try to influence terms the Trump Administration was considering by the Chinese government to try to influence terms the Trump Administration was considering
imposing at the time on the U.S. operations of China-based ByteDance’s social media platform, imposing at the time on the U.S. operations of China-based ByteDance’s social media platform,
TikTok.49 In September 2020, ByteDance said it had applied to the Chinese government for a TikTok.49 In September 2020, ByteDance said it had applied to the Chinese government for a
license to export its algorithm, but indicated it may not have needed to provide U.S. parties access license to export its algorithm, but indicated it may not have needed to provide U.S. parties access
after after al all.50 This example shows how the Chinese government might use the catalogue to control .50 This example shows how the Chinese government might use the catalogue to control
certain technologies to enhance its influence over company operations in China and overseas, certain technologies to enhance its influence over company operations in China and overseas,
influence U.S. decision-making, and influence U.S. decision-making, and ~~potential y~~potentially constrain or seek to override U.S. authorities constrain or seek to override U.S. authorities
over Chinese companies’ trade and operations in the United States. over Chinese companies’ trade and operations in the United States.
In December 2020, China’s Ministry of Commerce, State Cryptography Administration, and In December 2020, China’s Ministry of Commerce, State Cryptography Administration, and
General Administration of Customs jointly issued an General Administration of Customs jointly issued an Announcement on the Issuance of Import
Licensing List, Export Control List and Related Administrative Measures for Commercial

47 China’s Ministry of Commerce, “47 China’s Ministry of Commerce, “ Catalogue of ChinaCatalogue of China'’s Export Prohibited and Restricted s Export Prohibited and Restricted ~~T echnologies~~Technologies,” ,”
Announcement No. 38, August 28, 2020, http://www.gov.cn/zhengce/zhengceku/2020Announcement No. 38, August 28, 2020, http://www.gov.cn/zhengce/zhengceku/2020 -
-08/29/5538299/files/135c5cdd6baa46a986ac5e51a1a49ac3.pdf08/29/5538299/files/135c5cdd6baa46a986ac5e51a1a49ac3.pdf (in Chinese). For a summary of technologies, see CRS (in Chinese). For a summary of technologies, see CRS
Insight IN11524, Insight IN11524, China Issues New Export Control Law and Related Policies, by Karen M. Sutter. , by Karen M. Sutter.
48 For a summary of the new technologies added to the catalogue, see CRS 48 For a summary of the new technologies added to the catalogue, see CRS Insight IN11524, Insight IN11524, China Issues New Export
Control Law and Related Policies, by Karen M. Sutter. , by Karen M. Sutter.
49 “China’s New 49 “China’s New ~~T ech~~Tech Export Controls Could Give Beijing a Say in Export Controls Could Give Beijing a Say in ~~T ikT ok~~TikTok Sale,” Sale,” Reuters, August, August 30, 2020. 30, 2020.
50 Arjun Kharpal, “ByteDance Applies for Export License from China as 50 Arjun Kharpal, “ByteDance Applies for Export License from China as ~~T ikT ok~~TikTok Deal Waits for Approval,” CNBC, Deal Waits for Approval,” CNBC,
~~Sept ember~~September 24, 2020. 24, 2020.
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Encryption to restrict the trade of commercial encryption products and related technology. The to restrict the trade of commercial encryption products and related technology. The
list of products controlled for export includes security chips, cipher cards, encrypted virtual list of products controlled for export includes security chips, cipher cards, encrypted virtual
private network (VPN) devices, various cryptographic devices including those using quantum private network (VPN) devices, various cryptographic devices including those using quantum
technologies, and technologies or tools used to measure, test, or evaluate these products.51 The technologies, and technologies or tools used to measure, test, or evaluate these products.51 The
measures established the Ministry of Commerce’s central role over a new licensing process and measures established the Ministry of Commerce’s central role over a new licensing process and
places these products under the purview of China’s new Export Control Law. In a move to create places these products under the purview of China’s new Export Control Law. In a move to create
parity and an abilityparity and an ability to retaliate in response to U.S. export control actions, on April 28, 2021, to retaliate in response to U.S. export control actions, on April 28, 2021,
China’s Ministry of Commerce issued China’s Ministry of Commerce issued Guiding Opinions on the Establishment of an Internal
Compliance Program for Export Control by Exporters of Dual-use Items. The Opinions and . The Opinions and
related guidelines outline best practices for internal compliance programs for both domestic and related guidelines outline best practices for internal compliance programs for both domestic and
foreign firms in China.52 foreign firms in China.52
Table 2. Select Technologies Prohibited or Restricted for Export
Items listed in the Catalogue of Technologies Prohibited or Restricted from Export Items listed in the Catalogue of Technologies Prohibited or Restricted from Export
Amended August 28, 2020 Amended August 28, 2020
 
biotechnology, pharmaceuticals, and medical biotechnology, pharmaceuticals, and medical equipment equipment
 
3D printing 3D printing
 
construction, petroleum, construction, petroleum, and power equipment, including technology relating to equipment and materialsand power equipment, including technology relating to equipment and materials for for
Generation III & IV nuclear reactors and the design of Generation III nuclear power plants Generation III & IV nuclear reactors and the design of Generation III nuclear power plants
 
machine tools machine tools
 
high speed wind tunnel design high speed wind tunnel design
 
aerospace bearings aerospace bearings
 
unmanned aerial unmanned aerial vehicles (UAVs) vehicles (UAVs)
 
space space–-related remoterelated remote sensing imagesensing image acquisition, measurementacquisition, measurement instruments,instruments, and data transmission and data transmission
 
vacuum technology vacuum technology
 
mapping mapping
 
information processing technologies information processing technologies (e.g., personal interactive data algorithms,(e.g., personal interactive data algorithms, speech synthesis, artificial speech synthesis, artificial
~~intel igence~~intelligence-based interactive interface,-based interactive interface, voice evaluation, and voice evaluation, and ~~intel igent~~intelligent scoring) scoring)
 
cryptographic and cyber-related technologies cryptographic and cyber-related technologies
Source: Catalogue of Technologies Prohibited or Restricted from Export,, China’s Ministry of CommerceChina’s Ministry of Commerce and Ministry and Ministry
of Science and Technology, Amended August 28, 2020, http://www.gov.cn/zhengce/zhengceku/2020-of Science and Technology, Amended August 28, 2020, http://www.gov.cn/zhengce/zhengceku/2020-
08/29/5538299/files/135c5cdd6baa46a986ac5e51a1a49ac3.pdf. 08/29/5538299/files/135c5cdd6baa46a986ac5e51a1a49ac3.pdf.
Unreliable Entity List
China’s Ministry of Commerce on September 19, 2020, issued a State Council-approved China’s Ministry of Commerce on September 19, 2020, issued a State Council-approved Order
on Provisions on the Unreliable Entity List that that ~~cal s~~calls for establishing a new system to identify and for establishing a new system to identify and

51 Jenny (Jia) Sheng, Jack Ko, Ph.D., Chunbin Xu, “China Publishes Import License List and Export Control List for 51 Jenny (Jia) Sheng, Jack Ko, Ph.D., Chunbin Xu, “China Publishes Import License List and Export Control List for
Commercial Encryption,” Pillsbury Alert, December 16, 2020, https://www.pillsburylaw.com/en/news-and-Commercial Encryption,” Pillsbury Alert, December 16, 2020, https://www.pillsburylaw.com/en/news-and-
insights/importinsights/import -export-export -control-license-lists-commercial-encryption.html. -control-license-lists-commercial-encryption.html.
52 Jenny (Jia) Sheng, Jack Ko, Ph.D., Nancy A. Fischer, Matthew R. Rabinowitz, 52 Jenny (Jia) Sheng, Jack Ko, Ph.D., Nancy A. Fischer, Matthew R. Rabinowitz, Chunbin Xu, Fang Wang, Chunbin Xu, Fang Wang, ~~T oochi~~Toochi L. L.
Ngwangwa,Ngwangwa, “ “China’s MOFCOM IssuesChina’s MOFCOM Issues Internal Export Control Program Guidelines,” PillsburyInternal Export Control Program Guidelines,” Pillsbury Alert, May 12, 2021, Alert, May 12, 2021,
https://www.pillsburylaw.com/en/news-and-insights/china-mofcom-issues-internal-exporthttps://www.pillsburylaw.com/en/news-and-insights/china-mofcom-issues-internal-export -control-program--control-program-
guidelines.html. guidelines.html.
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respond to entities that endanger China’s sovereignty, security, or development; violate “normal” respond to entities that endanger China’s sovereignty, security, or development; violate “normal”
market transaction principles; and cause serious damage to the legitimate rights and interests of market transaction principles; and cause serious damage to the legitimate rights and interests of
Chinese companies, organizations, or individuals.53 The list triggers export control action, and Chinese companies, organizations, or individuals.53 The list triggers export control action, and
justifications for including an entity on the list appear to be quite broad. Punitive actions include justifications for including an entity on the list appear to be quite broad. Punitive actions include
fines, restrictions, or prohibitions on participation in China-related trade and investment and on fines, restrictions, or prohibitions on participation in China-related trade and investment and on
foreign personnel entry, work, stay, and residence in China. The government is expected to issue foreign personnel entry, work, stay, and residence in China. The government is expected to issue
implementing regulations and update its control lists. The Unreliableimplementing regulations and update its control lists. The Unreliable Entity List would Entity List would
presumably closely align with new blocking measures (see below) and presumably closely align with new blocking measures (see below) and ~~al ow~~allow the Chinese the Chinese
government to impose or threaten to impose controls against particular companies or technologies government to impose or threaten to impose controls against particular companies or technologies
on which the U.S. and other governments have imposed export controls that affect Chinese on which the U.S. and other governments have imposed export controls that affect Chinese
entities. It also would entities. It also would ~~al ow~~allow the government to impose controls where it has niche advantages or the government to impose controls where it has niche advantages or
control over certain elements of global technology supply chains. The development of such a list control over certain elements of global technology supply chains. The development of such a list
also also ~~potential y al ows~~potentially allows the Chinese government an additional policy tool to institutionalize the Chinese government an additional policy tool to institutionalize its tit-its tit-
for-tat retaliation against specific corporate actors to punish and pressure corporate decision-for-tat retaliation against specific corporate actors to punish and pressure corporate decision-
making on broader political and economic Chinese interests. As discussed above, China’s making on broader political and economic Chinese interests. As discussed above, China’s
provisions imply a broader application of export controls than those of the United States that are provisions imply a broader application of export controls than those of the United States that are
~~relatively~~ relatively narrowly applied with regard to discrete national security concerns. narrowly applied with regard to discrete national security concerns.
Blocking Measures
In January 2021, China’s Ministry of Commerce issued blocking measures—rules designed to In January 2021, China’s Ministry of Commerce issued blocking measures—rules designed to
counter the extraterritorial reach of foreign government sanctions and related foreign court counter the extraterritorial reach of foreign government sanctions and related foreign court
rulings—in accordance with China’s National Security Law.54 The measures represent an effort rulings—in accordance with China’s National Security Law.54 The measures represent an effort
by China to build formal capacity to directly by China to build formal capacity to directly ~~chal enge~~challenge sanctions imposed by the United States, sanctions imposed by the United States,
the European Union, and other countries on PRC entities. The measures aim to counter foreign the European Union, and other countries on PRC entities. The measures aim to counter foreign
laws and policies in instances when the Chinese government determines that extraterritorial laws and policies in instances when the Chinese government determines that extraterritorial
applications of foreign laws or policies “violate international law and basic principles of applications of foreign laws or policies “violate international law and basic principles of
international relations” or “unjustifiably” prohibit or restrict PRC entities from engaging in trade international relations” or “unjustifiably” prohibit or restrict PRC entities from engaging in trade
with a party from a third country or region. with a party from a third country or region.
Some experts assess that, while some aspects of the measures are similar to blocking measures Some experts assess that, while some aspects of the measures are similar to blocking measures
developed by the United Kingdom and the European Commission, there are significant developed by the United Kingdom and the European Commission, there are significant
differences in China’s approach as defined in these measures and China’s Anti-Foreign Sanctions differences in China’s approach as defined in these measures and China’s Anti-Foreign Sanctions
Law (see below). In particular, the scope, potential consequences for violators, and broader levers Law (see below). In particular, the scope, potential consequences for violators, and broader levers
over trade and investment of China’s measures are significantly broader than Europe’s laws, over trade and investment of China’s measures are significantly broader than Europe’s laws,
which target U.S. unilateral sanctions taken against a which target U.S. unilateral sanctions taken against a ~~smal~~ small group of countries (e.g., Cuba, Iran, group of countries (e.g., Cuba, Iran,
and Russia), with relatively narrow applications that aim to and Russia), with relatively narrow applications that aim to ~~al ow~~allow certain European firms to certain European firms to
continue to conduct some business with these countries. The scope of China’s measures, in continue to conduct some business with these countries. The scope of China’s measures, in
contrast, are quite broad; the Chinese government could apply them to any measure enacted by contrast, are quite broad; the Chinese government could apply them to any measure enacted by
the United States or another government that Beijing assesses is discriminatory.55 Moreover, the United States or another government that Beijing assesses is discriminatory.55 Moreover,
China’s penalties are to be applied within China’s legal system in which China’s firms enjoy the China’s penalties are to be applied within China’s legal system in which China’s firms enjoy the

53 China’s Ministry of Commerce, “MOFCOM Order No. 4 of 2020 on Provisions of the Unreliable Entity List,” 53 China’s Ministry of Commerce, “MOFCOM Order No. 4 of 2020 on Provisions of the Unreliable Entity List,”
September 19, 2020, http://english.mofcom.gov.cn/article/policyrelease/questions/202009/20200903002580.shtml. September 19, 2020, http://english.mofcom.gov.cn/article/policyrelease/questions/202009/20200903002580.shtml.
54 China’s Ministry of Commerce, MOFCOM Order No. 1 of 2021 on Rules on Counteracting Unjustified Extra- 54 China’s Ministry of Commerce, MOFCOM Order No. 1 of 2021 on Rules on Counteracting Unjustified Extra-
territorial Application of Foreign Legislation and Other Measures,” January 9, 2021, territorial Application of Foreign Legislation and Other Measures,” January 9, 2021,
http://english.mofcom.gov.cn/article/policyrelease/questions/202101/20210103029708.shtml (English), http://english.mofcom.gov.cn/article/policyrelease/questions/202101/20210103029708.shtml (English),
http://www.mofcom.gov.cn/article/b/c/202101/20210103029710.shtml (Chinese). http://www.mofcom.gov.cn/article/b/c/202101/20210103029710.shtml (Chinese).
55 Mary E. Lovely and Jeffrey J. Schott, “Can China Blunt the Impact of New U.S. Sanctions,” Policy Brief 21 55 Mary E. Lovely and Jeffrey J. Schott, “Can China Blunt the Impact of New U.S. Sanctions,” Policy Brief 21 -13, -13,
Peterson Institute for International Economics, June 2021. Peterson Institute for International Economics, June 2021.
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special protections and preferences of China’s courts, special protections and preferences of China’s courts, ~~al owing~~allowing the government additional leeway the government additional leeway
to pressure companies to adhere to China’s rules. to pressure companies to adhere to China’s rules.
China’s measures China’s measures ~~cal~~ call for the establishment of a government-working group tasked with for the establishment of a government-working group tasked with
countering such foreign actions and measures according to its assessment of a range of factors, countering such foreign actions and measures according to its assessment of a range of factors,
including whether other countries’ laws and policies infringe on China’s sovereignty, security, including whether other countries’ laws and policies infringe on China’s sovereignty, security,
and development interests. The measures authorize the Chinese government to adopt and development interests. The measures authorize the Chinese government to adopt
countermeasures, including prohibition orders that exempt Chinese and other entities from countermeasures, including prohibition orders that exempt Chinese and other entities from
compliance and the imposition of fines. The measures require Chinese entities to report to this compliance and the imposition of fines. The measures require Chinese entities to report to this
government-working group within 30 days of encountering a relevant restriction.government-working group within 30 days of encountering a relevant restriction.
The measures seem to pressure U.S. and other foreign firms to adhere to any Chinese The measures seem to pressure U.S. and other foreign firms to adhere to any Chinese
countermeasures. Article 9 discusses the imposition of penalties on entities that comply with the countermeasures. Article 9 discusses the imposition of penalties on entities that comply with the
foreign actions, including legalforeign actions, including legal proceedings in Chinese courts, rights to compensation for losses, proceedings in Chinese courts, rights to compensation for losses,
and other forms of unspecified Chinese government support. Foreign firms operating in China and other forms of unspecified Chinese government support. Foreign firms operating in China
that comply with foreign sanctions or restrictions could face penalties, including legal action in that comply with foreign sanctions or restrictions could face penalties, including legal action in
Chinese courts. Disclosing information about a party who brings an issue to the Chinese Chinese courts. Disclosing information about a party who brings an issue to the Chinese
government is subject to punishment, including potential criminal charges under Chinese law.56 government is subject to punishment, including potential criminal charges under Chinese law.56
These provisions appear to seek to These provisions appear to seek to ~~chal enge~~challenge the extraterritorial reach of U.S. policy actions by the extraterritorial reach of U.S. policy actions by
pressuring U.S. and other firms operating in China—under the threat of potential sanctions and pressuring U.S. and other firms operating in China—under the threat of potential sanctions and
civil and criminal prosecution—to adhere to Chinese measures that may contravene U.S. policy civil and criminal prosecution—to adhere to Chinese measures that may contravene U.S. policy
actions and could violate U.S. laws. actions and could violate U.S. laws.
Anti-Foreign Sanctions Law
China moved to broaden the scope and jurisdiction of the initialChina moved to broaden the scope and jurisdiction of the initial Ministry of Commerce’s Ministry of Commerce’s
blocking measures to a broad national level on June 10, 2021, when the NPC Standing blocking measures to a broad national level on June 10, 2021, when the NPC Standing
Committee adopted the Anti-Foreign Sanctions Law.57 The law was enacted after two, instead of Committee adopted the Anti-Foreign Sanctions Law.57 The law was enacted after two, instead of
the traditionalthe traditional three readings a draft law three readings a draft law ~~typical y~~typically undergoes, and there was no public comment undergoes, and there was no public comment
period, in a sign of China’s capacity and interest in accelerating the development and passage of period, in a sign of China’s capacity and interest in accelerating the development and passage of
national security-related legislation.58 The law centralizes existing authorities and formalizes the national security-related legislation.58 The law centralizes existing authorities and formalizes the
Chinese government’s ability to sanction and “countersanction” individuals, entities, and Chinese government’s ability to sanction and “countersanction” individuals, entities, and
governments, as governments, as ~~wel~~ well as impose countermeasures in response to other countries’ sanctions on as impose countermeasures in response to other countries’ sanctions on
PRC individualsPRC individuals and entities, or on China more broadly. While the Ministry of Commerce and entities, or on China more broadly. While the Ministry of Commerce
blocking measures focused on the behavior of third parties caught up in foreign government blocking measures focused on the behavior of third parties caught up in foreign government
sanctions, the new law sanctions, the new law ~~al ows~~allows for directly imposing sanctions on countries that have imposed for directly imposing sanctions on countries that have imposed
sanctions on China. At least one group of legal experts assessed that the law includes Hong Kong sanctions on China. At least one group of legal experts assessed that the law includes Hong Kong
and Macau as part of China.and Macau as part of China. 59 The Chinese government explains the new law, in Article 1, as an 59 The Chinese government explains the new law, in Article 1, as an
effort to “safeguard national sovereignty, security, and development interests, and protect the effort to “safeguard national sovereignty, security, and development interests, and protect the
legitimate rights and interests of China’s citizens and organizations.” Article 3 asserts China’s legitimate rights and interests of China’s citizens and organizations.” Article 3 asserts China’s

56 China’s Ministry of Commerce, “MOFCOM Order No. 1 of 2021 on Rules on Counteracting Unjustified 56 China’s Ministry of Commerce, “MOFCOM Order No. 1 of 2021 on Rules on Counteracting Unjustified ~~E xtra~~Extra--
territorial Application of Foreign Legislation and Other Measures,” January 9, 2021, territorial Application of Foreign Legislation and Other Measures,” January 9, 2021,
http://english.mofcom.gov.cn/article/policyrelease/questions/202101/20210103029708.shtml (English), http://english.mofcom.gov.cn/article/policyrelease/questions/202101/20210103029708.shtml (English),
http://www.mofcom.gov.cn/article/b/c/202101/20210103029710.shtml (Chinese). http://www.mofcom.gov.cn/article/b/c/202101/20210103029710.shtml (Chinese).
57 “Anti-Foreign Sanctions Law of the People’s Republic of China,” June 10, 2021, 57 “Anti-Foreign Sanctions Law of the People’s Republic of China,” June 10, 2021,
http://www.npc.gov.cn/npc/c30834/202106/d4a714d5813c4ad2ac54a5f0f78a5270.shtmlhttp://www.npc.gov.cn/npc/c30834/202106/d4a714d5813c4ad2ac54a5f0f78a5270.shtml . .
58 Lester Ross, Jeffrey I. Kessler, Kenneth Zhou, and 58 Lester Ross, Jeffrey I. Kessler, Kenneth Zhou, and ~~T ingting~~Tingting Liu, “China Enacts Anti-Sanctions Law,” WilmerHale Liu, “China Enacts Anti-Sanctions Law,” WilmerHale
Client Alert, June 11, 2021. Client Alert, June 11, 2021.
59 Ibid. 59 Ibid.
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right to adopt countermeasures when another country “violates international law and basic norms right to adopt countermeasures when another country “violates international law and basic norms
of international relations” or “adopts discriminatory restrictive measures against Chinese citizens of international relations” or “adopts discriminatory restrictive measures against Chinese citizens
and organizations, and interferes in China’s internal affairs.”60 This law and related developments and organizations, and interferes in China’s internal affairs.”60 This law and related developments
present “present “~~potential y~~potentially irreconcilable compliance problems,” according to Greg irreconcilable compliance problems,” according to Greg ~~Gil igan~~Gilligan, chair of the , chair of the
American Chamber of Commerce in China.61 American Chamber of Commerce in China.61
Other major provisions includeOther major provisions include the following: :
 The law directs the State Council to set up a mechanism to implement the law  The law directs the State Council to set up a mechanism to implement the law
and and ~~al ows~~allows the State Council to place individuals the State Council to place individuals and entities that “directly or and entities that “directly or
indirectly participate in the formulation, decision, and implementation of indirectly participate in the formulation, decision, and implementation of
discriminatory restrictive measures [on China]” on a “counter control list” discriminatory restrictive measures [on China]” on a “counter control list”
(Article 4). This list may include spouses and immediate family members; senior (Article 4). This list may include spouses and immediate family members; senior
staff or “actual controllers” of organizations; organizations in which targeted staff or “actual controllers” of organizations; organizations in which targeted
persons serve in senior positions; and organizations involved in the creation and persons serve in senior positions; and organizations involved in the creation and
operation of sanctions on China (Article 5). operation of sanctions on China (Article 5).
 Other potential countermeasures include restrictions on visas and country entry  Other potential countermeasures include restrictions on visas and country entry
and exit; seizure or freezing of movable and immovable property; and prohibition and exit; seizure or freezing of movable and immovable property; and prohibition
or restrictions on certain transactions, cooperation, and activities (Article 6). or restrictions on certain transactions, cooperation, and activities (Article 6).
 The law restricts individuals and entities from implementing or assisting in the  The law restricts individuals and entities from implementing or assisting in the
implementation of foreign countries’ restrictive measures and implementation of foreign countries’ restrictive measures and ~~al ows~~allows for Chinese for Chinese
citizens and organizations to file a lawsuit in China to determine infringement citizens and organizations to file a lawsuit in China to determine infringement
and compensate for losses (Article 12). This provision creates a pathway for and compensate for losses (Article 12). This provision creates a pathway for
China’s courts to China’s courts to ~~potential y chal enge~~potentially challenge U.S. actions with rulings in China that U.S. actions with rulings in China that
seek to overturn U.S. policy actions, as seek to overturn U.S. policy actions, as ~~wel~~ well as U.S. court decisions. as U.S. court decisions.
 The law also  The law also ~~al ows~~allows for China to prosecute any organization or individual who for China to prosecute any organization or individual who
fails to implement or cooperate with China’s countermeasures (Article 14) or that fails to implement or cooperate with China’s countermeasures (Article 14) or that
implements, assists, or supports acts that engage China’s sovereignty, security, implements, assists, or supports acts that engage China’s sovereignty, security,
and development interests (Article 15). and development interests (Article 15).
Even before the enactment of the new anti-sanctions law, the Chinese government had been Even before the enactment of the new anti-sanctions law, the Chinese government had been
testing U.S. redlines in testing U.S. redlines in ~~chal enging~~challenging the enforcement of U.S. sanctions and invoking the enforcement of U.S. sanctions and invoking
countersanctions in response to foreign governments’ sanctions on PRC individuals and entities. countersanctions in response to foreign governments’ sanctions on PRC individuals and entities.
For example, in December 2020, China included a senior official who had recently been For example, in December 2020, China included a senior official who had recently been
sanctioned by the U.S. government as part of its delegation to a dinner hosted by the American sanctioned by the U.S. government as part of its delegation to a dinner hosted by the American
Chamber of Commerce in Beijing.62Chamber of Commerce in Beijing.62 In February 2021, a Chinese state media editor warned that In February 2021, a Chinese state media editor warned that
the Chinese government would countersanction any country that was to boycott China’s hosting the Chinese government would countersanction any country that was to boycott China’s hosting
of the 2022 Winter Olympics.63 In January 2021, China sanctioned ten former Trump of the 2022 Winter Olympics.63 In January 2021, China sanctioned ten former Trump
AdministrationAdministration officials it considered responsible for U.S. policy toward China and their officials it considered responsible for U.S. policy toward China and their
immediate family members minutes after the U.S. presidential transition, restricting them and immediate family members minutes after the U.S. presidential transition, restricting them and
“companies and institutions associated with them from doing business in China.”64 This followed “companies and institutions associated with them from doing business in China.”64 This followed

60 “Anti-Foreign Sanctions Law of the People’s Republic of China, June 10, 2021, 60 “Anti-Foreign Sanctions Law of the People’s Republic of China, June 10, 2021,
http://www.npc.gov.cn/npc/c30834/202106/d4a714d5813c4ad2ac54a5f0f78a5270.shtmlhttp://www.npc.gov.cn/npc/c30834/202106/d4a714d5813c4ad2ac54a5f0f78a5270.shtml . .
61 “How China Is 61 “How China Is ~~T rying~~Trying to Fight Back Against Sanctions,” Bloomberg News, July 28, 2021. to Fight Back Against Sanctions,” Bloomberg News, July 28, 2021.
62 “China Sends Sanctioned Official to AmCham Dinner in Beijing,” 62 “China Sends Sanctioned Official to AmCham Dinner in Beijing,” Bloomberg News, December 10, 2020. , December 10, 2020.
63 Jonathan White, “Beijing 2022: ‘China Will Seriously Sanction’ Any Country that Boycotts Winter Olympics, says 63 Jonathan White, “Beijing 2022: ‘China Will Seriously Sanction’ Any Country that Boycotts Winter Olympics, says
State-backed Media Chief,” State-backed Media Chief,” South China Morning Post, February 8, 2021. , February 8, 2021.
64 “Foreign Ministry Spokesperson Announces Sanctions on Pompeo and Others,” China’s Ministry of Foreign Affairs, 64 “Foreign Ministry Spokesperson Announces Sanctions on Pompeo and Others,” China’s Ministry of Foreign Affairs,
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China’s announcement of unspecified sanctions against some Members of Congress and other China’s announcement of unspecified sanctions against some Members of Congress and other
Americans in July, August, and November 2020, over their raising of human rights concerns, Americans in July, August, and November 2020, over their raising of human rights concerns,
including China’s policies in Xinjiang, and in retaliationincluding China’s policies in Xinjiang, and in retaliation to U.S. sanctions on certain Chinese to U.S. sanctions on certain Chinese
officials over China’s actions in Hong Kong.65 officials over China’s actions in Hong Kong.65
Foreign Investment Review
China has formalized its foreign investment authorities as they relate to national security concerns China has formalized its foreign investment authorities as they relate to national security concerns
in an effort to normalize the government’s approach to national economic security, seek parity in an effort to normalize the government’s approach to national economic security, seek parity
with the United States, and extend the government’s jurisdiction overseas. In December 2020, with the United States, and extend the government’s jurisdiction overseas. In December 2020,
China’s Ministry of Commerce and National Development and Reform Commission (NDRC) China’s Ministry of Commerce and National Development and Reform Commission (NDRC)
issued Measures for the Security Review of Foreign Investment, which came into effect in issued Measures for the Security Review of Foreign Investment, which came into effect in
January 2021.66 The measures implement provisions in China’s 2015 National Security Law January 2021.66 The measures implement provisions in China’s 2015 National Security Law
(Article 59) and 2020 Foreign Investment Law (Article 35) that provide a legal framework for (Article 59) and 2020 Foreign Investment Law (Article 35) that provide a legal framework for
China’s national security review of foreign investment.67 The scope of the measures includes China’s national security review of foreign investment.67 The scope of the measures includes
investments in China, offshore investments that result in control of a Chinese target (including a investments in China, offshore investments that result in control of a Chinese target (including a
variable interest entity (VIE) structure), mergers and acquisitions, and greenfield investments (an variable interest entity (VIE) structure), mergers and acquisitions, and greenfield investments (an
investment in which a company builds a new operation from the ground up).68 investment in which a company builds a new operation from the ground up).68
The measures give the government the authority to review, mitigate, and block investment-related The measures give the government the authority to review, mitigate, and block investment-related
transactions. The structure of a new review process mimics certain aspects of the U.S. transactions. The structure of a new review process mimics certain aspects of the U.S.
government’s Committee on Foreign Investment in the United States (CFIUS) process and may government’s Committee on Foreign Investment in the United States (CFIUS) process and may
aim to create a sense of parity and facilitate China’s ability to pressure CFIUS through retaliatory aim to create a sense of parity and facilitate China’s ability to pressure CFIUS through retaliatory
responses to CFIUS determinations on PRC transactions.69 The timing of China’s measures may responses to CFIUS determinations on PRC transactions.69 The timing of China’s measures may

January 20, 2021, https://www.fmprc.gov.cn/mfa_eng/xwfw_665399/s2510_665401/2535_665405/t1847554.shtmlJanuary 20, 2021, https://www.fmprc.gov.cn/mfa_eng/xwfw_665399/s2510_665401/2535_665405/t1847554.shtml . .
65 Cate Cadell and 65 Cate Cadell and ~~T ony~~Tony Munroe, “China Imposes Sanctions on 28 Munroe, “China Imposes Sanctions on 28 ~~T rump~~ Trump-era Officials Including Pompeo,” -era Officials Including Pompeo,” Reuters, ,
January 20, 2021; Keith Bradsher, “January 20, 2021; Keith Bradsher, “ China Imposes China Imposes ~~T it~~Tit-for-Tat Sanctions on -for-Tat Sanctions on ~~T hree~~Three American Lawmakers,” American Lawmakers,” The New
York ~~Tim es~~Times, July 13, 2020; “, July 13, 2020; “ Foreign Ministry Spokesperson Zhao LijianForeign Ministry Spokesperson Zhao Lijian'’s Regulars Regular Press Conference,” China’s Ministry Press Conference,” China’s Ministry
of Foreign Affairs, Augustof Foreign Affairs, August 10, 2020, 10, 2020,
https://www.fmprc.gov.cn/mfa_eng/xwfw_665399/s2510_665401/2511_665403/t1805288.shtmlhttps://www.fmprc.gov.cn/mfa_eng/xwfw_665399/s2510_665401/2511_665403/t1805288.shtml ; “; “ Foreign Ministry Foreign Ministry
Spokesperson HuaSpokesperson Hua ~~Chunying'~~ Chunying’s Regulars Regular Press Conference,” China’s Ministry of Foreign Affairs, July 13, 2020, Press Conference,” China’s Ministry of Foreign Affairs, July 13, 2020,
https://www.fmprc.gov.cn/mfa_eng/xwfw_665399/s2510_665401/t1797455.shtml; “https://www.fmprc.gov.cn/mfa_eng/xwfw_665399/s2510_665401/t1797455.shtml; “ Foreign Ministry Spokesperson Foreign Ministry Spokesperson
~~Hua Chunying'~~Hua Chunying’s Regulars Regular Press Conference,” Ministry of Foreign Affairs of the PRC, November 30, 2020, Press Conference,” Ministry of Foreign Affairs of the PRC, November 30, 2020,
https://www.fmprc.gov.cn/mfa_eng/xwfw_665399/s2510_665401/https://www.fmprc.gov.cn/mfa_eng/xwfw_665399/s2510_665401/~~2511 _665403~~2511_665403/t1836732.shtml. /t1836732.shtml.
~~66https~~66 https://www.bakermckenzie.com//media/files/insight/publications/2021/01/://www.bakermckenzie.com//media/files/insight/publications/2021/01/~~foreign_investment_security_review_mea~~
~~sures.pdf?la=en~~ foreign_investment_security_review_measures.pdf?la=en (English), https://www.bakermckenzie.com/-/media/files/insight/publications/2021/01/china-enacts-(English), https://www.bakermckenzie.com/-/media/files/insight/publications/2021/01/china-enacts-
new-foreign-investmentnew-foreign-investment -security-review-measures.pdf?la=en (Chinese language). -security-review-measures.pdf?la=en (Chinese language).
67 Lester Ross, Kenneth Zhou, and 67 Lester Ross, Kenneth Zhou, and ~~T ingting~~Tingting Liu, “China’s New Investment Security Review Measures,” Wilmer Hale Liu, “China’s New Investment Security Review Measures,” Wilmer Hale
Client Alert, December 22, 2020. Client Alert, December 22, 2020.
68 Howard Hao Wu and 68 Howard Hao Wu and ~~T racy~~Tracy Wut, “China Enacts New Foreign Investment Security Review Measures,” Baker Wut, “China Enacts New Foreign Investment Security Review Measures,” Baker
McKenzie Insight, January 4, 2021; Z. Alex Zhang, Vivian McKenzie Insight, January 4, 2021; Z. Alex Zhang, Vivian ~~T soi~~Tsoi, Charlie Zhu and, Charlie Zhu and Chunlei Pang, “Chunlei Pang, “~~T he~~The New FISR New FISR
Measures:Measures: A Step Further in China’s National Security ReviewA Step Further in China’s National Security Review of Foreign Investments,” White & Case Alert, January of Foreign Investments,” White & Case Alert, January
21, 2021; for discussion21, 2021; for discussion of VIEof VIE structure, see CRSstructure, see CRS In FocusIn Focus IF11803, IF11803, U.S. Capital Markets and China: Issues for
Congress, by Michael D. Sutherland and Karen M. Sutter. , by Michael D. Sutherland and Karen M. Sutter.
69 CFIUS 69 CFIUS is an interagency committee that serves the President in overseeing the national security implications of is an interagency committee that serves the President in overseeing the national security implications of
foreign investment in the economy. It reviews certain foreign investment transactions to determine if (1) foreign investment in the economy. It reviews certain foreign investment transactions to determine if (1) ~~th ey~~they threaten threaten
to impair the national security; (2) the foreign investor is controlled by a foreign government; or (3) the transaction to impair the national security; (2) the foreign investor is controlled by a foreign government; or (3) the transaction
couldcould affect homeland security or wouldaffect homeland security or would result in control of any critical infrastructure that could impair the national result in control of any critical infrastructure that could impair the national
security. While the President has the authority to block proposed or pending foreign investment transactions that security. While the President has the authority to block proposed or pending foreign investment transactions that
threaten to impair the national security, the use of this authority is still relatively rare. See CRSthreaten to impair the national security, the use of this authority is still relatively rare. See CRS Report RL33388, Report RL33388, The
~~Com m ittee on Foreign Investm ent in the United States (CFIUS)~~ ~~, by James K. Jackson.~~
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be in response to congressional and U.S. government efforts to strengthen CFIUS’ purview and be in response to congressional and U.S. government efforts to strengthen CFIUS’ purview and
authorities in 2018, with the passage of the Foreign Investment Risk Review Modernization Act authorities in 2018, with the passage of the Foreign Investment Risk Review Modernization Act
of 2018 (FIRRMA) (P.L. 115-232) and in response to the increased scrutiny and restrictions the of 2018 (FIRRMA) (P.L. 115-232) and in response to the increased scrutiny and restrictions the
Committee appears to have imposed on certain PRC-tied transactions since that time.70Committee appears to have imposed on certain PRC-tied transactions since that time.70
The new foreign review measures The new foreign review measures ~~cal~~ call for the creation of a government mechanism to review for the creation of a government mechanism to review
foreign investment from a national security perspective, to be located at NDRC and chaired by foreign investment from a national security perspective, to be located at NDRC and chaired by
NDRC and the Ministry of Commerce. The new foreign investment review measures require a NDRC and the Ministry of Commerce. The new foreign investment review measures require a
declaration for foreign investment in sectors related to national defense and security, including in declaration for foreign investment in sectors related to national defense and security, including in
agriculture, energy, critical materials, equipment, infrastructure, transportation, culture, agriculture, energy, critical materials, equipment, infrastructure, transportation, culture,
information technology, internet and cyber, financial services, and other key technologies. The information technology, internet and cyber, financial services, and other key technologies. The
measures define foreign control as 50% or greater equity interest in an enterprise or, if less than measures define foreign control as 50% or greater equity interest in an enterprise or, if less than
50% equity interest, as having the ability to influence corporate decisions, including those related 50% equity interest, as having the ability to influence corporate decisions, including those related
to human resources, finances, and technology.71According to Article 22, the measures also cover to human resources, finances, and technology.71According to Article 22, the measures also cover
foreign purchases of listed shares in Chinese companies through “stock exchanges or other foreign purchases of listed shares in Chinese companies through “stock exchanges or other
securities trading venues approved by the State Council.”72 securities trading venues approved by the State Council.”72
The Chinese government says the measures The Chinese government says the measures ~~fil~~ fill gaps in its review system as it shifts to a negative gaps in its review system as it shifts to a negative
list approach for approving foreign investment under which foreign investment is list approach for approving foreign investment under which foreign investment is ~~general y~~
~~al owed~~generally allowed except for those identified as being restricted.73 China arguably already has extensive except for those identified as being restricted.73 China arguably already has extensive
authorities to screen foreign investment, including for national security concerns, however. In authorities to screen foreign investment, including for national security concerns, however. In
form and practice, China’s authorities and scope of action over commercial activity are already form and practice, China’s authorities and scope of action over commercial activity are already
significantly more pervasive than the tools that the United States and other governments use. significantly more pervasive than the tools that the United States and other governments use.
NationalNational economic security interests already inform China’s industrial policies and related trade economic security interests already inform China’s industrial policies and related trade
and investment policies and decisions. China’s foreign investment catalogues and negative lists and investment policies and decisions. China’s foreign investment catalogues and negative lists
establish the sectors in which foreign investment establish the sectors in which foreign investment ~~wil~~ will be encouraged, allowed, restricted, or be encouraged, allowed, restricted, or
prohibited, and calibrate terms of market access (including technology transfer and partnership prohibited, and calibrate terms of market access (including technology transfer and partnership
requirements) based on China’s national development goals and related industrial plans.74 Under requirements) based on China’s national development goals and related industrial plans.74 Under
China’s new Foreign Investment Law and related implementing regulations that took effect in China’s new Foreign Investment Law and related implementing regulations that took effect in
January 2020, for example, the Special Administrative Measures for Foreign Investment (also January 2020, for example, the Special Administrative Measures for Foreign Investment (also
referred to as the “negative list”) and the Catalogue of Encouraged Industries for Foreign referred to as the “negative list”) and the Catalogue of Encouraged Industries for Foreign
Investment prohibit, restrict, and incentivize foreign investment, according to national economic Investment prohibit, restrict, and incentivize foreign investment, according to national economic
~~security concerns and national development priorities.75 China has broad discretion to restrict or~~

~~70 See CRS~~ Committee on Foreign Investment in the United States (CFIUS), by James K. Jackson. 70 See CRS In Focus IF10952, In Focus IF10952, CFIUS Reform Under FIRRMA, by James K. Jackson and Cathleen D. Cimino-Isaacs , by James K. Jackson and Cathleen D. Cimino-Isaacs
and CRSand CRS In FocusIn Focus IF11334, IF11334, CFIUS: New Foreign ~~Investm ent~~Investment Review Regulations, by Cathleen D. Cimino-Isaacs and , by Cathleen D. Cimino-Isaacs and
James K. Jackson. James K. Jackson.
71 Yan Luo, 71 Yan Luo, ~~T imothy~~Timothy P. Stratford, and Eric Carlson, “ P. Stratford, and Eric Carlson, “ China Issues Measures on National Security Review of Foreign China Issues Measures on National Security Review of Foreign
InvestmentInvestment ,” Covington & Burling LLP.,” Covington & Burling LLP.
72 “Improving the Foreign Investment Security Review System to Encourage a Higher Level of Opening to the Outside 72 “Improving the Foreign Investment Security Review System to Encourage a Higher Level of Opening to the Outside
World,” Press Briefing, Foreign Investment Security Review Working Mechanism Office, PRC National Development World,” Press Briefing, Foreign Investment Security Review Working Mechanism Office, PRC National Development
and Reform Commission, December 19, 2021, https://www.ndrc.gov.cn/xwdt/xwfb/202012/t20201219_1255024.html. and Reform Commission, December 19, 2021, https://www.ndrc.gov.cn/xwdt/xwfb/202012/t20201219_1255024.html.
73 “Improve the Foreign Investment Security Review System to Accompany a Higher Level of Opening to the Outside 73 “Improve the Foreign Investment Security Review System to Accompany a Higher Level of Opening to the Outside
World,” NDRCWorld,” NDRC press briefingpress briefing on the on the Foreign ~~Investm ent~~Investment Security Review Measures, December 19, 2020, , December 19, 2020,
https://www.ndrc.gov.cn/xwdt/xwfb/202012/t20201219_1255024.html. https://www.ndrc.gov.cn/xwdt/xwfb/202012/t20201219_1255024.html.
74 A negative list approach typically outlines sectors or areas of the economy in which investment is prohibited or 74 A negative list approach typically outlines sectors or areas of the economy in which investment is prohibited or
restricted with the idearestricted with the idea that, unless a sector is listed, the economy should bethat, unless a sector is listed, the economy should be open to foreign investment. “open to foreign investment. “ How to Use How to Use
China’s Negative Lists and Foreign Investment Encouraged Catalogue,” China Briefing, Dezan Shira & Associates, China’s Negative Lists and Foreign Investment Encouraged Catalogue,” China Briefing, Dezan Shira & Associates,
December 10, 2019. December 10, 2019.
~~75 Foreign Investment Law of the People’s Republic of China and Implementation Measures, effective January 1, 2020,~~
~~https://www.chinalawtranslate.com/en/foreign -investment-law-2019/ (unofficial English translation of the law);~~
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security concerns and national development priorities.75 China has broad discretion to restrict or condition foreign investment in sectors designated as restricted (condition foreign investment in sectors designated as restricted (~~see~~see Table 3), and has a range of ), and has a range of
other authorities that facilitate setting terms beyond the specific sectors identified in this list. other authorities that facilitate setting terms beyond the specific sectors identified in this list.
Table 3. Selected Highlights of China’s Investment Restrictions by Sector
Drawn from China’s Negative Investment List Drawn from China’s Negative Investment List~~, Updated~~ (December 10, 2020December 10, 2020)
Sector
Details
Agriculture
 
cultivation of plants for production, management, testing, or trade of seeds cultivation of plants for production, management, testing, or trade of seeds
 
agricultural related transportation, including fresh milk agricultural related transportation, including fresh milk
 
production, sale or trade of food production, sale or trade of food
 
GMO research, GMO research, production, processing, or import production, processing, or import
 
production or operation of genetic materials production or operation of genetic materials from livestock from livestock
 
fisheries fisheries
 
animal diagnosis and treatment animal diagnosis and treatment
 
pesticides pesticides
 
animal husbandry animal husbandry
 
transfer of land management rights transfer of land management rights
 
cultivation or production of tobacco related products cultivation or production of tobacco related products
Mining, Energy, and
 
exploration, exploitation, production, or operation of mineral exploration, exploitation, production, or operation of mineral resources resources
Resources
 
trade and sale of agriculture, crude oil, trade and sale of agriculture, crude oil, and other designated commodities, and other designated commodities,
technologies,technologies, and services and services
Manufacturing,
 
production, sale, production, sale, and trade of pharmaceuticals,and trade of pharmaceuticals, medical devices,medical devices, and and
Retail/Wholesale, and
cosmetics cosmetics
Trade
 
production of certain metals, production of certain metals, shipbuilding, aerospace, rail,shipbuilding, aerospace, rail, ~~motor~~ motor vehicles, vehicles,
and related components and equipment and related components and equipment
 
“special” equipment and “important” industrial products “special” equipment and “important” industrial products
 
telecommunications, telecommunications, radio, and computer related products and systems radio, and computer related products and systems
 
encryption encryption
 
warehousing and logistics warehousing and logistics
Infrastructure and
 
construction, engineering, construction, engineering, and related technical servicesand related technical services
Transportation
 
electric electric power and public utilities power and public utilities
 
road, rail, road, rail, and water transport services and water transport services
 
water resource water resource ~~management~~

~~https://www.chinalawtranslate.com/en/implementation~~ management 75 Foreign Investment Law of the People’s Republic of China and Implementation Measures, effective January 1, 2020, https://www.chinalawtranslate.com/en/foreign-investment-law-2019/ (unofficial English translation of the law); https://www.chinalawtranslate.com/en/implementation-regulations-for-the-foreign-investment-law/0 (unofficial -regulations-for-the-foreign-investment-law/0 (unofficial
English translation of the implementation measures); Catalogue of Industries for Encouraging Foreign Investment English translation of the implementation measures); Catalogue of Industries for Encouraging Foreign Investment
(2020), (2020), ~~effect ive~~effective January 27, 2021 January 27, 2021, https://www.ndrc.gov.cn/xxgk/zcfb/fzggwl/202012/ https://www.ndrc.gov.cn/xxgk/zcfb/fzggwl/202012/~~P020201 228567029819518.pdf;~~
~~New Special Administ rative~~P020201228567029819518.pdf; New Special Administrative Measures for Foreign Investment Access (“ Measures for Foreign Investment Access (“ Negative List”) (2020), Negative List”) (2020),
https://www.dezshira.com/library/legal/special-administrative-measures-access-foreign-investment-2020-edition-https://www.dezshira.com/library/legal/special-administrative-measures-access-foreign-investment-2020-edition-
national-negative-list.html?1593598930 (unofficial English translation); new Special national-negative-list.html?1593598930 (unofficial English translation); new Special ~~Administ rative~~Administrative Measures for Measures for
Foreign Investment Access to Pilot Free Foreign Investment Access to Pilot Free ~~T rade~~Trade Zones (“ Zones (“ ~~FT Z~~FTZ Negative List Negative List ”) (2020), effective July 23, 2020, ”) (2020), effective July 23, 2020,
https://www.dezshira.com/library/legal/https://www.dezshira.com/library/legal/~~FT Z~~FTZ-free-trade-zone-special-administrative-measures-foreign-investment-2020--free-trade-zone-special-administrative-measures-foreign-investment-2020-
national-negative-list.html?1593599181 (unofficial English translation); Angel Huang, Jessienational-negative-list.html?1593599181 (unofficial English translation); Angel Huang, Jessie ~~Chenghui T ang~~ Chenghui Tang, Ross , Ross
Keene, Keene, and Patrick H. Hu, “China Further Opens its Market with NewPatrick H. Hu, “China Further Opens its Market with New ‘Foreign Investment Law,’” Jones Day, February ‘Foreign Investment Law,’” Jones Day, February
2020. 2020.
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Sector
Details
Services
 
hotel operations hotel operations
 
financial services financial services
 
real estate real estate
 
medical medical services services
 
educational institutions and services educational institutions and services
 
wide range of other business services wide range of other business services
Research, Testing, and
 
scientific research scientific research
Surveying
 
use of human genetic resources use of human genetic resources
 
geographic surveying, mapping, geographic surveying, mapping, and remoteand remote sensing sensing
 
exploration, inspection, testing, certification, exploration, inspection, testing, certification, and accreditation or and accreditation or
assessment assessment
 
meteorological meteorological and seismicand seismic services services
Publishing, Media, and
 
printing and publishing printing and publishing
Entertainment
 
media, media, news, and broadcasting news, and broadcasting
 
sports, culture, entertainment, and film sports, culture, entertainment, and film
Communications Services;
 
radio, telecom, radio, telecom, ~~and satel ite~~ and satellite services services
Internet and Internet-
 
~~Based Services~~

wide range of businesses wide range of businesses including news, social media,including news, social media, gaming, financial gaming, financial
Based Services services,services, ride sharing services,ride sharing services, and apps and apps
Source: “China Releases“China Releases 2020 Negative List for Market Access,”2020 Negative List for Market Access,” China Briefing,China Briefing, Dezan Shira & Associates, Dezan Shira & Associates,
DecemberDecember 23, 2020, https://www.china-briefing.com/news/china-2020-negative-list-market-access/;23, 2020, https://www.china-briefing.com/news/china-2020-negative-list-market-access/; “Market “Market
AccessAccess Negative List (2020),” PRC National DevelopmentNegative List (2020),” PRC National Development and Reformand Reform Commission,Commission, Notice (2020) No. 1880, Notice (2020) No. 1880,
DecemberDecember 10, https://www.ndrc.gov.cn/xxgk/zcfb/ghxwj/202012/t20201216_1252897_ext.html. 10, https://www.ndrc.gov.cn/xxgk/zcfb/ghxwj/202012/t20201216_1252897_ext.html.
Notes: This list is designed to This list is designed to ~~il ustrate~~ illustrate certain areas of restrictions.certain areas of restrictions. It is not comprehensive.It is not comprehensive. In addition to In addition to
formalformal sectoral-based restrictions,sectoral-based restrictions, the PRC government also uses procurement,the PRC government also uses procurement, technical standards, and other technical standards, and other
domesticdomestic ~~requirements~~ requirements to restrictto restrict or otherwiseor otherwise condition foreign investment.condition foreign investment.
Draft Regulations on Rare Earth Elements (REEs)
The PRC government has also drafted regulations to enhance its ability to control and leverage The PRC government has also drafted regulations to enhance its ability to control and leverage
the trade of critical materials, such as rare earth elements (REEs), key inputs in a variety of the trade of critical materials, such as rare earth elements (REEs), key inputs in a variety of
consumer electronics and advanced technology products. In January 2021, China’s Ministry of consumer electronics and advanced technology products. In January 2021, China’s Ministry of
Industry and Information Technology (MIIT) issued draft Industry and Information Technology (MIIT) issued draft Regulations on Rare Earth
Management that cover China’s entire REEs supply chain, limit the export of REEs, and put the that cover China’s entire REEs supply chain, limit the export of REEs, and put the
management of these exports under the jurisdiction of China’s new Export Control Law.76 The management of these exports under the jurisdiction of China’s new Export Control Law.76 The
draft regulation also draft regulation also ~~cal s~~calls for creating a strategic reserve and tracking system across the supply for creating a strategic reserve and tracking system across the supply
chain—including information on mining, processing, production, and sales—that seeks to chain—including information on mining, processing, production, and sales—that seeks to
manage supply in part through a quota system, something MIIT already does.77 According to the manage supply in part through a quota system, something MIIT already does.77 According to the

76 Rare earth elements (REEs) refer to 17 elements: lanthanum, cerium, praseodymium, neodymium, promethium, 76 Rare earth elements (REEs) refer to 17 elements: lanthanum, cerium, praseodymium, neodymium, promethium,
samarium, europium, gadolinium,samarium, europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium, lutetium, scandium, and terbium, dysprosium, holmium, erbium, thulium, ytterbium, lutetium, scandium, and
yttrium. REEs are essential in a wideyttrium. REEs are essential in a wide range of industriesrange of industries ~~including~~ including electronics, telecommunications, clean energy electronics, telecommunications, clean energy
technologies, aerospace, automotive, and defense. Seetechnologies, aerospace, automotive, and defense. See ~~CRS~~ CRS Report R46618, Report R46618, An Overview of Rare Earth ~~Elem ents~~Elements and
Related Issues for Congress,, by Brandon S.by Brandon S. ~~T racy~~ Tracy. .
77 77 ~~T om~~Tom Daly, “China Hikes Half-Year Rare Earth Output Quotas to Record Level,” Daly, “China Hikes Half-Year Rare Earth Output Quotas to Record Level,” Reuters, February 19, 2021. , February 19, 2021.
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2020 version of China’s negative investment list, foreign investment in exploration, mining, and 2020 version of China’s negative investment list, foreign investment in exploration, mining, and
processing of REEs and tungsten is prohibited.78processing of REEs and tungsten is prohibited.78
China has curtailed access to strategic materials that it controls in the past and has used its control China has curtailed access to strategic materials that it controls in the past and has used its control
over REEs to signal foreign policy concerns and impose consequences on other countries. In over REEs to signal foreign policy concerns and impose consequences on other countries. In
2010, after the Japan Coast Guard arrested and detained the captain of a Chinese fishing vessel 2010, after the Japan Coast Guard arrested and detained the captain of a Chinese fishing vessel
following a clash in disputed waters near the Senkaku (Diaoyu) Islands in the East China Sea, following a clash in disputed waters near the Senkaku (Diaoyu) Islands in the East China Sea,
China held REE shipments bound for Japan (see China held REE shipments bound for Japan (see Appendix).). China has also used export China has also used export
restrictions and other restrictions on the use of these resources to pressure foreign firms reliant on restrictions and other restrictions on the use of these resources to pressure foreign firms reliant on
these inputs to bring advanced production to China.79 In May 2019, official Chinese media these inputs to bring advanced production to China.79 In May 2019, official Chinese media
featured a visit by China’s leader Xi to an REE magnet production facility in Ganzhou, a city in featured a visit by China’s leader Xi to an REE magnet production facility in Ganzhou, a city in
China’s Jiangxi province in a potential warning about China’s ability to leverage REE supply China’s Jiangxi province in a potential warning about China’s ability to leverage REE supply
chains.80 chains.80
Ad Hoc Trade Measures and Economic Coercion81
China regularly uses economic coercion to advance its economic and industrial goals and to set China regularly uses economic coercion to advance its economic and industrial goals and to set
commercial terms, including forcing technology transfer, setting technology licensing terms, and commercial terms, including forcing technology transfer, setting technology licensing terms, and
advocating its objectives through pressure on the business community.82 While many U.S. firms advocating its objectives through pressure on the business community.82 While many U.S. firms
have strong interests in open trade and investment channels with China, China’s behind-the-have strong interests in open trade and investment channels with China, China’s behind-the-
scenes pressure can sometimes make it difficult to discern to what extent a U.S. company’s scenes pressure can sometimes make it difficult to discern to what extent a U.S. company’s
representation of its economic and business interests in China also may be shaped by undisclosed representation of its economic and business interests in China also may be shaped by undisclosed
Chinese government pressures, demands, or threats, issued directly or through Chinese companies Chinese government pressures, demands, or threats, issued directly or through Chinese companies
and business partners.83 Certain provisions in China’s new national security and trade measures and business partners.83 Certain provisions in China’s new national security and trade measures
give the PRC government additional levers that can be used in both visible and private ways to give the PRC government additional levers that can be used in both visible and private ways to
pressure foreign companies to adhere to certain commercial or political requirements. In certain pressure foreign companies to adhere to certain commercial or political requirements. In certain
instances, the threat of potential action could instances, the threat of potential action could ~~potential y~~ potentially be as powerful as the imposition of costs.be as powerful as the imposition of costs.
The The ~~Chinese~~PRC government appears to be intensifying pressure on U.S. companies in ways that could affect open and informed U.S. public discourse about U.S. concerns and policy options with regard to China. In November 2021, Reuters reported that the PRC Embassy in Washington had sent letters to U.S. companies pressing executives to urge Members of Congress to alter or drop specific bills that seek to enhance U.S. competitiveness. According to press reports, the letters warned U.S. executives that their companies would risk losing market share or revenue in China if the legislation were to be passed and become law.84 In August 2021, Senator Mark Warner said 78 Sofia Baruzzi, “China Tightens ~~government for some time also has used ad hoc trade restrictions to commercially~~
~~and political y pressure its major trading partners, to deter foreign countries, nongovernmental~~
~~organizations, and companies from actions that the government views as inimical to its political~~
~~interests, and to take action against those entities deemed to have violated those interests (see~~
Table A-1). This pressure or action may take the form of (real or threatened) trade restrictions (on
~~either imports or exports), popular boycott campaigns, restrictions on Chinese outbound tourism,~~
~~suspension of contracts, or the imposition of restrictions in China and other costs ostensibly~~

~~78 Sofia Baruzzi, “China T ightens~~ Control Over Management of Rare Earths,” China Briefing, Dezan Shira and Control Over Management of Rare Earths,” China Briefing, Dezan Shira and
Associates, February 25, 2021. Associates, February 25, 2021.
79 See 79 See ~~CRS~~ CRS Report R42510, Report R42510, China’s Rare Earth Industry and Export Regime: Economic and Trade Implications for
the United States, by, by Wayne M. Morrison and Rachel Y. Wayne M. Morrison and Rachel Y. ~~T ang~~Tang.
80 Alexandra Ma, “ 80 Alexandra Ma, “ Xi Jinping may have shown how he plans to cripple US tech and defense giants in the trade war Xi Jinping may have shown how he plans to cripple US tech and defense giants in the trade war
with a visit to a Chinese magnet factory,” with a visit to a Chinese magnet factory,” Business Insider, May 21, 2019. , May 21, 2019.
81 81 ~~T his~~This section includes contributions by section includes contributions by CRS Analysts Caitlin Campbell and Michael SutherlandCaitlin Campbell and Michael Sutherland ~~at the Congression al Research~~
~~Service.~~
. 82 “Findings of the Investigation into China’s Acts, Policies, and Practices Related to 82 “Findings of the Investigation into China’s Acts, Policies, and Practices Related to ~~T echnology T ransfer~~Technology Transfer, Intellectual , Intellectual
Property, and Innovation Under Section 301 of the Property, and Innovation Under Section 301 of the ~~T rade~~Trade Act of 1974,” Office of the U.S. Act of 1974,” Office of the U.S. ~~T rade~~Trade Representative, March Representative, March
22, 2018, https://ustr.gov/sites/default/files/Section%20301%20FINAL.PDF. 22, 2018, https://ustr.gov/sites/default/files/Section%20301%20FINAL.PDF.
83 “China Urges U.S. Companies to Lobby Washington on 83 “China Urges U.S. Companies to Lobby Washington on ~~T rade~~Trade,” CBS News,,” CBS News, July 12, 2018; Jeanne Whalen, “China July 12, 2018; Jeanne Whalen, “China
HawksHawks Encounter Powerful Opponent: U.S. Companies,” Encounter Powerful Opponent: U.S. Companies,” The Washington Post, October 12, 2020. October 12, 2020.
84 Michael Martina, “Chinese Embassy Lobbies U.S. Business to Oppose China Bills,” Reuters, November 15, 2021. Congressional Research Service Congressional Research Service

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link to page 59 China’s Countermeasures to U.S. Economic Policy Actions and Authorities that several witnesses declined to testify at the U.S. Senate’s Select Committee on Intelligence’s open hearing on China because of fears of retribution by China.85 In October 2021, Representative Brad Sherman said during a House Financial Services subcommittee hearing on China that several financial industry representatives had withdrawn their original commitment to testify because of fear of backlash from China.86 In its August 2021 petition to the Department of Commerce to investigate potential circumvention of U.S. antidumping/countervailing duty orders, an industry coalition of U.S. solar manufacturers requested that it not be required to disclose its member firms because they could face “retaliation and other forms of harm” given the Chinese government’s control over global solar supply chains.87 In November 2021, the Department of Commerce responded that the association would have to disclose its members in order for their petition to be considered.88 The Chinese government for some time also has used ad hoc trade restrictions to commercially and politically pressure its major trading partners, to deter foreign countries, nongovernmental organizations, and companies from actions that the government views as inimical to its political interests, and to take action against those entities deemed to have violated those interests (see Table A-1). This pressure or action may take the form of (real or threatened) trade restrictions (on either imports or exports), popular boycott campaigns, restrictions on Chinese outbound tourism, suspension of contracts, or the imposition of restrictions in China and other costs ostensibly ~~Policy Actions and Authorities~~

related to regulations. The Chinese government appears to also use sanctions, and related to regulations. The Chinese government appears to also use sanctions, and
countersanctions—including measures targeting certain foreign parliamentarians and academic countersanctions—including measures targeting certain foreign parliamentarians and academic
researchers, and institutes—in an effort to stifle criticism of its policies and advance its researchers, and institutes—in an effort to stifle criticism of its policies and advance its
geopolitical goals. China has also demonstrated trade brinkmanship. The PRC government geopolitical goals. China has also demonstrated trade brinkmanship. The PRC government
countered each round of U.S. tariffs that the U.S. Trade Representative (USTR) imposed on countered each round of U.S. tariffs that the U.S. Trade Representative (USTR) imposed on
Chinese imports under Section 301 of the Trade Act of 1974 between 2018 and 2020, targeting Chinese imports under Section 301 of the Trade Act of 1974 between 2018 and 2020, targeting
sectors such as agriculture in an effort to pressure Washington to lift U.S. tariffs.sectors such as agriculture in an effort to pressure Washington to lift U.S. tariffs.8489 The uptick in The uptick in
China’s economic pressure on trading partners is amplifying ongoing concerns about Chinese China’s economic pressure on trading partners is amplifying ongoing concerns about Chinese
trade practices and industrial policies more broadly, and prompting policy discussion about trade practices and industrial policies more broadly, and prompting policy discussion about
supply chain diversification away from China, developing alternative markets for global supply chain diversification away from China, developing alternative markets for global
production, and the need for collective trade action among like-minded countries.production, and the need for collective trade action among like-minded countries.85
~~After China joined~~ 90 85 U.S. Senate Select Committee on Intelligence, Open Hearing on Beijing’s Long Arm: Threats to U.S. National Security, August 4, 2021. 86 U.S. House Committee on Financial Services, Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets, Hearing, “Taking Stock of China, Inc.: Examining Risks to Investors and the U.S. Posed by Foreign Issuers in U.S. Markets,” October 26, 2021. 87 Letters to the U.S. Secretary of Commerce from Wiley, Counsel to the American Solar Manufacturers Against Chinese Circumvention, August 16, 2021 and October 13, 2021. 88 Letter from the Director, Office IV, AD/CVD Operations to Wiley, November 10, 2021. 89 In 2018, the USTR under Section 301 of the Trade Act of 1974 (19 U.S.C. §2411) concluded that China engages in forced technology transfer, cyber-enabled theft of U.S. IP and trade secrets, discriminatory and nonmarket licensing practices, and state-funded strategic acquisitions of U.S. assets. The U.S. government subsequently imposed tariffs on imports from China worth approximately $250 billion. The Chinese government countered with tariffs on $110 billion worth of U.S. products. See CRS In Focus IF11284, U.S.-China Trade Relations, by Karen M. Sutter, CRS Insight IN11208, U.S. Signs Phase One Trade Deal with China, by Karen M. Sutter, and CRS Report R45949, U.S.-China Tariff Actions by the Numbers, by Brock R. Williams and Keigh E. Hammond. 90 Lucy Fisher, “Downing Street Plans New 5G Club of Democracies,” The Daily Times, May 29, 2020; Jonas Parello-Plesner, “An ‘Economic Article 5’ to Counter China,” The Wall Street Journal, February 11, 2021; “Australia, Japan and India Form Supply Chain Initiative to Counter China,” Bloomberg News, April 28, 2021; “G7 Foreign and Development Ministers’ Equitable Access and Collaboration Statement,” London, May 5, 2021. Congressional Research Service 21 China’s Countermeasures to U.S. Economic Policy Actions and Authorities After China joined the World Trade Organization (WTO) in 2001, its commitments may have the World Trade Organization (WTO) in 2001, its commitments may have
constrained its ability and inclination to discriminate in direct and obvious ways through the constrained its ability and inclination to discriminate in direct and obvious ways through the
raising of tariffs, for example. China’s economic coercive and retaliatory measures instead were raising of tariffs, for example. China’s economic coercive and retaliatory measures instead were
more informal, indirect, or not more informal, indirect, or not ~~official y~~officially articulated, providing China’s government flexibility articulated, providing China’s government flexibility in in
their application and plausibletheir application and plausible deniability. More recently, China has become more active and deniability. More recently, China has become more active and
direct in its demands and related economic coercion and trade brinkmanship, demonstrating a direct in its demands and related economic coercion and trade brinkmanship, demonstrating a
potential potential ~~wil ingness~~willingness to jeopardize economic ties with major trading partners. to jeopardize economic ties with major trading partners.8691 While WTO While WTO
members can and do members can and do ~~chal enge~~challenge China on certain practices that may violate its WTO obligations China on certain practices that may violate its WTO obligations
through WTO dispute settlement, some analysts assess that this process may be inadequate, given through WTO dispute settlement, some analysts assess that this process may be inadequate, given
the growing frequency of China’s actions. It can take two to three years for a dispute process to the growing frequency of China’s actions. It can take two to three years for a dispute process to
run its course, run its course, ~~al owing~~allowing China the time it needs to impose pressure before being China the time it needs to impose pressure before being ~~potential y~~
potentially disciplined.disciplined.8792
In November 2020, China’s Embassy in Canberra provided Australian media with a document In November 2020, China’s Embassy in Canberra provided Australian media with a document
demanding that Australian government retract its actions that criticized Chinese policies and demanding that Australian government retract its actions that criticized Chinese policies and
sought to restrict certain Chinese investment, research, and political influence in Australia. China sought to restrict certain Chinese investment, research, and political influence in Australia. China
then imposed tariffs and other trade restrictions on Australian exports to China—including barley, then imposed tariffs and other trade restrictions on Australian exports to China—including barley,
coal, cotton, lobster, meat, and timber—when the government refused to submit to China’s coal, cotton, lobster, meat, and timber—when the government refused to submit to China’s
demands.demands.8893 In May 2021, China announced it was canceling its economic dialogue with Australia—the last meeting held in 2017—in response to the Australian government’s decision to review and potentially unwind certain Chinese port investments for national security concerns.94 In addition, China imposed trade restrictions on certain Canadian agricultural exports and the Chinese government held in custody—arguably in an arbitrary manner—two Canadian citizens (Michael Kovrig and Michael Spavor) and between December 2018 and September 2021 in apparent retaliation for the Canadian government’s arrest of Huawei’s Chief Financial Officer Meng Wanzhou.95 Ahead of a Canadian court’s decision on whether to extradite Meng to the United States, in August 2021 the Dandong Intermediate People’s Court in northeastern Liaoning province sentenced one of the Canadian citizens, Michael Spavor, to 11 years in prison on espionage charges.96 In September 2021, the U.S. government negotiated a deferred prosecution agreement (DPA) with Meng. The agreement involved Meng confirming the main points in the U.S. government’s case against Huawei and, in exchange, ended her extradition proceedings in 91 Jonathan Kearsley, Eryk Bagshaw, and Anthony Galloway, “If You Make China the Enemy, China Will Be the Enemy’: Beijing’s Fresh Threat to Australia,” The Sydney Morning Herald, November 18, 2020. 92 Jacob M. Schlesinger, “How China Swallowed the WTO,” The Wall Street Journal, November 1, 2017; Jikon Lai, “Australia’s WTO Complaint: What’s the Point?,” The Diplomat, January 5, 2021. 93 Ibid. Saheli Roy Choudhury, “Here’s a List of the Australian Exports Hit by Restrictions in China,” CNBC, December 17, 2020. 94 Gabriel Crossley and Kristy Needham, “China Suspends Economic Dialogue with Australia as Relations Curdle,” Reuters, May 6, 2021. 95 Christian Shepherd, “Two Canadians Held in China Over Arrest of Huawei CFO Go on Trial,” Financial Times, March 19, 2021. 96 Eva Xiao, “China Sentences Canadian Citizen to 11 Years for Espionage in Case at Heart of Diplomatic Standoff,” The Wall Street Journal, August 11, 2021. Congressional Research Service 22 China’s Countermeasures to U.S. Economic Policy Actions and Authorities Canada.97 The Canadian government’s release of Meng prompted the PRC government to then release the two Canadians, Kovrig and Spavor. 98 China also pressured ~~In May 2021, China announced it was canceling its economic dialogue with~~

~~84 In 2018, the UST R under Section 301 of the T rade Act of 1974 (19 U.S.C. §2411) concluded that China engages in~~
~~forced technology transfer, cyber-enabled theft of U.S. IP and trade secrets, discriminatory and nonmarket licensing~~
~~practices, and state-funded strategic acquisitions of U.S. assets. T he U.S. government subsequently imposed tariffs on~~
~~imports from China worth approximately $250 billion. T he Chinese government countered with tariffs on $110 billion~~
~~worth of U.S. products. See CRS In Focus IF11284, U.S.-China Trade Relations, by Karen M. Sutter, CRS Insight~~
~~IN11208, U.S. Signs Phase One Trade Deal with China , by Karen M. Sutter, and CRS Report R45949,~~ ~~U.S.-China~~
~~Tariff Actions by the Num bers, by Brock R. Williams and Keigh E. Hammond.~~
~~85 Lucy Fisher, “Downing Street Plans New 5G Club of Democracies,” The Daily Times, May 29, 2020; Jonas Parello-~~
~~Plesner, “ An ‘Economic Article 5’ to Counter China,” The Wall Street Journal, February 11, 2021; “ Australia, Japan~~
~~and India Form Supply Chain Initiative to Counter China,” Bloomberg News, April 28, 2021; “ G7 Foreign and~~
~~Development Ministers’ Equitable Access and Collaboration Statement,” London, May 5, 2021.~~
~~86 Jonathan Kearsley, Eryk Bagshaw, and Anthony Galloway, “If You Make China the Enemy, China Will Be the~~
~~Enemy’: Beijing's Fresh T hreat to Australia,” The Sydney Morning Herald, November 18, 2020.~~
~~87 Jacob M. Schlesinger, “How China Swallowed the WT O,” The Wall Street Journal, November 1, 2017; Jikon Lai,~~
~~“Australia’s WTO Complaint: What’s the Point?,” T he Diplomat, January 5, 2021.~~
~~88 Ibid. Saheli Roy Choudhury, “Here’s a List of the Australian Exports Hit by Restrictions in China,” CNBC,~~
~~December 17, 2020.~~
~~Congressional Research Service~~

21

~~China’s Countermeasures to U.S. Economic Policy Actions and Authorities~~

~~Australia—the last meeting held in 2017—in response to the Australian government’s decision to~~
~~review and potential y unwind certain Chinese port investments for national security concerns.89~~
~~In addition, China imposed trade restrictions on certain Canadian agricultural exports and the~~
~~Chinese government has held in custody—arguably in an arbitrary manner—two Canadian~~
~~citizens since December 2018 in apparent retaliation for the Canadian government’s arrest of~~
~~Huawei’s Chief Financial Officer Meng Wanzhou.90 Ahead of a Canadian court’s decision~~
~~expected in fal 2021 on whether to extradite Meng to the United States, the Dandong~~
~~Intermediate People’s Court in northeastern Liaoning province sentenced one of the Canadian~~
~~citizens, Michael Spavor, to 11 years in prison on espionage charges.91 China also has pressured~~
the United Kingdom (UK)-headquartered bank HSBC over its role in providing certain the United Kingdom (UK)-headquartered bank HSBC over its role in providing certain
documents and evidence in support of U.S. government charges against Huawei and Meng. In documents and evidence in support of U.S. government charges against Huawei and Meng. In
February 2021, Huawei applied to the UK’s High Court to require the handover of certain HSBC February 2021, Huawei applied to the UK’s High Court to require the handover of certain HSBC
records related to the U.S. government case against Huawei and Meng. Huawei’s application records related to the U.S. government case against Huawei and Meng. Huawei’s application
focuses on U.S. allegations that are based on a presentation that Meng reportedly gave to an focuses on U.S. allegations that are based on a presentation that Meng reportedly gave to an
HSBC executive about Huawei’s ties to Huawei subsidiary Skycom. HSBC has argued that it is HSBC executive about Huawei’s ties to Huawei subsidiary Skycom. HSBC has argued that it is
not a party to the U.S. case nor the extradition matter, thus the application is meritless.not a party to the U.S. case nor the extradition matter, thus the application is meritless.9299
Following a decision by Sweden’s courts to uphold a ban on Huawei’s participation in the Following a decision by Sweden’s courts to uphold a ban on Huawei’s participation in the
country’s 5G telecommunications market because of national security concerns, China Mobile country’s 5G telecommunications market because of national security concerns, China Mobile
Ltd., a Chinese government-owned wireless carrier, retaliated by reducing Sweden headquartered Ltd., a Chinese government-owned wireless carrier, retaliated by reducing Sweden headquartered
Ericsson’s share in its latest 5G equipment tender from 11% in 2020 to 1.9% in the August 2021 Ericsson’s share in its latest 5G equipment tender from 11% in 2020 to 1.9% in the August 2021
awards.awards. 93100
Data Localization and Control
China’s efforts to promote data sovereignty appear to be central to advancing its broader China’s efforts to promote data sovereignty appear to be central to advancing its broader
economic security policies. China has expanded data localizationeconomic security policies. China has expanded data localization requirements and placed data requirements and placed data
under new trade authorities, such as export controls and security review requirements for Chinese under new trade authorities, such as export controls and security review requirements for Chinese
firms listing or operating overseas. China’s new measures enhance the Chinese government’s firms listing or operating overseas. China’s new measures enhance the Chinese government’s
control over foreign data (e.g., personal identifying and health information), IP, technology, and control over foreign data (e.g., personal identifying and health information), IP, technology, and
research that is transferred to or developed in China and may increase the potential risks to the research that is transferred to or developed in China and may increase the potential risks to the
United States of U.S. government, commercial, and academic activities in these areas. United States of U.S. government, commercial, and academic activities in these areas.
Since at least 2007, when the Chinese government drafted a multi-level protection framework for Since at least 2007, when the Chinese government drafted a multi-level protection framework for
information security related to critical infrastructure, the government has been strengthening information security related to critical infrastructure, the government has been strengthening
requirements to localize certain technology, IP, research, and data in China.requirements to localize certain technology, IP, research, and data in China.94101 China’s 2015 China’s 2015
National Security Law requires information systems in China to be “secure and controllable.” National Security Law requires information systems in China to be “secure and controllable.”
China’s 2017 National Cybersecurity Law requires companies to store personal information and China’s 2017 National Cybersecurity Law requires companies to store personal information and
important data within China, and has set in motion requirements to place Chinese data and related important data within China, and has set in motion requirements to place Chinese data and related

~~89 Gabriel Crossley and Kristy Needham, “China Suspends Economic Dialogue with Australia as Relations Curdle,”~~
Reuters, May 6, 2021.
~~90 Christian Shepherd, “T wo Canadians Held in China Over Arrest of Huawei CFO Go on T rial,” Financial Times,~~
~~March 19, 2021.~~
~~91 Eva Xiao, “China Sentences Canadian Citizen to 11 Years for Espionage in Case at Heart of Diplomatic Standoff ,”~~
The Wall Street Journal, August 11, 2021.
~~92 “Huawei T akes HSBC to UK Court for Docs in Extradition Fight ,” Associated Press, February 12, 2021.~~
~~93 Stu Woo, “Beijing Shuns Ericsson, Nokia as the West Curbs Huawei,” The Wall Street Journal, August 3, 2021.~~
~~94 Nick Marro, “ T he 5 Levels of Information Security in China,” China Business Review, December 5, 2016.~~
~~Congressional Research Service~~

22

~~China’s Countermeasures to U.S. Economic Policy Actions and Authorities~~

~~infrastructure, such as servers and cloud services, in China and to certify the hardware and~~
~~services, including encryption, used through specific technical and security standards and~~
~~procurement rules.95 The Chinese government since 2016 has required U.S. technology firms~~
~~such as Apple to store data and accompanying cryptographic keys in China.96 In March 2018, the~~
infrastructure, such as servers and cloud services, in China and to certify the hardware and services, including encryption, used through specific technical and security standards and procurement rules.102 The Chinese government since 2016 has required U.S. technology firms such as Apple to store data and accompanying cryptographic keys in China.103 In March 2018, the 97 The DPA involved the United States Attorney’s Office for the Eastern District of New York, the Counterintelligence and Export Control Section of the Justice Department’s National Security Division, and the Money Laundering and Asset Recovery Section of the Justice Department’s Criminal Division. See “Huawei CFO Wanzhou Meng Admits to Misleading Global Financial Institution,” Department of Justice, U.S. Attorney’s Office, Eastern District of New York, September 24, 2021. 98 Ian Austen, “China Frees 2 Jailed Canadians after the U.S. Agrees to Release a Huawei Executive,” The New York Times, September 24, 2021. 99 “Huawei Takes HSBC to UK Court for Docs in Extradition Fight,” Associated Press, February 12, 2021. 100 Stu Woo, “Beijing Shuns Ericsson, Nokia as the West Curbs Huawei,” The Wall Street Journal, August 3, 2021. 101 Nick Marro, “The 5 Levels of Information Security in China,” China Business Review, December 5, 2016. 102 “New Chinese Cybersecurity and Data Privacy Requirements,” Jones Day Insight, December 2020. 103 Stephen Nellis and Cate Cadell, “Apple Moves to Store iCloud Keys in China, Raising Human Rights Fears,” Congressional Research Service 23 China’s Countermeasures to U.S. Economic Policy Actions and Authorities State Council issued State Council issued Scientific Data Management Measures to strengthen the government’s to strengthen the government’s
control over data generated through academic and commercial scientific research in China. The control over data generated through academic and commercial scientific research in China. The
scope of the measures includes both raw and derivative data and requires certain data storage in scope of the measures includes both raw and derivative data and requires certain data storage in
China and disclosure of data, including trade secrets, to China’s Ministry of Science and China and disclosure of data, including trade secrets, to China’s Ministry of Science and
Technology.Technology.97104
Recent Measures and Actions
Priorities in 2021 for China’s legislature, the National People’s Congress (NPC), include several Priorities in 2021 for China’s legislature, the National People’s Congress (NPC), include several
laws and measures related to data flows and security. These measures include newly passed laws laws and measures related to data flows and security. These measures include newly passed laws
on data security and personal data, and new measures on vehicle-tied data.on data security and personal data, and new measures on vehicle-tied data.98105 China is proposing China is proposing to to
use these new laws and measures to strengthen Chinese government control and curtail U.S. use these new laws and measures to strengthen Chinese government control and curtail U.S.
extraterritorial reach over data subject to China’s control. Unlike the U.S. approach to data trade extraterritorial reach over data subject to China’s control. Unlike the U.S. approach to data trade
that has sought market opening through a set of shared principles and best practices, China’s laws that has sought market opening through a set of shared principles and best practices, China’s laws
and measures include data localizationand measures include data localization provisions that would require personal and other sensitive provisions that would require personal and other sensitive
data to be located in China with restrictions on real time cross-border transfers of this data. data to be located in China with restrictions on real time cross-border transfers of this data.
New requirements could further limit the ability New requirements could further limit the ability of the U.S. government to implement measuresof the U.S. government to implement measures , ,
such as Securities and Exchange Commission (SEC) requirements that Chinese-listed firms such as Securities and Exchange Commission (SEC) requirements that Chinese-listed firms
disclose details about their owners and subsidiaries. In July 2021, for example, China’s disclose details about their owners and subsidiaries. In July 2021, for example, China’s
Cybersecurity Administration Cybersecurity Administration (CAC) reportedly undertook a security review of the Chinese ridesharing reportedly undertook a security review of the Chinese ridesharing
service Didi Chuxing Technology Co., in part due to concerns that its overseas listing on the New service Didi Chuxing Technology Co., in part due to concerns that its overseas listing on the New
York Stock ExchangeYork Stock Exchange (NYSE) could prompt greater public disclosure and release of the company’s data could prompt greater public disclosure and release of the company’s data
as part of U.S. listing requirementsas part of U.S. listing requirements 99 .106 In December 2021, Didi announced it would delist from the NYSE, just as CAC completed its cybersecurity review of the company.107 The new laws and measures expand the scope of China’s The new laws and measures expand the scope of China’s
reach with regard to the type of data covered and the parties responsible for compliance. The new reach with regard to the type of data covered and the parties responsible for compliance. The new
data security law and related draft laws and measures advance China’s data security law and related draft laws and measures advance China’s ~~longstanding~~long-standing goals of goals of
requiring data localizationrequiring data localization as a key step in developing its digitalas a key step in developing its digital economy.economy.~~100~~108 Some Members of Some Members of
Congress have asked the SEC to investigate and respond to these measures and related PRC Congress have asked the SEC to investigate and respond to these measures and related PRC
government actions regarding particular companies listed on U.S. exchanges.government actions regarding particular companies listed on U.S. exchanges.~~101~~109 In July 2021, the SEC announced it would require additional disclosure by and scrutiny of PRC firms listed on U.S. exchanges, particularly Reuters, February 24, 2018. 104 ~~In July 2021, the~~

~~95 “New Chinese Cybersecurity and Data Privacy Requirements,” Jones Day Insight, December 2020.~~
~~96 Stephen Nellis and Cate Cadell, “Apple Moves to Store iCloud Keys in Ch ina, Raising Human Rights Fears,”~~
Reuters, February 24, 2018.
97 China’s State Council “Scientific Data Management Measures,” March 17, 2018, China’s State Council “Scientific Data Management Measures,” March 17, 2018,
http://www.gov.cn/zhengce/content/2018-04/02/content_5279272.htm (in Chinese). http://www.gov.cn/zhengce/content/2018-04/02/content_5279272.htm (in Chinese).
98105 Mary Lam, “PRC Legal Update: Key Mary Lam, “PRC Legal Update: Key ~~T akeaways~~Takeaways from China’s from China’s ~~T wo~~Two Sessions Sessions 2021,” Bryan Cave Leighton Paisner, 2021,” Bryan Cave Leighton Paisner,
March 16, 2021; Jihong Chen, Peng Cai, JiaweiMarch 16, 2021; Jihong Chen, Peng Cai, Jiawei Wu, Yating Jiao, and JiabinWu, Yating Jiao, and Jiabin Sun,Sun, “ “New Legislative New Legislative ~~T rend of~~
~~T ightening~~Trend of Tightening ICV Data Regulation ICV Data Regulation in China,” Zhong Lun Lawin China,” Zhong Lun Law Firm, JuneFirm, June 1, 2021. 1, 2021.
99106 Lingling Wei and Keith Zhai, “ Lingling Wei and Keith Zhai, “ Chinese Regulators SuggestedChinese Regulators Suggested Didi Delay Its U.S. IPO,” Didi Delay Its U.S. IPO,” The Wall Street Journal, ,
JulyJuly 5, 2021. 5, 2021.
~~100~~107 Jing Yang, “Didi Global Plans to Delist From New York Stock Exchange,” The Wall Street Journal, December 3, 2021. 108 “China Unveils Internet Plus Action Plan to Fuel Growth,” Xinhua, July 4, 2015; “ “China Unveils Internet Plus Action Plan to Fuel Growth,” Xinhua, July 4, 2015; “ China’s Digital Economy: China’s Digital Economy: ~~T he~~The
Shape of Shape of ~~T hings~~Things to Come,” China Briefing, Dezan Shira to Come,” China Briefing, Dezan Shira and Associates, January 4, 2018; “and Associates, January 4, 2018; “ Digital Economy Digital Economy
Development in China 2020,” China Academy of Information and Communications Development in China 2020,” China Academy of Information and Communications ~~T echnology~~Technology (CAICT (CAICT ), July 2020, ), July 2020,
http://www.caict.ac.cn/english/research/whitepapers/202007/P020200728343679920779.pdfhttp://www.caict.ac.cn/english/research/whitepapers/202007/P020200728343679920779.pdf ; Cheng Yu and Zheng ; Cheng Yu and Zheng
Yiran, “China Eyes 6G as Next Yiran, “China Eyes 6G as Next ~~T ech~~Tech Frontier,” Frontier,” China Daily, March 20, 2021. , March 20, 2021.
~~101~~109 Kiran Stacey and James Politi, “Senators Call on U.S. Securities Kiran Stacey and James Politi, “Senators Call on U.S. Securities Regulator to Investigate Didi IPO,” Regulator to Investigate Didi IPO,” The Financial
Times, July 8, 2021. Congressional Research Service Congressional Research Service

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China’s Countermeasures to U.S. Economic Policy Actions and Authorities

~~SEC announced it would require additional disclosure by and scrutiny of PRC firms listed on~~
~~U.S. exchanges, particularly~~ those firms that use a variable interest entity (VIE) structure.those firms that use a variable interest entity (VIE) structure.~~102~~110 CRS CRS
estimates that about two-thirds of PRC firms listed on U.S. exchanges use a VIE structure.estimates that about two-thirds of PRC firms listed on U.S. exchanges use a VIE structure.~~103~~111
Data Security Law
On June 10, 2021, the NPC passed a new law on data security that entered into force on On June 10, 2021, the NPC passed a new law on data security that entered into force on
September 1, 2021.September 1, 2021.~~104~~112 The law seeks to classify, manage, and protect data according to its The law seeks to classify, manage, and protect data according to its
importance to state interests, including a stated focus to protect the “legitimate rights and interests importance to state interests, including a stated focus to protect the “legitimate rights and interests
of individuals and organizations” and safeguard China’s “national sovereignty, security, and of individuals and organizations” and safeguard China’s “national sovereignty, security, and
development interests” (Article 1). The law covers data processing in China and outside of China development interests” (Article 1). The law covers data processing in China and outside of China
if it “harms the national security, public interest, or the legitimate rights and interests of citizens if it “harms the national security, public interest, or the legitimate rights and interests of citizens
or organizations of the PRC” (Article 2). The law’s definition of covered data includes the or organizations of the PRC” (Article 2). The law’s definition of covered data includes the
collection, storage, use, processing, transmission, and disclosure of personal information and collection, storage, use, processing, transmission, and disclosure of personal information and
other important data (Article 3). The law designates the Chinese state as the party responsible for other important data (Article 3). The law designates the Chinese state as the party responsible for
data development and security plans (Article 13); a big data strategy, the construction of data data development and security plans (Article 13); a big data strategy, the construction of data
infrastructure, and plans for innovative applications of data in various industries (Article 14); the infrastructure, and plans for innovative applications of data in various industries (Article 14); the
development of a data security standards system (Article 17); and, international cooperation in development of a data security standards system (Article 17); and, international cooperation in
data security governance, including developing global rules and standards related to data data security governance, including developing global rules and standards related to data ~~sec urity~~security
(Article 11). The law also includes provisions that authorize the Chinese government to leverage (Article 11). The law also includes provisions that authorize the Chinese government to leverage
its control over data and retaliate against foreign government actions with which Beijing its control over data and retaliate against foreign government actions with which Beijing
disagrees. Article 26 disagrees. Article 26 ~~al ows~~allows the Chinese government to retaliate in kind when a foreign the Chinese government to retaliate in kind when a foreign
government “adopts discriminatory prohibitions, restrictions, or other similar trade and government “adopts discriminatory prohibitions, restrictions, or other similar trade and
investment measures against China related to data as investment measures against China related to data as ~~wel~~ well as data development and utilization as data development and utilization
technologies.”technologies.” ~~105~~113
Provisions in the law restrict Chinese, U.S., and other foreign companies, entities, and individuals Provisions in the law restrict Chinese, U.S., and other foreign companies, entities, and individuals
from transferring data stored in China without Chinese government approval. The law requires from transferring data stored in China without Chinese government approval. The law requires
the creation of a data classification system based on the importance of the data to China’s the creation of a data classification system based on the importance of the data to China’s
economic development and national security interests (Article 21); a system to conduct risks economic development and national security interests (Article 21); a system to conduct risks
assessments on any data disclosure or transfer; and a catalogue to define “important data” that assessments on any data disclosure or transfer; and a catalogue to define “important data” that
could be subject to Chinese export controls (Article 25).could be subject to Chinese export controls (Article 25).~~106~~114 The law also The law also ~~cal s~~calls for establishing systems to certify and test data security (Article 18) and to control and monitor data transfer (Article 19).115 110 ~~for establishing~~

Tim es, July 8, 2021.
~~102~~ “Statement on Investor Protection “Statement on Investor Protection ~~Relat ed~~Related to Recent Developments in China,” Public Statement by SEC Chair Gary to Recent Developments in China,” Public Statement by SEC Chair Gary
Gensler,Gensler, July 30, 2021, https://www.sec.gov/news/public-statement/gensler-2021-07-30. CRS estimates that two-thirds July 30, 2021, https://www.sec.gov/news/public-statement/gensler-2021-07-30. CRS estimates that two-thirds
of all Chinese firms listed in the United States useof all Chinese firms listed in the United States use a VIE structure. A VIEa VIE structure. A VIE structure involves the owners of a Chinese structure involves the owners of a Chinese
firm creating an offshore holding company to which foreign investors can purchase an equity claim. firm creating an offshore holding company to which foreign investors can purchase an equity claim. ~~T he~~The holding holding
company is tied company is tied ~~t o~~to the “ the “ parent” through a series of contracts and revenue sharing agreements that mimic ownership parent” through a series of contracts and revenue sharing agreements that mimic ownership
arrangements but do not provide the same rights typically afforded to investors in U.S.arrangements but do not provide the same rights typically afforded to investors in U.S. -listed-listed firms. Seefirms. See ~~CRS~~ CRS In Focus In Focus
IF11803, IF11803, U.S. Capital Markets and China: Issues for Congress, by Michael D. Sutherland and Karen M. Sutter. , by Michael D. Sutherland and Karen M. Sutter.
~~103 See CRS~~ 111 See CRS In Focus IF11803, In Focus IF11803, U.S. Capital Markets and China: Issues for Congress, by Michael D. Sutherland and , by Michael D. Sutherland and
Karen M. Sutter. Karen M. Sutter.
~~104~~112 Data Security Law of the People'’s Republic of China, Adopted on June 10, 2021, Entered into force on September Adopted on June 10, 2021, Entered into force on September
1, 2021, http://www.npc.gov.cn/npc/c30834/202106/7c9af12f51334a73b56d7938f99a788a.shtml1, 2021, http://www.npc.gov.cn/npc/c30834/202106/7c9af12f51334a73b56d7938f99a788a.shtml (in Chinese). (in Chinese).
~~105~~113 Ibid. Ibid.
~~106~~114 Masha Borak, “China to Punish Data Exports to Overseas Courts as Beijing Beefs up Defence Against US Masha Borak, “China to Punish Data Exports to Overseas Courts as Beijing Beefs up Defence Against US Long Long
Arm,” Arm,” South China Morning Post, April 28, 2021. , April 28, 2021.
115 Data Security Law of the People’s Republic of China, Adopted on June 10, 2021, Entered into force on September 1, 2021, http://www.npc.gov.cn/npc/c30834/202106/7c9af12f51334a73b56d7938f99a788a.shtml (in Chinese Congressional Research Service 25~~Congressional Research Service~~

24

China’s Countermeasures to U.S. Economic Policy Actions and Authorities

~~systems to certify and test data security (Article 18) and to control and monitor data transfer~~
~~(Article 19).107~~
Chapter 6 of the law outlines legal liabilityChapter 6 of the law outlines legal liability for data processing parties. According to the for data processing parties. According to the
provisions, Chinese authorities have the right to inspect, impose fines, revoke business licenses, provisions, Chinese authorities have the right to inspect, impose fines, revoke business licenses,
and and ~~potential y~~ potentially bring civil and criminal charges against parties found in noncompliance. The bring civil and criminal charges against parties found in noncompliance. The
scope of potential violations is broad and includes a “violationscope of potential violations is broad and includes a “violation of the national core data of the national core data
management system;” “endangering [China’s] national sovereignty, security and development management system;” “endangering [China’s] national sovereignty, security and development
interests;” and the “unauthorized transfer of data overseas.”interests;” and the “unauthorized transfer of data overseas.”~~108~~116 Unauthorized transfer of data Unauthorized transfer of data
includes existing provisions and laws regarding China’s state secrets and military laws, includes existing provisions and laws regarding China’s state secrets and military laws,
forthcoming personal data legal requirements, and providing data to a foreign judicialforthcoming personal data legal requirements, and providing data to a foreign judicial or law or law
enforcement agency without the approval of the competent Chinese authority.enforcement agency without the approval of the competent Chinese authority.~~109~~117 The broad scope The broad scope
of the law may give Chinese authorities significant enforcement leeway and could prompt firms of the law may give Chinese authorities significant enforcement leeway and could prompt firms
to be cautious in how they interpret the measures to avoid penalties and prosecution. to be cautious in how they interpret the measures to avoid penalties and prosecution.
Critical Information Infrastructure
The Chinese government continues to tighten its cybersecurity measures which include purview The Chinese government continues to tighten its cybersecurity measures which include purview
over networks overseas. In July 2021, China’s State Council issued new over networks overseas. In July 2021, China’s State Council issued new Regulations on the
Security Protection of Critical Information Infrastructure that it adopted in April that it adopted in April 2021, which 2021, which
became effective on September 1, 2021.became effective on September 1, 2021.~~110~~118 The new regulations build on China’s 2016 The new regulations build on China’s 2016
Cybersecurity Law and prioritize the protection of critical information infrastructure (CII) and Cybersecurity Law and prioritize the protection of critical information infrastructure (CII) and
networks not only in China but also overseas (Article 5). The regulations define CII as including networks not only in China but also overseas (Article 5). The regulations define CII as including
public communication and information services, energy, transportation, water conservancy, public communication and information services, energy, transportation, water conservancy,
finance, public services, e-government, national defense science and technology industries, and finance, public services, e-government, national defense science and technology industries, and
other important industries and network facilities and information systems. (Article 2).These other important industries and network facilities and information systems. (Article 2).These
categories are the same as those in China’s 2016 Cybersecurity Law with the addition of “defense categories are the same as those in China’s 2016 Cybersecurity Law with the addition of “defense
science and industry technologies.” The regulations require network operations to report major science and industry technologies.” The regulations require network operations to report major
incidents and intrusions (Article 15) and incidents and intrusions (Article 15) and ~~cal~~ call for the joint military and civilianfor the joint military and civilian protection of CII protection of CII
(Article 38). The regulations reinforce China’s April 2020 Cybersecurity Review Measures in (Article 38). The regulations reinforce China’s April 2020 Cybersecurity Review Measures in
prioritizing the purchase of “secure and trusted” network products (Article 19), which could favor prioritizing the purchase of “secure and trusted” network products (Article 19), which could favor
PRC vendors over foreign suppliers.PRC vendors over foreign suppliers.~~111~~119
Automotive-Vehicle Data
China is increasing the government’s control over data generated by automotive vehicles in China is increasing the government’s control over data generated by automotive vehicles in
China, including foreign firms’ vehicles, and the cross-border export of data generated by China, including foreign firms’ vehicles, and the cross-border export of data generated by
vehicles in China. In May 2021, the Cyberspace Administration of China (CAC) issued vehicles in China. In May 2021, the Cyberspace Administration of China (CAC) issued

~~107 Data Security Law of the People's Republic of China, Adopted on June 10, 2021, Entered into force on September~~
~~1, 2021, http://www.npc.gov.cn/npc/c30834/202106/7c9af12f51334a73b56d7938f99a788a.shtml (in Chinese~~
~~language).~~
~~108 Ibid.~~
~~109 Ibid.~~
~~110 "~~Provisions on the Management of Automobile Data Security for public comment.120 In August 2021, five government agencies issued Regulations on the Management of Automobile Data language). 116 Ibid. 117 Ibid. 118 “Regulations on the Security Protection of Critical Information Infrastructure,” State Council Order No. 745, July Regulations on the Security Protection of Critical Information Infrastructure,” State Council Order No. 745, July
30, 2021, http://www.cac.gov.cn/2021-08/17/c_1630785976988160.htm (in Chinese language). 30, 2021, http://www.cac.gov.cn/2021-08/17/c_1630785976988160.htm (in Chinese language).
~~111 T ingting~~119 Tingting Liu, Lester Ross, and Kenneth Zhou, “ Liu, Lester Ross, and Kenneth Zhou, “ China Rolls Out Critical Information Infrastructure Security China Rolls Out Critical Information Infrastructure Security
~~Protect ion~~Protection Regulations,” WilmerHale, August Regulations,” WilmerHale, August 20, 2021. 120 Draft Provisions on the Management of Automobile Data Security, May 12, 2021, http://www.cac.gov.cn/2021-05/12/c_1622400511898266.htm. ~~20, 2021.~~
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Provisions on the Management of Automobile Data Security for public comment.112 In August
~~2021, five government agencies issued Regulations on the Management of Automobile Data~~
Security for Trial Implementation, which Security for Trial Implementation, which ~~wil~~ will be effective October 1, 2021.be effective October 1, 2021.~~113~~121 These measures These measures
focus on data collection, analysis, storage, use, and export.focus on data collection, analysis, storage, use, and export.
The provisions require personal information and other “important data” to be stored within China The provisions require personal information and other “important data” to be stored within China
and for CAC to provide a security assessment for any cross-border data transmission. The and for CAC to provide a security assessment for any cross-border data transmission. The
definition of “important data” is quite broad and includes any data which may have a bearing on definition of “important data” is quite broad and includes any data which may have a bearing on
national security or the public interest. This includes data on the flow of people and vehicles in a national security or the public interest. This includes data on the flow of people and vehicles in a
range of sensitive areas tied to the military, government, or the CPC; detailed surveying and range of sensitive areas tied to the military, government, or the CPC; detailed surveying and
mapping data; operational data about vehicle charging grids; statistics on the types and flows of mapping data; operational data about vehicle charging grids; statistics on the types and flows of
vehicles on the road; audio and video data outside a vehicle, including human faces, voices, and vehicles on the road; audio and video data outside a vehicle, including human faces, voices, and
license plates; and other data deemed to affect national security and public interest. The scope of license plates; and other data deemed to affect national security and public interest. The scope of
responsible parties is also broad and moves beyond critical infrastructure providers to responsible parties is also broad and moves beyond critical infrastructure providers to al all data data
processers, including vehicle manufacturers, component and software providers, auto dealers, processers, including vehicle manufacturers, component and software providers, auto dealers,
maintenance and repair providers, online car-hailing companies, and insurance companies.maintenance and repair providers, online car-hailing companies, and insurance companies.~~114~~122
Certain data are not to leave China “under any circumstances.” China’s draft Certain data are not to leave China “under any circumstances.” China’s draft National Standard
of Safety Requirements for Collecting Data of Connected Vehicles, which the government which the government
released on April 28, 2021, restricts the cross-border transfer of data on roads, buildings, terrain, released on April 28, 2021, restricts the cross-border transfer of data on roads, buildings, terrain,
traffic participants and other data collected from connected vehicles’ external environment traffic participants and other data collected from connected vehicles’ external environment
through cameras, radar or other sensors, and data related to a vehicle’s location and trajectory.through cameras, radar or other sensors, and data related to a vehicle’s location and trajectory.~~115~~123
The Chinese government has already applied these rules to Tesla, a California-headquartered The Chinese government has already applied these rules to Tesla, a California-headquartered
electric vehicle company, electric vehicle company, ~~potential y~~potentially restricting the company’s ability to collect, transmit, and restricting the company’s ability to collect, transmit, and
assess vehicle-related data. Such restrictions could impede the ability of U.S. and other foreign assess vehicle-related data. Such restrictions could impede the ability of U.S. and other foreign
firms to leverage this information in real time for product R&D, testing, or development of firms to leverage this information in real time for product R&D, testing, or development of
autonomous driving capabilities. U.S. reports indicate that some U.S. auto companies already autonomous driving capabilities. U.S. reports indicate that some U.S. auto companies already
store data store data ~~domestical y~~domestically in China, but are now required to do this by law. Under pressure from the in China, but are now required to do this by law. Under pressure from the
Chinese government and in response to specific data restrictions imposed in March 2021, Tesla Chinese government and in response to specific data restrictions imposed in March 2021, Tesla
announced in May 2021 that it would create a new data center in China, and that “announced in May 2021 that it would create a new data center in China, and that “al all data data
generated from the sales of vehicles in the China market generated from the sales of vehicles in the China market ~~wil~~ will be stored domestically.”124 Personal Information In August 2021, China’s NPC passed a personal information protection law with data security restrictions that goes into effect on November 1, 2021.125 By restricting the types of data that 121~~be stored domestical y.” 116~~

~~112 Draft Provisions on the Management of Automobile Data Security, May 12, 2021, http://www.cac.gov.cn/2021-~~
~~05/12/c_1622400511898266.htm.~~
~~113~~“Five Departments Including the State Internet Information Office issued the “Five Departments Including the State Internet Information Office issued the Regulations on the Security
~~Managem ent of Autom obile~~Management of Automobile Data (for Trial ~~Im plem entation)~~,"Implementation),” Jointly issued by the State Internet Information Office, Jointly issued by the State Internet Information Office,
the National Development and Reform Commission, the Ministry of Industry and Information Technology, the the National Development and Reform Commission, the Ministry of Industry and Information Technology, the
Ministry of Public Security, and the Ministry of Ministry of Public Security, and the Ministry of ~~T ransportation~~Transportation, August 20, 2021, http://www.cac.gov.cn/2021-, August 20, 2021, http://www.cac.gov.cn/2021-
08/20/c_1631049984834616.htm (in Chinese language). 08/20/c_1631049984834616.htm (in Chinese language).
~~114~~122 Draft Draft Provisions on the Management of Automobile Data Security, May 12, 2021, http://www.cac.gov.cn/2021-, May 12, 2021, http://www.cac.gov.cn/2021-
05/12/c_1622400511898266.htm. 05/12/c_1622400511898266.htm.
~~115~~123 Lester Ross, Kenneth Zhou, and Lester Ross, Kenneth Zhou, and ~~T ingting~~Tingting Liu, “ Liu, “ China IssuedChina Issued Draft Provisions on the Management of Automobile Draft Provisions on the Management of Automobile
Data Security,” WilmerHale Client Alert, June 11, 2021, https://www.wilmerhale.com/en/insights/clientData Security,” WilmerHale Client Alert, June 11, 2021, https://www.wilmerhale.com/en/insights/client -
-alerts/20210611-china-issued-draftalerts/20210611-china-issued-draft -provisions-on-the-management-of-automobile-data-security. -provisions-on-the-management-of-automobile-data-security.
~~116 T refor~~124 Trefor Moss, “ Moss, “ ~~T esla~~Tesla to Store China Data Locally in New Data Center,” to Store China Data Locally in New Data Center,” The Wall Street Journal, May 26, 2021. , May 26, 2021.
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~~China’s Countermeasures to U.S. Economic Policy Actions and Authorities~~

~~Personal Information~~
~~In August 2021, China’s NPC passed a personal information protection law with data security~~
~~restrictions that goes into effect on November 1, 2021.117 By restricting the types of data that~~
125 “China Issues Second Version of the Draft Personal Information Protection Law for Public Comments,” Hunton Andrews Kurth LLP, The National Law Review, Volume XI, Number 124, May 4, 2021; Personal Information Protection Law of the People’s Republic of China (effective November 1, 2021), https://digichina.stanford.edu/news/translation-personal-information-protection-law-peoples-republic-china-effective-nov-1-2021 (informal translation posted on August 20, 2021, by Rogier Creemers and Graham Webster, DigiChina Cyber Policy Center, Stanford Congressional Research Service 27 China’s Countermeasures to U.S. Economic Policy Actions and Authorities companies can collect, the provisions are in some ways similar to what the European Union has companies can collect, the provisions are in some ways similar to what the European Union has
proposed. China’s law, however, differs in significant ways, particularly in not imposing any proposed. China’s law, however, differs in significant ways, particularly in not imposing any
restrictions on what data government entities may collect.restrictions on what data government entities may collect.~~118~~126 The law requires foreign firms The law requires foreign firms
conducting business in China that processes personal data to implement provisions on conducting business in China that processes personal data to implement provisions on
extraterritorial jurisdictionextraterritorial jurisdiction — —including reporting requirements to government agencies in including reporting requirements to government agencies in
China.China.~~119~~127 Personal information (PI) handlers who use PI for business uses and operate outside Personal information (PI) handlers who use PI for business uses and operate outside
China are required to set up a specialized entity or appoint a representative in China to handle PI China are required to set up a specialized entity or appoint a representative in China to handle PI
security and protection matters (Article 52). The process requires a security assessment by security and protection matters (Article 52). The process requires a security assessment by
China’s cyberspace authorities and the storage of personal information collected and generated China’s cyberspace authorities and the storage of personal information collected and generated
from China to be stored in China (Article 40). The provisions give China’s regulators broad from China to be stored in China (Article 40). The provisions give China’s regulators broad
powers to investigate potential violations of PI rights, including the ability to question employees, powers to investigate potential violations of PI rights, including the ability to question employees,
conduct on-site investigations, inspect business records, and seize equipment (Article 59).conduct on-site investigations, inspect business records, and seize equipment (Article 59).~~120~~
128 Data and Offshore Operations
Implementation of China’s data protection measures raises issues about what type of data and Implementation of China’s data protection measures raises issues about what type of data and
data operations are considered state or non-state in China. The Chinese government has been data operations are considered state or non-state in China. The Chinese government has been
taking actions to exert more control over its national technology champions—such as Alibaba, taking actions to exert more control over its national technology champions—such as Alibaba,
Tencent, and ByteDance (the parent company of TikTok)—and requiring these firms to share the Tencent, and ByteDance (the parent company of TikTok)—and requiring these firms to share the
data they collect through their business operations with the Chinese government.data they collect through their business operations with the Chinese government.~~121~~129 These firms These firms
also operate outside China, including in the United States, raising questions about what also operate outside China, including in the United States, raising questions about what
information the Chinese government could access.information the Chinese government could access.~~122~~130 There are now public examples that show There are now public examples that show
how censorship controls extend outside of China, and data access and how censorship controls extend outside of China, and data access and ~~col ection~~collection capabilities capabilities
could follow a similar trajectory. In August 2021, the Chinese government became a direct could follow a similar trajectory. In August 2021, the Chinese government became a direct
shareholder in ByteDance and joined the company’s board of directors in an arrangement that shareholder in ByteDance and joined the company’s board of directors in an arrangement that
some analysts say is similar to the structure the government also uses with other social media and some analysts say is similar to the structure the government also uses with other social media and
software-tied operators such as Sina Weibo.software-tied operators such as Sina Weibo.~~123~~131 In June 2021, former TikTok employees said that ByteDance has access to TikTok’s U.S. user data and is closely involved in the company’s decision-making and product development in the United States.132 These statements are in contrast to company statements that its U.S. operations are separate from its China business, and raises potential questions about the strength and effectiveness of risk mitigation measures that the U.S. government uses with technology companies with strong ties and operations centered in China. While it is U.S. headquartered, Zoom Video Communications, for example, reportedly University). 126 ~~In June 2021, former TikTok employees said that~~

~~117 “China Issues Second Version of the Draft Personal Information Protection Law for Public Comments,” Hunton~~
~~Andrews Kurth LLP, The National Law Review, Volume XI, Number 124, May 4, 2021;~~ ~~Personal Inform ation~~
~~Protection Law of the People's Republic of China~~ ~~(effective November 1, 2021),~~
~~https://digichina.stanford.edu/news/translation-personal-information-protection-law-peoples-republic-china-effective-~~
~~nov-1-2021 (informal translation posted on August 20, 2021 by Rogier Creemers and Graham Webster, DigiChina~~
~~Cyber Policy Center, Stanford University).~~
~~118~~ Natasha Lomas, “China Passes Data Protection Law,” Natasha Lomas, “China Passes Data Protection Law,” TechCrunch, August 20, 2021. , August 20, 2021.
~~119~~127 Ibid. Ibid.
~~120~~128 “China Releases Draft Personal Information Protection Law,” Greenberg “China Releases Draft Personal Information Protection Law,” Greenberg ~~T raurig~~Traurig Alert, Alert, The National Law Review, ,
Volume XI, Number 21, January 21, 2021. Volume XI, Number 21, January 21, 2021.
~~121~~129 Lingling Wei, “ Lingling Wei, “ China’s New Power Play: More Control of China’s New Power Play: More Control of ~~T ech~~Tech Companies’ Companies’ ~~T roves~~Troves of Data,” of Data,” The Wall Street
Journal, June 12, 2021. , June 12, 2021.
~~122~~130 “China-Based Executive at U.S. “China-Based Executive at U.S. ~~T elecommunications~~Telecommunications Company Charged with Disrupting Video Meetings Company Charged with Disrupting Video Meetings
Commemorating Commemorating ~~T iananmen~~Tiananmen Square Massacre,” Office of Public Square Massacre,” Office of Public Affairs, U.S.Affairs, U.S. Department of Justice, December 18, Department of Justice, December 18,
2020. 2020.
~~123~~131 Juro Osawa and Shai Oster, “Beijing Juro Osawa and Shai Oster, “Beijing ~~T ightens~~Tightens Grip on ByteDance by Quietly Grip on ByteDance by Quietly ~~T aking~~Taking Stake, China Board Seat Stake, China Board Seat ,” ,” The
~~Inform ation~~Information, August 6, 2021; Rita Liao, “, August 6, 2021; Rita Liao, “ China Roundup:China Roundup: ~~Beijing T akes~~ Beijing Takes Stake in ByteDance, Amazon Continues China Crackdown,” TechCrunch, August 21, 2021. 132 Salvador Rodriguez, “TikTok Insiders Say Social Media Company is Tightly Controlled by Chinese Parent ByteDance,” CNBC, June 25, 2021. Congressional Research Service 28 China’s Countermeasures to U.S. Economic Policy Actions and Authorities ~~Stake in ByteDance, Amazon Continues~~
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~~China’s Countermeasures to U.S. Economic Policy Actions and Authorities~~

~~ByteDance has access to TikTok's U.S. user data and is closely involved in the company's~~
~~decision-making and product development in the United States.124 These statements are in~~
~~contrast to company statements that its U.S. operations are separate from its China business, and~~
~~raises potential questions about the strength and effectiveness of risk mitigation measures that the~~
~~U.S. government uses with technology companies with strong ties and operations centered in~~
~~China. While it is U.S. headquartered, Zoom Video Communications, for example, reportedly~~
relies on PRC nationals as technical experts based in the United States and in China to develop relies on PRC nationals as technical experts based in the United States and in China to develop
algorithms and provide customer support for its U.S. operations.algorithms and provide customer support for its U.S. operations.~~125~~133 In its March 2021 annual 10- In its March 2021 annual 10-
K filingK filing to the SEC, the company said that it “employ(s) a product development team that has to the SEC, the company said that it “employ(s) a product development team that has a a
relatively significant footprint in China today,” which “carries out the design and architecture relatively significant footprint in China today,” which “carries out the design and architecture
decisions made by our U.S. engineering team.” The company identified potential risks with this decisions made by our U.S. engineering team.” The company identified potential risks with this
structure: “We have a sizable number of research and development personnel in China, which has structure: “We have a sizable number of research and development personnel in China, which has
exposed and could continue to expose us to governmental and regulatory, as exposed and could continue to expose us to governmental and regulatory, as ~~wel~~ well as market and as market and
media scrutiny regarding the actual or perceived integrity of our platform or data security and media scrutiny regarding the actual or perceived integrity of our platform or data security and
privacy features.”privacy features.”~~126~~134
Trade Agreement Provisions
China has negotiated specific data policy flexibilitiesChina has negotiated specific data policy flexibilities in its free trade agreements that in its free trade agreements that ~~al ow~~allow it to it to
continue these restrictive data practices. In the Regional Comprehensive Economic Partnership continue these restrictive data practices. In the Regional Comprehensive Economic Partnership
(RCEP) agreement, signed in November 2020 among 15 countries, the e-commerce chapter (RCEP) agreement, signed in November 2020 among 15 countries, the e-commerce chapter
includes language on data transfer and location of computing facilities that, through broad includes language on data transfer and location of computing facilities that, through broad
exceptions, exceptions, ~~al ows~~allows parties to require data localization parties to require data localization and does not prevent a party from taking and does not prevent a party from taking
any measures that it considers necessary for the protection of its “essential security interests” in any measures that it considers necessary for the protection of its “essential security interests” in
the “cross border transfer of information by electronic means.”the “cross border transfer of information by electronic means.”~~127~~135 Significantly, the agreement Significantly, the agreement
also prohibits the requirement of source code transfers for licensing. In contrast, the United States also prohibits the requirement of source code transfers for licensing. In contrast, the United States
has negotiated to prohibit such localization requirements and other digital trade barriers in its has negotiated to prohibit such localization requirements and other digital trade barriers in its
~~trade agreements.128~~

~~China Crackdown,” TechCrunch, August 21, 2021.~~
~~124 Salvador Rodriguez, “T ikT ok Insiders Say Social Media Company is T ightly Controlled by Chinese P arent~~
~~ByteDance,” CNBC, June 25, 2021.~~
~~125~~trade agreements.136 The Changing Role of Hong Kong Since the promulgation of the Law of the People’s Republic of China on Safeguarding National Security in the Hong Kong Special Administrative Region in June 2020, the economic role of Hong Kong—including with regard to China’s trade and data security measures—has changed significantly. China’s blocking measures and anti-sanctions law, among other actions, arguably undermine Hong Kong’s traditional role as an international financial center and trade hub by bringing it under PRC requirements. The PRC government has also moved swiftly to control information dissemination and expression of views, as well as align Hong Kong’s judiciary more closely with the PRC system and views. In June 2021, the Director of Hong Kong’s Office for Safeguarding National Security warned that Hong Kong’s judiciary would be “the biggest loophole in the rule of law if national security is not safeguarded” and said it “must highly 133 Arjun Kharpal, “Zoom to Halt Direct Sales of Products to Users in China and Switch to Partner-only Model,” Arjun Kharpal, “Zoom to Halt Direct Sales of Products to Users in China and Switch to Partner-only Model,”
CNBC,CNBC, ~~August~~ August 3, 2020. 3, 2020.
~~126 T he~~134 The company also said that, in September 2019, the Chinese government turned off its service in company also said that, in September 2019, the Chinese government turned off its service in ~~Ch ina~~China without without
warningwarning and requiredand required the firm to designate an in-house contact for law enforcement requests and transfer China-based the firm to designate an in-house contact for law enforcement requests and transfer China-based
useruser data houseddata housed in the United States to a data center in China. “in the United States to a data center in China. “ Annual Report Pursuant to Section 13 or 15(d) of the Annual Report Pursuant to Section 13 or 15(d) of the
SecuritiesSecurities Exchange Act of 1934,” for the fiscal year ended January 31, 2021, Zoom Video Communications, Inc., filed Exchange Act of 1934,” for the fiscal year ended January 31, 2021, Zoom Video Communications, Inc., filed
on March 18, 2021, https://investors.zoom.us/node/8631/html. on March 18, 2021, https://investors.zoom.us/node/8631/html.
~~127~~135 RCEP signatories include RCEP signatories include the Asia-Pacific nations of Australia, Brunei, Cambodia, China, Indonesia, Japan, Laos, the Asia-Pacific nations of Australia, Brunei, Cambodia, China, Indonesia, Japan, Laos,
Malaysia, Myanmar, New Zealand, the Philippines, Singapore, South Korea, Malaysia, Myanmar, New Zealand, the Philippines, Singapore, South Korea, ~~T hailand~~Thailand, and Vietnam. Patrick LeBlond, , and Vietnam. Patrick LeBlond,
“Digital “Digital ~~T rade~~Trade: Is RCEP the : Is RCEP the ~~WT O~~WTO’s Future?” Centre for International Governance Innovation, November 23, 2020. ’s Future?” Centre for International Governance Innovation, November 23, 2020.
SeeSee ~~CRS~~ CRS Insight IN11200, Insight IN11200, The Regional ~~Com prehensive Econom ic~~Comprehensive Economic Partnership: Status and Recent ~~Developm ents~~Developments, by , by
Cathleen D. Cimino-Isaacs and Michael D. Sutherland. Cathleen D. Cimino-Isaacs and Michael D. Sutherland.
~~128 See CRS~~ 136 See CRS In Focus IF10770, In Focus IF10770, Digital Trade, by Rachel F. Fefer. , by Rachel F. Fefer.
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China’s Countermeasures to U.S. Economic Policy Actions and Authorities manifest the national will and national interest” or it would lose its legal authority granted by China’s legislature.137 On July 16, 2021, the U.S. Department of State, along with the U.S. Department of the Treasury, ~~Policy Actions and Authorities~~

~~The Changing Role of Hong Kong~~
~~Since the promulgation of the Law of the People’s Republic of China on Safeguarding National~~
~~Security in the Hong Kong Special Administrative Region in June 2020, the economic role of~~
~~Hong Kong—including with regard to China’s trade and data security measures—has changed~~
~~significantly. China’s blocking measures and anti-sanctions law, among other actions, arguably~~
~~undermine Hong Kong’s traditional role as an international financial center and trade hub by~~
~~bringing it under PRC requirements. The PRC government has also moved swiftly to control~~
~~information dissemination and expression of views, as wel as align Hong Kong’s judiciary more~~
~~closely with the PRC system and views. In June 2021, the Director of Hong Kong’s Office for~~
~~Safeguarding National Security warned that Hong Kong’s judiciary would be “the biggest~~
~~loophole in the rule of law if national security is not safeguarded” and said it “must highly~~
~~manifest the national wil and national interest” or it would lose its legal authority granted by~~
~~China’s legislature.129~~
~~On July 16, 2021, the U.S. Department of State, along with the U.S. Department of the Treasury,~~
the U.S. Department of Commerce, and the U.S. Department of Homeland Security, issued a the U.S. Department of Commerce, and the U.S. Department of Homeland Security, issued a
business advisory that warned U.S. businesses about emerging “operational, financial, legal, and business advisory that warned U.S. businesses about emerging “operational, financial, legal, and
reputational risks” to their operations and activities in Hong Kong.reputational risks” to their operations and activities in Hong Kong.~~130~~138 This followed earlier U.S. This followed earlier U.S.
government determinations and actions with regard to Hong Kong. On July 14, 2020, President government determinations and actions with regard to Hong Kong. On July 14, 2020, President
Donald J. Trump issued Executive Order (E.O.) 13936, which declared that the United States Donald J. Trump issued Executive Order (E.O.) 13936, which declared that the United States
would no longer treat Hong Kong as a jurisdiction separate from China for purposes of trade. The would no longer treat Hong Kong as a jurisdiction separate from China for purposes of trade. The
E.O. E.O. ~~specifical y~~specifically determined that, pursuant to section 202 of the United States-Hong Kong Policy determined that, pursuant to section 202 of the United States-Hong Kong Policy
Act of 1992, “the Special Administrative Region of Hong Kong (Hong Kong) is no longer Act of 1992, “the Special Administrative Region of Hong Kong (Hong Kong) is no longer
sufficiently autonomous to justify differential treatment in relation to the People’s Republic of sufficiently autonomous to justify differential treatment in relation to the People’s Republic of
China (PRC or China) under the particular United States laws and provisions thereof set out in the China (PRC or China) under the particular United States laws and provisions thereof set out in the
order.”order.”~~131~~139 Pursuant to the order, the U.S. government changed export control policy to require re- Pursuant to the order, the U.S. government changed export control policy to require re-
exports from Hong Kong to China to apply for a U.S. license rather than a license from Hong exports from Hong Kong to China to apply for a U.S. license rather than a license from Hong
Kong trade authorities.Kong trade authorities.~~132~~
140 Pursuant to the Hong Kong Autonomy Act (P.L. 116-149), in October 2020, the U.S. government Pursuant to the Hong Kong Autonomy Act (P.L. 116-149), in October 2020, the U.S. government
designated PRC and Hong Kong officials to be subject to sanctions for their role in contributing designated PRC and Hong Kong officials to be subject to sanctions for their role in contributing
to China’s failure to meet its international obligations related to Hong to China’s failure to meet its international obligations related to Hong ~~Kong133~~Kong141 In March 2021, the In March 2021, the
U.S. government designated the 14 vice chairs of the NPC’s Standing Committee to also be U.S. government designated the 14 vice chairs of the NPC’s Standing Committee to also be
subject to sanctions.subject to sanctions.~~134~~142 On July 16, 2021, the U.S. State Department issued a business advisory On July 16, 2021, the U.S. State Department issued a business advisory
warning about deteriorating conditions in Hong Kong.warning about deteriorating conditions in Hong Kong.~~135~~143 In response, on July 23, 2021, the In response, on July 23, 2021, the

~~129~~Chinese government announced that it was pursuing countermeasures that imposed sanctions under its new Anti-sanctions Law on one entity (the Hong Kong Democratic Council) and seven U.S. individuals (former U.S. Secretary of Commerce Wilbur Ross, the Chair of the U.S.-China Economic and Security Review Commission (USCC) Carolyn Bartholomew, former Staff Director of Congressional-Executive Commission on China (CECC) Jonathan Stivers, DoYun Kim at the National Democratic Institute for International Affairs, senior program manager of the International Republican Institute (IRI) Adam Joseph King, and China Director at Human Rights Watch Sophie Richardson).144 137 Helen Davidson, “Hong Kong’s Courts Should Reflect China’s Will, Says Official,” Helen Davidson, “Hong Kong’s Courts Should Reflect China’s Will, Says Official,” The Guardian, June 30, 2021. , June 30, 2021.
~~130~~138 “Issuance of a Hong Kong Business “Issuance of a Hong Kong Business Advisory,” Fact Sheet, Office of the Spokesperson, U.S. Department of State, Advisory,” Fact Sheet, Office of the Spokesperson, U.S. Department of State,
JulyJuly 16, 2021. 16, 2021.
~~131 “T he~~139 “The President’s Executive Order on Hong Kong Normalization,” Executive Order 13936, July 14, 2020, President’s Executive Order on Hong Kong Normalization,” Executive Order 13936, July 14, 2020,
https://www.federalregister.gov/documents/2020/07/17/2020https://www.federalregister.gov/documents/2020/07/17/2020 -15646/the-presidents-executive-order-on-hong-kong--15646/the-presidents-executive-order-on-hong-kong-
normalization. normalization.
~~132~~140 “Removal of Hong Kong as a “Removal of Hong Kong as a ~~Separat e~~Separate Destination Under the Export Administration Regulations,” Rule, Bureau Destination Under the Export Administration Regulations,” Rule, Bureau of of
Industry and Security, U.S.Industry and Security, U.S. Department of Commerce, December 23, 2020.Department of Commerce, December 23, 2020.
~~133~~ 141 “Identification of Foreign Persons Involved in the Erosion of the Obligations of China Under the Joint Declaration “Identification of Foreign Persons Involved in the Erosion of the Obligations of China Under the Joint Declaration
or the Basicor the Basic Law,” Report, BureauLaw,” Report, Bureau of East Asian Affairs, U.S. Department of State, October 14, 2020.of East Asian Affairs, U.S. Department of State, October 14, 2020.
~~134~~ 142 Yew Lun Yew Lun ~~T ian~~Tian, “China Passes Law to Counter Foreign Sanctions,” Reuters, June 20, 2021. , “China Passes Law to Counter Foreign Sanctions,” Reuters, June 20, 2021.
~~135~~143 “Issuance of a Hong Kong Business “Issuance of a Hong Kong Business Advisory,” Office of the Spokesperson, U.S. Department of State, July 16, 2021. 144 “Foreign Ministry Spokesperson’s Remarks on China’s Decision to Impose Sanctions on Relevant US Individuals and Entity,” Ministry of Foreign Affairs of the People’s Republic of China, July 23, 2021, https://www.fmprc.gov.cn/mfa_eng/xwfw_665399/s2510_665401/2535_665405/t1894670.shtml. Congressional Research Service 30 China’s Countermeasures to U.S. Economic Policy Actions and Authorities ~~Advisory,” Office of the Spokesperson, U.S. Department of State, July 16,~~
~~Congressional Research Service~~

29

~~China’s Countermeasures to U.S. Economic Policy Actions and Authorities~~

~~Chinese government announced that it was pursuing countermeasures that imposed sanctions~~
~~under its new Anti-sanctions Law on one entity (the Hong Kong Democratic Council) and seven~~
~~U.S. individuals (former U.S. Secretary of Commerce Wilbur Ross, the Chair of the U.S.-China~~
~~Economic and Security Review Commission (USCC) Carolyn Bartholomew, former Staff~~
~~Director of Congressional-Executive Commission on China (CECC) Jonathan Stivers, DoYun~~
~~Kim at the National Democratic Institute for International Affairs, senior program manager of the~~
~~International Republican Institute (IRI) Adam Joseph King, and China Director at Human Rights~~
~~Watch Sophie Richardson).136~~
Some foreign companies had been using data servers in Hong Kong in lieu of placing certain Some foreign companies had been using data servers in Hong Kong in lieu of placing certain
servers directly in mainland China, but this model is now at risk under the terms of the national servers directly in mainland China, but this model is now at risk under the terms of the national
security law for Hong Kong and recent moves by the Chinese government and the Hong Kong security law for Hong Kong and recent moves by the Chinese government and the Hong Kong
authorities to implement the law’s provisions.authorities to implement the law’s provisions.~~137~~145 In July 2020, TikTok’s parent company In July 2020, TikTok’s parent company
ByteDance announced it would cease operations of its Hong Kong app following the enactment ByteDance announced it would cease operations of its Hong Kong app following the enactment
of the National Security Law. ByteDance China CEO Zhang Nan said in a statement, however, of the National Security Law. ByteDance China CEO Zhang Nan said in a statement, however,
that while the Chinese version of TikTok, Douyin, does not that while the Chinese version of TikTok, Douyin, does not ~~official y~~officially operate in Hong Kong, it operate in Hong Kong, it
“has lots of users in Hong Kong and [we] “has lots of users in Hong Kong and [we] ~~wil~~ will continue to serve the users there.” In April 2021, continue to serve the users there.” In April 2021,
media reports indicated that ByteDance might be considering an IPO for some of its businesses, media reports indicated that ByteDance might be considering an IPO for some of its businesses,
particularly, Douyin, in Hong Kong or New York, particularly, Douyin, in Hong Kong or New York, ~~potential y~~potentially scaling back original IPO plans to scaling back original IPO plans to
list list al all of ByteDance.of ByteDance.~~138~~146 In July 2021, U.S. firms Facebook, Google, and Twitter reportedly In July 2021, U.S. firms Facebook, Google, and Twitter reportedly
privately told the Hong Kong government that they would need to leave Hong Kong if new data-privately told the Hong Kong government that they would need to leave Hong Kong if new data-
protection laws required them to disclose individuals’ information online so that they could be protection laws required them to disclose individuals’ information online so that they could be
harassed by others, a practice harassed by others, a practice ~~cal ed~~called “doxing.” The companies reportedly expressed concern that “doxing.” The companies reportedly expressed concern that
the new rules could put their staff at risk of criminal charges related to what the companiesthe new rules could put their staff at risk of criminal charges related to what the companies ’ users ’ users
post online.post online.~~139~~147 In May 2021, Hong Kong government authorities froze assets belonging to jailed In May 2021, Hong Kong government authorities froze assets belonging to jailed
Hong Kong media tycoon Jimmy Lai, including Hong Kong media tycoon Jimmy Lai, including al all shares in his company, Next Digital. This shares in his company, Next Digital. This
marked the first reported instance of China targeting a listed firm in Hong Kong under the new marked the first reported instance of China targeting a listed firm in Hong Kong under the new
National Security law provisions.National Security law provisions.~~140~~148 Hong Kong authorities reportedly arrested 117 people and Hong Kong authorities reportedly arrested 117 people and
charged 60 people under the new national security law between June 2020 and June 2021.charged 60 people under the new national security law between June 2020 and June 2021.~~141~~

~~2021.~~
~~136 “Foreign Ministry Spokesperson's Remarks on China's Decision to Impose Sanctions on Relevant US Individuals~~
~~and Entity,” Ministry of Foreign Affairs of the People’s Republic of China, July 23, 20 21,~~
~~https://www.fmprc.gov.cn/mfa_eng/xwfw_665399/s2510_665401/2535_665405/t1894670.shtml .~~
~~137 Sebastian Moss, “T ech Companies Grapple with Hong Kong's New Security Law,” Data Center Dynamics, July 8,~~
~~2020. See CRS Report R46473, China’s National Security Law for Hong Kong: Issues for Congress, by Susan V.~~
~~Lawrence and Michael F. Martin.~~
~~138 Anusuya Lahiri, “ByteDance Ditches IPO Plans For T he T ime Being,” South China Morning Post, April 23, 2021;~~
~~Yingzhi Yang and T ony Munroe, “T ikTok Owner ByteDance Launches Share Buyback After Shelving IPO P lans,”~~
Reuters, May 26, 2021.
~~139 Newley Purnell, “ Facebook, T witter, Google T hreaten to Quit Hong Kong Over Proposed Data Laws,”~~ ~~The Wall~~
~~Street Journal, July 5, 2021.~~
~~140 Jessie Pang, T winnie Siu, Hong Kong Freezes Listed Shares of Media T ycoon Lai Under Security L aw,” Reuters,~~
~~May 14, 2021.~~
141 Pak Yiu and Anand Katakam, “In One Year, Hong Kong Arrests 117 People Under New Security Law,” Reuters,
~~June 29, 2021.~~
~~Congressional Research Service~~

30

~~China’s Countermeasures to U.S. Economic Policy Actions and Authorities~~

~~Regulatory and Legal Activism142~~
~~China’s leadership is cal ing for the expanded use of domestic authorities in IP, technical~~
~~standards, procurement, and competition—both domestical y and global y—to advance China’s~~
~~national development goals. China is pressing for its courts to more actively promote China’s IP~~
~~and other commercial interests and for the adoption of China’s legal and judicial pronouncements~~
~~overseas, in part through broad judicial reforms and specific judiciary actions. On September 25,~~
~~2020, China’s Supreme People’s Court issued~~ ~~Guiding Opinions on Service Guarantees to~~
~~Further Expand Opening to the Outside World, which focuses on building China’s judicial~~
~~competencies, as part of a broader effort to expand the global influence of China’s judicial~~
~~system.143 The guidance cal s for coordinating international and domestic actions to defend~~
~~China’s judicial sovereignty and national security. The Supreme Court’s Five-Year Judicial~~
~~Protection Plan (2021-2025) cal s~~149 In October 2021, the Hong Kong Association of Banks issued guidance that included input from the Hong Kong Monetary Authority that obligates Hong Kong banks to report disclosures on clients suspected of violating the national security law.150 Regulatory and Legal Activism151 China’s leadership is calling for the expanded use of domestic authorities in IP, technical standards, procurement, and competition—both domestically and globally—to advance China’s national development goals. China is pressing for its courts to more actively promote China’s IP and other commercial interests and for the adoption of China’s legal and judicial pronouncements overseas, in part through broad judicial reforms and specific judiciary actions. On September 25, 2020, China’s Supreme People’s Court issued Guiding Opinions on Service Guarantees to Further Expand Opening to the Outside World, which focuses on building China’s judicial 145 Sebastian Moss, “Tech Companies Grapple with Hong Kong’s New Security Law,” Data Center Dynamics, July 8, 2020. See CRS Report R46473, China’s National Security Law for Hong Kong: Issues for Congress, by Susan V. Lawrence and Michael F. Martin. 146 Anusuya Lahiri, “ByteDance Ditches IPO Plans For The Time Being,” South China Morning Post, April 23, 2021; Yingzhi Yang and Tony Munroe, “TikTok Owner ByteDance Launches Share Buyback After Shelving IPO Plans,” Reuters, May 26, 2021. 147 Newley Purnell, “Facebook, Twitter, Google Threaten to Quit Hong Kong Over Proposed Data Laws,” The Wall Street Journal, July 5, 2021. 148 Jessie Pang, Twinnie Siu, Hong Kong Freezes Listed Shares of Media Tycoon Lai Under Security Law,” Reuters, May 14, 2021. 149 Pak Yiu and Anand Katakam, “In One Year, Hong Kong Arrests 117 People Under New Security Law,” Reuters, June 29, 2021. 150 Denise Wee, Hong Kong Widens Security Supervision With Request to Banks, Bloomberg, October 24, 2021. 151 The analysis on standards in this section includes a contribution by CRS Analyst Michael Sutherland. Congressional Research Service 31 China’s Countermeasures to U.S. Economic Policy Actions and Authorities competencies, as part of a broader effort to expand the global influence of China’s judicial system.152 The guidance calls for coordinating international and domestic actions to defend China’s judicial sovereignty and national security. The Supreme Court’s Five-Year Judicial Protection Plan (2021-2025) calls for “further maturation” of China’s IP judicial system “with for “further maturation” of China’s IP judicial system “with
Chinese characteristics, in line with rules of innovation, and meeting the needs of national Chinese characteristics, in line with rules of innovation, and meeting the needs of national
development goals,” and “to resolutely defend national sovereignty and core interests.” The plan development goals,” and “to resolutely defend national sovereignty and core interests.” The plan
~~cal s~~calls for “promoting the extraterritorial application of China’s laws and regulations on IP rights,” for “promoting the extraterritorial application of China’s laws and regulations on IP rights,”
“effectively protecting the overseas security and legal rights of Chinese citizens and enterprises,” “effectively protecting the overseas security and legal rights of Chinese citizens and enterprises,”
“properly resolving international “properly resolving international ~~paral el~~parallel litigation,” litigation,” and “safeguarding national security in the and “safeguarding national security in the
field of IP rights” (Articles 16 and 17).field of IP rights” (Articles 16 and 17).~~144~~153
As part of this effort, the Chinese government appears to be encouraging firms to advocate in the As part of this effort, the Chinese government appears to be encouraging firms to advocate in the
U.S. and other foreign legal systems to U.S. and other foreign legal systems to ~~chal enge~~challenge U.S. government actions that impose trade, U.S. government actions that impose trade,
investment, and procurement restrictions.investment, and procurement restrictions.~~145~~
154  In early 2019, Huawei sued the U.S. government in U.S. federal court in the  In early 2019, Huawei sued the U.S. government in U.S. federal court in the
Eastern District of Texas— Eastern District of Texas— where Huawei’s U.S. headquarters is located—where Huawei’s U.S. headquarters is located— over over
its ban on the federal purchase of the company’s products, but the case was its ban on the federal purchase of the company’s products, but the case was
rejected by a federal judge who determined that the U.S. government had acted rejected by a federal judge who determined that the U.S. government had acted
within its rights to ban Huawei.within its rights to ban Huawei.~~146~~155 Huawei has also sought to advance its IP Huawei has also sought to advance its IP
interests in the United States and has pressed its case in foreign courts including interests in the United States and has pressed its case in foreign courts including
in Australia, Canada, and Sweden.in Australia, Canada, and Sweden.~~147~~156
 In January 2021, Chinese smartphone producer Xiaomi sued the U.S.  In January 2021, Chinese smartphone producer Xiaomi sued the U.S.
government over its inclusion of the company in a list of Chinese military-tied government over its inclusion of the company in a list of Chinese military-tied

~~142 T he analysis on standards in this section includes a contribution by Michael Sutherland at the Congressional~~
~~Research Service.~~
~~143~~firms that Congress requires the U.S. Department of Defense to report.157 Luokang Technology, a Chinese mapping firm, and GOWIN Semiconductor, a Chinese field-programmable gate array (FPGA) semiconductor chip designer and manufacturer, filed similar suits in March 2021 and May 2021 respectively. In March 2021, a U.S. federal court blocked the U.S. government’s investment ban on Xiaomi, ruling that the Defense Department’s explanation for the ban was 152 China Supreme People’s Court, Fafa (2020) No. 37, https://mp.weixin.qq.com/s/zC5p4zojHVo8VDvBRiruUw China Supreme People’s Court, Fafa (2020) No. 37, https://mp.weixin.qq.com/s/zC5p4zojHVo8VDvBRiruUw (in (in
Chinese). Chinese).
~~144~~153 Marc Cohen, “ Marc Cohen, “ ~~T hree~~Three SPC Reports Document China’s Drive to Increase its Global SPC Reports Document China’s Drive to Increase its Global Role on IP AdjudicationRole on IP Adjudication ,” China ,” China
IPR Blog,IPR Blog, May 5, 2021, https://chinaipr.com/2021/05/05/three-spc-reports-documentMay 5, 2021, https://chinaipr.com/2021/05/05/three-spc-reports-document -chinas-drive-to-increase-its--chinas-drive-to-increase-its-
global-role-on-ip-adjudication/. global-role-on-ip-adjudication/.
~~145~~154 Dan Strumpf, “ Dan Strumpf, “ Huawei Files U.S. Lawsuit Disputing Huawei Files U.S. Lawsuit Disputing ~~T hat~~That It Is a Security It Is a Security ~~T hreat~~ Threat,” ,” The Wall Street Journal, ,
February 10, 2021. See CRSFebruary 10, 2021. See CRS Report R46693, Report R46693, Huawei and U.S. Law, by Stephen P. Mulligan, by Stephen P. Mulligan and Chris D. Linebaugh. and Chris D. Linebaugh.
~~146~~155 Steven Overly, “Court Rejects Huawei Steven Overly, “Court Rejects Huawei's ’s Lawsuit Over Federal Defense SpendingLawsuit Over Federal Defense Spending Law,” Law,” Politico, February 18, , February 18,
2020. 2020.
~~147~~156 Johan Ahlander and Supantha Mukherjee, “Swedish Johan Ahlander and Supantha Mukherjee, “Swedish Court Upholds Ban on HuaweiCourt Upholds Ban on Huawei selling 5G Network Gear,” selling 5G Network Gear,”
Reuters, June 22, 2021; Moira Warburton, “, June 22, 2021; Moira Warburton, “ Canada Court Rejects HuaweiCanada Court Rejects Huawei ~~CFO~~ CFO Push for Publication Ban on New Push for Publication Ban on New
Evidence in U.S.Evidence in U.S. Extradition Case,” Extradition Case,” Reuters, June 25, 2021; Paul Mozur and Austin Ramzy, “, June 25, 2021; Paul Mozur and Austin Ramzy, “ Huawei SuesHuawei Sues U.S. U.S.
Government Over What it Calls Unfair Ban,” Government Over What it Calls Unfair Ban,” The New York Times, March 6, 2020. 157 These reporting requirements were originally under required under provision in Section 1237 of the FY1999 National Defense Authorization Act (NDAA) (P.L. 105-261). These requirements are superseded by new requirements set in Section 1260H of the FY2021 NDAA (P.L. 116-283). Demtri Sevastopulo, “Xiaomi Sues U.S. Government Over Inclusion on Pentagon Blacklist,” The Financial Times, January 29, 2021; “Granting Plaintiffs’ Motion for Preliminary Injunction; Granting Plaintiffs’ Motion for Leave to File Supplemental Declaration,” Xiaomi Corporation vs. Department of Defense, United States District Court for the District of Columbia, March 12, 2021, https://storage.courtlistener.com/recap/gov.uscourts.dcd.226816/gov.uscourts.dcd.226816.21.0_1.pdf. Congressional Research Service 32 China’s Countermeasures to U.S. Economic Policy Actions and Authorities “inadequate” and “lacked substantial evidence.”158~~York Times, March 6, 2020;~~
~~Congressional Research Service~~

31

~~China’s Countermeasures to U.S. Economic Policy Actions and Authorities~~

~~firms that Congress requires the U.S. Department of Defense to report.148~~
~~Luokang Technology, a Chinese mapping firm, and GOWIN Semiconductor, a~~
~~Chinese field-programmable gate array (FPGA) semiconductor chip designer and~~
~~manufacturer, filed similar suits in March 2021 and May 2021 respectively. In~~
~~March 2021, a U.S. federal court blocked the U.S. government’s investment ban~~
~~on Xiaomi, ruling that the Defense Department’s explanation for the ban was~~
~~“inadequate” and “lacked substantial evidence.”149~~ In May 2021, a U.S. federal In May 2021, a U.S. federal
court also blocked implementation of the ban on Luokang.court also blocked implementation of the ban on Luokang.~~150~~159 Some experts assess Some experts assess
that the U.S. government did not advocate effectively on its behalf in that the U.S. government did not advocate effectively on its behalf in
consideration of the potential evidence and arguments it could have leveraged.consideration of the potential evidence and arguments it could have leveraged.~~151~~160
GOWIN rescinded its lawsuit in June 2021, after the Defense Department GOWIN rescinded its lawsuit in June 2021, after the Defense Department
removed it from its list of PLA-tied firms.removed it from its list of PLA-tied firms.~~152~~161 The Defense Department has The Defense Department has
removed removed al all three companies from its list of PLA-tied firms.three companies from its list of PLA-tied firms.~~153~~162
In its In its 2021 Special 301 Report released in April 2021, the USTR highlighted released in April 2021, the USTR highlighted “strong concerns “strong concerns
about the emerging practice in Chinese courts of issuing anti-suit injunctions”—court orders that about the emerging practice in Chinese courts of issuing anti-suit injunctions”—court orders that
prevent a party from initiating or continuing a patent rights proceeding in another jurisdiction—prevent a party from initiating or continuing a patent rights proceeding in another jurisdiction—
“in standards essential patents (SEP) disputes.”“in standards essential patents (SEP) disputes.”~~154~~163 USTR noted that “since the first issuance of USTR noted that “since the first issuance of
such an anti-suit injunction in August 2020, Chinese courts have swiftly issued additional anti-such an anti-suit injunction in August 2020, Chinese courts have swiftly issued additional anti-
suit injunctions in other SEP cases.” Chinese semiconductor companies—such as Fujian Jinhua suit injunctions in other SEP cases.” Chinese semiconductor companies—such as Fujian Jinhua
Integrated Circuit Co. Ltd. and Advanced Micro-Fabrication Equipment Inc. (AMEC)—have Integrated Circuit Co. Ltd. and Advanced Micro-Fabrication Equipment Inc. (AMEC)—have
~~chal enged~~challenged foreign companies’ exclusive use of certain proprietary technologies and pressed for foreign companies’ exclusive use of certain proprietary technologies and pressed for
better licensing terms by initiating copycat versions of U.S. cases in China’s courts.better licensing terms by initiating copycat versions of U.S. cases in China’s courts.~~155 Xiaomi is~~

~~148 T hese reporting requirements were originally under required under provision in Section 1237 of the FY1999~~
~~National Defense Authorization Act (NDAA) (P.L. 105-261). These requirements are superseded by new requirements~~
~~set in Section 1260H of the FY2021 NDAA (P.L. 116-283). Demtri Sevastopulo, “ Xiaomi Sues U.S. Government Over~~
~~Inclusion on Pentagon Blacklist ,” The Financial Tim es, January 29, 2021; “ Granting Plaintiffs’ Motion for Preliminary~~
~~Injunction; Granting Plaintiffs’ Motion for Leave to File Supplemental Declaration,” Xiaomi Corporation vs.~~
~~Department of Defense, United States District Court for the District of Columbia, March 12, 2021,~~
~~https://storage.courtlistener.com/recap/gov.uscourts.dcd.226816/gov.uscourts.dcd.226816.21.0_1.pdf.~~
~~149~~164 Xiaomi is currently trying to leverage an anti-suit injunction in China’s Wuhan Intermediate Court against Delaware-headquartered InterDigital, Inc. to challenge Interdigital’s ability to bring patent infringement charges against Xiaomi in U.S. and other courts outside China.165 China’s SEP effort has become increasingly complex as non-Chinese parties have pressed for U.S. courts’ acceptance of Chinese rulings that support their interests, as evidenced by a fair, reasonable and nondiscriminatory licensing rates (FRAND) case between Swedish-headquartered Ericsson and South Korean-headquartered Samsung in U.S. federal court in the Eastern District of Texas.166 158 “Granting Plaintiffs’ Motion for Preliminary Injunction; Granting Plaintiffs’ Motion for Leave to File Supplemental “Granting Plaintiffs’ Motion for Preliminary Injunction; Granting Plaintiffs’ Motion for Leave to File Supplemental
Declaration,” Xiaomi Corporation vs. Department of Defense, United States District Court for the District of Columbia, Declaration,” Xiaomi Corporation vs. Department of Defense, United States District Court for the District of Columbia,
March, 12, 2021, https://www.courtlistener.com/recap/gov.uscourts.dcd.226816/gov.uscourts.dcd.226816.21.0_1.pdfMarch, 12, 2021, https://www.courtlistener.com/recap/gov.uscourts.dcd.226816/gov.uscourts.dcd.226816.21.0_1.pdf . .
~~150~~159 Karen Freifeld, “Nasdaq Withdraws Listing Ban on Luokung after U.S. Judge Karen Freifeld, “Nasdaq Withdraws Listing Ban on Luokung after U.S. Judge's ’s Decision,” Decision,” Reuters, May 6, 2021. , May 6, 2021.
~~151~~160 Dan Strumpf, “Xiaomi Wins Court Ruling Dan Strumpf, “Xiaomi Wins Court Ruling Halting U.S. Investment Ban,” Halting U.S. Investment Ban,” The Wall Street Journal, March 12, 2021; , March 12, 2021;
Patrick Jenevein, “Last Week, Xiaomi Group WonPatrick Jenevein, “Last Week, Xiaomi Group Won – –and the U.S. Departments of Defense and Justice Lostand the U.S. Departments of Defense and Justice Lost – –a Round a Round
in U.S. Districtin U.S. District Court in Washington, D.C.,” Pointe Bello Insights, June 2021, at Court in Washington, D.C.,” Pointe Bello Insights, June 2021, at
https://www.pointebello.com/insights/balance-sheethttps://www.pointebello.com/insights/balance-sheet -battlefields; Emily Weinstein, “-battlefields; Emily Weinstein, “ U.S. Investment in China’s Capital U.S. Investment in China’s Capital
Markets and Military-Industrial Complex,” Markets and Military-Industrial Complex,” ~~T estimony~~Testimony before the U.S. China Economic and Security Review before the U.S. China Economic and Security Review
Commission, March 19, 2021. Commission, March 19, 2021.
~~152~~161 Chad Bray, “China Chad Bray, “China'’s Luokung s Luokung ~~T echnology~~Technology Sues U.S. Government over Sues U.S. Government over ~~T rump'~~Trump’s Investment Blacklist,” s Investment Blacklist,” South China
Morning Post, March 5, 2021; “, March 5, 2021; “ GOWIN Removed from CCMCGOWIN Removed from CCMC List, Withdrawing Lawsuit,”List, Withdrawing Lawsuit,” ~~GOWIN~~ GOWIN Company Press Company Press
Release,Release, June 25, 2021; https://www.gowinsemi.com/en/about/detail/latest_news/70/. June 25, 2021; https://www.gowinsemi.com/en/about/detail/latest_news/70/.
~~153~~162 U.S. Department of Defense “ U.S. Department of Defense “ Notice of Designation of Chinese Military Companies Under the William M. (Mac) Notice of Designation of Chinese Military Companies Under the William M. (Mac)
~~T hornberry~~Thornberry NDAA for FY21,” June 28, 2021, https://www.federalregister.gov/documents/2021/06/28/2021 NDAA for FY21,” June 28, 2021, https://www.federalregister.gov/documents/2021/06/28/2021 -
-13753/notice-of-designation-of-chinese-military-companies-under-the-william-m-mac-thornberry-ndaa-for-fy21. 13753/notice-of-designation-of-chinese-military-companies-under-the-william-m-mac-thornberry-ndaa-for-fy21.
~~154~~163 Office of the U.S. Office of the U.S. ~~T rade~~Trade Representative, Representative, Special 301 Report, April 30, 2021. , April 30, 2021.
~~155~~164 “AMEC Wins Injunction in Patent Infringement Dispute Involving Veeco Instruments (Shanghai) Co., Ltd,” “AMEC Wins Injunction in Patent Infringement Dispute Involving Veeco Instruments (Shanghai) Co., Ltd,” PR
Newswire,, December 8, 2017; “December 8, 2017; “ Veeco, AMEC and SGLVeeco, AMEC and SGL Settle MOCVDSettle MOCVD Wafer Carrier Patent Litigation,”Wafer Carrier Patent Litigation,”
Semiconductor Semiconductor ~~T oday~~Today, February 8, 2018; and “, February 8, 2018; and “ Micron Provides StatementMicron Provides Statement on Fujian Province Patent Litigation,” Micron Company News Release, July 5, 2018. 165 Konstanze Richter, “Post-ASI Battle: InterDigital Sues Xiaomi for Patent Infringement in Munich,” JUVE Patent, May 19, 2021; John Z.L. Huang, James H. Jiang, and Ya-Chiao Chang, “Wuhan D/B/A Chicago of China, Now Epicenter of Anti-Suit Injunctions,” Winston and Strawn LLP, April 22, 2021. 166 Gene Quinn, “Ericsson Wins Temporary Restraining Order Over Samsung in ED TX FRAND Litigation,” IP Congressional Research Service 33 China’s Countermeasures to U.S. Economic Policy Actions and Authorities ~~on Fujian Province Patent Litigation,”~~
~~Congressional Research Service~~

32

~~China’s Countermeasures to U.S. Economic Policy Actions and Authorities~~

~~currently trying to leverage an anti-suit injunction in China’s Wuhan Intermediate Court against~~
~~Delaware-headquartered InterDigital, Inc. to chal enge Interdigital’s ability to bring patent~~
~~infringement charges against Xiaomi in U.S. and other courts outside China.156 China’s SEP effort~~
~~has become increasingly complex as non-Chinese parties have pressed for U.S. courts’ acceptance~~
~~of Chinese rulings that support their interests, as evidenced by a fair, reasonable and~~
~~nondiscriminatory licensing rates (FRAND) case between Swedish-headquartered Ericsson and~~
~~South Korean-headquartered Samsung in U.S. federal court in the Eastern District of Texas.157~~
Moreover, according to USTR, “recent high-level statements have raised concerns about whether Moreover, according to USTR, “recent high-level statements have raised concerns about whether
the proliferation of such anti-suit injunctions has been purposeful, including statements from the proliferation of such anti-suit injunctions has been purposeful, including statements from
President Xi about promoting the extraterritorial application of China’s IP law and from China’s President Xi about promoting the extraterritorial application of China’s IP law and from China’s
IP IP ~~appel ate~~appellate court about how issuance of China’s first SEP-related anti-suit injunction accelerated court about how issuance of China’s first SEP-related anti-suit injunction accelerated
global settlement in a SEP dispute and was an example of the court ‘serving’ the ‘global settlement in a SEP dispute and was an example of the court ‘serving’ the ‘~~overal~~ overall work’ of work’ of
the Chinese Communist Party and the Chinese state.” As part of its judicialthe Chinese Communist Party and the Chinese state.” As part of its judicial reforms, China has reforms, China has
advocated that judges closely use certain previous cases as guidance. In this regard, China’s advocated that judges closely use certain previous cases as guidance. In this regard, China’s
Supreme Court has emphasized the importance of 10 “big cases” as important models. Two of Supreme Court has emphasized the importance of 10 “big cases” as important models. Two of
these cases involve anti-suit injunctions (these cases involve anti-suit injunctions (Huawei v. Conversant and and OPPO vs. Sharp).).~~158~~167
The Chinese government is also asserting the role of its domestic regulatory and judicial system The Chinese government is also asserting the role of its domestic regulatory and judicial system
to empower the government to press foreign firms for more generous IP licensing terms. China’s to empower the government to press foreign firms for more generous IP licensing terms. China’s
antimonopoly law states that IP should be shared when it promotes the public interest of creating antimonopoly law states that IP should be shared when it promotes the public interest of creating
common standards or meeting industrial goals.common standards or meeting industrial goals.~~159~~168 In April 2021, a Chinese court ruled that certain In April 2021, a Chinese court ruled that certain
Hitachi Metals REEs patents are “de-facto” essential and said that the companyHitachi Metals REEs patents are “de-facto” essential and said that the company'’s refusal to s refusal to
license them to certain entities in China constitutes an abuse of their dominant market position license them to certain entities in China constitutes an abuse of their dominant market position
and control of certain technologies that deny others market entry.and control of certain technologies that deny others market entry.~~160~~169 China’s state-controlled Rare China’s state-controlled Rare
Earth Earth ~~Al iance~~ Alliance has targeted Hitachi’s rare earth magnet patents since at least 2014.has targeted Hitachi’s rare earth magnet patents since at least 2014.~~161~~170
More broadly, the Chinese government is using its competition authorities to More broadly, the Chinese government is using its competition authorities to ~~commercial y~~commercially
pressure and impose terms on U.S. and foreign firms in ways that advance China’s industrial pressure and impose terms on U.S. and foreign firms in ways that advance China’s industrial
policies. policies. ~~Specifical y~~Specifically, the Chinese government is leveraging U.S. technology companies’ need for , the Chinese government is leveraging U.S. technology companies’ need for
its approval of global merger and acquisition deals to set specific market terms and, in some its approval of global merger and acquisition deals to set specific market terms and, in some
instances, direct the sale of particular businesses to advantage particular Chinese companies. This instances, direct the sale of particular businesses to advantage particular Chinese companies. This
pattern of behavior has become particularly prominent and pattern of behavior has become particularly prominent and ~~potential y~~potentially consequential in the consequential in the
~~semiconductor sector:~~

~~Micron Company News Release, July 5, 2018.~~
~~156 Konstanze Richter, “Post-ASI Battle: InterDigital Sues Xiaomi for Patent Infringement in Munich,” JUVE Patent,~~
~~May 19, 2021; John Z.L. Huang, James H. Jiang, and Ya-Chiao Chang, “ Wuhan D/B/A Chicago of China, Now~~
~~Epicenter of Anti-Suit Injunctions,” Winston and Strawn LLP, April 22, 2021.~~
~~157 Gene Quinn, “ Ericsson Wins T emporary Restraining Order Over Samsung in ED T X FRAND Litigation ,” IP~~
~~Watch Dog, December 29, 2020.~~
~~158 Marc Cohen, “T hree SPC Reports Document China’s Drive to Increase its Global Role on IP Adjudication,” China~~
~~IPR Blog, May 5, 2021, https://chinaipr.com/2021/05/05/three-spc-reports-document -chinas-drive-to-increase-its-~~
~~global-role-on-ip-adjudication/.~~
~~159 Antimonopoly Law of the People’s Republic of China, August 3, 2008,~~
semiconductor sector:  China’s review in 2015 of the Dutch firm NXP’s acquisition of the U.S. firm Freescale set terms that forced the sale of NXP’s RF power transistor business to JAC Capital, a company-controlled by China’s State Council.171 Under this Chinese government direction, JAC Capital acquired NXP’s restructured RF Power chip business Nexperia in 2015. In July 2021, Nexperia, with support from Chinese state funds (Wise Capital and JAC Capital), announced it would be acquiring the UK’s semiconductor chip facility, Newport Wafer Fab. The facility has 400 advanced technical personnel developing advanced Gallium Nitride (GaN) light-emitting diodes (LEDs) and field effect transistors (HEMTs), next generation radio frequency (RF) monolithic microwave integrated circuits for radar and communications, and is working with the UK’s Advanced Propulsion Watch Dog, December 29, 2020. 167 Marc Cohen, “Three SPC Reports Document China’s Drive to Increase its Global Role on IP Adjudication,” China IPR Blog, May 5, 2021, https://chinaipr.com/2021/05/05/three-spc-reports-document-chinas-drive-to-increase-its-global-role-on-ip-adjudication/. 168 Antimonopoly Law of the People’s Republic of China, August 3, 2008, http://english.mofcom.gov.cn/article/policyrelease/Businessregulations/201303/20130300045909.shtmlhttp://english.mofcom.gov.cn/article/policyrelease/Businessregulations/201303/20130300045909.shtml . .
~~160~~169 Jacob Schindler, “Court Rules Against Hitachi Metals in China’s First ‘Essential Facilities’ Patent Case,” Global Jacob Schindler, “Court Rules Against Hitachi Metals in China’s First ‘Essential Facilities’ Patent Case,” Global
Competition Review, April 29, 2021. Competition Review, April 29, 2021.
~~161~~170 “China “China ~~T akes~~Takes on Hitachi as 17-year-old Rare Earth Patent Ends,” Bloomberg News, on Hitachi as 17-year-old Rare Earth Patent Ends,” Bloomberg News, July 28, 2014. 171 Chester Yung and Archie van Riemskijk, “NXP Semiconductors Sells Unit to Chinese Firm for $1.8 Billion,” The Wall Street Journal, May 28, 2015. Congressional Research Service 34 China’s Countermeasures to U.S. Economic Policy Actions and Authorities Centre.172~~July 28, 2014.~~
~~Congressional Research Service~~

33

~~China’s Countermeasures to U.S. Economic Policy Actions and Authorities~~

~~ China’s review in 2015 of the Dutch firm NXP’s acquisition of the U.S. firm~~
~~Freescale set terms that forced the sale of NXP’s RF power transistor business to~~
~~JAC Capital, a company-controlled by China’s State Council.162 Under this~~
~~Chinese government direction, JAC Capital acquired NXP’s restructured RF~~
~~Power chip business Nexperia in 2015. In July 2021, Nexperia, with support~~
~~from Chinese state funds (Wise Capital and JAC Capital), announced it would be~~
~~acquiring the UK’s semiconductor chip facility, Newport Wafer Fab. The facility~~
~~has 400 advanced technical personnel developing advanced Gal ium Nitride~~
~~(GaN) light-emitting diodes (LEDs) and field effect transistors (HEMTs), next~~
~~generation radio frequency (RF) monolithic microwave integrated circuits for~~
~~radar and communications, and is working with the UK’s Advanced Propulsion~~
~~Centre.163~~ In response to political pressure from members of Parliament, UK In response to political pressure from members of Parliament, UK
Prime Minister Boris Johnson announced on July 7, 2021, that the UK Prime Minister Boris Johnson announced on July 7, 2021, that the UK
government would review the investment transaction.government would review the investment transaction.~~164~~173
 China imposed antitrust terms on Qualcomm in 2015, which required Qualcomm  China imposed antitrust terms on Qualcomm in 2015, which required Qualcomm
to pay a $975 to pay a $975 ~~mil ion~~ million fine, as fine, as ~~wel~~ well as license its 3G and 4G patents to Chinese as license its 3G and 4G patents to Chinese
companies and enter into a joint venture with the government of China’s Guizhou companies and enter into a joint venture with the government of China’s Guizhou
Province to jointly manufacture server chips in order for Qualcomm to access the Province to jointly manufacture server chips in order for Qualcomm to access the
wireless market in China.wireless market in China.~~165~~174
 In 2020, China reportedly leveraged its antitrust purview to complicate Applied  In 2020, China reportedly leveraged its antitrust purview to complicate Applied
Material’s bid for Kokusai Electric and NVidia’s bid for Japan’s SoftBank- Material’s bid for Kokusai Electric and NVidia’s bid for Japan’s SoftBank-
controlled ARM.controlled ARM.~~166~~175 China also is complicating the potential use of foreign China also is complicating the potential use of foreign
investment review and antitrust authorities in the United States, Japan, and the investment review and antitrust authorities in the United States, Japan, and the
UK over ARM’s business in China by facilitating a dispute about whether certain UK over ARM’s business in China by facilitating a dispute about whether certain
ARM businesses in China were included in Softbank’s purchase of ARM in ARM businesses in China were included in Softbank’s purchase of ARM in
2016. The head of ARM’s joint venture business in China is suing ARM China 2016. The head of ARM’s joint venture business in China is suing ARM China
for control of ARM’s China operations, with reported backing of the Shenzhen for control of ARM’s China operations, with reported backing of the Shenzhen
government. The Shenzhen government appears to have an active stake in both government. The Shenzhen government appears to have an active stake in both
transactions and may be trying to secure the best technology access for China transactions and may be trying to secure the best technology access for China
through its joint positions. The Shenzhen government is also partnered with through its joint positions. The Shenzhen government is also partnered with
ARM through SoftBank’s joint venture with the Hopu Fund.ARM through SoftBank’s joint venture with the Hopu Fund.~~167~~

~~162 Chester Yung and Archie van Riemskijk, “NXP Semiconductors Sells Unit to Chinese Firm for $1.8 Billion,”~~ ~~The~~
~~Wall Street Journal, May 28, 2015.~~
~~163 Sam Shead, “UK's Largest Chip Plant to be Acquired~~ 176 The Chinese government is seeking to influence global standards in sectors in which U.S. firms have traditionally led standard setting (e.g., telecommunications, data protection, and cybersecurity) to advance China’s national economic, industrial, and technological development goals.177 U.S. stakeholders have raised concerns about Beijing pressuring Chinese participants to 172 Sam Shead, “UK’s Largest Chip Plant to be Acquired by Chinese-Owned Firm Nexperia Amid Global by Chinese-Owned Firm Nexperia Amid Global
Semiconductor Shortage,” CNBC,Semiconductor Shortage,” CNBC, July 2, 2021; “July 2, 2021; “ Newport Wafer Fab Profile,” Newport Wafer Fab Profile,” Manufacturing-Today, Issue 183. , Issue 183.
~~164~~173 David Wilcock, “Boris Johnson U-turns to Confirm National Security Adviser Will Probe Sale of UK Microchip David Wilcock, “Boris Johnson U-turns to Confirm National Security Adviser Will Probe Sale of UK Microchip
Maker Newport Wafer FabMaker Newport Wafer Fab to Chinese firm Nexperia,” to Chinese firm Nexperia,” Daily Mail, July, July 7, 2021. 7, 2021.
~~165 “T he~~174 “The Complete Administrative Sanction Decision for the Qualcomm Case, National Development and Reform Complete Administrative Sanction Decision for the Qualcomm Case, National Development and Reform
Commission of the People’s Republic of China,” March 2, 2015; Noel RandewichCommission of the People’s Republic of China,” March 2, 2015; Noel Randewich and Matthew Miller, “Qualcomm to and Matthew Miller, “Qualcomm to
Pay $975 million to Resolve China Antitrust Dispute,” Pay $975 million to Resolve China Antitrust Dispute,” Reuters, February 9, 2015; “Qualcomm, February 9, 2015; “Qualcomm ~~and Guizhou Province Sign~~
~~Strategic Cooperation Agreement and Form Joint Venture to Design and Sell World-Class Server Chipsets in China,” Qualcomm~~
~~Press Release, January 17, 2016; Lewis Ho and Monique Lee, “A Case Study: How the Record Breaking Antitrust Penalty Against~~
~~Qualcomm Transforms the Landscape of SEPs Licensing in China,” Dechert LLP, March 27, 2015.~~
~~166 “Applied Materials T erminates~~ and Guizhou Province Sign Strategic Cooperation Agreement and Form Joint Venture to Design and Sell World-Class Server Chipsets in China,” Qualcomm Press Release, January 17, 2016; Lewis Ho and Monique Lee, “A Case Study: How the Record Breaking Antitrust Penalty Against Qualcomm Transforms the Landscape of SEPs Licensing in China,” Dechert LLP, March 27, 2015. 175 “Applied Materials Terminates $2.2 Billion Deal for Japan’s Kokusai Electric,” $2.2 Billion Deal for Japan’s Kokusai Electric,” Reuters, March 29, 2021; “Nvidia’s , March 29, 2021; “Nvidia’s
Acquisition of ARMAcquisition of ARM ~~T hrows~~ Throws Company into Company into ~~T ech~~Tech Spat Between U.S. Spat Between U.S. and China,” and China,” Reuters, September 14, 2020; Ryan September 14, 2020; Ryan
McMorrow and Richard Waters, “Nvidia Asks Chinese RegulatorsMcMorrow and Richard Waters, “Nvidia Asks Chinese Regulators to Approve $40bn Arm Deal,” to Approve $40bn Arm Deal,” The Financial Times, ,
June 8, 2021. June 8, 2021.
~~167~~176 Debby Wu and Ian King, “ARM Battle With China CEO Escalates, Complicating SoftBank Sale,” Bloomberg, Debby Wu and Ian King, “ARM Battle With China CEO Escalates, Complicating SoftBank Sale,” Bloomberg,
~~Congressional Research Service~~

34

~~China’s Countermeasures to U.S. Economic Policy Actions and Authorities~~

~~The Chinese government is seeking to influence global standards in sectors in which U.S. firms~~
~~have traditional y led standard setting (e.g., telecommunications, data protection, and~~
~~cybersecurity) to advance China’s national economic, industrial, and technological development~~
~~goals.168 U.S. stakeholders have raised concerns about Beijing pressuring Chinese participants to~~
~~vote as a bloc for standards proposed by Chinese firms.169 China’s approach chal enges U.S.~~
~~interests in part because of how the government is arguably using standards to set technology~~
~~requirements in China that advance its industrial policies and potential y~~ April 9, 2021; Peter Clarke, “ARM in Struggle for Control of Chinese Subsidiary,” EETimes, June 11, 2020. 177 International standards, broadly defined, are technical specifications, procedures, and benchmarks that are either established de jure by international standards-setting organizations such as the International Organisation for Standardisation (ISO), or in a more de facto manner as certain technology or practices are adopted by firms for economic reasons. Scott Kennedy, “The Political Economy of Standards Coalitions: Explaining China’s Involvement in High-Tech Standards Wars,” Asia Policy No. 2 (July 2006): pp. 41-62; Valentina Pop, Sha Hua, and Daniel Michaels, “From Lightbulbs to 5G, China Battles West for Control of Vital Technology Standards,” Wall Street Journal, February 8, 2021. Congressional Research Service 35 China’s Countermeasures to U.S. Economic Policy Actions and Authorities vote as a bloc for standards proposed by Chinese firms.178 China’s approach challenges U.S. interests in part because of how the government is arguably using standards to set technology requirements in China that advance its industrial policies and potentially disadvantage foreign disadvantage foreign
firms. A core tenet of China’s cybersecurity certification, as outlined in various regulations and firms. A core tenet of China’s cybersecurity certification, as outlined in various regulations and
China’s 2017 Cybersecurity Law, is a set of “secure and controllable” standards formulated by China’s 2017 Cybersecurity Law, is a set of “secure and controllable” standards formulated by
China’s National Information Security Standardization Technical Committee more widely known China’s National Information Security Standardization Technical Committee more widely known
as “Technical Committee 260” or “TC260.”as “Technical Committee 260” or “TC260.”~~170~~179 China appears to be using these domestic standards China appears to be using these domestic standards
to require U.S. firms to share key technologies with Chinese government agencies and industry to require U.S. firms to share key technologies with Chinese government agencies and industry
associations.associations.~~171~~180 Under these policies, U.S. technology firms since 2015 have increasingly Under these policies, U.S. technology firms since 2015 have increasingly
partnered in China with state companies, institutes, and the Chinese government.partnered in China with state companies, institutes, and the Chinese government.~~172~~181
China-Controlled Global Networks and Platforms
China’s national government and related overseas projects under its China’s national government and related overseas projects under its One Belt, One Road initiative initiative
aim, in part, to develop alternatives to U.S. trade networks and technical standards.aim, in part, to develop alternatives to U.S. trade networks and technical standards.~~173~~182 These These
alternative Chinese-led technology, supply chain, and financial networks could facilitate China’s alternative Chinese-led technology, supply chain, and financial networks could facilitate China’s
abilityability to create alternatives to U.S. global networks and platforms and deepen China’s influence to create alternatives to U.S. global networks and platforms and deepen China’s influence
in setting global market terms, rules, and standards. Many of China’s investments in ports, rail, in setting global market terms, rules, and standards. Many of China’s investments in ports, rail,
and telecommunications networks involve the creation of infrastructure on which China can and telecommunications networks involve the creation of infrastructure on which China can
develop related and interoperable products and services.develop related and interoperable products and services.~~174~~183 In a March 2021 discussion of the 14th Five-Year Plan, Zhang Yuyan, Director of the Institute of World Politics at the Chinese Academy of Social Sciences, emphasized the importance of “seeking to advance Chinese rules and standards overseas,” “introducing and going out on the basis of fair and reasonable institutional arrangements,” and “continuously strengthening the coordination and integration of rules, regulations, management, standards with other countries.”184 The 14th Five-Year plan outlines how China plans to actively participate in the setting of international rules and standards, with an emphasis on digital and financial trade.185 178 U.S. China Business Council (USCBC), “China in International Standards Setting: USCBC ~~In a March 2021 discussion of the 14th~~

~~April 9, 2021; Peter Clarke, “ARM in Struggle for Control of Chinese Subsidiary,” EETimes, June 11, 2020.~~
~~168 International standards, broadly defined, are technical specifications, procedures, and benchmarks that are either~~
~~established de jure by international standards-setting organizations such as the International Organisation for~~
~~Standardisation (ISO), or in a more de facto manner as certain technology or practices are adopted by f irms for~~
~~economic reasons. Scott Kennedy, “T he Political Economy of Standards Coalitions: Explaining China’s Involvement in~~
~~High-T ech Standards Wars,” Asia Policy No. 2 (July 2006): pp. 41-62; Valentina Pop, Sha Hua, and Daniel Michaels,~~
~~“From Lightbulbs to 5G, China Battles West for Control of Vital T echnology Standards,” Wall Street Journal,~~
~~February 8, 2021.~~
~~169 U.S. China Business Council (USCBC), “China in International Standards Setting: USCBC~~ Recommendations for Recommendations for
Constructive Participation,” February 2020, Constructive Participation,” February 2020,
https://www.uschina.org/sites/default/files/china_in_international_standards_setting.pdfhttps://www.uschina.org/sites/default/files/china_in_international_standards_setting.pdf ; Melanie Hart and Jordan ; Melanie Hart and Jordan
Link, “Link, “~~T here~~There Is a Solution to the Huawei Is a Solution to the Huawei Challenge,” Challenge,” Center For American Progress, October 14, 2020. , October 14, 2020.
~~170~~179 Samm Sacks, “How Chinese Cybersecurity Standards Impact Doing Business Samm Sacks, “How Chinese Cybersecurity Standards Impact Doing Business In China,” In China,” Center for Strategic and
International Studies, August, August 2, 2018, https://www.csis.org/analysis/how-chinese-cybersecurity-standards-impact2, 2018, https://www.csis.org/analysis/how-chinese-cybersecurity-standards-impact --
doing-business-china;doing-business-china; Clara Wang, “Clara Wang, “ Here’s who has the ear of China’s most active cyber regulator,” Here’s who has the ear of China’s most active cyber regulator,” Protocol, January , January
27, 2021, https://www.protocol.com/china/tc260-china-cyber-regulator-companies. 27, 2021, https://www.protocol.com/china/tc260-china-cyber-regulator-companies.
~~171~~180 European Chamber of Commerce in China, “Standards and Conformity Assessment Working Group Position Paper European Chamber of Commerce in China, “Standards and Conformity Assessment Working Group Position Paper
2019/2020,” September 24, 2019, https://www.europeanchamber.com.cn/en/publications-2019/2020,” September 24, 2019, https://www.europeanchamber.com.cn/en/publications-
archive/710/Standards_and_Conformity_Assessment_Working_Group_Position_Paper_2019_2020. archive/710/Standards_and_Conformity_Assessment_Working_Group_Position_Paper_2019_2020.
~~172~~181 Eva Dou, “ Eva Dou, “ China’s China’s ~~T ech~~Tech Rules Make It Hard for U.S. Firms to Rules Make It Hard for U.S. Firms to ~~T ake~~Take Control,” Control,” The Wall Street Journal, June 2, , June 2,
2016. 2016.
~~173 See CRS~~ 182 See CRS In Focus IF11735, In Focus IF11735, China’s “One Belt, One Road” Initiative: Economic Issues, by Karen M. Sutter, , by Karen M. Sutter,
Andres B. Schwarzenberg,Andres B. Schwarzenberg, and Michael D. Sutherland. and Michael D. Sutherland.
~~174~~183 Ashley Dutta, “Introduction to China’s Digital Silk Road: Economic and Ashley Dutta, “Introduction to China’s Digital Silk Road: Economic and ~~T echnological~~Technological Implications,” Roundtable Implications,” Roundtable
in Asia Policy 15.1, National Bureau of Asian Research, January 2020. in Asia Policy 15.1, National Bureau of Asian Research, January 2020.
~~Congressional Research Service~~

35

~~China’s Countermeasures to U.S. Economic Policy Actions and Authorities~~

~~Five-Year Plan, Zhang Yuyan, Director of the Institute of World Politics at the Chinese Academy~~
~~of Social Sciences, emphasized the importance of “seeking to advance Chinese rules and~~
~~standards overseas,” “introducing and going out on the basis of fair and reasonable institutional~~
~~arrangements,” and “continuously strengthening the coordination and integration of rules,~~
~~regulations, management, standards with other countries.”175 The 14th Five-Year plan outlines~~
~~how China plans to actively participate in the setting of international rules and standards, with an~~
~~emphasis on digital and financial trade.176~~
~~In particular, China’s BeiDou Navigation Satel ite System provides an alternative to U.S. GPS~~
184 “Economists Interpret the ‘14th Five-Year Plan’ and the Outline of Long-Term Goals for 2035,” Economic Daily, March 14, 2021, http://www.gov.cn/zhengce/2021-03/14/content_5592819.htm. 185 (Authorized Release) Proposal of the Central Committee of the Chinese Communist Party on Drawing Up the 14th Five-Year Plan for National Economic and Social Development and Long-Range Objectives for 2030, Xinhua, Congressional Research Service 36 China’s Countermeasures to U.S. Economic Policy Actions and Authorities In particular, China’s BeiDou Navigation Satellite System provides an alternative to U.S. GPS navigation technology, including an alternative technology foundation on which China can build navigation technology, including an alternative technology foundation on which China can build
a a ~~vertical y~~vertically integrated Chinese commercial ecosystem in a range of products, services, and integrated Chinese commercial ecosystem in a range of products, services, and
technologies that rely on these geolocation technologies. In transportation, overland routes that technologies that rely on these geolocation technologies. In transportation, overland routes that
China is developing through China is developing through One Belt, One Road projects offer alternative trading routes to U.S.-projects offer alternative trading routes to U.S.-
controlled sea lanes. China’s creation of controlled sea lanes. China’s creation of One Belt, One Road arbitration centers in China aim to arbitration centers in China aim to
formulate arbitration rules, set up a platform to provide legal services, and settle disputes in ways formulate arbitration rules, set up a platform to provide legal services, and settle disputes in ways
that may give China an upper hand.that may give China an upper hand.~~177~~186 In a potential conflict of interest, the Wuhan Arbitration In a potential conflict of interest, the Wuhan Arbitration
Panel that China set up to arbitrate commercial disputes involving Panel that China set up to arbitrate commercial disputes involving One Belt, One Road projects projects
includes the heads of legal departments of China’s major state firms most active in includes the heads of legal departments of China’s major state firms most active in One Belt, One
Road projects—including, China State Railway Group, China State Construction Engineering projects—including, China State Railway Group, China State Construction Engineering
Corporation, Power Construction Corporation of China, China Communications Construction Corporation, Power Construction Corporation of China, China Communications Construction
Company, and Sinohydro Corporation.Company, and Sinohydro Corporation.~~178~~187
Central Bank Digital Currency
China’s central bank, the People’s Bank of China (PBOC), is developing a digitalChina’s central bank, the People’s Bank of China (PBOC), is developing a digital currency and currency and
piloting its adoption piloting its adoption ~~domestical y, as wel~~ domestically, as well as through pilot trading with Hong Kong, Thailand, and as through pilot trading with Hong Kong, Thailand, and
the United Arab Emirates (UAE).the United Arab Emirates (UAE).~~179~~188 China’s development of a digital China’s development of a digital currency could leverage currency could leverage
financial technology architecture that China’s leading companies, such as Alibaba, are developing financial technology architecture that China’s leading companies, such as Alibaba, are developing
overseas.overseas.~~180~~189 The dominance of the U.S. dollar in cross-border trade and international financial The dominance of the U.S. dollar in cross-border trade and international financial
transactions transactions ~~al ows~~allows the United States unique visibility the United States unique visibility and levers of influence through policy measures, such as sanctions imposed for foreign policy or national security objectives that impede access to the U.S. financial system or use of the U.S. dollar in international trade. Some analysts assess that China’s efforts to develop an alternative currency and financial network will not immediately challenge the global role of the U.S. dollar given an array of constraints, such as the lack of full convertibility of China’s currency, the renminbi (RMB), hesitancy of other central banks to use a digital currency, long-standing international acceptance of reliance on the U.S. dollar in particular sectors (oil and gas, for example), and national security concerns in other countries.190 Over time, however, a Chinese central bank digital currency and accompanying ~~and levers of influence through policy~~

~~175 “Economists Interpret the ‘14th Five-Year Plan’ and the Outline of Long-T erm Goals for 2035,” Economic Daily,~~
~~March 14, 2021, http://www.gov.cn/zhengce/2021-03/14/content_5592819.htm.~~
~~176 (Authorized Release) Proposal of the Central Committee of the Chinese Communist Party on Drawing Up the 14th~~
~~Five-Year Plan for National Economic and Social Development and Long-Range Objectives for 2030, Xinhua,~~
November 3, 2020, https://web.archive.org/web/20201104114039/http:/www.xinhuanet.com/politics/zywj/2020November 3, 2020, https://web.archive.org/web/20201104114039/http:/www.xinhuanet.com/politics/zywj/2020 -
-11/03/c_1126693293.htm (Chinese text); https://cset.georgetown.edu/wp-11/03/c_1126693293.htm (Chinese text); https://cset.georgetown.edu/wp-
content/uploads/t0237_5th_Plenum_Proposal_EN-1.pdf (unofficial English translation). content/uploads/t0237_5th_Plenum_Proposal_EN-1.pdf (unofficial English translation).
~~177 T ianshu~~186 Tianshu (Susan) Lu and Yisha He, “ (Susan) Lu and Yisha He, “ Recent Developments In China’s Cross-border Dispute Resolution Under the Recent Developments In China’s Cross-border Dispute Resolution Under the
‘Belt and Road‘Belt and Road Initiative,’” Initiative,’” The American Review of International Arbitration, Columbia, Columbia Law School, FebruaryLaw School, February 1, 1,
2018. 2018.
~~178~~187 “China Establishes ‘One Belt, One Road’ Arbitration Court,” China Go Abroad, “China Establishes ‘One Belt, One Road’ Arbitration Court,” China Go Abroad,
http://www.chinagoabroad.com/en/article/21685http://www.chinagoabroad.com/en/article/21685 . For a list of the arbitrators, . For a list of the arbitrators,
seehttp://www.wiac.org.cn/index.php/arbitrator/index/p/1.html. seehttp://www.wiac.org.cn/index.php/arbitrator/index/p/1.html.
~~179~~188 Frank Frank ~~T ang~~Tang, “China Digital Currency: China, Hong Kong Begin , “China Digital Currency: China, Hong Kong Begin ~~T esting~~Testing Digital Yuan as Beijing Ramps up Digital Yuan as Beijing Ramps up
Research into Cross-Border Use,” Research into Cross-Border Use,” South China Morning Post, April 2, 2021; “, April 2, 2021; “ Joint Statement on Multiple Central Joint Statement on Multiple Central
Bank Digital Currency (m-CBDC)Bank Digital Currency (m-CBDC) ~~Bridge Project , “~~ Bridge Project, “ Hong Kong Monetary Authority, February 23, 2021, Hong Kong Monetary Authority, February 23, 2021,
https://www.info.gov.hk/gia/general/202102/23/P2021022300482.htm. https://www.info.gov.hk/gia/general/202102/23/P2021022300482.htm.
~~180~~189 Barry Naughton, “Chinese Industrial Policy and the Digital Silk Road: Barry Naughton, “Chinese Industrial Policy and the Digital Silk Road: ~~T he~~The Case of Alibaba Case of Alibaba in Malaysia,” in Malaysia,”
RoundtableRoundtable in Asiain Asia Policy 15.1, National Bureau of Asian Research, January 28, 2020.Policy 15.1, National Bureau of Asian Research, January 28, 2020.
~~Congressional Research Service~~

36

~~China’s Countermeasures to U.S. Economic Policy Actions and Authorities~~

~~measures, such as sanctions imposed for foreign policy or national security objectives that impede~~
~~access to the U.S. financial system or use of the U.S. dollar in international trade. Some analysts~~
~~assess that China’s efforts to develop an alternative currency and financial network wil not~~
~~immediately chal enge the global role of the U.S. dollar given an array of constraints, such as the~~
~~lack of full convertibility of China’s currency, the renminbi (RMB), hesitancy of other central~~
~~banks to use a digital currency, longstanding international acceptance of reliance on the U.S.~~
~~dollar in particular sectors (oil and gas, for example), and national security concerns in other~~
~~countries.181 Over time, however, a Chinese central bank digital currency and accompanying~~
190 Martin Chorzempa, “China’s Pursuit of Leadership in Digital Currency,” Testimony before the U.S.-China Economic and Security Review Commission, April 15, 2021. Congressional Research Service 37 China’s Countermeasures to U.S. Economic Policy Actions and Authorities global payments network could offer China alternatives to the U.S. dollar and workarounds to global payments network could offer China alternatives to the U.S. dollar and workarounds to
U.S. sanctions, at least in certain instances or transactions.U.S. sanctions, at least in certain instances or transactions.~~182~~191
China arguably might use its digital China arguably might use its digital currency to secure a global leadership role in setting global currency to secure a global leadership role in setting global
financial rules and standards. At the Bank of International Settlements (BIS) Innovation Summit financial rules and standards. At the Bank of International Settlements (BIS) Innovation Summit
in March 2021, China submitted a in March 2021, China submitted a Global Sovereign Digital Currency Governance proposal that proposal that
discusses its views for standards and norms on cross-border digital transactions, risk supervision, discusses its views for standards and norms on cross-border digital transactions, risk supervision,
and the use and ownership of data. At the BIS event, Mu Changchun, a director of PBOC’s and the use and ownership of data. At the BIS event, Mu Changchun, a director of PBOC’s
DigitalDigital Currency Research Institute, reportedly indicated that PBOC aims to become the first Currency Research Institute, reportedly indicated that PBOC aims to become the first
major global central bank to issue a sovereign digital currency in order to propel the major global central bank to issue a sovereign digital currency in order to propel the
internationalizationinternationalization of the RMB, and reduce dependence on the global U.S. dollar system. Mu of the RMB, and reduce dependence on the global U.S. dollar system. Mu
said that, “Our project is to safeguard the monetary sovereignty. And most of the monetary said that, “Our project is to safeguard the monetary sovereignty. And most of the monetary
authorities or central banks would like to do the same to avoid dollarization.”authorities or central banks would like to do the same to avoid dollarization.”~~183~~192 China’s China’s
payments network also could give China greater visibilitypayments network also could give China greater visibility and control of certain global financial and control of certain global financial
flows.flows.
In January 2021, PBOC announced a joint venture with the Belgium-based financial messaging In January 2021, PBOC announced a joint venture with the Belgium-based financial messaging
service, the Society for Worldwide Interbank Financial Telecommunications (SWIFT). SWIFT is service, the Society for Worldwide Interbank Financial Telecommunications (SWIFT). SWIFT is
relied on relied on ~~global y~~globally for its facilitation of electronic financial transactions. The scope of the joint for its facilitation of electronic financial transactions. The scope of the joint
venture includes creating a storage center in China to venture includes creating a storage center in China to ~~al ow~~allow the government to monitor and the government to monitor and
analyze cross-border payment messaging and to build a localized network in China that would analyze cross-border payment messaging and to build a localized network in China that would
“ensure a more stable, resilient and secure connection to the main SWIFT network.” Other “ensure a more stable, resilient and secure connection to the main SWIFT network.” Other
shareholders of the venture include China’s Cross-border Interbank Payment System (CIPS)—shareholders of the venture include China’s Cross-border Interbank Payment System (CIPS)—
China’s domestic payment system which offers clearing and settlement services for participants China’s domestic payment system which offers clearing and settlement services for participants
in cross-border RMB payments and trade—and the Payment & Clearing Association of China—a in cross-border RMB payments and trade—and the Payment & Clearing Association of China—a
PBOC affiliate tasked with creating and operating China’ online payment clearing platform for PBOC affiliate tasked with creating and operating China’ online payment clearing platform for
non-banking payment institutions.non-banking payment institutions.~~184~~

~~181 Martin Chorzempa, “China’s Pursuit of Leadership in Digital Currency,” T estimony before the U.S.-China~~
~~Economic and Security Review Commission, April 15, 2021.~~
~~182 See CRS~~ 193 Research, Talent, and Open-Source Technology As China seeks U.S. capabilities in technology and research to realize its industrial policy goals, it is simultaneously expanding its economic security authorities to control and leverage the foreign research and innovation that is conducted in or transferred to China. China’s policies encourage U.S. companies to transfer technology, IP, talent, and R&D to operations in China in exchange for preferential terms, including financing. China’s Made in China 2025 industrial policies require firms to transfer certain IP ownership to a China-based business that is legally separate from its corporate parent, potentially giving China control over certain technologies, including through its new export control law.194 In establishing a direct quid pro quo link between technology transfer and qualifications for particular government incentives in semiconductors, China appears to be pursuing trade practices—that were detailed in USTR’s Section 301 report 191 See CRS In Focus IF11885, In Focus IF11885, De-Dollarization Efforts in China and Russia, by Rebecca M. Nelson and Karen M. , by Rebecca M. Nelson and Karen M.
Sutter; CRSSutter; CRS In FocusIn Focus IF11471, IF11471, Financial Innovation: Central Bank Digital Currencies, by Marc Labonte, Rebecca, by Marc Labonte, Rebecca M. M.
Nelson, andNelson, and David W. Perkins and CRSDavid W. Perkins and CRS In FocusIn Focus IF11707, IF11707, The U.S. Dollar as the World’s ~~Dom inant~~ Dominant Reserve
Currency, coordinated by Rebecca, coordinated by Rebecca M. Nelson. M. Nelson.
~~183~~192 “China Proposes Global Rules “China Proposes Global Rules for Managing Sovereign Digital Currencies,” China Briefing, Dezan Shira and for Managing Sovereign Digital Currencies,” China Briefing, Dezan Shira and
Associates, April 4, 2021; “China SuggestsAssociates, April 4, 2021; “China Suggests Principles for CrossPrinciples for Cross Border CBDCBorder CBDC to ‘Avoid Dollarization,’” Ledger to ‘Avoid Dollarization,’” Ledger
Insights, March 25, 2021. Insights, March 25, 2021.
~~184~~193 “China Central Bank Says New SWIFT “China Central Bank Says New SWIFT JV Will Set Up Localized Data JV Will Set Up Localized Data ~~W arehouse~~Warehouse,” Reuters, March 23, 2021. 194 See CRS Report R46767, China’s New Semiconductor Policies: Issues for Congress, by Karen M. Sutter. Congressional Research Service 38 China’s Countermeasures to U.S. Economic Policy Actions and Authorities from March 2018—of concern to the U.S. government, including many in Congress.195 Specifically~~,” Reuters, March 23, 2021.~~
~~Congressional Research Service~~

37

~~China’s Countermeasures to U.S. Economic Policy Actions and Authorities~~

~~Research, Talent, and Open-Source Technology~~
~~As China seeks U.S. capabilities in technology and research to realize its industrial policy goals,~~
~~it is simultaneously expanding its economic security authorities to control and leverage the~~
~~foreign research and innovation that is conducted in or transferred to China. China’s policies~~
~~encourage U.S. companies to transfer technology, IP, talent, and R&D to operations in China in~~
~~exchange for preferential terms, including financing. China’s Made in China 2025 industrial~~
~~policies require firms to transfer certain IP ownership to a China-based business that is legal y~~
~~separate from its corporate parent, potential y giving China control over certain technologies,~~
~~including through its new export control law.185 In establishing a direct quid pro quo link between~~
~~technology transfer and qualifications for particular government incentives in semiconductors,~~
~~China appears to be pursuing trade practices—that were detailed in USTR’s Section 301 report~~
~~from March 2018—of concern to the U.S. government, including many in Congress.186~~
~~Specifical y~~, China’s new semiconductor policies may violate provisions in the January 2020, , China’s new semiconductor policies may violate provisions in the January 2020,
U.S.-China Phase One Trade Deal, particularly in Chapter 2 of the agreement that addressed some U.S.-China Phase One Trade Deal, particularly in Chapter 2 of the agreement that addressed some
aspects of China’s technology transfer policies and practices. Among related commitments, in aspects of China’s technology transfer policies and practices. Among related commitments, in
Article 2.3 of the agreement, China agreed it would not require or pressure firms to transfer Article 2.3 of the agreement, China agreed it would not require or pressure firms to transfer
technology in relation to investment transactions, or as a condition for parties to receive or technology in relation to investment transactions, or as a condition for parties to receive or
continue to receive any advantages conferred by China.continue to receive any advantages conferred by China.~~187~~196
With greater U.S. and foreign government scrutiny of Chinese foreign acquisitions, China has With greater U.S. and foreign government scrutiny of Chinese foreign acquisitions, China has
sought other forms of cooperation, including joint ventures, technology licensing, research sought other forms of cooperation, including joint ventures, technology licensing, research
partnerships, open-source technology collaboration, and talent programs that sponsor Chinese partnerships, open-source technology collaboration, and talent programs that sponsor Chinese
study and work overseas and seek to attract foreign experts to work in China.study and work overseas and seek to attract foreign experts to work in China.~~188~~197 Details in Details in
China’s new 14th Five Year Plan show how, even as the government advocates for technology China’s new 14th Five Year Plan show how, even as the government advocates for technology
independence, it is seeking specific U.S. and foreign capabilities to independence, it is seeking specific U.S. and foreign capabilities to ~~fil~~ fill critical gaps and realize critical gaps and realize
these goals. In January 2021, Jiang Jinquan—the head of the CPC Central Committee’s Policy these goals. In January 2021, Jiang Jinquan—the head of the CPC Central Committee’s Policy
Research Office—published a commentary in Research Office—published a commentary in Study Times, the newspaper of China’s premier the newspaper of China’s premier
Communist Party training academy, that Communist Party training academy, that ~~cal ed~~called for China’s national mobilization for China’s national mobilization to counter what to counter what
he described as a “U.S. technology blockade.” He he described as a “U.S. technology blockade.” He ~~cal ed~~called for a “new development pattern” in for a “new development pattern” in
which China would aim for greater self-sufficiency, focus on “indigenous innovation” and look to which China would aim for greater self-sufficiency, focus on “indigenous innovation” and look to
overcome serious technology gaps and dependencies.overcome serious technology gaps and dependencies.~~189~~

~~185 See CRS Report R46767, China’s New Semiconductor Policies: Issues for Congress, by Karen M. Sutter.~~
~~186 Pursuant to Section 301 of the T rade Act of 1974 (19 USC §§2411 -2420), UST R concluded that China’s policies~~
~~and practices relat ed~~198 China’s 14th Five-Year plan prioritizes research collaboration with foreign companies and universities, in China and overseas, and is spurring policies and incentives to attract foreign research talent to China.199 China’s plans and policies encourage its firms and institutes to establish research operations overseas to access advanced capabilities. Huawei, for example, is reportedly investing $1.2 billion in an optoelectronics R&D and production center in Cambridge, England.200 China’s bid for Newport Wafer Production in England would allow China to access 195 Pursuant to Section 301 of the Trade Act of 1974 (19 USC §§2411-2420), USTR concluded that China’s policies and practices related to forced technology transfer requirements, cyber-enabled theft of U.S. intellectual property and to forced technology transfer requirements, cyber-enabled theft of U.S. intellectual property and
trade secrets, discriminatory and nonmarket licensing practices, and state-funded strategic acquisitiontrade secrets, discriminatory and nonmarket licensing practices, and state-funded strategic acquisition of U.S.of U.S. assets assets
werewere unreasonable or discriminatory. See “unreasonable or discriminatory. See “ Findings of the Investigation Into China’s Acts, Policies, and Practices Findings of the Investigation Into China’s Acts, Policies, and Practices
Related to Related to ~~T echnology T ransfer~~Technology Transfer, Intellectual Property, and Innovation Under Section 301 of the , Intellectual Property, and Innovation Under Section 301 of the ~~T rade~~Trade Act of 1974,” Act of 1974,”
Office of the United States Office of the United States ~~T rade~~Trade Representative, March 22, Representative, March 22, ~~20 18~~2018, https://ustr.gov/sites/default/files/ , https://ustr.gov/sites/default/files/
Section%20301%20FINAL.PDF. Section%20301%20FINAL.PDF.
~~187~~196 “Economic and “Economic and ~~T rade~~Trade Agreement Between the Government of the United States of America and the Government of Agreement Between the Government of the United States of America and the Government of
the People’s Republicthe People’s Republic of China,” January 15, 2020, https://ustr.gov/sites/default/files/files/agreements/ of China,” January 15, 2020, https://ustr.gov/sites/default/files/files/agreements/
phase%20one%20agreement/phase%20one%20agreement/~~Economic_And_Trade_Agreement_Between_T he_United_States_And_China_Text.pdf.~~
~~9; and CRS~~ Economic_And_Trade_Agreement_Between_The_United_States_And_China_Text.pdf. 9; and CRS Insight IN11208, Insight IN11208, U.S. Signs Phase One Trade Deal with China , by Karen M. Sutter. , by Karen M. Sutter.
~~188~~197 Xinhua, “ Xinhua, “~~T he~~The 14th Five Year Plan and 2035 Long- 14th Five Year Plan and 2035 Long-~~T erm~~Term Development Objectives,” March 11, 2020, Development Objectives,” March 11, 2020,
http://www.xinhuanet.com/fortune/2021-03/13/c_1127205564.htm. http://www.xinhuanet.com/fortune/2021-03/13/c_1127205564.htm.
~~189~~198 Che Pan, “US-China Che Pan, “US-China ~~T ech~~Tech War: Beijing’s War: Beijing’s ~~T op~~Top Policy Official Lays Out Strategy to Address Washington’s Policy Official Lays Out Strategy to Address Washington’s
‘Stranglehold’ Over China,” ‘Stranglehold’ Over China,” South China Morning Post, January 26, 2021; Jiang Jinquan, “牢牢把握习近平新时代中, January 26, 2021; Jiang Jinquan, “牢牢把握习近平新时代中
国特色社会主义思想的基本立场观点方法国特色社会主义思想的基本立场观点方法 (“Firmly Grasp the Basic(“Firmly Grasp the Basic ~~Standpoint~~ Standpoint, Views,, Views, and Methods of Xi Jinping’s Thoughts on Socialism with Chinese Characteristics in the New Era),” Study Times, July 6, 2020, http://theory.people.com.cn/n1/2020/0706/c40531-31771933.html. 199 Ibid; “Implementation Plan for the Pilot Comprehensive Reform of Building a Pilot Demonstration Zone of Socialism with Chinese Characteristics in Shenzhen (2020-2025)” General Office, Central Committee of the Communist Party of China and General Office of the State Council, October 11, 2020, http://www.gov.cn/zhengce/2020-10/11/content_5550408.htm (in Chinese). 200 “Huawei to Build an Optoelectronics R&D and Manufacturing Centre in Cambridge,” Huawei Company Press Release, June 25, 2020. Congressional Research Service 39 China’s Countermeasures to U.S. Economic Policy Actions and Authorities ~~and Methods of Xi Jinping’s~~
~~Congressional Research Service~~

38

~~China’s Countermeasures to U.S. Economic Policy Actions and Authorities~~

~~China’s 14th Five-Year plan prioritizes research collaboration with foreign companies and~~
~~universities, in China and overseas, and is spurring policies and incentives to attract foreign~~
~~research talent to China.190 China’s plans and policies encourage its firms and institutes to~~
~~establish research operations overseas to access advanced capabilities. Huawei, for example, is~~
~~reportedly investing $1.2 bil ion in an optoelectronics R&D and production center in Cambridge,~~
~~England.191 China’s bid for Newport Wafer Production in England would al ow China to access~~
the semiconductor-related research the company conducts with UK universities. In October 2020, the semiconductor-related research the company conducts with UK universities. In October 2020,
Huawei announced its fifth R&D center in France that is to focus on advanced computing and Huawei announced its fifth R&D center in France that is to focus on advanced computing and
leverage advanced mathematics talent and capabilities.leverage advanced mathematics talent and capabilities.~~192~~201 Many of China’s top technology Many of China’s top technology
firms—including Alibaba,firms—including Alibaba, Baidu, and Tencent—operate research centers in the United States, Baidu, and Tencent—operate research centers in the United States,
~~al owing~~allowing them to partner with U.S. universities and access U.S. technology and talent. them to partner with U.S. universities and access U.S. technology and talent.~~193~~202
China’s State Talent Programs
China operates state talent programs to acquire targeted cutting-edge technologies and China operates state talent programs to acquire targeted cutting-edge technologies and
capabilities at their development point through foreign research and researcher ties. These capabilities at their development point through foreign research and researcher ties. These
programs are programs are ~~specifical y~~specifically targeted to advance the goals and targeted to advance the goals and ~~fil~~ fill the gaps identified in China’s the gaps identified in China’s
industrial plans and advance China’s economic, technological, and military competitiveness.industrial plans and advance China’s economic, technological, and military competitiveness.~~194~~203
The Chinese government runs hundreds of talent recruitment programs, including the The Chinese government runs hundreds of talent recruitment programs, including the Recruitment
Plan for Global Experts, which is more commonly known as the which is more commonly known as the Thousand Talents Plan. Program . Program
participation can involve contract terms that create “conflicts of commitment and/or conflicts of participation can involve contract terms that create “conflicts of commitment and/or conflicts of
interest for researchers,” according to the White House’s Office of Science and Technology interest for researchers,” according to the White House’s Office of Science and Technology
Policy. These terms can include requirements to attribute awards, patents, and projects to the Policy. These terms can include requirements to attribute awards, patents, and projects to the
foreign institution, even if conducted under U.S. funding; requirements to recruit or train other foreign institution, even if conducted under U.S. funding; requirements to recruit or train other
talent recruitment plan members, circumventing merit-based processes; and requirements to talent recruitment plan members, circumventing merit-based processes; and requirements to
replicate or transfer U.S.-funded work to China.replicate or transfer U.S.-funded work to China.~~195~~204 Chinese science and technology (S&T) Chinese science and technology (S&T)
officials are positioned in PRC embassies in countries with strong technology capabilities, such as officials are positioned in PRC embassies in countries with strong technology capabilities, such as
the United States, the United Kingdom and Russia, to spot opportunities and facilitate the transfer the United States, the United Kingdom and Russia, to spot opportunities and facilitate the transfer
of S&T capabilities prioritized by the Chinese government.of S&T capabilities prioritized by the Chinese government.~~196~~

~~T houghts on Socialism with Chinese Characteristics in the New Era),” Study Tim es, July 6, 2020,~~
~~http://theory.people.com.cn/n1/2020/0706/c40531 -31771933.html.~~
~~190 Ibid; "Implementation Plan for the Pilot Comprehensive Reform of Building a Pilot Demonstration Zone of~~
~~Socialism with Chinese Characteristics in Shenzhen (2020 -2025)" General Office, Central Committee of the~~
~~Communist Party of China and General Office of the State Council, October 11, 2020,~~
~~http://www.gov.cn/zhengce/2020-10/11/content_5550408.htm (in Chinese).~~
~~191 “Huawei to Build an Optoelectronics R&D and Manufacturing Centre in Cambridge,” Huawei Company Press~~
~~Release, June 25, 2020.~~
~~192 “Huawei Opens Research Center in France,” Xinhua, October 10 , 2020.~~
~~193 T hilo Hanneman, Daniel H. Rosen, Cassie Gao, and Adam Lysenko, “T wo -Way Street: US-China Investment~~
~~T rends-2020 Update,” Rhodium Group, May 11, 2020; Michael Brown and Pavneet Singh, “ China’s T echnology~~
~~T ransfer Strategy,” Defense Innovation Unit Experimental (DIUx), January 2018.~~
~~194 Glenn T iffert~~205 Growing awareness of China’s use of U.S. research ties as a technology transfer vehicle has prompted the U.S. government to begin investigating current activity and enforcing laws and rules that protect the integrity of U.S. federally funded research. These laws and rules include requirements to scrutinize PRC nationals participating in U.S. government funded research, ensure U.S. government grantees report all relevant foreign ties, and ensure U.S. universities disclose sources of foreign funding.206 Initial investigations by Congress, the U.S. Department of 201 “Huawei Opens Research Center in France,” Xinhua, October 10, 2020. 202 Thilo Hanneman, Daniel H. Rosen, Cassie Gao, and Adam Lysenko, “Two-Way Street: US-China Investment Trends-2020 Update,” Rhodium Group, May 11, 2020; Michael Brown and Pavneet Singh, “China’s Technology Transfer Strategy,” Defense Innovation Unit Experimental (DIUx), January 2018. 203 Glenn Tiffert, “Global Engagement: Rethinking Risk in the Research Enterprise,” Hoover Institution, July 30, 2020; , “Global Engagement: Rethinking Risk in the Research Enterprise,” Hoover Institution, July 30, 2020;
Jeff Stoff, “China’s Jeff Stoff, “China’s ~~T alent~~Talent Programs,” in Programs,” in China’s Quest for Foreign Technology: Beyond Espionage, William C. , William C.
Hannas and Didi Kirsten Hannas and Didi Kirsten ~~T atlow~~Tatlow, eds., Routledge,, eds., Routledge, 2021. 2021.
~~195~~204 “Enhancing the Integrity of America’s Research Enterprise,” the White House Office of Science and “Enhancing the Integrity of America’s Research Enterprise,” the White House Office of Science and ~~T echnology~~Technology
Policy Office, July 2020, https://trumpwhitehouse.archives.gov/wp-content/uploads/2020/07/Enhancing-the-Security-Policy Office, July 2020, https://trumpwhitehouse.archives.gov/wp-content/uploads/2020/07/Enhancing-the-Security-
and-Integrity-of-Americas-Research-Enterprise.pdf. and-Integrity-of-Americas-Research-Enterprise.pdf.
~~196~~205 Ryan Fedasiuk, Ryan Fedasiuk, Emily Weinstein, and Anna Puglisi, “China’s Emily Weinstein, and Anna Puglisi, “China’s ~~T echnology~~Technology Wishlist,” Center for Security and Emerging Technology, May 2021. 206 “Institutional Compliance with Section 117 of the Higher Education Act of 1965,” Office of the General Counsel, U.S. Department of Education, October 2020; “Financial Conflict of Interest: Investigator Disclosures of Foreign Financial Interests,” National Institute of Health Notice, NOT-OD-18-160, March 30, 2018; “Federal Research Agencies Need to Enhance Policies to Address Foreign Influence,” GAO Report to the Chairman, Committee on Finance, U.S. Senate, December 2020; and “Recommended Practices for Strengthening the Security and Integrity of America’s Science and Technology Research Enterprise,” Subcommittee on Research Security, Joint Committee on the Research Environment, National Science and Technology Council, January 2021. Congressional Research Service 40 China’s Countermeasures to U.S. Economic Policy Actions and Authorities ~~Wishlist,” Center for Security and~~
~~Congressional Research Service~~

39

~~China’s Countermeasures to U.S. Economic Policy Actions and Authorities~~

~~Growing awareness of China’s use of U.S. research ties as a technology transfer vehicle has~~
~~prompted the U.S. government to begin investigating current activity and enforcing laws and~~
~~rules that protect the integrity of U.S. federal y funded research. These laws and rules include~~
~~requirements to scrutinize PRC nationals participating in U.S. government funded research,~~
~~ensure U.S. government grantees report al relevant foreign ties, and ensure U.S. universities~~
~~disclose sources of foreign funding.197 Initial investigations by Congress, the U.S. Department of~~
Justice, and the U.S Department of Education have identified numerous instances of U.S. Justice, and the U.S Department of Education have identified numerous instances of U.S.
academic institutions, U.S. researchers, and PRC researchers failing to disclose sources of PRC academic institutions, U.S. researchers, and PRC researchers failing to disclose sources of PRC
funding and institutional ties, even when funding and institutional ties, even when ~~legal y~~legally required to do so. required to do so.~~198~~207 Initial oversight since 2018 Initial oversight since 2018
by the National Institutes of Health (NIH) prompted the agency to send roughly 180 letters to by the National Institutes of Health (NIH) prompted the agency to send roughly 180 letters to
more than 60 U.S. institutions about potential rule violations. In response to initial reactions by more than 60 U.S. institutions about potential rule violations. In response to initial reactions by
some universities that academics identified by the federal government of potential concern did some universities that academics identified by the federal government of potential concern did
not have ties to China, NIH reportedly provided specific details about numerous examples in not have ties to China, NIH reportedly provided specific details about numerous examples in
which published research indicated that U.S. government grantees also were receiving Chinese which published research indicated that U.S. government grantees also were receiving Chinese
government support.government support. ~~199~~208 In addition to publicized dismissals of 54 scientists from NIH and others In addition to publicized dismissals of 54 scientists from NIH and others
from U.S. research institutes, U.S. universities have fired faculty in cases that remain from U.S. research institutes, U.S. universities have fired faculty in cases that remain
confidential, and repaid NIH “hundreds of thousands of dollars” in grants as a result of rule confidential, and repaid NIH “hundreds of thousands of dollars” in grants as a result of rule
violations, according to Michael Lauer, head of NIH’s extramural research program.violations, according to Michael Lauer, head of NIH’s extramural research program.~~200~~
209 In January 2020, the Department of Justice (DOJ) charged Charles Lieber, Chair of the In January 2020, the Department of Justice (DOJ) charged Charles Lieber, Chair of the
Department of Chemistry and Chemical BiologyDepartment of Chemistry and Chemical Biology at Harvard University, with making a at Harvard University, with making a
““~~material y~~materially false, fictitious, and fraudulent statement” in failing false, fictitious, and fraudulent statement” in failing to disclose to his U.S. to disclose to his U.S.
government funders his contractual arrangements and funding sources from China, including the government funders his contractual arrangements and funding sources from China, including the
Wuhan University of Technology (where he served as “strategic scientist” and developed a Wuhan University of Technology (where he served as “strategic scientist” and developed a
nanotechnology lab) and China’s Thousand Talents Program. The Justice Department’s nanotechnology lab) and China’s Thousand Talents Program. The Justice Department’s
indictment documents include copies of the original contracts and details about the scope of work indictment documents include copies of the original contracts and details about the scope of work
and funding amounts, and and funding amounts, and ~~al eged~~alleged efforts to hide his China affiliations and payments. efforts to hide his China affiliations and payments.~~201~~210
Following the Justice Department’s indictment in July 2020 of five PRC nationals for failing to Following the Justice Department’s indictment in July 2020 of five PRC nationals for failing to
disclose ties to China’s military and the shuttering of the PRC Consulate in Houston (which had disclose ties to China’s military and the shuttering of the PRC Consulate in Houston (which had

~~Emerging T echnology, May 2021.~~
~~197 “Institutional Compliance with Section 117 of the Higher Education Act of 1965,” Office of the General Counsel,~~
~~U.S. Department of Educat ion, October 2020; “ Financial Conflict of Interest: Investigator Disclosures of Foreign~~
~~Financial Interests,” National Institute of Health Notice, NOT -OD-18-160, March 30, 2018; “ Federal Research~~
~~Agencies Need to Enhance Policies to Address Foreign Influence,” GAO Report to the Chairman, Committee on~~
~~Finance, U.S. Senate, December 2020; and “Recommended Practices for Strengthening the Security and Integrity of~~
~~America’s Science and T echnology Research Enterprise,” Subcommittee on Research Security, Joint Committee on the~~
~~Research Environment, National Science and T echnology Council, January 2021.~~
~~198 “T he~~served as a top S&T transfer center), DOJ estimates that 1,000 PRC researchers left the United States.211 Some Members of Congress and several Asian-American organizations have expressed concerns that the U.S. government has been overzealous in seeking to address the risks posed by the Chinese government’s use of the U.S. research enterprise for its own industrial and technological gains. They say that the U.S. government may be conducting ethnic profiling, chilling U.S. research collaboration, and argue that criminal charges are too harsh for misreporting.212 The U.S. 207 “The China Initiative: Year-in-Review (2019-20),” Office of Public Affairs, U.S. Department of Justice, November China Initiative: Year-in-Review (2019-20),” Office of Public Affairs, U.S. Department of Justice, November
16, 2020; “16, 2020; “ Institutional Compliance with Section 117 of the Higher Education Act of 1965,” Office of the General Institutional Compliance with Section 117 of the Higher Education Act of 1965,” Office of the General
Counsel,Counsel, U.S. Department of Education, October 2020; “Federal Research Agencies NeedU.S. Department of Education, October 2020; “Federal Research Agencies Need to Enhanceto Enhance Policies to Policies to
AddressAddress Foreign Influence,” GAO,Foreign Influence,” GAO, December 2020; and “December 2020; and “~~T hreats~~Threats to the U.S. Research Enterprise: China’s to the U.S. Research Enterprise: China’s ~~T alent~~Talent
Recruitment Plans,” Staff Report, Permanent Subcommittee on Investigations, U.S. Senate, November 18, 2019.Recruitment Plans,” Staff Report, Permanent Subcommittee on Investigations, U.S. Senate, November 18, 2019.
~~199~~ 208 Jeffrey Mervis, “NIH Probe of Foreign Jeffrey Mervis, “NIH Probe of Foreign ~~T ies~~Ties Has Led to Undisclosed Firings—and Refunds from Institutions,” Has Led to Undisclosed Firings—and Refunds from Institutions,”
Science, June 26, 2019; and Jeffrey Mervis, “, June 26, 2019; and Jeffrey Mervis, “ ~~Fifty~~ Fifty-Four Scientists Have Lost -Four Scientists Have Lost ~~T heir~~Their Jobs as a Result Jobs as a Result of NIH of NIH ~~P robe~~Probe into into
Foreign Foreign ~~T ies~~Ties,” ,” Science, June 12, 2020. , June 12, 2020.
~~200~~209 Ibid. Ibid.
~~201~~210 “Harvard University Professor and “Harvard University Professor and ~~T wo~~Two Chinese Nationals Charged in Chinese Nationals Charged in ~~T hree~~Three Separate China Related Cases,” Office Separate China Related Cases,” Office
of Publicof Public Affairs, U.S.Affairs, U.S. Department of Justice, January 28, 2020, at https://www.justice.gov/opa/pr/harvard-university-Department of Justice, January 28, 2020, at https://www.justice.gov/opa/pr/harvard-university-
professor-and-two-chinese-nationals-charged-three-separate-china-related and https://www.justice.gov/opa/press-professor-and-two-chinese-nationals-charged-three-separate-china-related and https://www.justice.gov/opa/press-
release/file/1239796/download (Chargingrelease/file/1239796/download (Charging documents). 211 Ryan Fedasiuk, Emily Weinstein, and Anna Puglisi, “China’s Technology Wishlist,” Center for Security and Emerging Technology, May 2021; and Aruna Viswanatha, “U.S. Drops Visa Fraud Cases Against Five Chinese Researchers,” The Wall Street Journal, July 21, 2021. 212 “Researching while Chinese American: Ethnic Profiling, Chinese American Scientists and a New American Brain Drain,” Congressional Roundtable chaired by Representative Jamie Raskin, Chair of the Oversight Subcommittee on Civil Rights and Civil Liberties, and Representative Judy Chu, Chair of the Congressional Asian Pacific American Congressional Research Service 41 link to page 47 link to page 62 China’s Countermeasures to U.S. Economic Policy Actions and Authorities ~~documents).~~
~~Congressional Research Service~~

40

~~China’s Countermeasures to U.S. Economic Policy Actions and Authorities~~

~~served as a top S&T transfer center), DOJ estimates that 1,000 PRC researchers left the United~~
~~States.202~~
~~Some Members of Congress and several Asian-American organizations have expressed concerns~~
~~that the U.S. government has been overzealous in seeking to address the risks posed by the~~
~~Chinese government’s use of the U.S. research enterprise for its own industrial and technological~~
~~gains. They say that the U.S. government may be conducting ethnic profiling, chil ing U.S.~~
~~research collaboration, and argue that criminal charges are too harsh for misreporting.203 The U.S.~~
university system has pushed back on U.S. government efforts to enforce statutory reporting university system has pushed back on U.S. government efforts to enforce statutory reporting
requirements on sources of foreign funding outlined in Section 117 of the Higher Education Act requirements on sources of foreign funding outlined in Section 117 of the Higher Education Act
of 1965, arguing that requirements are unclear and burdensome.of 1965, arguing that requirements are unclear and burdensome.~~204~~213 Many experts agree that the Many experts agree that the
U.S. government should not conduct ethnic profiling but stress that the security U.S. government should not conduct ethnic profiling but stress that the security ~~chal enges~~challenges China China
poses to U.S. research are serious and should be addressed.poses to U.S. research are serious and should be addressed.~~205~~214 Some experts warn that Beijing is Some experts warn that Beijing is
seeking to leverage U.S. societal tensions, including race issues, and is “exploiting identity seeking to leverage U.S. societal tensions, including race issues, and is “exploiting identity
politics by promoting any changes in U.S. policy as ethnic profiling, and offering a narrative politics by promoting any changes in U.S. policy as ethnic profiling, and offering a narrative
about being merely a proponent of ‘development’ and science, in order to divert attention from its about being merely a proponent of ‘development’ and science, in order to divert attention from its
own questionable behavior.”own questionable behavior.”~~206~~
215 Some Members warn that the U.S. government is not doing enough to address the risks that Some Members warn that the U.S. government is not doing enough to address the risks that
China’s talent programs pose to U.S. research integrity, economic competitiveness, and national China’s talent programs pose to U.S. research integrity, economic competitiveness, and national
security. The U.S. Senate Permanent Subcommittee on Investigations, in its November 2019 staff security. The U.S. Senate Permanent Subcommittee on Investigations, in its November 2019 staff
report, determined that it was not in the U.S. national security interest to fund China’s economic report, determined that it was not in the U.S. national security interest to fund China’s economic
and military development with U.S. taxpayer dollars. The report and military development with U.S. taxpayer dollars. The report ~~cal ed~~called on the university on the university
community to take greater responsibility to vet academics for financial conflicts of interest, community to take greater responsibility to vet academics for financial conflicts of interest,
foreign sources of funding, and other research affiliations and ties, noting that universities already foreign sources of funding, and other research affiliations and ties, noting that universities already
have relevant vetting authorities that they use to ascertain scientific rigor, have relevant vetting authorities that they use to ascertain scientific rigor, ~~al egations~~allegations of of
plagiarism, research aptitude, and prior publications. The Subcommittee found that, rather than plagiarism, research aptitude, and prior publications. The Subcommittee found that, rather than
overreacting, “the federal government has failed to stop China from acquiring knowledge and overreacting, “the federal government has failed to stop China from acquiring knowledge and
~~intel ectual~~ intellectual property from U.S. taxpayer funded researchers and scientists. Nor do federal property from U.S. taxpayer funded researchers and scientists. Nor do federal
agencies have a comprehensive strategy to combat this threat.”agencies have a comprehensive strategy to combat this threat.”~~207~~216 The Subcommittee found that The Subcommittee found that
members of China’s state talent plans sign members of China’s state talent plans sign ~~legal y~~ legally binding contracts with Chinese institutions that binding contracts with Chinese institutions that
often have nondisclosure provisions and can “incentivize members to lie on grant applications to often have nondisclosure provisions and can “incentivize members to lie on grant applications to

~~202 Ryan Fedasiuk, Emily Weinstein, and Anna Puglisi, “China’s T echnology Wishlist,” Center for Security and~~
~~Emerging T echnology, May 2021; and Aruna Viswanatha, “ U.S. Drops Visa Fraud Cases Against Five Chinese~~
~~Researchers,” The Wall Street Journal, July 21, 2021.~~
~~203 “Researching while Chinese American: Ethnic Profiling, Chinese American Scientists and a New American Brain~~
~~Drain,” Congressional Roundtable chaired by Representative Jamie Raskin, Chair of the Oversight Subcommittee on~~
~~Civil Rights and Civil Liberties, and Representative Judy Chu, Chair of the Congressional Asian Pacific American~~
~~Caucus, June 30, 2021; and Margaret K. Lewis, “Criminalizing China,” 11 1, T he Journal of Criminal Law and~~
~~Criminology 145 (2020).~~
~~204 Letter from T ed~~U.S. grant-making agencies, set up ‘shadow labs’ in China working on research identical to their U.S. research, and, in some cases, transfer U.S. scientists’ hard-earned intellectual capital.”217 Open-Source Technology Platforms In response to U.S. government restrictions on certain technology licensing to China and acquisitions of U.S. technology firms, China is turning to U.S.-led open source technology platforms—such as RISC-V, the Open Compute Project (OCP), and the O-RAN Alliance—as alternative vehicles to obtain the technology and expertise it needs to advance its industrial and technology goals. (See “Open-Source Technology” and Table A-2.) RISC-V and the O-RAN Alliance promote their development of open and interoperable solutions in part as solutions for the United States and its allies and partners to diversify away from Chinese companies of concern such as Huawei, but many Chinese technology firms and government institutes are members of these organizations. Moreover, these platforms seem to be providing a way for Chinese firms and Caucus, June 30, 2021; and Margaret K. Lewis, “Criminalizing China,” 111, The Journal of Criminal Law and Criminology 145 (2020). 213 Letter from Ted Mitchell, President, ACE, to Levon Schlichter, Office of the General Counsel, U.S. Department of Mitchell, President, ACE, to Levon Schlichter, Office of the General Counsel, U.S. Department of
Education, December 14, 2020, https://www.acenet.edu/Documents/Comments-memo-ED-Section-117-121420.pdf. Education, December 14, 2020, https://www.acenet.edu/Documents/Comments-memo-ED-Section-117-121420.pdf.
~~205~~214 Ken Dilanian, “American Universities are a Soft Ken Dilanian, “American Universities are a Soft ~~T arget~~Target for China for China'’s Spies, say U.S. Intelligence Officials,” CNBC, s Spies, say U.S. Intelligence Officials,” CNBC,
February 2, 2020 February 2, 2020
~~206~~215 Anna B. Puglisi, “ Anna B. Puglisi, “~~T estimony~~Testimony before the U.S. Senate Select Committee on Intelligence,” August 4, 2021. before the U.S. Senate Select Committee on Intelligence,” August 4, 2021.
~~207 “T hreats~~216 “Threats to the U.S. Research Enterprise: China’s to the U.S. Research Enterprise: China’s ~~T alent~~Talent Recruitment Plans,” Staff Report, Permanent Recruitment Plans,” Staff Report, Permanent
Subcommittee on Investigations, U.S. Senate, November 18, 2019. Subcommittee on Investigations, U.S. Senate, November 18, 2019.
217 Ibid. Congressional Research Service Congressional Research Service

41

~~link to page 46 link to page 60~~ 42 China’s Countermeasures to U.S. Economic Policy Actions and Authorities institutes of concern to the U.S. government ~~Policy Actions and Authorities~~

~~U.S. grant-making agencies, set up ‘shadow labs’ in China working on research identical to their~~
~~U.S. research, and, in some cases, transfer U.S. scientists’ hard-earned intel ectual capital.”208~~
~~Open-Source Technology Platforms~~
~~In response to U.S. government restrictions on certain technology licensing to China and~~
~~acquisitions of U.S. technology firms, China is turning to U.S.-led open source technology~~
~~platforms—such as RISC-V, the Open Compute Project (OCP), and the O-RAN Al iance—as~~
~~alternative vehicles to obtain the technology and expertise it needs to advance its industrial and~~
~~technology goals. (See “Open-Source Technology” and Table A-2). RISC-V and the O-RAN~~
~~Al iance promote their development of open and interoperable solutions in part as solutions for~~
~~the United States and its al ies and partners to diversify away from Chinese companies of concern~~
~~such as Huawei, but many Chinese technology firms and government institutes are members of~~
~~these organizations. Moreover, these platforms seem to be providing a way for Chinese firms and~~
~~institutes—including Huawei and ZTE, both of which are on the U.S. Department of Commerce’s~~
~~Bureau of Industry and Security (BIS)’s export-restrictive Entity List—to access U.S. technology~~
to access U.S. technology and capabilities to design semiconductor chips and access semiconductor tools and software.and capabilities to design semiconductor chips and access semiconductor tools and software.~~209~~218
Open-Source Technology
Open source originated from the term, Open source originated from the term, open source software (OSS), which is software built on publicly accessible open source software (OSS), which is software built on publicly accessible
code designed to be modifiedcode designed to be modified and distributed. OSS is often developed in a decentralized and and distributed. OSS is often developed in a decentralized and ~~col aborative~~collaborative way, way,
relying on peer reviewrelying on peer review and community production.and community production.~~210~~219 Segments of the technology research Segments of the technology research community use open community use open
source technology platforms to share technology with a community of experts that they seek to adapt and source technology platforms to share technology with a community of experts that they seek to adapt and
develop through an open and develop through an open and ~~col aborative model~~ collaborative model that proponents argue can morethat proponents argue can more quickly advance technological quickly advance technological
developmentsdevelopments and breakthroughs.and breakthroughs.~~211~~220 The open source technology approach has grown in popularity and influence The open source technology approach has grown in popularity and influence
over the past several yearsover the past several years in a range of technologies related to hardware, software,in a range of technologies related to hardware, software, fifth-generation fifth-generation
~~telecommunications~~ telecommunications (5G), and artificial (5G), and artificial ~~intel igence~~ intelligence (AI) due to a combination of factors. These factors include the (AI) due to a combination of factors. These factors include the
emergenceemergence of next generation technologies,of next generation technologies, organized movementsorganized movements by key U.S. technology firmsby key U.S. technology firms that utilize other that utilize other
firms’firms’ hardware and software to standardize and commoditizehardware and software to standardize and commoditize the industry to bring down costs, and the search the industry to bring down costs, and the search
for alternative for alternative ~~col aboration~~collaboration vehicles in response to U.S. government technology restrictions vehicles in response to U.S. government technology restrictions on China. on China.
Members of these platforms include Members of these platforms include ~~prominent PRC government institutes—such as the Chinese~~
~~Academy of Science’s Institute of Advanced Computing, the Beijing Academy of Edge~~
~~Computing, Chongqing University’s Industrial Technology Research Institute, and Tsinghua~~
~~University—as wel as government funds and consortiums, such as the Xiamen Semiconductor~~
~~Industry Group.212 The platforms include China’s national technology champions—such as~~

~~208 Ibid.~~
~~209 Jeffrey Burt, “Alibaba on the Bleeding Edge of RISC-V with XT 910,” T he Next Platform, August 21, 2020. Iain~~
~~Morris, “China's Role in Open RAN is a Looming P roblem,” Light Reading, December 17, 2020. For a list of RISC-~~
~~V’s members, see https://riscv.org/members/. For the U.S. Department of Commerce’s Entity List, see~~
~~https://www.bis.doc.gov/index.php/documents/regulations-docs/2326-supplement -no-4-to-part-744-entity-list-4/file.~~
~~210 Jim McGregor, “T he Difference Between ARM, MIPS, x86, RISC-V And Others In Choosing A Processor~~
~~Architecture, Forbes,” April 5, 2108, https://www.forbes.com/sites/tiriasresearch/2018/04/05/what -you-need-to-know-~~
~~about-processor-architectures/#5b4c51324f57.~~
~~211 Nitin Dahad, “Can ARM Survive RISC-V Challenge?” EETimes, February 13, 2019, https://www.eetimes.com/can-~~
~~arm-survive-risc-v-challenge/.~~
~~212 For details on the fund and its ties to the Chinese Academy of Sciences see the company’s website at~~
~~http://xmsig.com/en/about .~~
~~Congressional Research Service~~

42

~~China’s Countermeasures to U.S. Economic Policy Actions and Authorities~~

~~Alibaba, Baidu, and Tencent—as wel~~ PRC companies that are restricted by the U.S. government or otherwise identified as companies of concern due to national security considerations, including PRC state and military ties. For example, Huawei, Semiconductor Manufacturing International Company (SMIC), and the semiconductor firm Phytium are on the U.S. Department of Commerce’s Bureau of Industry and Security (BIS)’s export-restrictive Entity List.221 BIS added Phytium to the Entity List in April 2021, ahead of a Washington Post article that reported how Phytium was using U.S. software to support its partnership with the PRC military’s China Aerodynamics Research and Development Center and its hypersonic program. The article also mentioned that Phytium was producing its semiconductor chips at TSMC in Taiwan.222 In response, Alchip Technologies Ltd., a Taiwan-headquartered firm that designs application-specific integrated circuits, or ASICs, that are fabricated at TSMC, said that it had halted shipments to Phytium.223 ZTE is no longer on the Entity List, under terms negotiated with the U.S. government to address its export control violations even though it is restricted as a PRC company of concern in other U.S. government provisions. 224 Huawei and ZTE, for example, are 218 Jeffrey Burt, “Alibaba on the Bleeding Edge of RISC-V with XT910,” The Next Platform, August 21, 2020. Iain Morris, “China’s Role in Open RAN is a Looming Problem,” Light Reading, December 17, 2020. For a list of RISC-V’s members, see https://riscv.org/members/. 219 Jim McGregor, “The Difference Between ARM, MIPS, x86, RISC-V And Others In Choosing A Processor Architecture, Forbes,” April 5, 2108, https://www.forbes.com/sites/tiriasresearch/2018/04/05/what-you-need-to-know-about-processor-architectures/#5b4c51324f57. 220 Nitin Dahad, “Can ARM Survive RISC-V Challenge?” EETimes, February 13, 2019, https://www.eetimes.com/can-arm-survive-risc-v-challenge/. 221 For the U.S. Department of Commerce’s Entity List, see https://www.bis.doc.gov/index.php/documents/regulations-docs/2326-supplement-no-4-to-part-744-entity-list-4/file. 222 Ellen Nakashima and Gerry Shih, “China Builds Advanced Weapons Systems Using American Chip Technology,” The Washington Post, April 9, 2021; Addition of Entities to the Entity List, BIS, U.S. Department of Commerce, April 8, 2021. 223 According to this report, Phytium contributed to 39% of AIchip Technologies’ revenue in 2020. See Lisa Wang, “With Phytium on U.S. Entity List, Alchip Halts its Orders,” Taipei Times, April 14, 2021. 224 In response to findings that ZTE had violated U.S. export controls, the U.S. government negotiated two agreements in 2017 and 2018 to address U.S. national security concerns and placed ZTE under a compliance monitoring agreement. See “Order Terminating Denial Order Issued on April 15, 2018, Against Zhongxing Telecommunications Equipment Corporation and ZTE Kangxun Telecommunications Ltd.,” BIS Notice, July 23, 2018. Two of China’s defense industrial conglomerates—China Aerospace Science and Industry Corp (CASIC) and China Aerospace Science Congressional Research Service 43 China’s Countermeasures to U.S. Economic Policy Actions and Authorities among the PRC companies that the Federal Communications Commission (FCC) includes in its covered list of communications equipment and services that “pose an unacceptable risk to the national security of the United States or the security and safety of United States persons.”225 Under terms set in the Secure Equipment Act of 2021 (P.L. 117-55), the FCC is to establish rules stating that it will no longer review or approve any authorization application for equipment or services from companies on this list. China Mobile, China Telecom, China Unicom, Huawei, Inspur Group, and SMIC are among the firms that the Department of Defense has identified as Chinese military companies operating in the United States.226 These platforms include prominent PRC government institutes—such as the Chinese Academy of Science’s Institute of Advanced Computing, the Beijing Academy of Edge Computing, Chongqing University’s Industrial Technology Research Institute, MIIT’s China Academy of Information and Communications Technology (CAICT), and Tsinghua University—as well as government funds and consortiums, such as the Xiamen Semiconductor Industry Group.227 They also include China’s national technology champions—such as Alibaba, Baidu, and Tencent—as well as Inspur Group and GigaDevice, who are state champions ~~as Inspur Group and GigaDevice, who are state champions~~
in China’s computer server and flash memory semiconductor markets respectively.in China’s computer server and flash memory semiconductor markets respectively.~~213~~228
Many PRC firms are leveraging expertise and technology shared on these platforms to develop Many PRC firms are leveraging expertise and technology shared on these platforms to develop
technology capabilities that China says are “indigenous.” In 2019, Pingtouge, the chip subsidiary technology capabilities that China says are “indigenous.” In 2019, Pingtouge, the chip subsidiary
of Chinese company Alibaba, worked with RISC-V to develop its first processors—Xuantie 910 of Chinese company Alibaba, worked with RISC-V to develop its first processors—Xuantie 910
and Hanguang 800.and Hanguang 800.~~214~~229 Under China’s new semiconductor policies, the Chinese government is Under China’s new semiconductor policies, the Chinese government is
incentivizing the creation of new companies and development of “indigenous” capabilities; the incentivizing the creation of new companies and development of “indigenous” capabilities; the
number of new registrations for semiconductor firms increased three-fold in the first 5 months of number of new registrations for semiconductor firms increased three-fold in the first 5 months of
2021 over 2020.2021 over 2020.~~215~~230 The platforms include some of these new PRC firms, such as X-EPIC (a PRC The platforms include some of these new PRC firms, such as X-EPIC (a PRC
electronic design automation, or EDA, software tool developer), and Biren Technology, which is electronic design automation, or EDA, software tool developer), and Biren Technology, which is
reportedly working with RISC-V to develop a 7 nanometer graphics processing unit (GPU) chip reportedly working with RISC-V to develop a 7 nanometer graphics processing unit (GPU) chip
for high performance computing applications in China.for high performance computing applications in China.~~216~~231 Some companies, such as Shanghai and Technology Corp (CASC)—are among ZTE’s shareholders. See Christopher Balding, “ZTE’s Ties to China’s Military-Industrial Complex Run Deep,” Foreign Policy, July 19, 2018; ZTE Corporation 2020 Annual Report. 225 “List of Equipment and Services Covered by Section 2 of the Secure Networks Act,” Federal Communications Commission, March 12, 2021. 226 “Chinese Military Companies Operating in the United States” in Accordance with Section 1260H of the William M. ("Mac") Thornberry National Defense Authorization Act for Fiscal Year 2021 (P.L. 116-283), U.S. Department of Defense. 227 For details on the fund and its ties to the Chinese Academy of Sciences see the company’s website at http://xmsig.com/en/about. 228 Clark Edward Barrett, “ ~~Some companies, such as Shanghai~~
~~Boelink Communication Technology, develop public security products and services.217 China may~~
~~be using U.S.-based professional associations as wel as technology incubators and accelerators to~~
~~access U.S. talent and technology. The Chinese-American Semiconductor Professional~~
~~Association (CASPA), may provide talent pipelines for its PRC members—such as Horizon~~
~~Robotics, Huawei, Semiconductor Manufacturing International Company (SMIC), and the~~
~~Chinese Academy of Science’s Shanghai Industrial Technology Research Institute. U.S. joint~~
~~ventures with China, such as Chengdu Silicon Power Technology, provide U.S. talent, IP, tools~~
~~and software to China’s semiconductor firms.218~~

~~213 Clark Edward Barrett, “~~ China’s “Server Sinification” Campaign for Import Substitution: Strategy and Snowden China’s “Server Sinification” Campaign for Import Substitution: Strategy and Snowden
(Part 1 and Part 1),” China Brief, Volume(Part 1 and Part 1),” China Brief, Volume 14 , Issue14 , Issue 24 and Volume24 and Volume 15, Issue15, Issue ~~2, T he~~ 2, The Jamestown Foundation, December Jamestown Foundation, December
19, 2014 and January 23, 2015; Paul Mozur and Jane Perlez, “U.S. 19, 2014 and January 23, 2015; Paul Mozur and Jane Perlez, “U.S. ~~T ech~~Tech Giants May Blur Giants May Blur National Security National Security
BoundariesBoundaries in China Deals,”in China Deals,” The New York Times, October 20, 2015; Daniel Nenni, “, October 20, 2015; Daniel Nenni, “ China’s First Self-Developed China’s First Self-Developed
Memory Chip Maker ScoresMemory Chip Maker Scores Financing,” SemiWiki.com, December 21, 2020; Jeffrey Ding, “Financing,” SemiWiki.com, December 21, 2020; Jeffrey Ding, “ China’s AI ‘National China’s AI ‘National
~~T eam~~Team,’” ChinAI Newsletter Number,’” ChinAI Newsletter Number 51, May 20, 2019; Keith Zhai and Lingling Wei, “51, May 20, 2019; Keith Zhai and Lingling Wei, “ China Lays Plans to China Lays Plans to ~~T ame T ech~~Tame Tech
Giant Alibaba,”Giant Alibaba,” The Wall Street Journal, March 11, 2021. , March 11, 2021.
~~214~~229 Jeffrey Burt, “Alibaba on the Bleeding Edge of RISC-V Jeffrey Burt, “Alibaba on the Bleeding Edge of RISC-V ~~with XT 910,” T he~~ with XT910,” The Next Platform, August 21, 2020. Next Platform, August 21, 2020.
~~215~~230 Josh Ye, “New Chinese Semiconductor Firms Have Josh Ye, “New Chinese Semiconductor Firms Have ~~T ripled~~Tripled in 2021 as Beijing and Washington Jockey Over in 2021 as Beijing and Washington Jockey Over
~~T echnological~~Technological Supremacy,” Supremacy,” South China Morning Post, June 9, 2021; See CRS, June 9, 2021; See CRS Report R46767, Report R46767, China’s New
~~Sem iconductor~~Semiconductor Policies: Issues for Congress, by, by Karen M. Sutter. Karen M. Sutter.
~~216~~231 “X-EPIC Announces Dr. “X-EPIC Announces Dr. ~~T C~~TC Lin as Chief Scientist,” Company Press Release, October 16, 2020, https://www.x- Lin as Chief Scientist,” Company Press Release, October 16, 2020, https://www.x-
epic.com/en/nd.jsp?id=38#_np=2_506; Anton Shilov, “epic.com/en/nd.jsp?id=38#_np=2_506; Anton Shilov, “ ~~Chinese Company to Send 7nm GPU to Production Next~~
~~Quarter,” Tom ’s Hardware, June 26, 2021.~~
~~217 For details on Boelink’s work see the company’s website at http://en.boelink.com/.~~
~~218 CASPA eLetter: No. 94, October 19, 2016, http://www.caspa.com/news/publications/news-~~
~~list/582d2c6860cb84c2124259be; “ Announcing the Grand Opening of Silicon Power T echnology Industry: Luminary~~
~~David French and Silicon Valley’s Silicon Catalyst partner to Launch Incubator for Power Semiconductor Startups,”~~
~~Silicon Catalyst Company Announcement, January 17, 2019; https://siliconcatalyst.com/announcing-the-grand-~~
~~opening-of-silicon-power-technolog. For a list of CASPA’s corporate members, see http://www.caspa.com/members.~~
~~Congressional Research Service~~

43

~~China’s Countermeasures to U.S. Economic Policy Actions and Authorities~~
Chinese Company to Send 7nm GPU to Production Next Congressional Research Service 44 China’s Countermeasures to U.S. Economic Policy Actions and Authorities Boelink Communication Technology, develop public security products and services.232 China may be using U.S.-based professional associations as well as technology incubators and accelerators to access U.S. talent and technology. The Chinese-American Semiconductor Professional Association (CASPA), may provide talent pipelines for its PRC members—such as Horizon Robotics, Huawei, SMIC, and the Chinese Academy of Science’s Shanghai Industrial Technology Research Institute. U.S. joint ventures with China, such as Chengdu Silicon Power Technology, provide U.S. talent, IP, tools and software to China’s semiconductor firms.233
Examples of Corporate Countermeasures to U.S.
Restrictions
Huawei and Honor
Chinese companies are restructuring themselves Chinese companies are restructuring themselves ~~potential y~~potentially to circumvent U.S. export and to circumvent U.S. export and
investment restrictions. Current U.S. government 5G-related export control restrictions, for investment restrictions. Current U.S. government 5G-related export control restrictions, for
example, are specific to Huawei and its affiliates. In November 2020, China’s government, acting example, are specific to Huawei and its affiliates. In November 2020, China’s government, acting
through the Shenzhen branch of the State-owned Assets Supervision and Administration through the Shenzhen branch of the State-owned Assets Supervision and Administration
Commission of the State Council (SASAC), took control of Huawei’s smartphone business, Commission of the State Council (SASAC), took control of Huawei’s smartphone business,
Honor.Honor. ~~219~~234 Honor CEO Zhao Ming moved over from Huawei to head the new SASAC-controlled Honor CEO Zhao Ming moved over from Huawei to head the new SASAC-controlled
company. In addition, Honor inherited Huawei’s R&D teams from Shenzhen, Beijing, and Xi'an, company. In addition, Honor inherited Huawei’s R&D teams from Shenzhen, Beijing, and Xi'an,
together with the “highest quality assets of the Huawei system,” including the most advanced together with the “highest quality assets of the Huawei system,” including the most advanced
technology and design, according to Zhao Ming.technology and design, according to Zhao Ming.~~220~~235 Zhao said that Huawei had divested from Zhao said that Huawei had divested from
Honor to ensure its survival amid the U.S. export controls that prevented the company from Honor to ensure its survival amid the U.S. export controls that prevented the company from
making chips. Unnamed “industry insiders” told China’s making chips. Unnamed “industry insiders” told China’s Global Times newspaper that Honor newspaper that Honor
may capture Huawei’s lost ground overseas once “everything is back in place.”may capture Huawei’s lost ground overseas once “everything is back in place.”~~221~~236 Since Since
restructuring, Honor has resumed cooperation with Huawei’s original suppliers, including Intel, restructuring, Honor has resumed cooperation with Huawei’s original suppliers, including Intel,
MediaTek, Micron, Microsoft, Qualcomm, and Samsung.MediaTek, Micron, Microsoft, Qualcomm, and Samsung.~~222~~237 In June 2021, Honor launched a Quarter,” Tom’s Hardware, June 26, 2021. 232 For details on Boelink’s work see the company’s website at http://en.boelink.com/. 233 CASPA eLetter: No. 94, October 19, 2016, http://www.caspa.com/news/publications/news-list/582d2c6860cb84c2124259be; “Announcing the Grand Opening of Silicon Power Technology Industry: Luminary David French and Silicon Valley’s Silicon Catalyst partner to Launch Incubator for Power Semiconductor Startups,” Silicon Catalyst Company Announcement, January 17, 2019; https://siliconcatalyst.com/announcing-the-grand-opening-of-silicon-power-technolog. For a list of CASPA’s corporate members, see http://www.caspa.com/members. 234 Scott Livingston, “Huawei, HONOR, and China’s Evolving State Capitalist Tool Kit,” CSIS Brief, December 2020; Chen Qingqing and Shen Weiduo, “Update: Former Chief Executive of Honor Zhao Ming becomes CEO of ‘New’ Company After Sub-brand Sold by Huawei,” Global Times, November 17, 2020; “Huawei Officially Sold Glory to Shenzhen Zhixinxin: The Shareholder Structure Behind it is Disclosed,” Sina Technology, November 17, 2020. 235 Zhao Juecheng and Shen Weiduo, “Honor 50 Series Handset Powered with Qualcomm Chips Launched in Shanghai,” Global Times, June 16, 2021. 236 Ibid. 237 Kelsey Cheng, “Huawei Spin-off Brand Honor Working with Qualcomm to Launch New 5G Phone in Coming Months,” Pan Daily, January 7, 2021; Celia Chen, “Exclusive: Honor CEO Speaks Out: Unburdened by U.S. Sanctions on Huawei, the Budget Smartphone Brand Looks to Take on Apple and Former Parent,” South China Morning Post,” January 27, 2021; Anniek Bao, “Honor Inks Deal With Microsoft in Post-Huawei Rush to Rebuild Links to U.S. Companies,” Caixin, December 25, 2020. Congressional Research Service 45 China’s Countermeasures to U.S. Economic Policy Actions and Authorities ~~In June 2021, Honor launched a~~
premium smartphone that is powered by Qualcomm premium smartphone that is powered by Qualcomm'’s new Snapdragon 778G 5G chip.s new Snapdragon 778G 5G chip. ~~223~~238 In November 2021, U.S. media reported that Huawei might sell its server business to another PRC government consortium in a deal structure that appears to be similar to the one it used to sell Honor.239
Honor, having been restructured as a separate entity, may Honor, having been restructured as a separate entity, may ~~fal~~ fall outside current U.S. government outside current U.S. government
restrictions in the absence of further clarification or action from the U.S. Department of restrictions in the absence of further clarification or action from the U.S. Department of
Commerce’s BIS. While Huawei and its affiliates are listed on BIS’ Entity List, subjecting U.S. Commerce’s BIS. While Huawei and its affiliates are listed on BIS’ Entity List, subjecting U.S.
trade with these companies to a license, Honor may not be currently restricted because it is no trade with these companies to a license, Honor may not be currently restricted because it is no
longer under Huawei and thus is not listed on the Entity List. To date, BIS has not clarified if it longer under Huawei and thus is not listed on the Entity List. To date, BIS has not clarified if it
assesses that Honor assesses that Honor ~~fal s~~falls within current export control restrictions, or if it would add Honor to the within current export control restrictions, or if it would add Honor to the
Entity List to explicitly apply U.S. export controls to the restructured Honor business. In August Entity List to explicitly apply U.S. export controls to the restructured Honor business. In August
2021, the Chair of the House GOP’s Task Force on China and some of its Members sent a letter 2021, the Chair of the House GOP’s Task Force on China and some of its Members sent a letter
to Commerce Secretary Gina Raimondo asking that the End-User Review Committee (ERC) to Commerce Secretary Gina Raimondo asking that the End-User Review Committee (ERC)
designate Honor Device Co. Ltd. to the Department of Commerce Entity List.designate Honor Device Co. Ltd. to the Department of Commerce Entity List.~~224~~240 Also in August 2021, Senator Wicker, ranking member of the Senate Committee on Commerce, Science, and Transportation, sent a letter to the acting undersecretary at BIS inquiring about Huawei licensing and implementation of a Final Rule that was to restrict Huawei’s access to U.S. technologies.241 In mid-September 2021, media reports indicated that U.S. agency participants in the ERC had considered whether to add Honor to the Entity List but the decision was split at a staff level and would be escalated to a higher policy level, likely the Advisory Committee on Export Policy (ACEP).242 In October 2021, the House Foreign Affairs Committee released BIS licensing data for Huawei and SMIC for the six-month period from November 2020 to April 2021. Even though both firms were on the Entity List, the data showed that BIS approved 113 licenses for Huawei at an estimated value of $61.4 billion, and 48 licenses were returned without action (RWA) at an estimated value of $29.8 billion. Many of these licenses were for semiconductor-related items, according to the BIS footnotes.243 BIS approved 188 licenses for SMIC at an estimated value of $41.9 billion, and 17 licenses were returned RWA at an estimated value of $1.2 billion. These licenses included semiconductor equipment, as well as chemicals and gases used in 238 David Kirton, “Chinese Phone Maker Honor Partners with Key Chip Suppliers after Huawei Split,” Reuters, January 21, 2021. 239 Sebastian Moss, “Huawei Reportedly Plans to Sell x86 Server Business Following U.S. Sanctions,” Data Center Dynamics, November 3, 2021. 240 “House GOP China Task ~~Also in August~~

~~219 Scott Livingston, “Huawei, HONOR, and China’s Evolving State Capitalist T ool Kit,” CSIS Brief, December 2020;~~
~~Chen Qingqing and Shen Weiduo, “Update: Former Chief Executive of Honor Zhao Ming becomes CEO of 'New'~~
~~Company After Sub-brand Sold by Huawei,” Global Tim es, November 17, 2020; “ Huawei Officially Sold Glory to~~
~~Shenzhen Zhixinxin: T he Shareholder Structure Behind it is Disclosed,” Sina Technology, November 17, 2020.~~
~~220 Zhao Juecheng and Shen Weiduo, “Honor 50 Series Handset Powered with Qualcomm Chips Launched in~~
~~Shanghai,” Global Tim es, June 16, 2021.~~
~~221 Ibid.~~
~~222 Kelsey Cheng, “ Huawei Spin-off Brand Honor Working with Qualcomm to Launch New 5G Phone in Coming~~
~~Months,” Pan Daily, January 7, 2021; Celia Chen, “Exclusive: Honor CEO Speaks Out: Unburdened by U.S. Sanctions~~
~~on Huawei, the Budget Smartphone Brand Looks to T ake on Apple and Former Parent,” South China Morning Post,”~~
~~January 27, 2021; Anniek Bao, “ Honor Inks Deal With Microsoft in Post -Huawei Rush to Rebuild Links to U.S.~~
~~Companies,” Caixin, December 25, 2020.~~
~~223 David Kirton, “Chinese Phone Maker Honor Partners with Key Chip Suppliers after Huawei Split,” Reuters,~~
~~January 21, 2021.~~
~~224 “House GOP China T ask~~ Force Letter to U.S. Commerce Secretary Gina Raimondo,” August 6, 2021, https://gop- Force Letter to U.S. Commerce Secretary Gina Raimondo,” August 6, 2021, https://gop-
foreignaffairs.house.gov/press-release/mccaul-china-task-force-members-ask-for-honor-device-co-to-be-added-to-the-foreignaffairs.house.gov/press-release/mccaul-china-task-force-members-ask-for-honor-device-co-to-be-added-to-the-
~~Congressional Research Service~~

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~~China’s Countermeasures to U.S. Economic Policy Actions and Authorities~~

~~2021, Senator Wicker, ranking member of the Senate Committee on Commerce, Science, and~~
~~Transportation, sent a letter to the acting undersecretary at BIS inquiring about Huawei licensing~~
~~and implementation of a Final Rule that was to restrict Huawei’s access to U.S. technologies.225~~
~~In mid-September 2021, media reports indicated that U.S. agency participants in the ERC had~~
~~considered whether to add Honor to the Entity List but the decision was split at a staff level and~~
~~would be escalated to a higher policy level, likely the Advisory Committee on Export Policy~~
~~(ACEP).226~~
~~Huawei is also shifting into new businesses, such as cloud computing, auto, and optical chips, to~~
~~gain access to export-controlled U.S. semiconductor chips and related technology.227 China’s~~
~~policies also cal~~ entity-list/. 241 “Letter from Senator Roger F. Wicker to Jeremy Pelter, Acting Undersecretary of BIS,” August 11, 2021, https://www.commerce.senate.gov/services/files/776D4787-7260-42C2-9BEB-EFA3C7683780. 242 Ellen Nakashima and Jeanne Whalen, “Key Security Agencies Split Over Whether to Blacklist Former Huawei Smartphone Unit,” The Washington Post, September 19, 2021. The process for adding a company to the Entity List, including the escalation process, is detailed in Supplement No. 5 to Part 744 of the Export Administration Regulations (EAR), 15 C.F.R. § 730 et seq. 243 See https://gop-foreignaffairs.house.gov/wp-content/uploads/2021/10/Huawei-Licensing-Information.pdf. According to the EAR 15 C.F.R. § 772.1 a return without action can include a license exemption or determination that a license is not required among other types of BIS administrative actions. Congressional Research Service 46 China’s Countermeasures to U.S. Economic Policy Actions and Authorities semiconductor chip fabrication.244 Over this period, BIS denied two licenses for Huawei, and one license for SMIC.245 Huawei is also shifting into new businesses, such as cloud computing, auto, and optical chips, to gain access to export-controlled U.S. semiconductor chips and related technology.246 U.S. export controls generally do not currently cover cloud computing, and the United States does not generally restrict foreign cloud services businesses.247 China’s policies also call for strengthening ties with foreign industry associations for strengthening ties with foreign industry associations ~~potential y~~potentially to work to work
around U.S. restrictions.around U.S. restrictions.~~228~~248 In January 2021, BlackBerry Limited, a Canadian headquartered In January 2021, BlackBerry Limited, a Canadian headquartered
software company, announced it sold 90 smartphone patents—including some security-related software company, announced it sold 90 smartphone patents—including some security-related
patents—to Huawei, despite current U.S. restrictions on Huawei, highlighting areas of potential patents—to Huawei, despite current U.S. restrictions on Huawei, highlighting areas of potential
statutory or policy gaps in U.S. government efforts to address PRC companies of concern.statutory or policy gaps in U.S. government efforts to address PRC companies of concern.~~229~~249 U.S. U.S.
and other governments’ restrictions of Huawei do not cover the company’s participation in 6G and other governments’ restrictions of Huawei do not cover the company’s participation in 6G
research and applications. In January 2021, Huawei executives initiated a public relations push research and applications. In January 2021, Huawei executives initiated a public relations push
with the Australian government that advocates for Huawei’s participation in the Australian with the Australian government that advocates for Huawei’s participation in the Australian
government’s 6G standards-setting process and 6G-related R&D.government’s 6G standards-setting process and 6G-related R&D.~~230~~250 In response to requests from In response to requests from
U.S. companies, including Qualcomm, in June 2020 BIS issued an interim final rule that clarified U.S. companies, including Qualcomm, in June 2020 BIS issued an interim final rule that clarified
that U.S. export restrictions would not apply to standard-setting collaboration with Huawei.that U.S. export restrictions would not apply to standard-setting collaboration with Huawei.~~231~~251 In In
addition, U.S. and other governments’ 5G restrictions do not currently apply to some other addition, U.S. and other governments’ 5G restrictions do not currently apply to some other
prominent Chinese telecommunications vendors that may also raise concerns, such as Oppo, prominent Chinese telecommunications vendors that may also raise concerns, such as Oppo,
Vivo, or Xiaomi. Vivo, or Xiaomi.
Applied Materials and Jingsheng
Other examples show how Chinese firms may be seeking to use offshore structures to obtain U.S. Other examples show how Chinese firms may be seeking to use offshore structures to obtain U.S.
technologies and technologies and ~~potential y~~potentially bypass U.S. authorities. In August 2021, China’s Jingsheng bypass U.S. authorities. In August 2021, China’s Jingsheng
Mechanical and Electrical Co., Ltd. announced that it would be forming a joint venture with the Mechanical and Electrical Co., Ltd. announced that it would be forming a joint venture with the
Hong Kong subsidiary of U.S. headquartered semiconductor tools and equipment company, Hong Kong subsidiary of U.S. headquartered semiconductor tools and equipment company,

~~entity-list/.~~
~~225 “Letter from Senator Roger F. Wicker to Jeremy Pelter, Acting Undersecretary of BIS,” August 11, 2021,~~
~~https://www.commerce.senate.gov/services/files/776D4787 -7260-42C2-9BEB-EFA3C7683780.~~
~~226 Ellen Nakashima and Jeanne Whalen, “Key Security Agencies Split Over Whether to Blacklist Former Huawei~~
~~Smartphone Unit,” The Washington Post, September 19, 2021. T he process for adding a company to the Entity List,~~
~~including the escalation process, is detailed in Supplement No. 5 to Part 744 of the Export Administration Regulations,~~
~~15 C.F.R. § 730 et seq.~~
~~227 “Huawei Focusing on Cloud Business Which Still Has Access to U.S. Chips,” Reuters, August 29, 2020; and Karen~~
~~Freifeld, “Huawei Gets U.S. Approvals to Buy Auto Chips, Sparking Blow Back,” Reuters, August 25, 2021.~~
~~228~~Applied Materials, Inc. Jingsheng would control the joint venture and Applied Materials would sell its equipment business in Italy, wafer testing equipment business in Singapore, and assets from its R&D and wafer business subsidiary in Xi’an, China.252 Jingsheng says that the 244 See https://gop-foreignaffairs.house.gov/wp-content/uploads/2021/10/SMIC-Licensing-Information.pdf. 245 Ibid. 246 “Huawei Focusing on Cloud Business Which Still Has Access to U.S. Chips,” Reuters, August 29, 2020; and Karen Freifeld, “Huawei Gets U.S. Approvals to Buy Auto Chips, Sparking Blow Back,” Reuters, August 25, 2021. 247 BIS 2018 Annual Conference on Export Controls and Policy, Bureau of Industry and Security, U.S. Department of Commerce, Presentation on Export Controls and Cloud Computing, May 13, 2018. 248 Ramish Zafar, “U.S. Chip Firms to Coordinate with Chinese Firms on IP Security, Other Areas,” WCCF Ramish Zafar, “U.S. Chip Firms to Coordinate with Chinese Firms on IP Security, Other Areas,” WCCF ~~T ech~~Tech Inc., Inc.,
March 11, 2021. March 11, 2021.
~~229~~249 Sean Silcoff, “BlackBerry Sells 90 Patents to Huawei, Covering Key Smartphone Sean Silcoff, “BlackBerry Sells 90 Patents to Huawei, Covering Key Smartphone ~~T echnology~~Technology Advances,” Advances,” The
Globe and Mail, January 12, 2021. , January 12, 2021.
~~230~~250 Joseph Waring, “Huawei Pushes Australia for 6G Role,” Joseph Waring, “Huawei Pushes Australia for 6G Role,” Mobile World Live, January 6, 2021. , January 6, 2021.
~~231~~251 “Release of ‘ “Release of ‘~~T echnology~~Technology’ to Certain Entities on the Entity List in the Context of Standards Organization’ to Certain Entities on the Entity List in the Context of Standards Organization , U.S. , U.S.
Department of Commerce’s Bureau of Industry and Security,” 85 Department of Commerce’s Bureau of Industry and Security,” 85 Federal Register 36719, June 18, 2020, 36719, June 18, 2020,
shttps://www.federalregister.gov/documents/2020/06/18/2020shttps://www.federalregister.gov/documents/2020/06/18/2020 -13093/release-of-technology-to-certain-entities-on-the--13093/release-of-technology-to-certain-entities-on-the-
entity-list-in-the-context-of-standardsentity-list-in-the-context-of-standards. 252 Mike Rosa, “Xi’an Center Advances More-than-Moore Technology Development,” Applied Materials Company Website, March 2018, https://www.appliedmaterials.com/nanochip/nanochip-fab-solutions/march-2018/xian-center-advances-more-than-moore-technology-development. Congressional Research Service 47.
~~Congressional Research Service~~

45

China’s Countermeasures to U.S. Economic Policy Actions and Authorities ~~Policy Actions and Authorities~~

~~Applied Materials, Inc. Jingsheng would control the joint venture and Applied Materials would~~
~~sel its equipment business in Italy, wafer testing equipment business in Singapore, and assets~~
~~from its R&D and wafer business subsidiary in Xi’an, China.232 Jingsheng says that the~~
businesses in the deal have “no assets, operations or personnel in the United States.”businesses in the deal have “no assets, operations or personnel in the United States.”~~233~~253
Jingsheng’s business focuses on semiconductor research and manufacturing equipment related to Jingsheng’s business focuses on semiconductor research and manufacturing equipment related to
silicon and silicon carbide.silicon and silicon carbide.~~234~~254 The firm participates in China’s The firm participates in China’s National Science and Technology
Major 02 Special Project, which directs and funds the development of China’s “indigenous” , which directs and funds the development of China’s “indigenous”
semiconductor materials, tools, and equipment capabilities.semiconductor materials, tools, and equipment capabilities.~~235~~255 Some experts anticipate that next Some experts anticipate that next
generation semiconductor capabilities could benefit from breakthroughs in silicon and silicon generation semiconductor capabilities could benefit from breakthroughs in silicon and silicon
carbide, materials that also have defense applications.carbide, materials that also have defense applications.~~236~~256 By transferring semiconductor IP and By transferring semiconductor IP and
capabilities to a Chinese firm, Appliedcapabilities to a Chinese firm, Applied Materials (and Jingsheng) may be seeking to qualify for Materials (and Jingsheng) may be seeking to qualify for
China’s semiconductor policy incentives.China’s semiconductor policy incentives.~~237~~257 The deal could also be in response to less visible The deal could also be in response to less visible
Chinese government pressure. In March 2021, Applied Materials announced that its agreement to Chinese government pressure. In March 2021, Applied Materials announced that its agreement to
acquire Kokusai Electric Corporation expired because Applied Materials “did not receive acquire Kokusai Electric Corporation expired because Applied Materials “did not receive
confirmation of timely approval from the regulator in China.”confirmation of timely approval from the regulator in China.”~~238~~258
U.S. technology companies, such as Advanced Micro Devices, Inc. (AMD), previously responded U.S. technology companies, such as Advanced Micro Devices, Inc. (AMD), previously responded
to Chinese pressures to to Chinese pressures to ~~sel~~ sell core x86 semiconductor capabilities to a Chinese state consortium by core x86 semiconductor capabilities to a Chinese state consortium by
using a set of separate but interrelated commercial transactions to avoid CFIUS jurisdiction.using a set of separate but interrelated commercial transactions to avoid CFIUS jurisdiction.~~239~~259
Concerns about these types of joint venture deals motivated some Members of Congress to Concerns about these types of joint venture deals motivated some Members of Congress to
expand CFIUS’ jurisdiction with the passage of FIRRMA in 2018.expand CFIUS’ jurisdiction with the passage of FIRRMA in 2018.~~240~~260 A new provision in A new provision in
FIRRMA gives CFIUS jurisdiction over “any other transaction, transfer, agreement, or FIRRMA gives CFIUS jurisdiction over “any other transaction, transfer, agreement, or
arrangement, designed or intended to evade or circumvent the CFIUS review process.”arrangement, designed or intended to evade or circumvent the CFIUS review process.”~~241~~

~~232 Mike Rosa, “ Xi’an Center Advances More-than-Moore T echnology Development,”~~261 In November 2021, the Italian government reportedly blocked Jingsheng’s bid for the Applied Applied Materials business based in Italy.262 Policy Implications and Issues for Congress China’s buildout of a robust national economic security toolkit, combined with its efforts to counter U.S. authorities and restrictions on China, indicate that U.S. government efforts to 253~~Materials Company~~
~~Website, March 2018, https://www.appliedmaterials.com/nanochip/nanochip-fab-solutions/march-2018/xian-center-~~
~~advances-more-than-moore-technology-development.~~
~~233~~ “Zhejiang Jingsheng (300316 CH),” Company Update, China Merchants Bank International Securities, Equity “Zhejiang Jingsheng (300316 CH),” Company Update, China Merchants Bank International Securities, Equity
Research, AugustResearch, August 2, 2021, at https://pdf.dfcfw.com/pdf/H3_AP202108021507573507_1.pdf?1627903003000.pdf2, 2021, at https://pdf.dfcfw.com/pdf/H3_AP202108021507573507_1.pdf?1627903003000.pdf . .
~~234~~254 For further information see the company’s website at http://www.jsjd.cc/ For further information see the company’s website at http://www.jsjd.cc/ and the company’s 2020 Annual Report and the company’s 2020 Annual Report
available at https://vip.stock.finance.sina.com.cn/corp/view/vCB_AllBulletinDetail.php?stockid=300316&id=7113943available at https://vip.stock.finance.sina.com.cn/corp/view/vCB_AllBulletinDetail.php?stockid=300316&id=7113943 . .
~~235~~255 “National Science and “National Science and ~~T echnology~~Technology Major Specialized Enterprises—01 Special and 02 Special Enterprises Major Specialized Enterprises—01 Special and 02 Special Enterprises
Concentrated at IC China 2014,” AugustConcentrated at IC China 2014,” August 22, 2014, China Semiconductor Industry Association. See22, 2014, China Semiconductor Industry Association. See details at the details at the
company’s website at http://www.jsjd.cc/casesinfo.aspx?id=38company’s website at http://www.jsjd.cc/casesinfo.aspx?id=38 and in the company’s stock notice from May 4, 2017 at and in the company’s stock notice from May 4, 2017 at
http://pdf.dfcfw.com/pdf/H2_AN201705030551346515_01.pdfhttp://pdf.dfcfw.com/pdf/H2_AN201705030551346515_01.pdf . .
~~236~~256 Brad Bergen, “Semiconductor Breakthrough: Scientists Just Widened the Gap with New Brad Bergen, “Semiconductor Breakthrough: Scientists Just Widened the Gap with New ~~T iny~~Tiny Chips,” Chips,” Interesting
Engineering, May 20 2021; Julissa, May 20 2021; Julissa Green, “Green, “ An Overview of SiliconAn Overview of Silicon ~~Carbide~~ Carbide Ceramic Materials,” AdvancedCeramic Materials,” Advanced Ceramic Ceramic
Materials. Materials.
~~237 See CRS~~ 257 See CRS Report R46767, Report R46767, China’s New Semiconductor Policies: Issues for Congress, by Karen M. Sutter. , by Karen M. Sutter.
~~238~~258 “Applied Materials Announces “Applied Materials Announces ~~T ermination~~Termination of Kokusai Electric Acquisition Agreement,” Globe Newswire, of Kokusai Electric Acquisition Agreement,” Globe Newswire, March March
29, 2021. 29, 2021.
~~239~~259 Kate O’Keeffe and Brian Spegele, “How a Big U.S. Chip Maker Gave China the ‘Keys to the Kingdom’,” Kate O’Keeffe and Brian Spegele, “How a Big U.S. Chip Maker Gave China the ‘Keys to the Kingdom’,” The Wall
Street Journal, June 27, 2019. , June 27, 2019.
~~240~~260 Kate O’Keeffe and Siobhan Hughes, “Congress to Kate O’Keeffe and Siobhan Hughes, “Congress to ~~T oughen~~Toughen Foreign Investment Reviews Amid Foreign Investment Reviews Amid ~~T rade~~Trade Fight With Fight With
China,” China,” The Wall Street Journal, July 19, 2018. , July 19, 2018.
~~241 See CRS~~ 261 See CRS In Focus IF11334, In Focus IF11334, CFIUS: New Foreign Investment Review Regulations, by Cathleen D. Cimino-Isaacs , by Cathleen D. Cimino-Isaacs
and James K. Jackson. and James K. Jackson.
262 Giuseppe Fonte and Ella Cao, “Italy's Draghi Vetoes Third Chinese Takeover This Year,” Reuters, November 23, 2021. Congressional Research Service Congressional Research Service

4648

China’s Countermeasures to U.S. Economic Policy Actions and Authorities ~~Policy Actions and Authorities~~

~~Policy Implications and Issues for Congress~~
~~China’s buildout of a robust national economic security toolkit, combined with its efforts to~~
~~counter U.S. authorities and restrictions on China, indicate that U.S. government efforts to~~
advance and protect U.S. economic, trade, and national security interests with regard to China advance and protect U.S. economic, trade, and national security interests with regard to China
most likely most likely ~~wil~~ will require sustained policy focus, bureaucratic agility, and politicalrequire sustained policy focus, bureaucratic agility, and political resolve to be resolve to be
effective. effective. ~~Longstanding~~Long-standing and emerging patterns of China’s economic and trade behavior show that and emerging patterns of China’s economic and trade behavior show that
the United States should expect and be prepared at both a strategic and tactical level to counter the United States should expect and be prepared at both a strategic and tactical level to counter
China’s measures and countermeasures as U.S. officials seek to work with China’s measures and countermeasures as U.S. officials seek to work with ~~al ies~~allies and partners to and partners to
address the concerns posed by China’s behavior. Relatedly, the United States should anticipate address the concerns posed by China’s behavior. Relatedly, the United States should anticipate
China’s likelyChina’s likely increased use of its geo-economic toolkit of trade retaliation, brinkmanship tactics, increased use of its geo-economic toolkit of trade retaliation, brinkmanship tactics,
and other formal and informal tools of economic coercion to advance its political and economic and other formal and informal tools of economic coercion to advance its political and economic
goals. China’s approach involves pressuring business and appears to be undermining certain goals. China’s approach involves pressuring business and appears to be undermining certain
global trade rules and norms or aims to set new rules that may differ from U.S. approaches, global trade rules and norms or aims to set new rules that may differ from U.S. approaches,
including areas involving digitalincluding areas involving digital trade rules and standard-setting. Some of these behaviors may trade rules and standard-setting. Some of these behaviors may
require new rules and approaches—at the unilateral, plurilateral, and multilateral levels—and require new rules and approaches—at the unilateral, plurilateral, and multilateral levels—and
concerted joint actions by the United States and like-minded countries. concerted joint actions by the United States and like-minded countries.
China is deploying trade tools that attempt to create parity with the United States but which may China is deploying trade tools that attempt to create parity with the United States but which may
make broader and discriminatory use of these tools in advancing China’s nationalmake broader and discriminatory use of these tools in advancing China’s national economic, economic,
industrial, and politicalindustrial, and political goals; promoting national champions; and pressuring foreign firms and goals; promoting national champions; and pressuring foreign firms and
governments. An important consideration in U.S. government policies and actions is the role of governments. An important consideration in U.S. government policies and actions is the role of
the state in China’s business ecosystem and the control and influence the Chinese state may have the state in China’s business ecosystem and the control and influence the Chinese state may have
over China’s corporate actors. This state role arguably over China’s corporate actors. This state role arguably ~~al ows~~allows the Chinese government to align the Chinese government to align
with or with or ~~potential y~~ potentially compel its leading companies in undertaking joint action in China and compel its leading companies in undertaking joint action in China and
overseas to advance China’s political and other goals. As China seeks to counter U.S. policy overseas to advance China’s political and other goals. As China seeks to counter U.S. policy
actions and press for an extraterritorial reach of its regulatory system and judicial decisions, a key actions and press for an extraterritorial reach of its regulatory system and judicial decisions, a key
consideration is how U.S. policies and authorities view Chinese corporate entities, including how consideration is how U.S. policies and authorities view Chinese corporate entities, including how
they are defined, as they are defined, as ~~wel~~ well as views on their role and rights in the United States.as views on their role and rights in the United States.~~242~~
263 Some U.S. experts, companies, universities, and Members of Congress view some of the recent Some U.S. experts, companies, universities, and Members of Congress view some of the recent
U.S. trade restrictions on China—such as the imposition of tariffs, expanding the number of U.S. trade restrictions on China—such as the imposition of tariffs, expanding the number of
Chinese firms on the BIS Entity List, and increased scrutiny of China’s funding and research Chinese firms on the BIS Entity List, and increased scrutiny of China’s funding and research
activities in the United States—as complicating and adversely impacting the abilityactivities in the United States—as complicating and adversely impacting the ability to do business to do business
with China, one of the largest global markets, and argue that the restrictions undermine longer-with China, one of the largest global markets, and argue that the restrictions undermine longer-
term U.S. economic competitiveness and innovation. They argue that the U.S. government has term U.S. economic competitiveness and innovation. They argue that the U.S. government has
restricted too much trade, investment, and research ties with China, citing the economic benefits restricted too much trade, investment, and research ties with China, citing the economic benefits
of collaboration and the economic costs of decoupling. Others argue that, given the scope and of collaboration and the economic costs of decoupling. Others argue that, given the scope and
scale of the scale of the ~~chal enges~~challenges that China poses, the United States must protect its interests and address that China poses, the United States must protect its interests and address
the asymmetry and vulnerabilities in how commercial relationships, investment, research ties the asymmetry and vulnerabilities in how commercial relationships, investment, research ties
with China are developing China’s capabilitieswith China are developing China’s capabilities in ways that may disadvantage the United States. in ways that may disadvantage the United States.
Other experts and Members of Congress support a policy of continued economic engagement Other experts and Members of Congress support a policy of continued economic engagement
with China, as it represents one of the largest markets in the world, while addressing major issues with China, as it represents one of the largest markets in the world, while addressing major issues
of concern with respect to market access and other discriminatory barriers in China and China’s of concern with respect to market access and other discriminatory barriers in China and China’s
state-led policies that may create many of these barriers. This viewpoint state-led policies that may create many of these barriers. This viewpoint ~~general y~~generally supports supports
continued negotiation in concert with like-minded nations and other advanced economies to continued negotiation in concert with like-minded nations and other advanced economies to

~~242 T om Westbrook, Pei Li, John Mccrank, and Alexandra Alper, “NYSE May Make Second U-turn on China T elecom~~
~~Delistings Amid Confusion over Policy,” Reuters, January 4, 2021.~~
~~Congressional Research Service~~

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~~China’s Countermeasures to U.S. Economic Policy Actions and Authorities~~

advance more reciprocal economic relationships with China, and to take stronger action using advance more reciprocal economic relationships with China, and to take stronger action using
various trade policies, if necessary, to achieve this goal. various trade policies, if necessary, to achieve this goal.
The Biden Administration is undertaking a review of U.S. trade policy toward China that looks to The Biden Administration is undertaking a review of U.S. trade policy toward China that looks to
continue the Trump Administration’s framing of China as a strategic competitor. In this context, continue the Trump Administration’s framing of China as a strategic competitor. In this context,
263 Tom Westbrook, Pei Li, John Mccrank, and Alexandra Alper, “NYSE May Make Second U-turn on China Telecom Delistings Amid Confusion over Policy,” Reuters, January 4, 2021. Congressional Research Service 49 China’s Countermeasures to U.S. Economic Policy Actions and Authorities and in consideration of China’s recent trade measures and countermeasures, Congress might and in consideration of China’s recent trade measures and countermeasures, Congress might
consider whether, and, if so, how to address the following: consider whether, and, if so, how to address the following:
U.S. ~~legislation and policymaking on China concerns:~~Legislation and Policymaking on China Concerns
 A key issue for Congress is whether current U.S. policy approaches and tools,  A key issue for Congress is whether current U.S. policy approaches and tools,
including recent or pending legislation, are sufficient in how the United States including recent or pending legislation, are sufficient in how the United States
prioritizes, scopes, structures, and acts on its concerns about China to advance prioritizes, scopes, structures, and acts on its concerns about China to advance
U.S. nationalU.S. national interests. Congress may further review U.S. government decision-interests. Congress may further review U.S. government decision-
making on China trade and economic security issues and the use of existing making on China trade and economic security issues and the use of existing
authorities and tools to address China’s practices of concern to determine if authorities and tools to address China’s practices of concern to determine if
existing policies and tools are sufficient. Key questions include whether the U.S. existing policies and tools are sufficient. Key questions include whether the U.S.
government bureaucracy is sufficiently agile and effective in its response to government bureaucracy is sufficiently agile and effective in its response to
China’s measures and countermeasures and to what extent is the U.S. China’s measures and countermeasures and to what extent is the U.S.
government proactive or reactive in its efforts, and how are U.S. actions government proactive or reactive in its efforts, and how are U.S. actions
coordinated so that agencies’ authorities are coordinated so that agencies’ authorities are ~~mutual y~~mutually reinforcing on crosscutting reinforcing on crosscutting
issues. Congress might explore, for example, how various U.S. government issues. Congress might explore, for example, how various U.S. government
agencies collaborate to address crosscutting concerns such as U.S. technology agencies collaborate to address crosscutting concerns such as U.S. technology
transfer to China. transfer to China.
 Congress may review its legislation, hearings, reports and other oversight that it  Congress may review its legislation, hearings, reports and other oversight that it
has conducted on U.S. policies over the past five years related to China trade and has conducted on U.S. policies over the past five years related to China trade and
economic security issues to assess implementation. Congress may consider how economic security issues to assess implementation. Congress may consider how
it is leveraging its own reports and findings. How is Congress organizing and it is leveraging its own reports and findings. How is Congress organizing and
collaborating to address crosscutting concerns that may collaborating to address crosscutting concerns that may ~~fal~~ fall across different across different
committee jurisdictions? Should Congress utilize more actively the role of its committee jurisdictions? Should Congress utilize more actively the role of its
Designated Congressional Advisors and Congressional Advisory Groups on Designated Congressional Advisors and Congressional Advisory Groups on
Negotiations that it established in Trade Promotion Authority legislationNegotiations that it established in Trade Promotion Authority legislation enacted enacted
in 2015 (P.L. 114-26), to represent congressional views on U.S.-China trade and in 2015 (P.L. 114-26), to represent congressional views on U.S.-China trade and
economic issues to the Executive Branch?economic issues to the Executive Branch?~~243~~264
 Another area for ongoing congressional scrutiny is the U.S. government’s  Another area for ongoing congressional scrutiny is the U.S. government’s
experience to date on prominent issues, such as the treatment of national security experience to date on prominent issues, such as the treatment of national security
concerns related to Huawei, to ascertain lessons and best practices in advancing concerns related to Huawei, to ascertain lessons and best practices in advancing
U.S. economic and national security objectives vis-a-vis China. Congress could U.S. economic and national security objectives vis-a-vis China. Congress could
look ahead to consider how the government should address related and emerging look ahead to consider how the government should address related and emerging
issues, such as cloud computing, 5G connected vehicles and devices, 6G issues, such as cloud computing, 5G connected vehicles and devices, 6G
development, and other advanced Chinese technology. A related issue is the development, and other advanced Chinese technology. A related issue is the
efforts and outcomes of ongoing cooperation with U.S. efforts and outcomes of ongoing cooperation with U.S. ~~al ies~~allies and partners and partners
regarding U.S. concerns about Huawei and whether such approaches should be regarding U.S. concerns about Huawei and whether such approaches should be
applied to other concerns. applied to other concerns.
China’s Trade and Economic Coercion:
 Congress may examine how China’s exercise of its new measures and  Congress may examine how China’s exercise of its new measures and
countermeasures could countermeasures could ~~chal enge~~challenge U.S. economic competitiveness and national ~~U.S. economic competitiveness and national~~

~~243 See CRS Report R43491, Trade Promotion Authority (TPA): Frequently Asked Questions, by Ian F. Fergusson and~~
~~Christopher M. Davis.~~
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security. Congress could assess how these measures might undermine U.S. security. Congress could assess how these measures might undermine U.S.
policies and authorities—including those related to recently passed legislation—policies and authorities—including those related to recently passed legislation—
and consider whether, and, if so, how to address this issue. Should Congress and consider whether, and, if so, how to address this issue. Should Congress
enhance U.S. government enforcement provisions to counter China’s pressures? enhance U.S. government enforcement provisions to counter China’s pressures?
264 See CRS Report R43491, Trade Promotion Authority (TPA): Frequently Asked Questions, by Ian F. Fergusson and Christopher M. Davis. Congressional Research Service 50 China’s Countermeasures to U.S. Economic Policy Actions and Authorities Are there existing laws and authorities that could be used to address these Are there existing laws and authorities that could be used to address these
~~chal enges~~challenges posed by China? Has the U.S. government’s defense of its policy posed by China? Has the U.S. government’s defense of its policy
decisions in U.S. courts been adequate? decisions in U.S. courts been adequate?
 Congress may look at whether companies should be required to report or disclose  Congress may look at whether companies should be required to report or disclose
when they are subject to pressure or benefit from China’s measures, including when they are subject to pressure or benefit from China’s measures, including
subsidies and other preferences. One option might be to amend the Anti-boycott subsidies and other preferences. One option might be to amend the Anti-boycott
Act of 2018 (P.L. 115-232, 50 U.S.C. 4801) to address specific requirements for Act of 2018 (P.L. 115-232, 50 U.S.C. 4801) to address specific requirements for
companies to counter how China may be using companies to counter how China may be using ad hoc trade measures against the trade measures against the
United States and its United States and its ~~al ies~~allies and partners. In this regard, Congress might consider and partners. In this regard, Congress might consider
whether it should restrict companies from participating in or benefitting from whether it should restrict companies from participating in or benefitting from
(either directly or indirectly) China’s commercial boycotts and other (either directly or indirectly) China’s commercial boycotts and other ad hoc trade trade
restrictions, and accepting Chinese government subsidies and preferences that restrictions, and accepting Chinese government subsidies and preferences that
advance China’s industrial policies of concern. Should Congress require that IP advance China’s industrial policies of concern. Should Congress require that IP
and technology transfer to China and Chinese entities tied to these policies and and technology transfer to China and Chinese entities tied to these policies and
preferences be reported to the government or otherwise publicly disclosed, and preferences be reported to the government or otherwise publicly disclosed, and
what might be the costs of such action or inaction? Other potential options that what might be the costs of such action or inaction? Other potential options that
could be explored in terms of their costs and benefits might be whether Congress could be explored in terms of their costs and benefits might be whether Congress
should require a new category of SEC disclosure for China risks that includes should require a new category of SEC disclosure for China risks that includes
economic coercion. economic coercion.
 Congress could consider whether, and if so, how, to enhance and support  Congress could consider whether, and if so, how, to enhance and support
concerted trade action with U.S. concerted trade action with U.S. ~~al ies~~allies and partners to help counter China’s and partners to help counter China’s
economic coercion. For example, Congress might encourage or seek the economic coercion. For example, Congress might encourage or seek the
negotiation of similar anti-boycott provisions with like-minded countries and of negotiation of similar anti-boycott provisions with like-minded countries and of
other options to counter China’s economic and trade coercion with joint actions other options to counter China’s economic and trade coercion with joint actions
that impose commensurate trade policy repercussions and economic costs, that impose commensurate trade policy repercussions and economic costs,
beginning with sectors China is leveraging, such as raw materials, energy, and beginning with sectors China is leveraging, such as raw materials, energy, and
agricultural commodities. agricultural commodities.
Congress could consider how to work with the European Commission regarding its efforts to strengthen its ability to impose commercial sanctions in response to economic coercion by countries outside the European Union.265  Another area of potential congressional focus might be to articulate the ways in  Another area of potential congressional focus might be to articulate the ways in
which China’s approach and behaviors undermine global trade rules, norms, and which China’s approach and behaviors undermine global trade rules, norms, and
principles and consider the range of U.S. options, including in the WTO. For principles and consider the range of U.S. options, including in the WTO. For
example, what is the feasibilityexample, what is the feasibility ~~of cal s~~ of calls by some experts for the United States and by some experts for the United States and
other countries to bring a WTO nullificationother countries to bring a WTO nullification and impairment case against China? and impairment case against China?
Could such action help to address the growing range of concerns that the United Could such action help to address the growing range of concerns that the United
States and others have with China’s trade measures?States and others have with China’s trade measures?~~244~~266 Should the USTR Should the USTR
prioritizeprioritize and accelerate the negotiation of agreements that address issues, such and accelerate the negotiation of agreements that address issues, such
as state funding and subsidies and nondiscriminatory trade rules and disciplines as state funding and subsidies and nondiscriminatory trade rules and disciplines
for digital trade? for digital trade?
~~Technology, Data, and Research~~

~~244 Jennifer Hillman, “T he~~ 265 Barbara Moens and Jakob Hanke Vela, “EU Flexes Geopolitical Muscle with New Trade Weapon,” Politico EU, December 6, 2021; “Strengthening the EU's autonomy – Commission seeks input on a new anti-coercion instrument,” European Commission Press Release, March 23, 2021. 266 Jennifer Hillman, “The Best Way to Address China’s Unfair Policies and Practices is Best Way to Address China’s Unfair Policies and Practices is ~~T hrough~~Through a Big, Bold, a Big, Bold,
Multilateral CaseMultilateral Case ~~at the WT O,” T estimony~~ at the WTO,” Testimony Before the U.S.-China Economic and Security Review Before the U.S.-China Economic and Security Review Commission, JuneCommission, June 8, 8,
2018; Stephen Ezell, “2018; Stephen Ezell, “ False Promises II: False Promises II: ~~T he~~The Continuing Gap Continuing Gap Between China’s Between China’s ~~WT O~~WTO Commitments and Its Practices,” Commitments and Its Practices,”
Information Technology and Innovation Foundation, July 26, 2021.Information Technology and Innovation Foundation, July 26, 2021.
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Technology, Data, and Research  Congress could seek an assessment of U.S.-China dual use technology ties to  Congress could seek an assessment of U.S.-China dual use technology ties to
identify actors, ties, and trends of concern and determine whether, and if so, in identify actors, ties, and trends of concern and determine whether, and if so, in
what ways, U.S. technology trade and two-way investment are strengthening what ways, U.S. technology trade and two-way investment are strengthening
China’s capabilities in areas that may undermine U.S. national security and China’s capabilities in areas that may undermine U.S. national security and
economic competitiveness. Congress might examine, for example, the effects of economic competitiveness. Congress might examine, for example, the effects of
expanded U.S. export controls since passage of the Export Control Reform Act expanded U.S. export controls since passage of the Export Control Reform Act
(ECRA), looking at the controls on particular firms and technologies that have (ECRA), looking at the controls on particular firms and technologies that have
been added, and the licensing of controlled technologies to China (including been added, and the licensing of controlled technologies to China (including
companies on the BIS Entity List), as companies on the BIS Entity List), as ~~wel~~ well as how U.S. government technology as how U.S. government technology
licensing and investment review decisions align with U.S. policy objectives on licensing and investment review decisions align with U.S. policy objectives on
China. China.
 An area for further congressional oversight and action could be to seek  An area for further congressional oversight and action could be to seek
accelerated U.S. multilateral action on export controls, in line with pending accelerated U.S. multilateral action on export controls, in line with pending
legislativelegislative proposals in the United States Innovation and Competition Act of proposals in the United States Innovation and Competition Act of
2021 (S. 1260 and H.Amdt. 3535). These measures would require the Executive 2021 (S. 1260 and H.Amdt. 3535). These measures would require the Executive
Branch to strengthen collaboration among members of the Wassenaar Branch to strengthen collaboration among members of the Wassenaar
Arrangement and jointlyArrangement and jointly impose and enforce technology controls on China. impose and enforce technology controls on China.
 China’s role and technological gains from participation in U.S. open source  China’s role and technological gains from participation in U.S. open source
technology platforms and whether, and if so how, this activity should be technology platforms and whether, and if so how, this activity should be
addressed is another area for ongoing congressional oversight. As the Department addressed is another area for ongoing congressional oversight. As the Department
of Defense and some in Congress look to open source technology solutions and of Defense and some in Congress look to open source technology solutions and
~~al iances~~alliances (e.g., ORAN) as a way to lessen dependence on Chinese companies, (e.g., ORAN) as a way to lessen dependence on Chinese companies,
Congress might address Chinese membership and roles in these platforms. Congress might address Chinese membership and roles in these platforms.
 Congress could also further deepen its understanding of trends, and the benefits  Congress could also further deepen its understanding of trends, and the benefits
and risks of China’s participation in U.S. research, including additional review of and risks of China’s participation in U.S. research, including additional review of
the findings and recommendations of the staff report, the findings and recommendations of the staff report, Threats to the U.S.
Research Enterprise: China’s Talent Recruitment Plans, which the U.S. Senate’s , which the U.S. Senate’s
Permanent Subcommittee on Investigations released in November 2019. A key Permanent Subcommittee on Investigations released in November 2019. A key
issue is whether U.S. government activity to date has been excessive or whether issue is whether U.S. government activity to date has been excessive or whether
further oversight, transparency, and restrictions should be considered with regard further oversight, transparency, and restrictions should be considered with regard
to visas, federal grant making, federal agency audits of programs and personnel, to visas, federal grant making, federal agency audits of programs and personnel,
and disclosure of foreign ties and funding. Another area of consideration is how and disclosure of foreign ties and funding. Another area of consideration is how
China’s participation in U.S. China’s participation in U.S. ~~federal y~~federally funded research may be developing funded research may be developing
particular capabilities in the United States and China and whether the U.S. particular capabilities in the United States and China and whether the U.S.
government should cultivate enhanced U.S. talent and alternative foreign talent. government should cultivate enhanced U.S. talent and alternative foreign talent.
~~Additional y,~~ Additionally, should the U.S. government conduct greater examination of should the U.S. government conduct greater examination of
outbound U.S. government and university funding and university IP and outbound U.S. government and university funding and university IP and
technology licensing for China-tied research and commercial activities? technology licensing for China-tied research and commercial activities?
 Congress may examine the potential effects of China’s measures on data and  Congress may examine the potential effects of China’s measures on data and
digital digital trade to ascertain whether U.S. government approaches to data protections trade to ascertain whether U.S. government approaches to data protections
and China’s corporate operations are adequate. Congress might also assess and China’s corporate operations are adequate. Congress might also assess
whether, and if so, how, to achieve nondiscriminatory trade rules and disciplines whether, and if so, how, to achieve nondiscriminatory trade rules and disciplines
in digitalin digital trade. Key issues that could be examined include how China’s new trade. Key issues that could be examined include how China’s new
measures affect U.S. IP, technology, trade secrets, data, and research that is measures affect U.S. IP, technology, trade secrets, data, and research that is
transferred to China, or China-controlled entities and how China may access U.S. transferred to China, or China-controlled entities and how China may access U.S.
data, including cyber metadata, through commercial operations in the United data, including cyber metadata, through commercial operations in the United
States or commercial ties to U.S. firms. In light of recent concerns, Congress States or commercial ties to U.S. firms. In light of recent concerns, Congress
Congressional Research Service 52 China’s Countermeasures to U.S. Economic Policy Actions and Authorities might consider whether to examine prominent corporate examples—might consider whether to examine prominent corporate examples— such as such as
WeChat, TikTok, or Zoom—to ascertain the effectiveness of U.S. policy WeChat, TikTok, or Zoom—to ascertain the effectiveness of U.S. policy
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approaches, including the Biden Administration’s proposed timeline and approaches, including the Biden Administration’s proposed timeline and
framework for assessing potential risks posed by Chinese software firms framework for assessing potential risks posed by Chinese software firms
operating in the United States. Relatedly, Congress might consider whether operating in the United States. Relatedly, Congress might consider whether
China’s new trade measures could undermine the risk mitigation measures and China’s new trade measures could undermine the risk mitigation measures and
approaches the U.S. government uses with regard to China-tied transactions of approaches the U.S. government uses with regard to China-tied transactions of
concern. Congress could also consider whether to act on proposed legislation that concern. Congress could also consider whether to act on proposed legislation that
would require additionalwould require additional U.S. government oversight over outbound U.S. U.S. government oversight over outbound U.S.
investments, technology licensing, and data transfers to China and PRC entities investments, technology licensing, and data transfers to China and PRC entities
by both the private sector and U.S. government agencies.by both the private sector and U.S. government agencies.~~245~~
267 Industrial Policies and the Role of the State
 Congress may continue to consider and address the  Congress may continue to consider and address the ~~chal enges~~challenges that the Chinese that the Chinese
government’s formal and informal levers of control over companies may pose for government’s formal and informal levers of control over companies may pose for
U.S. authoritiesU.S. authorities. Such issues might include state control, influence, funding, and Such issues might include state control, influence, funding, and
access; market restrictions; and other distorting and potentially anti-competitive access; market restrictions; and other distorting and potentially anti-competitive
practices. Congress might examine specific examples to ascertain how U.S. practices. Congress might examine specific examples to ascertain how U.S.
authorities distinguish between state and corporate actors; how U.S. incorporated authorities distinguish between state and corporate actors; how U.S. incorporated
firms have acted on behalf of the Chinese government; and whether the legal firms have acted on behalf of the Chinese government; and whether the legal
~~chal enges~~challenges posed by China in the United States expose any gaps in U.S posed by China in the United States expose any gaps in U.S
authorities or a need for new approaches.authorities or a need for new approaches.~~246~~268
 Congress might consider how the Chinese government uses competition  Congress might consider how the Chinese government uses competition
authorities to advance its industrial policies, including by requiring the authorities to advance its industrial policies, including by requiring the
divestiture and sale of targeted businesses and technologies to Chinese firms. divestiture and sale of targeted businesses and technologies to Chinese firms.
Congress might investigate why the U.S. government rarely, if ever, has Congress might investigate why the U.S. government rarely, if ever, has
undertaken an antitrust review of a PRC corporate merger or acquisition and undertaken an antitrust review of a PRC corporate merger or acquisition and
whether U.S. authorities, and use of these authorities, are sufficient to address whether U.S. authorities, and use of these authorities, are sufficient to address
instances of potential Chinese anticompetitive behavior. instances of potential Chinese anticompetitive behavior.
 An area for further congressional oversight might include elevating  An area for further congressional oversight might include elevating
biotechnology and agriculture as key concerns with regard to China. biotechnology and agriculture as key concerns with regard to China. China China
identifies agriculture as a national security priority, including in its investment identifies agriculture as a national security priority, including in its investment
restrictions, national development plans, and restrictions, national development plans, and ad hoc trade retaliation. Congress trade retaliation. Congress
could, for example, add the U.S. Department of Agriculture to CFIUS as a full could, for example, add the U.S. Department of Agriculture to CFIUS as a full
member. Congress might inquire on large member. Congress might inquire on large ~~potential y~~potentially high impact transactions to high impact transactions to
assess whether current U.S. authorities are sufficient. assess whether current U.S. authorities are sufficient.
~~ Another area for potential congressional examination is the lack of reciprocity in~~
~~U.S. and China’s investment terms and how China’s market barriers~~
~~disadvantage the United States. Do China’s market restrictions in strategic~~

~~245~~ 267 See proposed example by Senator Wyden, Protecting Americans’ See proposed example by Senator Wyden, Protecting Americans’ ~~Dat a~~Data from Foreign Surveillance Act from Foreign Surveillance Act , at , at
https://www.wyden.senate.gov/imo/media/doc/Protecting%20Americans%20Data%20from%20Foreign%https://www.wyden.senate.gov/imo/media/doc/Protecting%20Americans%20Data%20from%20Foreign%~~20Surveillan~~
ce20Surveillance%20Act%20of%202021%20Bill%20Text.pdf; and proposed legislation by Senator Casey%20Act%20of%202021%20Bill%20Text.pdf; and proposed legislation by Senator Casey and Senator Cornyn, and Senator Cornyn, ~~T he~~
The National Critical CapabilitiesNational Critical Capabilities Defense ActDefense Act , , https://www.casey.senate.gov/imo/media/doc/caseyhttps://www.casey.senate.gov/imo/media/doc/casey -
-cornyn_nccda_amendment.pdf. Also see the Genomics Data Security Act introduced by Senator Rubio,cornyn_nccda_amendment.pdf. Also see the Genomics Data Security Act introduced by Senator Rubio, S. 1744. S. 1744.
~~246~~268 On July 22, 2021, U.S. courts sentenced a California-man for his role in a scheme to illegally export integrated On July 22, 2021, U.S. courts sentenced a California-man for his role in a scheme to illegally export integrated
circuits with military applications to China. He usedcircuits with military applications to China. He used a California-based company that he controlled to funnel funds a California-based company that he controlled to funnel funds
provided by Chinese entities, which wereprovided by Chinese entities, which were ~~subsequently~~ subsequently placed on the BISplaced on the BIS Entity List, to finance the manufacturing of Entity List, to finance the manufacturing of
the military integrated circuits by the victim company. See “the military integrated circuits by the victim company. See “ Electrical Engineer Sentenced to More Electrical Engineer Sentenced to More ~~T han~~Than Five Years in Five Years in
Prison for Conspiring to Illegally Export to China Semiconductor Chips with Military Uses,” Office of Public Affairs, Prison for Conspiring to Illegally Export to China Semiconductor Chips with Military Uses,” Office of Public Affairs,
U.S.U.S. Department of Justice, July 22, 2021. Department of Justice, July 22, 2021.
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China’s Countermeasures to U.S. Economic Policy Actions and Authorities  Another area for potential congressional examination is the lack of reciprocity in U.S. and China’s investment terms and how China’s market barriers disadvantage the United States. Do China’s market restrictions in strategic ~~Policy Actions and Authorities~~

sectors incentivize China’s acquisitions and abilitysectors incentivize China’s acquisitions and ability to set joint venture and to set joint venture and
technology transfer terms? Do China’s requirements that U.S. software firms, technology transfer terms? Do China’s requirements that U.S. software firms,
such as Microsoft, share source code and cyber patches with the Chinese such as Microsoft, share source code and cyber patches with the Chinese
government and its state-tied firms create vulnerabilities for the United States, government and its state-tied firms create vulnerabilities for the United States,
including cyber intrusion and attacks, as the U.S. government relies on these including cyber intrusion and attacks, as the U.S. government relies on these
same firms to provide U.S. critical infrastructure?same firms to provide U.S. critical infrastructure?~~247~~269 Congress might examine Congress might examine
how Chinese firms are operating in U.S. emerging technology sectors that remain how Chinese firms are operating in U.S. emerging technology sectors that remain
closed or restricted to U.S. firms in China, such as social media, block chain, closed or restricted to U.S. firms in China, such as social media, block chain,
cloud computing, and software-tied services in health, finance, information, cloud computing, and software-tied services in health, finance, information,
media, and retail. Is there sufficient visibility and oversight of China’s activity in media, and retail. Is there sufficient visibility and oversight of China’s activity in
these areas in the U.S. market? Congress could work with the executive branch to these areas in the U.S. market? Congress could work with the executive branch to
set domestic reciprocity terms and seek similar provisions be negotiated with set domestic reciprocity terms and seek similar provisions be negotiated with
other like-mindedother like-minded countries to align approaches. countries to align approaches.
 Congress could seek to address China concerns through oversight of the June  Congress could seek to address China concerns through oversight of the June
2021 agreement with the European Union on aircraft subsidies, under which both 2021 agreement with the European Union on aircraft subsidies, under which both
sides agreed to coordinate and cooperate to diminish China’s ability to require sides agreed to coordinate and cooperate to diminish China’s ability to require
technology transfer in aerospace.technology transfer in aerospace.~~248~~270 Congress could share its views about how the Congress could share its views about how the
agreement could address transfer risks with regard to particular technological agreement could address transfer risks with regard to particular technological
capabilities and transactions. It could consider how this agreement could be a capabilities and transactions. It could consider how this agreement could be a
model for how the United States might partner with the EU in other sectors (e.g., model for how the United States might partner with the EU in other sectors (e.g.,
semiconductors and advanced materials), and with other countries to prevent semiconductors and advanced materials), and with other countries to prevent
China from coercing technology transfer. China from coercing technology transfer.

~~247~~ 269 Sumner Lemon, “China Gets Access to Microsoft Source Code,” Sumner Lemon, “China Gets Access to Microsoft Source Code,” IDG News Service, March 3, 2003; Kartikay , March 3, 2003; Kartikay
Mehrotra, “Hack Pushes Microsoft to Rethink How it DisclosesMehrotra, “Hack Pushes Microsoft to Rethink How it Discloses Code-SharingCode-Sharing Plan After SuspectedPlan After Suspected Leak,” Leak,” Bloomberg, ,
April 27, 2021. April 27, 2021.
~~248~~270 In the agreement’s In the agreement’s Annex on Cooperation on Non-Market Economies, the two sides agreed “to , the two sides agreed “to ~~coordinat e~~coordinate and and
explore common approaches and enhanced cooperation regarding the screening of newexplore common approaches and enhanced cooperation regarding the screening of new outward investments in joint outward investments in joint
ventures and production facilities in nonmarket economies to ensure that such activities are not influenced by ventures and production facilities in nonmarket economies to ensure that such activities are not influenced by
nonmarket forces, including conditioning the in-country purchases on the location of production facilities or other nonmarket forces, including conditioning the in-country purchases on the location of production facilities or other
actions, that lead to the transfer of technology or jobs to the detriment of market-oriented actors.” “actions, that lead to the transfer of technology or jobs to the detriment of market-oriented actors.” “ ~~UST R~~USTR Announces Announces
Joint U.S.-E.U. Cooperative Framework for Large CivilJoint U.S.-E.U. Cooperative Framework for Large Civil ~~Aircraft~~ Aircraft,” Office of the U.S. ,” Office of the U.S. ~~T rade~~Trade Representative, June 15, Representative, June 15,
2021. 2021. ~~T he~~The Agreement and Annex are available at Agreement and Annex are available at
https://ustr.gov/sites/default/files/files/FINAL%20Understanding%20on%20Principles%20relating%20to%20Large%https://ustr.gov/sites/default/files/files/FINAL%20Understanding%20on%20Principles%20relating%20to%20Large%2
~~0Civil~~20Civil%20Aircraft.pdf. %20Aircraft.pdf.
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Appendix.
Table A-1. Select Instances of China’s Ad Hoc Economic and Trade ~~Coercion 249~~Coercion271
Date
Event
2020-2021 2020-2021
China effectively restricted China effectively restricted imports of Australian coal, barley,imports of Australian coal, barley, beef, cotton, copper, sugar, beef, cotton, copper, sugar,
timber,timber, beer, wine,beer, wine, seafood, wheat, and wool beginning in May 2020. Observersseafood, wheat, and wool beginning in May 2020. Observers view these view these
restrictionsrestrictions as a responseas a response to Australian leaders’to Australian leaders’ ~~public cal s~~ public calls for an investigation into the origin for an investigation into the origin
of the Coronavirus Diseaseof the Coronavirus Disease 2019 (COVID-19) pandemic.2019 (COVID-19) pandemic.~~250~~272
In June 2021, China’s General AdministrationIn June 2021, China’s General Administration of Customs confiscated, destroyed, or returned of Customs confiscated, destroyed, or returned
severalseveral imported shipments of H&M, Gap, and Nike products that it claimedimported shipments of H&M, Gap, and Nike products that it claimed posed a potential posed a potential
health hazard to consumers.health hazard to consumers. ~~Some~~ Some experts contend that this was an escalation in a broader experts contend that this was an escalation in a broader
campaign of retaliation against Westerncampaign of retaliation against Western clothing brands clothing brands ~~fol owing~~ following statements releasedstatements released by Nike, by Nike,
H&M, and other companiesH&M, and other companies regarding forced labor in Xinjiang.regarding forced labor in Xinjiang.~~251~~273
2019-2020 2019-2020
After Daryl Morey, After Daryl Morey, General Manager of National General Manager of National ~~Basketbal~~ Basketball Association (NBA) team the Association (NBA) team the
Houston Rockets, tweeted an image with the caption “Fight for Freedom.Houston Rockets, tweeted an image with the caption “Fight for Freedom. Stand with Hong Stand with Hong
Kong,” the PRC consulate in Houston demanded the team “correct the error”Kong,” the PRC consulate in Houston demanded the team “correct the error” and “eliminate and “eliminate
the adverse impact.”the adverse impact.”~~252~~274 Soon thereafter, Chinese brands suspended cooperation with the Soon thereafter, Chinese brands suspended cooperation with the
team.team.~~253~~275 China Central Television, China Central Television, China’s state broadcaster, stopped broadcasting NBA China’s state broadcaster, stopped broadcasting NBA
preseason games in China and did not resumepreseason games in China and did not resume them until October 10, 2020, more than a year them until October 10, 2020, more than a year
later.later.~~254~~276 ESPN reported in September ESPN reported in September 2020 that the NBA had incurred “at least $200 2020 that the NBA had incurred “at least $200 ~~mil ion~~million” ”
in estimatedin estimated ~~losses~~ losses from the China market as a result of the controversy.from the China market as a result of the controversy.~~255~~

~~249 T his~~277 271 This chart was prepared by chart was prepared by CRS Analysts Caitlin Campbell and Michael SutherlandCaitlin Campbell and Michael Sutherland ~~at Congressional Research Service.~~
~~250~~. 272 Megan Ophel, “Warning from Australia: Meet the Megan Ophel, “Warning from Australia: Meet the ~~T hreat~~Threat of Chinese Economic Coercion to Democracy,” Center of Chinese Economic Coercion to Democracy,” Center
for a Newfor a New American Security, February 9, 2021; Bonnie S. Glaser,American Security, February 9, 2021; Bonnie S. Glaser, ~~“T ime~~ “Time for Collective Pushback Against China’s for Collective Pushback Against China’s
Economic Coercion,” Center for Strategic and International Studies, January 13, 2021; Paul Karp and Helen Davidson, Economic Coercion,” Center for Strategic and International Studies, January 13, 2021; Paul Karp and Helen Davidson,
“China Bristles at Australia’s Call“China Bristles at Australia’s Call for Investigation into Coronavirus Origin,” for Investigation into Coronavirus Origin,” The Guardian, April 29, 2020. , April 29, 2020.
~~251~~273 General Administration of Customs of the People’s Republic of China, General Administration of Customs of the People’s Republic of China, General Administration of Customs Reports
on the Safety of Children’s Products, June 1, 2021, , June 1, 2021,
http://www.customs.gov.cn/customs/xwfb34/302425/3692320/index.html;“http://www.customs.gov.cn/customs/xwfb34/302425/3692320/index.html;“ China accuses Western firms over China accuses Western firms over
‘harmful’ kids’ goods,”‘harmful’ kids’ goods,” BBC, June 3, 2021. , June 3, 2021.
~~252~~274 Consulate-General of the People’s Republic of China in Houston, “ Consulate-General of the People’s Republic of China in Houston, “ Chinese Consulate General Spokesperson’s Chinese Consulate General Spokesperson’s
Remarks on the Erroneous Comments on Hong Kong by General Manager of the Houston Rockets,” October 6, 2019, Remarks on the Erroneous Comments on Hong Kong by General Manager of the Houston Rockets,” October 6, 2019,
http://houston.china-consulate.org/eng/sgxw/t1705494.htm. http://houston.china-consulate.org/eng/sgxw/t1705494.htm.
~~253~~275 Paul Simao and Josh Horwitz, “NBA Stirs U.S. Hornet’s Nest, Faces China Backlash over Hong Kong Paul Simao and Josh Horwitz, “NBA Stirs U.S. Hornet’s Nest, Faces China Backlash over Hong Kong ~~T weet~~Tweet,” ,”
Reuters, October 6, 2019; Iain Marlow and, October 6, 2019; Iain Marlow and Jon Herskovitz, “Jon Herskovitz, “ NBA Chief DefendsNBA Chief Defends Freedom of Expression in Face Off Freedom of Expression in Face Off
with China,” Bloomberg,with China,” Bloomberg, October 8, 2019; Zhang Jianfeng, “Morey Owes the Chinese an Apology,” October 8, 2019; Zhang Jianfeng, “Morey Owes the Chinese an Apology,” ~~CCT V~~CCTV, October 8, , October 8,
2019. 2019.
~~254 “A T imeline~~276 “A Timeline of the Daryl Morey NBA-China Saga,” of the Daryl Morey NBA-China Saga,” South China Morning Post, at , at
https://multimedia.scmp.com/widgets/vert_timeline/?id=darylmoreyhttps://multimedia.scmp.com/widgets/vert_timeline/?id=darylmorey -nba-china-saga; -nba-china-saga; ~~CCT V, “~~ CCTV, “Central Radio and Central Radio and
~~T elevision~~Television General Station General Station ~~CCT V~~ CCTV Sports Channel StatementSports Channel Statement ,” October 8, 2019. ,” October 8, 2019.
~~255~~277 Kevin Arnovitz, “Inside the Longest, Most Unpredictable Year in NBA History,” ESPN, September 29, 2020. Kevin Arnovitz, “Inside the Longest, Most Unpredictable Year in NBA History,” ESPN, September 29, 2020.
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Date
Event
April April 2018 2018
The Civil Aviation Administration The Civil Aviation Administration of China (CAAC) issued a letterof China (CAAC) issued a letter directing foreign airlines, directing foreign airlines,
including U.S. carriers,including U.S. carriers, to referto refer to Taiwan as a region of China on their public websitesto Taiwan as a region of China on their public websites and and
applications. For airlinesapplications. For airlines that failed to comply within 30 days, CAAC threatened to designate that failed to comply within 30 days, CAAC threatened to designate
them as “severelythem as “severely untrustworthy” companies—an apparent referenceuntrustworthy” companies—an apparent reference to China’s emerging to China’s emerging
attempt to establish a social credit system to shape individual and corporate attempt to establish a social credit system to shape individual and corporate ~~behavior256~~behavior278—and —and
to report companies to the Cyberspace Administrationto report companies to the Cyberspace Administration of China for further sanctions.of China for further sanctions.~~257~~279
According to Reuters, by August 2018, According to Reuters, by August 2018, al all targeted U.S. airlinestargeted U.S. airlines had eitherhad either complied or had complied or had
begun taking steps to comply.begun taking steps to comply.~~258~~280
January 2018 January 2018
Marriott International, Inc., announced it would temporarily Marriott International, Inc., announced it would temporarily take down its Chinese-language take down its Chinese-language
websites and apps in China “at the request of the [PRC] Government”websites and apps in China “at the request of the [PRC] Government” in order to “make the in order to “make the
necessary corrections”necessary corrections” ~~fol owing~~ following two incidents: the hotel chain listed two incidents: the hotel chain listed Hong Kong, Tibet, Macau, Hong Kong, Tibet, Macau,
and Taiwan as “countries” in an email survey and on its app, and an employeeand Taiwan as “countries” in an email survey and on its app, and an employee operating the operating the
hotel’s official Twitter account “liked” a tweet by an organization that advocates for Tibetan hotel’s official Twitter account “liked” a tweet by an organization that advocates for Tibetan
independence. The hotel company issued an apology, pledged to completeindependence. The hotel company issued an apology, pledged to complete ~~a “ful~~ a “full investigation” investigation”
of the incidents, and later fired the employeeof the incidents, and later fired the employee who “liked” the tweet.who “liked” the tweet.~~259~~281
November November
The PRC State Tourism Bureau reportedly issued a directive The PRC State Tourism Bureau reportedly issued a directive to Chinese travel agencies to Chinese travel agencies
2017 2017
mandating the mandating the ~~cancel ation of al~~ cancellation of all tours and advertisementstours and advertisements for tours to the Vatican and St. for tours to the Vatican and St.
Peter’sPeter’s Basilica due to the Vatican’s maintenance of diplomatic relations with Taiwan.Basilica due to the Vatican’s maintenance of diplomatic relations with Taiwan.~~260~~282
2016-2018 2016-2018
In an effort to pressure South Korea to abandon its plans to deploy (jointly with the United In an effort to pressure South Korea to abandon its plans to deploy (jointly with the United
States) a TerminalStates) a Terminal High-Altitude Area DefenseHigh-Altitude Area Defense (THAAD) missile(THAAD) missile defense system,defense system, China took China took
measuresmeasures that included the that included the ~~fol owing:~~ following: (1) restricted(1) restricted South Korean entertainment and other South Korean entertainment and other
cultural exports from entering China, including cultural exports from entering China, including ~~cancel ing~~cancelling South Korean pop music events, South Korean pop music events,
banning South Korean televisionbanning South Korean television shows from airing on a state-owned televisionshows from airing on a state-owned television channel, and channel, and
withholding regulatory approvals for South Korean online video games; (2) banned the sale of withholding regulatory approvals for South Korean online video games; (2) banned the sale of
such South Korean household products as cosmetics,such South Korean household products as cosmetics, high-tech toilet seats, air purifiers,high-tech toilet seats, air purifiers, and and
food; (3) restricted tourismfood; (3) restricted tourism between the two countries by ordering travel agencies not to between the two countries by ordering travel agencies not to
provide South Koreaprovide South Korea tour packages and by rejecting Korean airlines’tour packages and by rejecting Korean airlines’ applications to increase applications to increase
charter flights between the two countries; and (4) targeted the China business of Lotte, the charter flights between the two countries; and (4) targeted the China business of Lotte, the
South Korean conglomerateSouth Korean conglomerate that agreed to provide land for the missilethat agreed to provide land for the missile defense system’s defense system’s
deployment site. China’s efforts to disrupt Lotte’s business reportedlydeployment site. China’s efforts to disrupt Lotte’s business reportedly included suspending new included suspending new
factories,factories, launching cyberattacks against Lotte’s website,launching cyberattacks against Lotte’s website, and closing 75 of 99 Lotte Mart stores and closing 75 of 99 Lotte Mart stores
in China for in China for ~~al eged~~ alleged safety violations.safety violations.~~261~~ 283 The campaign against Lotte also reportedly caused The campaign against Lotte also reportedly caused
hundreds of hundreds of ~~mil ions of dol ars or more in losses~~ millions of dollars or more in losses to the company, with revenues dropping 77% to the company, with revenues dropping 77%
in 2017.in 2017.~~262~~

~~256~~284 278 China’s nascent social credit system seeks to aggregate data about each Chinese citizen’s social and financial China’s nascent social credit system seeks to aggregate data about each Chinese citizen’s social and financial
behavior and assignbehavior and assign scores that could affect their access to a comprehensive list of financial and other services, scores that could affect their access to a comprehensive list of financial and other services,
includingincluding loans, jobs, domestic travel, and educational opportunities. loans, jobs, domestic travel, and educational opportunities.
~~257~~279 Civil Aviation Administration of China, “Notice Relating to Rectification of the Official Website within a Specified Civil Aviation Administration of China, “Notice Relating to Rectification of the Official Website within a Specified
~~T imeframe~~Timeframe,” April 25, 2018. ,” April 25, 2018.
~~258~~280 “U.S. Airlines Say Further Amending Websites to Change “U.S. Airlines Say Further Amending Websites to Change ~~T aiwan~~Taiwan References,” References,” Reuters, August 9, 2018. , August 9, 2018.
~~259~~281 Marriott International, Inc., “Statement from Arne Sorenson, President and CEO, Marriott International, Inc.,” Marriott International, Inc., “Statement from Arne Sorenson, President and CEO, Marriott International, Inc.,”
January 11, 2018; PRC Ministry of Foreign Affairs, “Foreign Ministry Spokesperson Lu Kang’sJanuary 11, 2018; PRC Ministry of Foreign Affairs, “Foreign Ministry Spokesperson Lu Kang’s ~~Regular~~ Regular Press Press
Conference,” January 12, 2018; Alanna Petroff and Steven Jiang, “China Blocks Marriott for Listing Conference,” January 12, 2018; Alanna Petroff and Steven Jiang, “China Blocks Marriott for Listing ~~T ibet and T aiwan~~Tibet and Taiwan
as Countries,” as Countries,” CNN,, January 11, 2018; Matthew Hansen, “Hansen: Omaha Man ‘Liked’ a January 11, 2018; Matthew Hansen, “Hansen: Omaha Man ‘Liked’ a ~~T weet~~Tweet, and then He Lost his , and then He Lost his
Dream Job,”Dream Job,” Omaha World-Herald, March 21, 2018. , March 21, 2018.
~~260~~282 Radio Free Asia, Radio Free Asia, “China’s Links with “China’s Links with ~~T he~~The Vatican Appear to Sour Amid Vatican Appear to Sour Amid ~~T ourism~~Tourism Ban,” November 21, 2017. Ban,” November 21, 2017.
~~261~~283 Ethan Meick and Nargiza Salidjanova, “China’s Response to U.S.-South Korean Missile Defense System Ethan Meick and Nargiza Salidjanova, “China’s Response to U.S.-South Korean Missile Defense System
Deployment and its Implications,” Deployment and its Implications,” U.S.-China Economic and Security Review Commission, July 26, 2017, p. 7-8. , July 26, 2017, p. 7-8.
~~262~~284 Coco Feng, “South Korea’s Lotte, Hit by Consumer Boycott, Sells More China Stores,” Coco Feng, “South Korea’s Lotte, Hit by Consumer Boycott, Sells More China Stores,” Caixin, May 12, 2018; “Hit , May 12, 2018; “Hit
by Political Crossfire, Lotte’s China Exit Stalls,” by Political Crossfire, Lotte’s China Exit Stalls,” Bloomberg, February 13, 2018; and “Lotte Aims to Complete Sales of , February 13, 2018; and “Lotte Aims to Complete Sales of
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Date
Event
2016-2017 2016-2017
The number of PRC tourists to Taiwan began to decline The number of PRC tourists to Taiwan began to decline after President Tsai Ing-wen took after President Tsai Ing-wen took
office on May 20, 2016. According to the Taiwan Tourism Bureau, the number of PRC visitors office on May 20, 2016. According to the Taiwan Tourism Bureau, the number of PRC visitors
to Taiwan in 2016 to Taiwan in 2016 ~~fel~~ fell 16% over 2015, to 3.5 16% over 2015, to 3.5 ~~mil ion.~~ million. In 2017, the number of PRC visitorsIn 2017, the number of PRC visitors ~~fel~~
fell 22% over 2016 to 2.7 22% over 2016 to 2.7 ~~mil ion.~~ million. The PRC had not acknowledged ordering tourists to stay away, The PRC had not acknowledged ordering tourists to stay away,
but its state media highlighted the reported negative impact of lowerbut its state media highlighted the reported negative impact of lower mainland tourist numbers mainland tourist numbers
on the Taiwan tourism industry and linkedon the Taiwan tourism industry and linked the phenomenon to President Tsaithe phenomenon to President Tsai'’s policies.s policies. The The
PRC's state news agency, Xinhua, noted in May 2017 that, “The PRC's state news agency, Xinhua, noted in May 2017 that, “The ~~lul~~ lull [in tourism[in tourism from mainland from mainland
China] China] ~~fol ows~~ follows the election of Taiwan’s new leaderthe election of Taiwan’s new leader Tsai Ing-wen, who assumed office last May. Tsai Ing-wen, who assumed office last May.
Tsai has refused to adhere to the 1992 Consensus, angering people on both sides of the Tsai has refused to adhere to the 1992 Consensus, angering people on both sides of the
Strait.”Strait.”~~263~~285
November November
After Mongolia hosted a visit from the Dalai Lama, the After Mongolia hosted a visit from the Dalai Lama, the ~~international y~~internationally recognized spiritual recognized spiritual
2016 2016
leader of Tibet, China raised fees on certain Mongolian imports, leader of Tibet, China raised fees on certain Mongolian imports, created delays at a major created delays at a major
border crossing,border crossing, and suspended negotiations for a loan to Mongolia. The Mongolian and suspended negotiations for a loan to Mongolia. The Mongolian
government government ~~eventual y~~eventually apologized to the PRC government and pledged not to host the Dalai apologized to the PRC government and pledged not to host the Dalai
Lama again.Lama again.~~264~~286
July 2015 July 2015
Reuters reported that Sony Pictures Entertainment executives made adjustments to China- Reuters reported that Sony Pictures Entertainment executives made adjustments to China-
related content in movies,related content in movies, including including RoboCop (2014) and (2014) and Pixels (2015), in order (2015), in order to appease to appease
Chinese film regulatorsChinese film regulators and moviegoers.and moviegoers. The article quoted Peter Shiao, founder and CEO of The article quoted Peter Shiao, founder and CEO of
filmfilm studio Orb Media Group, as saying “I think the studios have grown pretty savvy…For a studio Orb Media Group, as saying “I think the studios have grown pretty savvy…For a
type of movie,type of movie, particularly the global blockbusters,particularly the global blockbusters, they are not going to go and make they are not going to go and make
something that the Chinese would rejectsomething that the Chinese would reject for socialfor social or politicalor political reasons. That is already a reasons. That is already a
truism.”truism.”~~265~~287
2012-2016 2012-2016
~~Fol owing~~ Following a tense standoff between China and the Philippines in 2012 over Scarborough Shoal, a tense standoff between China and the Philippines in 2012 over Scarborough Shoal,
a disputed land feature in the South China Sea, China a disputed land feature in the South China Sea, China ~~periodical y~~ periodically restricted banana and other restricted banana and other
agricultural product importsagricultural product imports from the Philippines, citing phytosanitary standards, apparently to from the Philippines, citing phytosanitary standards, apparently to
signal its displeasuresignal its displeasure with Manila’s refusal to abandon its claimwith Manila’s refusal to abandon its claim to the disputed area.to the disputed area.~~266~~288 In In
addition, in 2012, Chinese travel agencies imposedaddition, in 2012, Chinese travel agencies imposed ~~restrictions~~ restrictions on or discouraged travel by on or discouraged travel by
Chinese citizens to the Philippines; China’s government Chinese citizens to the Philippines; China’s government ~~formal y~~formally lifted its travel warning in 2016 lifted its travel warning in 2016
amid improving bilateralamid improving bilateral relations and signals fromrelations and signals from Manila that it would not pursue its South Manila that it would not pursue its South
China Sea claimsChina Sea claims ~~as forceful y.267~~

as forcefully.289 Discount Store China in China by June,” Yonhap NewsDiscount Store China in China by June,” Yonhap News Agency, March 16, 2018.Agency, March 16, 2018.
~~263 T ourism~~ 285 Tourism Bureau, Ministry of Bureau, Ministry of ~~T ransportation~~Transportation and Communications, Republic of China ( and Communications, Republic of China (~~T aiwan), “~~ Taiwan), “2016 and 2017 2016 and 2017
Visitor Arrivals by Residence;”Visitor Arrivals by Residence;” “ “Xinhua Insight: What Has DPP Brought to Xinhua Insight: What Has DPP Brought to ~~T aiwan~~Taiwan Over the Past Year?” Xinhua, May Over the Past Year?” Xinhua, May
20, 2017. 20, 2017.
~~264~~286 Peter Harrell et al., “China’s Use of Coercive Economic Measures,” Peter Harrell et al., “China’s Use of Coercive Economic Measures,” Center for a New American Security, June 11, , June 11,
2018, p. 47. 2018, p. 47.
~~265~~287 Clare Baldwin Clare Baldwin and Kristina Cooke, “Special Report: How Sony Sanitized Adam Sandler Movie to Please Chinese and Kristina Cooke, “Special Report: How Sony Sanitized Adam Sandler Movie to Please Chinese
Censors,” Censors,” Reuters, July 24, 2015. , July 24, 2015.
~~266~~288 Peter Harrell et al., “China’s Use of Coercive Economic Measures,” Center for a New American Security, June 11, Peter Harrell et al., “China’s Use of Coercive Economic Measures,” Center for a New American Security, June 11,
2018, p. 43. 2018, p. 43.
~~267~~289 Willard Cheng, “China Lifts Willard Cheng, “China Lifts ~~T ravel~~Travel Warning on PH after Duterte Meets Xi,” Warning on PH after Duterte Meets Xi,” ABS-CBN News, October 20, 2016; , October 20, 2016;
Jason Gutierrez, “China IssuesJason Gutierrez, “China Issues Warnings on Philippines,” Warnings on Philippines,” AFP, May 11, 2012. , May 11, 2012.
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Date
Event
September September
After the Japan Coast Guard arrested and detained the captain of a Chinese fishing vessel After the Japan Coast Guard arrested and detained the captain of a Chinese fishing vessel
2010 2010
~~fol owing~~following a clash in disputed waters near the Senkaku (Diaoyu) Islands in the East China Sea, a clash in disputed waters near the Senkaku (Diaoyu) Islands in the East China Sea,
China threatened “strong countermeasures.”China threatened “strong countermeasures.”~~268~~ 290 A few weeksA few weeks later, China held exports of rare later, China held exports of rare
earth shipments bound for Japan at Chinese ports.earth shipments bound for Japan at Chinese ports.~~269~~291 The Japanese government reportedly was The Japanese government reportedly was
forced to spend at least $1 forced to spend at least $1 ~~bil ion~~billion to address and compensate for China’s restrictions. to address and compensate for China’s restrictions.~~270~~292
2010-2016 2010-2016
After the Norwegian Nobel Committee After the Norwegian Nobel Committee awarded the 2010 Nobel Peace Prize to Chinese awarded the 2010 Nobel Peace Prize to Chinese
writerwriter and pro-democracy activist Liu Xiaobo while he was imprisonedand pro-democracy activist Liu Xiaobo while he was imprisoned in China, the PRC in China, the PRC
halted a trade deal under negotiation and restrictedhalted a trade deal under negotiation and restricted Norwegian salmon imports.Norwegian salmon imports. This caused This caused
Norway’s share of China’s salmonNorway’s share of China’s salmon imports to drop from 94% in 2010 to an average of 16% imports to drop from 94% in 2010 to an average of 16%
from 2013-2016.from 2013-2016.~~271~~293 Relations normalized Relations normalized and the salmon trade resumed in 2016, with Norway and the salmon trade resumed in 2016, with Norway
pledging not to “support any actions that undermine” China’s corepledging not to “support any actions that undermine” China’s core interests and to “do its best interests and to “do its best
to avoid any future damage to the bilateral relations.”to avoid any future damage to the bilateral relations.”~~272~~ 294 Liu Xiaobo died in prison in 2017.Liu Xiaobo died in prison in 2017.~~273~~295
Source: Compiled Compiled by Caitlin by Caitlin ~~Campbel ,~~ Campbell, CRS Analyst in Asian Affairs,CRS Analyst in Asian Affairs, and Michael D. Sutherland, CRS Analyst in and Michael D. Sutherland, CRS Analyst in
International Trade and Finance. International Trade and Finance.
Table A-2. Select PRC Participants in U.S. Open-Source Technology Platforms
Open Compute Project,
IBM Open Power
~~RISC-V~~
~~O-RAN Alliance~~
Project, CHIPS Alliance,
Open Hardware Group,
RISC-V O-RAN Alliance and CASPA
 
Alibaba Group Alibaba Group
 
ArrayComm ArrayComm (Chengdu Airi Wireless(Chengdu Airi Wireless Technology) Technology)
 
Alibaba Group Alibaba Group
 
Beijing Beijing Academy of Academy of
 
AsiaInfo Holdings, Inc. AsiaInfo Holdings, Inc.
 
Baidu, Inc. Baidu, Inc.
Edge Computing Edge Computing
 
ASTRI (Hong Kong Applied Science and Technology  ASTRI (Hong Kong Applied Science and Technology 
Beijing Beijing Auphi Bi Auphi Bi
 
Chongqing University Chongqing University
Research Institute) Research Institute)
Software, Software,
Industrial Technology  Cambridge Industries Group Ltd. Industrial Technology  Cambridge Industries Group Ltd.
 
Biren Technology Biren Technology
Research Institute Research Institute
 
 
 

CertusNet Inc. CertusNet Inc.

Chengdu Silicon Power Chengdu Silicon Power

Huawei Technologies Huawei Technologies
Technology Technology
Co., Ltd. Co., Ltd.
 
China Mobile China Mobile
 
 
 

Chizhou HISEMI Chizhou HISEMI

Inspur Group Inspur Group

China Telecommunications China Telecommunications Corporation Corporation
Electronic Technology Electronic Technology
 
 

Institute of Advanced Institute of Advanced
China Unicom (China United Network China Unicom (China United Network
Co., Ltd. Co., Ltd.
Computing, Chinese Computing, Chinese
Communications Group Co., Ltd.) Communications Group Co., Ltd.)
 
Horizon Robotics Horizon Robotics
Academy of Science Academy of Science
 
China Academy of Information and Communications China Academy of Information and Communications
(CAS) (CAS)
Technology Technology
 
Huastart Huastart
 
 

Nanjing SemiDrive Nanjing SemiDrive
 
China Information Communication Technologies China Information Communication Technologies

Huawei Technologies Huawei Technologies
Technology Ltd. Technology Ltd.
Group Group
Co., Ltd. Co., Ltd.
 
 Rockchip Rockchip
 


Digigate (Nanjing Diange Communication Technology) Digigate (Nanjing Diange Communication Technology)
InnoGrit InnoGrit
 
 

China GrenTech Co., Ltd. China GrenTech Co., Ltd.

Inspur Group Inspur Group

~~268~~ 290 Martin Fackler and Ian Johnson, “Arrest in Disputed Seas Martin Fackler and Ian Johnson, “Arrest in Disputed Seas Riles China and Japan,” Riles China and Japan,” New York Times, September 19, , September 19,
2010. 2010.
~~269~~291 Keith Bradsher, “Amid Keith Bradsher, “Amid ~~T ension~~Tension, China Blocks Vital Exports to Japan,” , China Blocks Vital Exports to Japan,” New York Times, September 22, 2010. , September 22, 2010.
~~270~~292 Peter Harrell et al., “China’s Use of Coercive Economic Measures,” Center for a New American Security, June 11, Peter Harrell et al., “China’s Use of Coercive Economic Measures,” Center for a New American Security, June 11,
2018, p. 6. 2018, p. 6.
~~271~~293 Ibid. Ibid.
~~272~~294 “Statement of the Government of the People’s Republic of China and the Government of the Kingdom of Norway “Statement of the Government of the People’s Republic of China and the Government of the Kingdom of Norway
on Normalization of Bilateral Relations,” via Lieke Bos, “Norwayon Normalization of Bilateral Relations,” via Lieke Bos, “Norway -China Relations ‘Unfrozen,’” -China Relations ‘Unfrozen,’” Diplomat, December , December
21, 2016. 21, 2016.
~~273~~295 Charlie Campbell, “ Charlie Campbell, “ Liu Xiaobo, ChinaLiu Xiaobo, China'’s Most Prominent Political Prisoner, Dies at 61,” s Most Prominent Political Prisoner, Dies at 61,” Time, July 13, 2017. , July 13, 2017.
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Open Compute Project,
IBM Open Power
~~RISC-V~~
~~O-RAN Alliance~~
Project, CHIPS Alliance,
Open Hardware Group,
RISC-V O-RAN Alliance and CASPA
 
Shanghai Jiatong Shanghai Jiatong
 
ComLab (Beijing) Communication System Equipment  ComLab (Beijing) Communication System Equipment 
JCET JCET
University University
 
GMTC (Shenzhen Zhaochi) GMTC (Shenzhen Zhaochi)
 
Lenovo Group Limited Lenovo Group Limited
 
Shenzhen XTX Shenzhen XTX
 
Herystorm Herystorm (Guangzhou Huirui Sitong Technology) (Guangzhou Huirui Sitong Technology)
 
MooreElite MooreElite
Technology Co., Ltd.  HK Tech, Howking Tech (Nanjing Haojin Technology Co., Ltd.  HK Tech, Howking Tech (Nanjing Haojin
 
Nanjing University Nanjing University
 
Tsinghua University Tsinghua University
Communication Technology) Communication Technology)
Cloud Computing Lab Cloud Computing Lab
 
TrustKernel TrustKernel
 
Innogence (Sichuan Chuangzhi Lianheng Technology)  Innogence (Sichuan Chuangzhi Lianheng Technology) 
Semiconductor Semiconductor
 
Unisoc (formerly Unisoc (formerly
 
Manufacturing Manufacturing

Inspur Group Inspur Group
Spreadtrum Spreadtrum
International International
Communications, Communications, Inc.)Inc.)  
Institute of Advanced Computing, Chinese Academy Institute of Advanced Computing, Chinese Academy
Corporation (SMIC) Corporation (SMIC)
of Science (CAS) of Science (CAS)
 
Wanxiang Blockchain Wanxiang Blockchain
 
Shanghai Industrial Shanghai Industrial
 
Kindroid (Shanghai Jinzhuo Technology) Kindroid (Shanghai Jinzhuo Technology)
 
Technology Research Technology Research

X-EPIC X-EPIC
 
Institute, CAS Institute, CAS
 

Lenovo Group Limited Lenovo Group Limited

Xiamen Xiamen
Semiconductor Semiconductor
 
Mikwave Communications Mikwave Communications
 
Tencent Holdings Ltd. Tencent Holdings Ltd.
Industry Group, Co.  Industry Group, Co. 
New H3C Group (Ziguang Group) New H3C Group (Ziguang Group)
 
X-EPIC X-EPIC
Ltd. Ltd.
 
Phytium (Feiteng Information Technology Co., Ltd.) Phytium (Feiteng Information Technology Co., Ltd.)
 
YanRong Technology YanRong Technology
 
ZTE Corporation ZTE Corporation
 
Purple Mountain Laboratories Purple Mountain Laboratories
 
Raisecom Raisecom (Nanjing Research Institute of (Nanjing Research Institute of ~~Mil imeter~~Millimeter
Wave and Terahertz Technology) Wave and Terahertz Technology)
 
Ruijie Networks Ruijie Networks
 
Sageran (Guangzhou Shiju Network Technology) Sageran (Guangzhou Shiju Network Technology)
 
Shanghai Boelink Shanghai Boelink Communication Technology Ltd. Communication Technology Ltd.
 
Spideradio (Suzhou Zhizhu Communication Spideradio (Suzhou Zhizhu Communication
Technology) Technology)
 
State Grid Information and Telecom State Grid Information and Telecom Group Group
 
Sunwave Communications Sunwave Communications
 
Tianyi (Sichuan Tianyi Comheart Telecom) Tianyi (Sichuan Tianyi Comheart Telecom)
 
Tongwei (Shenzhen Gongjin Electronics) Tongwei (Shenzhen Gongjin Electronics)
 
Tongyu Communications Tongyu Communications
 
Tsinghua University Tsinghua University
 
Vavitel (Shenzhen Fanweitai Technology Service) Vavitel (Shenzhen Fanweitai Technology Service)
 
Wuhan Huagong Zhengyuan Photonics Technology Wuhan Huagong Zhengyuan Photonics Technology
Source: MembershipMembership details from the organizations’ websites. details from the organizations’ websites.
Notes: This chart is not exhaustive. MembershipThis chart is not exhaustive. Membership information accessed on June 29, 2021. information accessed on June 29, 2021.

Author Information

Karen M. Sutter Karen M. Sutter

Specialist in Asian Trade and Finance Specialist in Asian Trade and Finance

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Acknowledgments
The author thanks CRS The author thanks CRS ~~analysts~~Analysts Caitlin Campbell and Michael Sutherland for their contributions to this Caitlin Campbell and Michael Sutherland for their contributions to this
report. report.

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