Order Code RL31910
CRS Report for Congress
Received through the CRS Web
China: Economic Sanctions
Updated May 18, 2005
Dianne E. Rennack
Specialist in Foreign Policy Legislation
Foreign Affairs, Defense, and Trade Division
Congressional Research Service ˜ The Library of Congress

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China: Economic Sanctions
Summary
The United States currently maintains the following economic sanctions against
China:
! limits on U.S. foreign assistance;
! U.S. “No” votes or abstention in the international banks;
! ban on Overseas Private Investment Corporation programs;
! ban on export of defense articles or defense services;
! ban on import of munitions or ammunition;
! denial of Generalized System of Preferences status;
! substantial export controls on dual-use items, particularly satellites,
nuclear technology, and computers;
! export and licensing restrictions on targeted entities found to have
engaged in proliferation of missiles and weapons of mass destruction
(or related technology); and
! Presidential authority to restrict Chinese military companies and
Chinese government-affiliated businesses from developing
commercial activities inside the United States.
Human rights conditions in China and the threat of proliferation of weapons of
mass destruction resulting from China’s lack of export controls or lack of cooperation
with international export control standards continue to be the main foreign policy or
national security issues that hold these economic restrictions in place.
The influence of Congress on U.S. policy toward China, once significant
because so much hung on the annual possibility that favorable trade terms could be
suspended, has more recently been diffused. Sanctions that remain in place today can
all be modified, eased, or lifted altogether by the President, without congressional
input (though some changes would require that the President notify Congress).
Congress and the Administration each recognize the importance of China’s emerging
ability to consume and to produce, and China has become an increasingly important
trading partner of the United States. At the same time, because of the unrelenting
tension between the United States and the Peoples Democratic Republic of Korea
over the latter’s interest in developing nuclear weapons capability, and because of
China’s longstanding relation with North Korea as a primary trading partner and
benefactor, the United States’ relations with China are crucial.
This paper will be updated as events warrant.

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Contents
U.S. Economic Sanctions Currently in Place Against China . . . . . . . . . . . . . 1
Tiananmen Sanctions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Foreign Aid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Arms Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Generalized System of Preferences . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Export Controls Applied to U.S.-China Trade . . . . . . . . . . . . . . . . . . . 6
Proliferation-Related Sanctions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Satellites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Presidential Prerogative
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

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China: Economic Sanctions
U.S. Economic Sanctions Currently in Place Against China
U.S.-China relations, since 1969, when the process of normalization began
under President Nixon, have advanced to a point that relatively few restrictions
remain.1 Today, U.S. economic sanctions against China include:
! limits on U.S. foreign assistance;
! U.S. “No” votes or abstention in the international banks;
! ban on Overseas Private Investment Corporation (OPIC) programs;
! ban on export of defense articles or defense services;
! ban on import of munitions or ammunition;
! denial of Generalized System of Preferences status;
! substantial export controls on dual-use items, particularly satellites,
nuclear technology, and computers;
! export and licensing restrictions on targeted entities found to have
engaged in proliferation of missiles and weapons of mass destruction
(or related technology); and
! Presidential authority to restrict Chinese military companies and
Chinese government-affiliated businesses from developing
commercial activities inside the United States.
Many of these sanctions are imposed as a U.S. response to the Chinese
government’s crackdown against a fledgling democracy movement in the spring of
1989. The incidents at Tiananmen Square upended what had been two decades of
cautious but positive steps toward full and unfettered economic relations between the
United States and China.
U.S.-China relations have also been impeded by China’s willingness, some
would say eagerness, to export nuclear materials and goods and technology related
to missile proliferation. The early 1990s can be noted for reports that China assisted
Pakistan, Iran, and North Korea in their pursuit of the acquisition of weapons of mass
destruction.
Tiananmen Sanctions
In 1990, in the wake of the 1989 Tiananmen Square crackdown in China,
Congress passed legislation to reenforce interim economic and diplomatic sanctions
that President George H.W. Bush had implemented earlier to express U.S.
1 For a discussion of U.S. sanctions in place against China from 1949 to 1997, see Rennack,
Dianne E. China: U.S. Economic Sanctions. CRS Report 96-272 F. October 1, 1997. 51
p.

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disapproval of the Chinese government’s actions. The Tiananmen Square sanctions,
as they are popularly called, included:2
! a continuance of the suspension of Overseas Private Investment
Corporation financing (imposed earlier by the President);
! a continuance of the suspension of U.S. Trade and Development
Agency (USTDA) financing (imposed earlier by the President);
! a continuance of the suspension of export licensing for defense
articles and defense services on the U.S. Munitions List, including
helicopters and helicopter parts (imposed earlier by the President);
! a continuance of the suspension of export licenses for satellites
contracted to be launched in China (imposed earlier by the
President);
! a suspension of export licenses for crime control and detection
instruments and equipment;
! a denial of export licenses for any goods or technology used in
nuclear production, if the President finds that such products could be
diverted to the research or development of a nuclear explosive
device; and
! U.S. opposition to multilateral efforts to liberalize the application of
export controls that limited goods or technology to China.
The legislation included waiver authority provisions, authorizing the President to end
the sanctions if he determined either that (1) China’s progress in instilling certain
human rights standards warranted a change, or (2) it was in the U.S. national interest
to do so. It should be noted that “national interest” is considered the easiest standard
to meet in legislation that requires or authorizes the imposition of sanctions (by
comparison to what many consider the most rigorous standard, that a sanction not be
waived unless it is “essential to national security interests”). President Bush and his
successors have exercised the waiver on a case-by-case basis, in instances of satellite
exports and items related to counter-terrorism, or wholesale, in the case of restoring
USTDA funding, nuclear cooperation, and liberalization of export controls. In 1998,
however, Congress reenforced a portion of the Tiananmen Square sanctions, by
requiring that the President provide a detailed justification before he waived
restrictions on the export of any satellite of U.S. origin or related items.3
Foreign Aid4
While China is not explicitly denied U.S. foreign assistance, in recent past years,
the U.S. Agency for International Development (USAID) has noted that “[t]he
Chinese Government does not share core American values on human rights, religious
2 Section 902 of the Foreign Relations Authorization Act, Fiscal Years 1990 and 1991 (P.L.
101-246; 22 U.S.C. 2151 note).
3 Section 1515 of P.L. 105-261 (112 Stat. 2177; 22 U.S.C. 2778 note).
4 Not everyone agrees that the withholding of foreign aid is an economic sanction. See, for
example: Helms, Jesse. “What Sanctions Epidemic? U.S. Business’ Curious Crusade.”
Foreign Affairs. January-February 1999.

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freedom, and democracy. The United States and China also disagree on the best
policies for Taiwan and Tibet.”5 Each of these would be grounds for denying U.S.
foreign assistance.6 Even where foreign aid is denied, it should be remembered, aid
may be made available for many reasons, particularly for emergency food aid, child
survival and health, or disaster assistance.
In the past eight years, the United States has taken steps to make some aid
available to China. Since the late 1990s, for example, the United States has
supported medical projects through its American Schools and Hospitals Abroad
program. In 2000, in the same measure that authorized the extension of normal trade
relations, Congress established the means to provide assistance to support rule of law
programs in China.7 Beginning with the Fiscal Year 2002 foreign aid appropriations
measure, Congress removed China from the list of countries prohibited from
receiving U.S. indirect foreign assistance. China had been prohibited from receiving
such funds since FY1993, although the prohibition had little effect since the
President waived it each year. In the FY2002 appropriations measure, Congress also
put not less than $10 million in Economic Support Funds toward “activities to
support democracy, human rights, and the rule of law in the People’s Republic of
China,” of which $5 million was specifically earmarked for the State Department’s
Human Rights and Democracy Fund. Of that $5 million, $3 million “may be made
available to nongovernmental organizations located outside the People’s Republic
of China to support activities which preserve cultural traditions and promote
5 U.S. Agency for International Development. Fiscal Year 2004 Budget Justification to the
Congress: Annex II — Asia and the Near East. p. 39-44.
6 For example, for human rights, consider secs. 116, 239(i), and 502B of the Foreign
Assistance Act of 1961 (22 U.S.C. 2151n, 2199(i), and 2304, respectively), in which human
rights violations are grounds for denying economic assistance, Overseas Private Investment
Corporation programming, and military assistance, respectively. Sec. 701 of the
International Financial Institutions Act (22 U.S.C. 262d) requires that human rights be taken
into consideration when evaluating multilateral bank loan votes. Sec. 2(b)(1)(B) of the
Export-Import Bank Act of 1945 (12 U.S.C. 635(b)(1)(B)) authorizes the President to deny
Bank support if it is in the U.S. national interest in various areas, including human rights and
child labor. Title IV of the International Religious Freedom Act of 1998 (22 U.S.C. 6441
et seq.) authorizes the President to restrict foreign aid if he finds certain conditions exist.
Other laws provide for foreign aid restrictions if specific aspects of human rights are
substandard. Finally, annual foreign assistance appropriations bills have, for many years,
required international family planning programs to meet stringent conditions relating to
abortion, involuntary sterilization, and coercive family planning in developing countries.
The United Nations Population Fund (UNFPA) lost $34 million in each of the past three
fiscal years when, in FY2002, the Secretary of State determined that the organization
engaged in coercive family planning in China. See CRS Report RL32919, Foreign
Operations (House)/State, Foreign Operations, and Related Programs (Senate): FY2006
Appropriations, by Larry Q. Nowels and Susan B. Epstein. 59 p; and CRS Report RL32703,
The U.N. Population Fund: Background and U.S. Funding Debate, by Larry Q. Nowels.
33 p.
7 P.L. 106-286, particularly title V (114 Stat.903; 22 U.S.C. 6961 et seq.).

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sustainable development and environmental conservation in Tibetan communities in
Tibet.”8
Since 1989, the Overseas Private Investment Corporation (OPIC), an export
promotion program that is considered foreign aid, has not provided coverage or risk
insurance for U.S. investments in China. President George H.W. Bush required
OPIC and the U.S. Trade and Development Agency (USTDA), which finances
feasibility studies of U.S. overseas investments, to close their China offices and
programs after the Tiananmen Square crackdown. In the waning days of his term,
President Clinton notified Congress that it was in the U.S. national interest to
terminate the suspension of USTDA funding to China.9 USTDA officials
subsequently signed operating framework agreements with China’s Ministry of
Foreign Trade and Economic Cooperation and several other government offices, and
opened its grant assistance program on July 31, 2001. USTDA awarded China its
“Country of the Year” honor in 2002, and obligated more than $10 million toward
projects and events in the country that year. In 2004, USTDA committed more than
$3.9 million toward projects in China, largely relating to environmental and
infrastructure improvements.10
8 Secs. 523 and 526 of Public Law 107-115 (115 Stat. 2146, 2147). See also sec. 511 of P.L.
106-286 (22 U.S.C. 6981), granting normal trade relations for China, in which the Secretary
of Commerce is authorized to establish a program to conduct rule of law training and
provide technical assistance related to commercial activities, and in which the Secretary of
State is similarly tasked to create a program aimed at the development of China’s legal
system and civil society. USAID provides assistance to the Tibetan population in the Tibet
Autonomous Region and the Tibet Autonomous Prefectures and Counties in the provinces
of Qinghai, Gansu, Sichuan, and Yunnan. USAID supports HIV/AIDS work of
nongovernmental organizations in Guangxi and Yunnan. American Schools and Hospitals
Aborad (ASHA) has been engaged for eight years with the Center for American Studies at
Fudan University, Shanghai, and more recently with the Hopkins-Nanjing Center for
Chinese and American Studies, Nanjing, and with Project Hope in support of the Shanghai
Children’s Medical Center. U.S. Agency for International Development. Budget
Justification to the Congress: Fiscal Year 2006. p. 246-247. Beginning in 1993, China also
hosts Peace Corps volunteers to teach English and environmental studies in universities
(estimated FY2006 request: $1.8 million). A Legacy of Service and Compassion: Peace
Corps Congressional Budget Justification, Fiscal Year 2006. p. 89.
9 Compilation of Presidential Documents: Administration of William J. Clinton. “Letter to
Congressional Leaders Transmitting a Report on Funding for the Trade and Development
Agency With Respect to China.” January 15, 2001. p. 128. In fact, many policy analysts
expected President Clinton to resume both OPIC and USTDA programs in China prior to
his state visit in mid-1998. Even as the Administration was preparing for the summit,
however, Members of Congress were calling for an investigation of satellite exports to
China, and several departments and agencies within the executive branch began to scrutinize
technology transfers that exceeded licensing limits or took place altogether outside legal
bounds. See Kan, Shirley A. China: Possible Missile Technology Transfers from U.S.
Satellite Export Policy — Actions and Chronology. CRS Report 98-485 F. 59 p.
10 “China Receives USTDA 2002 Country of the Year Honors,” Trade and Export News
(press release). April 23, 2003; Annual Report 2004: The U.S. Trade and Development
Agency: Building the Environment for Trade. p. 37.

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The United States generally continues to abstain from or vote “No” in the
international financial institutions when loans for projects in China are on the table.
From April 1, 2001, through December 31, 2001, the last period for which data are
available, the World Bank, International Finance Corporation, Asian Development
Bank, and Asian Development Fund considered 26 loan or restructuring requests for
various projects in China, totaling some $1,633.5 million. Of these, the United States
abstained from or voted “No” in 24 instances. The United States gave its support
only where programs would meet basic human needs, or in circumstances where
impact on the human environment was not significantly damaging. Indeed, in the 26
instances where the United States abstained or voted “No” for human rights reasons
globally in this period, 24 of those votes were on loans to China.11 No one country
holds singular power to block a loan once it is brought up for a vote, however.
Arms Sales
The United States government maintains a prohibition on exporting defense
articles and defense services to China under the general authority granted to the
President and Secretary of State to control the import and export of such goods and
services in the context of U.S. foreign policy, as well as pursuant to the Tiananmen
sanctions.12 The export of defense articles and defense services has been prohibited
or limited to varying degrees as U.S.-China relations have thawed and shifted since
1949.
The United States also prohibits the import of munitions and ammunition from
China. President Clinton announced the sanction on imports in May 1994, along
with the announcement that he would renew Most-Favored-Nation trade status for
China for another year.13
11 Department of the Treasury. International Financial Institutions’ Transactions (April 1,
2001 through December 31, 2001), as reported to the Senate Committee on Foreign
Relations, November 18, 2003, in accordance with section 701 of the International Financial
Institutions Act (P.L. 95-118; 22 U.S.C. 262d), which requires the Secretary of the Treasury
to report to congressional committees annually on U.S. votes in the international financial
institutions.
12 Sections 2, 38, 40, 42, and 71 of the Arms Export Control Act (22 U.S.C. 2752, 2778,
2780, 2791, and 2797). Restrictions are stated at 22 CFR 126.1: Department of State:
Prohibited exports and sales to certain countries.
13 In 1993, President Clinton linked the annual renewal of Most-Favored-Nation trade status
for China to improved human rights conditions there. One year later, he de-linked human
rights from trade, but imposed the import restriction as an expression of continuing concerns
over human rights. He also announced increased Radio Free Asia and Voice of America
broadcasts to China, support for nongovernmental organizations working on human rights
in China, and the “development with American business leaders of a voluntary set of
principles for business activity in China.” “The President’s News Conference: May 26,
1994,” in Public Papers of the Presidents of the United States: William J. Clinton. vol. I, p.
991. See munitions import restrictions stated at 27 CFR 447.52 (redesignated from 27 CFR
47.52 on January 24, 2003; 63 F.R. 3744), Bureau of Alcohol, Tobacco and Firearms,
Department of Treasury; and arms embargo stated at 22 CFR 126.1, Department of State.

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Trade14
Generalized System of Preferences. Imports from China are denied duty-
free treatment afforded to certain imports from other developing countries under the
U.S. Generalized System of Preferences (GSP). The Trade Act of 1974, which
authorizes the GSP, requires a communist country to meet certain conditions before
the President may designate it as a “beneficiary developing country” to become
eligible for preferential trade treatment. The first set of bases for ineligibility are
applicable to communist countries and include ineligibility for normal trade relations
(formerly Most Favored Nation) and nonmembership in the World Trade
Organization (WTO) and International Monetary Fund (IMF). China cleared these
hurdles when China joined the WTO in 2001, the United States granted normal trade
status in 2002, and China has been a member in good standing in the IMF since 1980.
The third condition to be met by communist countries is that the country in question
“is not dominated or controlled by international communism.” Conditions applicable
to communist countries are not waivable. China may be denied for its political
system or for a number of other reasons stated in the law, including intellectual
property rights protection or workers’ rights.15
Export Controls Applied to U.S.-China Trade. Export regulations are
constructed to implement U.S. law and various international control regimes to which
the United States is a party (i.e., the Missile Technology Control Regime, or the
Nuclear Suppliers Group). They generally are not cast as economic sanctions
because their goal is not to change the particular objectionable behavior of a targeted
country but to meet U.S. legal and international obligations. The application of
export controls, however, can have the same appearance and effect as an economic
sanction imposed for foreign policy or national security objectives.
Though several departments and two commissions have export control
responsibilities,16 the lion’s share is assigned to the Department of Commerce’s
14 The sanctions discussed here are applied for foreign policy or national security objectives
but affect trade. Trade-related sanctions — including those imposed for intellectual
property rights issues or unfair market practices, for example — draw from a different body
of law and are not addressed in this paper. For trade related issues, see CRS Report
RS21292, Agriculture: U.S.-China Trade Issues, by Geoffrey S. Becker and Charles E.
Hanrahan; and CRS Issue Brief IB91121, China-U.S. Trade Issues, by Wayne M. Morrison.
15 Title V of the Trade Act of 1974 (P.L. 93-618; 19 U.S.C. 2461-2466), particularly sec.
502(b), (c), and (d).
16 As detailed in 15 CFR Part 730, Suppl. No. 3: the State Department oversees defense
articles and defense services. Department of Justice handles most controlled drug issues,
including related chemicals and precursor agents. Department of Health and Human
Services (Food and Drug Administration) manages the export of other drugs, biologics,
medical devices, and investigational drugs. Department of the Interior oversees fish and
wildlife controls and endangered species. Department of the Treasury (Office of Foreign
Assets Control) controls the flow of financial transactions and foreign access to assets in,
or of, the United States. Department of Energy scrutinizes exports related to gas, electricity,
and nuclear technology, technical data for nuclear weapons and special nuclear materials.
(continued...)

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Bureau of Industry and Security (BIS). BIS promulgates the Export Administration
Regulations (EAR).17 The EAR include the Commerce Control List, which
categorizes all goods, services, and technology for which export licenses are required
for a range of national security and foreign policy reasons.
An export license is required for commercial goods, services, or technology
intended for China for reasons of: chemical and biological weapons proliferation,
nuclear proliferation, national security, missile technology, regional stability, and
crime control. This means that exporting most items on the Commerce Control List
to China would require a license. For some goods and services, further guidance is
provided in the form of license exceptions. Computer equipment, assemblies and
components, for example, are controlled for national security reasons, but trading
partners are sorted into two groups or tiers. China is listed in the more restricted Tier
3, for which a computer may be sold and shipped if it is a slower processor, if the
end-user is clearly identified, and if the end-use does not pertain to nuclear, chemical,
biological, or missile activities.18 Each license application is thus scrutinized by the
Department of Commerce.
The United States’ trading partners are also sorted into four country groups.
Country Group A is reserved, mostly, for countries that are participants in the
Nuclear Suppliers Group, the Australia Group, and the Missile Technology Control
Regime. The most restrictive group, Country Group E, is reserved for those
countries identified by the State Department as supporters of international terrorism.
China is in Country Group D for national security and for proliferation of chemical
and biological weapons and missile technology. A Country Group D listing further
limits the likelihood of export licenses being granted for China for most Commerce
Control List items, though for China the general policy is to approve licenses except
in certain, very specific, instances. For example, it is general policy to deny licenses
to any national security-listed country where the export “would make a significant
contribution to the military potential of any other country or combination of countries
that would prove detrimental to the national security of the United States.” In the
case of China, however, only exports that “would make a direct and significant
contribution to electronic and anti-submarine warfare, intelligence gathering, power
projection, and air superiority receive extended review or denial.... Items may be
approved even though they may contribute to China’s military development or the
end-user or end-use is military.”19
16 (...continued)
Department of Transportation oversees the use of U.S.-flagged vessels. Two independent
commissions, the Nuclear Regulatory Commission and the Federal Maritime Commission,
keep track of nuclear materials and equipment, and ocean freight forwarders, respectively.
In each department or commission, it is possible that punitive restrictions — sanctions —
could be imposed on licensing to further national security or foreign policy goals.
17 15 CFR Subchapter C (Parts 730-799).
18 Tiers are at 15 CFR Part 740.7.
19 15 CFR Part 742.4(a) and 742.4(b)(7).

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Proliferation-Related Sanctions.20 China is a signatory of the Nuclear
Nonproliferation Treaty, the Comprehensive Nuclear Test Ban Treaty, and the
Chemical Weapons Convention; is a member of the Zangger Committee (pertaining
to nuclear trade); and has issued export control regulations to demonstrate its
commitment to follow the guidelines of the Missile Technology Control Regime.
Nonetheless, entities and individuals in China have been found to be in violation of
U.S. laws pertaining to proliferation of weapons of mass destruction. China has been
linked to sales or transfers of controlled nuclear and missile technology to Iran, North
Korea, Libya, Syria, and Pakistan. As a result of violating U.S. laws intended to
staunch international proliferation of weapons of mass destruction, the charged
Chinese entities have been denied: U.S. government contracts relating to missile
equipment or technology (unlikely to occur in any event), licenses to transfer
controlled materials (also unlikely in any circumstance), the right to import any
products into the United States, U.S. government sales or transfers of items
controlled on the U.S. Munitions List, and any U.S. (government or commercial)
sales or transfers of dual-use items on the Commerce Control List (for which China
is already heavily restricted).21
Satellites.22 President George H.W. Bush suspended export licenses for
satellites contracted to be launched in China after the Tiananmen Square crackdown
in 1989, an action reenforced by Congress a few months later when it enacted the
Tiananmen Square sanctions in 1990. The restriction remains in law but was waived
on a case-by-case basis by Presidents George H.W. Bush and Clinton, who each
found it in the U.S. national interest to do so. Following several controversial
issuances of export licenses for satellites during the Clinton Administration, since
1998, the President has been required to provide a detailed description and
justification of each waiver applicable to satellites or related items. The State
Department suspended the processing of export licenses for satellites to China in
February 2000. Each year since FY2002, Congress has enacted legislation to require
15-days advance notification of any licensing for export to China of satellites or
satellite components.23
20 For further discussion, see CRS Report RL31555, China and Proliferation of Weapons
of Mass Destruction and Missiles: Policy Issues, by Shirley A. Kan.
21 For U.S. Munitions List items: sec. 38 of the Arms Export Control Act (AECA) (P.L. 90-
629; 22 U.S.C. 2778); for missiles: sec. 73 of the AECA (22 U.S.C. 2797b), and sec. 11B
of the Export Administration Act of 1979 (EAA) (P.L. 96-72; 50 U.S.C. app. 2410b). For
chemical weapons: sec. 81 of the AECA (22 U.S.C. 2798), sec. 11C of the EAA (50 U.S.C.
app. 2410c), and sec. 3 of the Iran Nonproliferation Act of 2000 (P.L. 106-178; 50 U.S.C.
1701 note). For all manner of WMD proliferation: Executive Order 12938 (November 14,
1994; 50 U.S.C. 1701 note), wherein the President has the authority to control any relevant
item, deny procurement contracts, foreign aid, importation, support in the international
financial institutions, credit in other fora, and landing rights to an entity or country.
22 For further discussion, see CRS Report 98-485, China: Possible Missile Technology
Transfers From U.S. Satellite Export Policy — Actions and Chronology, by Shirley A. Kan.
23 Most recently in the Department of State and Related Agency Appropriations Act, 2005
(title IV of division B of P.L. 108-447).

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Presidential Prerogative
Effective since October 1998, the President is authorized to freeze the assets of,
prohibit any transactions with, and impose other restrictions (except those related to
importation) afforded his office under the International Emergency Economic Powers
Act on, any Communist Chinese military company, or any company controlled by the
People’s Liberation Army, a Chinese government ministry, or an entity affiliated with
the defense industrial base of China, that are operating directly or indirectly in the
United States. To trigger this, the Secretary of Defense is required to identify the
company or entity and notify Congress, the Director of Central Intelligence, the
Attorney General, and Secretaries of State, Treasury, Commerce, and Energy.24 To
date, the President has not used this authority.
In 2000, Congress enacted legislation to improve U.S.-China relations, primarily
by setting in motion the means to grant China permanent normal trade relations once
it joined the World Trade Organization.25 Prior to that, human rights conditions in
China had been subject to regular scrutiny by both the Legislative and Executive
Branches, with the two bodies often not in agreement. China continues to be so
scrutinized for human rights, religious freedom, labor rights, use of prison labor, and
proliferation issues. But the power of Congress, once significant because so much
hung on the annual possibility that favorable trade terms could be suspended, has
been diffused. The sanctions that remain in place today can all be modified, eased,
or lifted altogether by the President, without congressional input (though some
changes would require that the President notify Congress).
Congress and the Administration each recognize the importance of China’s
emerging ability to consume and to produce, and China has become an increasingly
important trading partner of the United States. At the same time, because of the
unrelenting tension between the United States and the Peoples Democratic Republic
of Korea over the latter’s interest in developing nuclear weapons capability, and
because of China’s longstanding relation with North Korea as a primary trading
partner and benefactor, the United States’ relations with China are crucial.
24 Sec. 1237 of the Strom Thurmond National Defense Authorization Act for Fiscal Year
1999 (P.L. 105-261; 50 U.S.C. 1701 note). As enacted, the law required the Secretary of
Defense to publish a list of Chinese companies in the Federal Register annually. The
Secretary notified Congress that the task exceeded his office’s intelligence capabilities. The
law was amended the following year to require the Secretary to notify only the Committees
on Armed Services and the above-noted administration officials. For complete statement
of the President’s authority under sec. 203 of the International Emergency Economic Powers
Act, see P.L. 95-223 (50 U.S.C. 1702). For further discussion of the People’s Liberation
Army’s commercial interests inside the United States, see CRS Report 98-197, China’s
Military-Owned Businesses, by Shirley A. Kan.
25 P.L. 106-286 (114 Stat. 880, enacted October 10, 2000).

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