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

governmentâ€™s growing assertiveness in advancing and aligning Chinaâ€™s national economic
security tools to seek global economic, technology, and military leadership, and relatedly, control

of core technologies and global supply chains. Chinaâ€™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
have applied toward China, such as sanctions, export controls, and foreign investment review. While Chinaâ€™s measures
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. Chinaâ€™s
measures pressure U.S. and other firms to abide by Chinaâ€™s policies and laws in ways that contravene U.S. authorities. Some
of Chinaâ€™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 Chinaâ€™s measures. Many of
Chinaâ€™s measures provide for retaliation in an apparent effort to codify and legitimize the Chinese governmentâ€™s propensity
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.
These recent measures are part of a broader effort by Chinaâ€™s leader Xi Jinping since 2014 to build out Chinaâ€™s national
security authorities to establish broad justification, jurisdiction, and mechanisms for Chinaâ€™s national security-related actions
on trade, investment, and other economic activity. Central to Chinaâ€™s efforts are new measures that promote data sovereignty
by expanding data localization requirements and placing data under new trade authorities, such as e xport controls and
security review requirements for Chinese firms listing or operating overseas. These measures appear to enhance the Chinese
governmentâ€™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 o f
U.S. government, commercial, and academic activities in these areas. Relatedly, China in its 14th Five-Year Plan (2021-25) is
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
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
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
access to U.S. and foreign technology, capabilities, research, and talent. Chinaâ€™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
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. Chinaâ€™s
industrial policies continue to require U.S. and other foreign firms to transfer advanced capabilities to China, using structures
that place these firmsâ€™ IP, R&D, and technology under Chinaâ€™s authorities and control. Chinaâ€™s announcements of
â€œindigenousâ€ 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
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.
As the Biden Administration frames the U.S.-China relationship as one of â€œstrategic competition,â€ Congress might examine
the Executive Branchâ€™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 Chinaâ€™s new trade measures and countermeasures, and the
broader challenges that Chinaâ€™s approach may pose for the United States. Congress might consider how Chinaâ€™s measures
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
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
to impose consequences and counter specific Chinese trade policies, actions, and behaviors of mutual concern.
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Appendixes
Appendix. .................................................................................................................... 53

Contacts
Author Information ....................................................................................................... 57

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Introduction
This report assesses a set of interrelated trade laws, regulations, and policies that the government
of the Peopleâ€™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
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
controls and related technology catalogues, new measures on the security review of foreign
investment, measures to create and operationalize a list of â€œunreliable entities,â€ â€œblocking
measures,â€ and a related anti-sanctions law, al of which seek to broadly limit the extraterritorial
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
such as rare earth elements (REEs), as wel as data and scientific research. (See â€œNew Laws and
Regulationsâ€ below.)
These new measures are rooted in broader initiatives to strengthen the Chinese governmentâ€™s
national economic security authorities and levers of control. The measures also amplify and
reinforce Chinaâ€™s use of market restrictions and economic coercion to pressure governments,
firms, and individuals to comply with Chinaâ€™s various political, economic, and technology
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
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 potential y violate,
U.S. laws by penalizing companies that contravene Chinaâ€™s measures.
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 chal enge the
United States and other countries.1 Chinaâ€™s actions in these areas chal enge current global rules
and norms, expose potential gaps in authorities, and, given Chinaâ€™s role as a top trader, could
potential y erode the current global trading system and the World Trade Organization (WTO),
more broadly. Details in Chinaâ€™s 14th Five-Year Plan, which sets national economic development
priorities for 2021 to 2025, and policy statements, including those by Chinaâ€™s leader Xi Jinping,
show that China is intensifying its push for global acceptance of its rules, laws, and technical
standards overseas. Another area of focus is Chinaâ€™s development of secure supply chains and
alternative trade, currency, and technology platforms that could al ow China greater leeway to
work around or chal enge trade and development restrictions associated with U.S. dollar-based
sanctions.
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
and where expanded or new multilateral trade rules, agreements, and actions may be needed.
Chinese firms are chal enging 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

1 A technical standard is process or technical specifications designed to improve the quality, security and compatibility
of various goods and services. Standards can involve specifications or technologies on which other tech nologies or
methods will 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
benefits, but can also determine which technologies become dominant and provide advantages to certain firms well
placed to produce to the standards. See John Seaman, â€œ China and the New Geopolitics of T echnical Standardization,â€
French Institute of International Relations, January 27, 2020.
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prioritizing 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
to China in sectors prioritized in its industrial policies such as Made in China 2025.2
Concerns about the risks that Chinaâ€™s statist economic and technology practices and the related
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
2016, the U.S. Congress has sought to address these growing concerns about Chinaâ€™s trade
policies and practices through a broad range of new legislation, hearings, and reports. New
legislation 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
China and Chinaâ€™s state-directed acquisition of U.S. companies with sensitive capabilities.
Congressional reports have assessed the risks and policy options to address concerns about
Chinaâ€™s role in U.S. federal y funded research and U.S. communications infrastructure, and risks
created by Chinaâ€™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
Administrations warn about Chinaâ€™s trajectory and prioritize concerns about China as a strategic
competitor.3 Similar concerns have been building in other countries, particularly those that have
suffered from Chinaâ€™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
Congress about the ways in which U.S. commercial and investment ties may be supporting
Chinaâ€™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
China and in partnership with like-minded partner countries. In this context, this report raises
issues and considerations about how Chinaâ€™s new measures and countermeasures might chal enge
U.S. national interestsâ€”including the legislation and policies the U.S. government has already
put in placeâ€”in ways that could require sustained U.S. policy attention, agility, and resolve, as
wel as potential U.S. and multilateral counter responses.
Broader Context of Chinaâ€™s New Measures
Chinaâ€™s recent trade measures that it has enacted since 2020 are part of a broader effort by
Chinaâ€™s leader Xi Jinping since 2014 to build out and strengthen Chinaâ€™s national security
authorities that establish broad justification, scope, reach, and mechanisms for Chinaâ€™s national
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
authorities that include laws and regulations on counterespionage (2014)4, national security and

2 See CRS In Focus IF11684, Chinaâ€™s 14th Five-Year Plan: A First Look, by Karen M. Sutter and Michael D.
Sutherland and CRS In Focus IF10964, â€œMade in China 2025â€ Industrial Policies: Issues for Congress, by Karen M.
Sutter.
3 â€œInterim National Security Strategic Guidance,â€ Office of the White House, March 3, 2021; â€œNational Security
Strategy of the United States of America,â€ Office of the White House, December 18, 2017.
4 Counterespionage Law of the Peopleâ€™s Republic of China, November 1, 2014, http://news.xinhuanet.com/
politics/2014-11/01/c_1113074346.htm (Chinese); https://www.chinalawtranslate.com/en/anti-espionage/ (unofficial
English translation).
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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
(2018),9 and encryption (2019).10 These laws and regulations require companies, organizations,
and individualsâ€”both foreign and domesticâ€”to cooperate with the Chinese state in national
security matters, affecting a range of economic activities and technology issues.11
Since 2014, Chinaâ€™s leader Xi Jinping has made several speeches that show how he is developing
concepts of national security and law to advance Chinaâ€™s national interests, domestical y and
global y. Chinaâ€™s emerging concept of national security under Xi Jinping includes traditional and
nontraditional elements, defensive and offensive measures, and an interplay of domestic and
global factors. Xiâ€™s concept of â€œoveral national securityâ€ discusses economic security as the
foundation of Chinaâ€™s security, and the interplay between Chinaâ€™s economic development and
security as one of five key relationships. The concept includes Chinaâ€™s â€œright to develop,â€ a
principle that Chinese officials often invoke in response to U.S. sanctions and other restrictions
affecting trade, investment, and collaboration.12
Two speeches by Xi Jinping in spring 2018 emphasize Chinaâ€™s efforts to promote and secure
control over core technologies, research, and innovation. In an April 2018 speech at Chinaâ€™s
National Cybersecurity and Informatization Work Conference, Xi emphasized developing and

5 National Security Law of the Peopleâ€™s Republic of China, July 1, 2015,
https://www.chinalawtranslate.com/en/2015nsl/ (unofficial English translation); Counter-Terrorism Law of the
Peopleâ€™s Republic of China, December 27, 2017, https://www.chinalawtranslate.com/en/counter-terrorism-law-2015/
(unofficial English translation).
6 Criminal Law of the Peopleâ€™s Republic of China, Amended on September 1, 2015.
7 Cybersecurity Law of the Peopleâ€™s Republic of China, Effective June 1, 2017,
https://www.newamerica.org/cybersecurity-initiative/digichina/blog/translation-cybersecurity-law-peoples-republic-
china/ (unofficial English translation); The Peopleâ€™s Republic of Chinaâ€™s Law on the Managem ent of the Activities of
Overseas Nongovernm ental Organizations, https://chinadevelopmentbrief.cn/reports/the-peoples-republic-of-chinas-
law-on-the-management -of-the-activities-of-overseas-ngos-within-mainland-china/ (unofficial English translation).
8 Measures for the Administration of Law Firms; Ministry of Justice of the Peopleâ€™s Republic of China, amended on
September 6, 2016, and effective November 1, 2016, http://www.gov.cn/gongbao/content/2016/content_5109321.htm
(Chinese language); Adm inistrative Measures for the Practice of Law by Lawyers, as amended on September 18, 2016,
http://www.gov.cn/gongbao/content/2016/content_5113014.htm (Chinese language); as amended on December 5,
2018; http://www.moj.gov.cn/government_public/content/2018 -12/13/gggs_44271.html (Chinese language).
9 Standardization of Law of the Peopleâ€™s Republic of China, effective January 1, 2018,
https://www.cfstc.org/en/2932583/2968817/index.html (unofficial English translation).
10 Cryptography Law of the Peopleâ€™s Republic of China, effective January 1, 2020,
http://www.npc.gov.cn/npc/c30834/201910/6f7be7dd5ae545 9a8de8baf36296bc74.shtml (Chinese language).
11 Murray Scot T anner, â€œBeijingâ€™s New National Intelligence Law: From Defense to Offense,â€ Lawfare, July 20, 2017;
â€œChina Adds Broad New Definitions to Counter-Espionage Law,â€ Reuters, December 6, 2017; â€œChina Enacts Broad
Counter-T errorism Law,â€ Client Alert, Covington, January 5, 2016; Steve Dickinson, â€œ China Cybersecurity: No Place
to Hide,â€ Harris Bricken, October 11, 2020; Siodhbhra Parkin, â€œ How China Regulates Foreign Non-Governmental
Organizations,â€ SupChina, August 8, 2019; Laney Zhang, â€œ China: Multiple Areas of Criminal Law Changing under
New Amendment ,â€ Global Legal Monitor, Library of Congress Law Library, February 26, 2021; â€œ Revised Measures
on Law Firms Further Curb Independence of Chinese Lawyers,â€ China Human Rights Briefing, Chinese Human Rights
Defenders, October 3, 2016; Changhao Wei, â€œ Legislation Review: China to Revamp Standardization System,â€ NPC
Observer, May 17, 2017; â€œT he Grand â€œFinaleâ€ of Chinaâ€™s Encryption Law,â€ Hogan Lovells, November 20 19.
12 Jude Blanchette, â€œIdeological Security as National Security,â€ CSIS Report, December 2, 2020. Blanchette translates
T ang Aijun, â€œIdeological Security in the Framework of the Overall National Security Outlook,â€ Socialism Studies, May
2019.
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controlling core technologies as â€œimportant instruments of the state.â€ 13 In a May 2018 address to
the Chinese Academies of Sciences and Engineering, Xi said that â€œthe initiatives of innovation
and development must be securely kept in our own hands.â€14 Relatedly, China is pressing for
global acceptance of its domestic authorities and potential y an extraterritorial reach of its courtsâ€™
decisions. In a November 2020 speech at the Party Central Committee's Work Conference on the
Comprehensive Rule of Law, Xi cal ed for promoting Chinese law in matters involving foreign
parties, including overseas, and for coordinating Chinaâ€™s promotion of domestic and foreign-
related rule of law efforts.15
These measures also seek to advance Chinaâ€™s economic security goals as clarified in Chinaâ€™s 14th
Five-Year Plan for 2021-2025, which Chinaâ€™s legislature approved on March 11, 2021. The new
plan seeks to advance Chinaâ€™s national economic security interests through specific trade and
investment actions. It specifical y mentions the use of market restrictions and Chinaâ€™s One Belt,
One Road global networks to foster Chinese-controlled supply chains. It also cal s for sharpening
Chinaâ€™s use of antitrust, IP, and technical standards tools, both domestical y and overseas.16
Chinaâ€™s leaders seek to secure supply chains and boost self-sufficiency in agriculture, energy,
technology, and industry, while leveraging Chinaâ€™s control over global supply chokepoints.17 In
an April 2020 speech, Xi cal ed for China to build production and supply chains that are
â€œindependently controllable, secure and reliableâ€ to ensure industrial and national security.18 Xi
said China should â€œtighten international production chainsâ€™ dependence on China, forming a
powerful countermeasure and deterrent capability.â€19 Xi also cal ed for developing and leveraging
control of core technologiesâ€”in sectors such as high speed rail, telecommunications and power
equipment, and new energyâ€”and localizing technology and critical production in China.
Chinaâ€™s new trade measures codify and seek to legitimize longstanding practices of economic
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
economic coercion and retaliation against its major trading partnersâ€”including the United States,
the European Union, Australia, and Canadaâ€”as it develops these tools. Additional y, China is

13 â€œXi Jinpingâ€™s April 20 [2018] Speech at the National Cybersecurity and Informatization Work Conference,â€
Unofficial English translation, New America Foundation Blog, April 30, 2018.
14 â€œChina Focus: Xi Calls for Developing China into World Science and T echno logy Leader,â€ Xinhua, May 29, 2019.
15 â€œOn the Study and Implementation of General Secretary Xi Jinping's Important Speech at the Central Committee's
Work Conference on Comprehensive Rule of Law,â€ Commentator Article, Peopleâ€™s Daily, November 20, 2020.
16 â€œT he 14th Five Year Plan and 2035 Long-T erm Development Objectives,â€ Xinhua, March 11, 2021,
http://www.xinhuanet.com/fortune/2021-03/13/c_1127205564.htm. See CRS In Focus IF11684, Chinaâ€™s 14th Five-
Year Plan: A First Look, by Karen M. Sutter and Michael D. Sutherland.
17 Proposal of the Central Committee of the Communist Party of China on Formulating the Fourteenth Five -Year Plan
for National Econom ic and Social Developm ent and the Long -term Goals for 2035 (adopted at the Fifth Plenary
Session 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/2020 -11/03/c_1126693293.htm; Report on the
Im plem entation of the 2019 Plan for National Econom ic and Social Development and on the 2020 Draft Plan for
National Econom ic and Social Developm ent, delivered at the T hird Session of the T hirteenth National Peopleâ€™s
Congress on May 22, 2020; National Development and Reform Commission of the PRC, as published by Xinhua News
Agency, http://www.xinhuanet.com/english/download/nationaleconomic.pdf .
18 Xi Jinping, â€œCertain Major Issues in the National Medium and Long-T erm Economic and Social Development
Strategy),â€ Qiushi Journal, 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-
and-social-development -strategy/.
19 Ibid.
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using ad hoc boycotts and trade restrictions against several major trading partners and the use of
sanctions that arguably reflect Chinaâ€™s undermining of the rules-based global trading system.
Chinaâ€™s actions target certain foreign officials, researchers, and institutions to try to deter
criticism of Chinese policies and promote acquiescence to Chinaâ€™s economic and political
demands. (See â€œAd Hoc Trade Measures and Economic Coercionâ€ below and Table A-1.)
Chinaâ€™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 Chinaâ€™s
industrial policies that seek civilian and military technology leadership through discriminatory
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
increased scrutiny of academic ties, strengthened foreign investment review and export control
authorities, banned U.S. investment in firms tied to Chinaâ€™s military, and invoked Section 301 of
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
supply chain (an Executive Order that President Trump renewed in May 2020, and that President
Biden renewed in May 2021, see below)â€”and banned PRC firms Huawei, China Mobile, and
China 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-
use exports to China, based on human rights and related surveil ance concerns, as wel as U.S.
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
human rights violations in Xinjiang23 and has imposed sanctions related to the Chinese
governmentâ€™s actions in Hong Kong. (See â€œThe Changing Role of Hong Kongâ€ below.)
In May 2021, the Biden Administration renewed the May 2019 Trump Administration Executive
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
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 Chinaâ€™s military, but
omitted some military-tied firms that had been previously identified by the Department of

20 See CRS In Focus IF11284, U.S.-China Trade Relations, by Karen M. Sutter; CRS In Focus IF11627, U.S. Export
Control Reform s and China: Issues for Congress, by Ian F. Fergusson and Karen M. Sutter; CRS In Focus IF10952,
CFIUS Reform Under FIRRMA, by James K. Jackson and Cathleen D. Cimino -Isaacs.
21 â€œExecutive Order on Securing the Information and Communications T echnology and Services Supply Chain ,â€ May
15, 2019; â€œ T ext of a Notice on the Continuation of the National Emergency on Securing the Information and
Communications T echnology and Services Supply Chain ,â€ May 13, 2020; â€œ Notice on the Continuation of the National
Emergency with Respect to Securing the Information and Communications T echnology and Services Supply Chain,â€
May 11, 2021.
22 â€œAddition of Certain Entities to the Entity List,â€ Bureau of Industry and Security, U.S. Department of Commerce,
October 9, 2019; â€œ Xinjiang Uyghur Autonomous Region WRO Frequently Asked Questions,â€ U.S. Customs and
Border Protection, https://www.cbp.gov/trade/programs-administration/forced-labor/xinjiang-uyghur-autonomous-
region-wro-frequently-asked-questions; â€œ Fact Sheet: New U.S. Government Actions on Forced Labor in Xinjiang,â€
Office of the White House, June 24, 2021. See CRS Report R46631, Section 307 and U.S. Im ports of Products of
Forced Labor: Overview and Issues for Congress, coordinated by Cathleen D. Cimino-Isaacs and CRS Report R46750,
Hum an Rights in China and U.S. Policy: Issues for the 117th Congress, by T homas Lum and Michael A. W eber.
23 U.S. Department of the T reasury Press Release, T reasury Sanctions Chinese Government Officials in Connection
with Serious Human Rights Abuse in Xinjiang, March 22, 2021, at https://home.treasury.gov/news/press-
releases/jy0070.
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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
would have restricted specifical y 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.
government over the next year to examine potential data security risks, including potential risks
that PRC firms may pose.25 In response to Chinaâ€™s industrial policies and trade and economic
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
U.S. research and development more broadly.26
Attempts to Create Parity with U.S. Authorities
Chinaâ€™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
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
several years to try to constrain and address Chinese behaviors of concern in commerce and
technology.27 While some aspects of Chinaâ€™s new laws and regulatory mechanisms might look
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
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 stateâ€”the PRC government, the Communist Party of
China (CPC), and the Peopleâ€™s Liberation Army (PLA)â€”in Chinaâ€™s economy and business
ecosystem, which blurs lines between Chinaâ€™s government authorities and business operations.
The Chinese state is directly involved in advancing Chinaâ€™s national economic development and
related industrial policy goals and in promoting national corporate champions, sometimes setting
commercial terms and influencing corporate decision-making.28 This overlap between
government and business interests has become increasingly blurred since 2006, with the
enactment of Chinaâ€™s Medium- and Long-Term Plan in Science in Technology (2006-2020), as

24 â€œExecutive Order on Addressing the T hreat from Securities Investments that Finance Certain Companies of the
Peopleâ€™s Republic of China,â€ June 3, 2021.
25 President T rump issued three related Executive Orders that sought to address the potential national security risks
including those involving data with regard to PRC firms operating in the United States. On August 6, 2020, former
President T rump issued E.O. 13942 and E.O. 13943 to address the threats posed by T ikT ok and WeChat under
Executive Order 13873, issued on May 15, 2 019, that declared a national emergency with respect to the information
and communications technology and services supply chain. On January 5, 2021 President T rump issued E.O. 13971 to
address the threat posed by applications and other software Application s and Other Software Developed or Controlled
by Chinese Companies. In May 2021 President Biden renewed E.O. 13971. In June 2021 President Biden rescinded
E.O. 13942 and E.O. 13943 issued a new Executive Order on Protecting Am ericansâ€™ Sensitive Data from Fo reign
Adversaries.
26 â€œExecutive Order on Americaâ€™s Supply Chains,â€ Office of the White House, February 21, 2021; See, for example,
United States Innovation and Competition Act of 2021 S. 1260.
27 See CRS In Focus IF11284, U.S.-China Trade Relations, by Karen M. Sutter.
28 Mark Wu, â€œT he â€˜China, Inc.â€™ Challenge to Global T rade Governance,â€ Harvard International Law Journal, Vol. 57,
(2016): 1001-1063.
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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
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
the establishment and reinvigoration of corporate Party Committees, changes to companiesâ€™
Articles of Association, and influence through supervisory boards and trade unions that fal under
state control.31 While the number of formal y declared state firms managed by the central
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
through these hybrid models, particularly in strategic and advanced technology sectors.32
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
because of how it applies these tools to seek particular advantages for Chinaâ€™s industry and
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
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
production capabilities to China and Chinese entities.34 Increasingly, China is turning to data
controls as wel as IP, technical standards, procurement, and antitrust tools to advance these
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

29 Cong Cao, Richard P. Suttmeier, and Denis Fred Simon, â€œChinaâ€™s 15 -Year Science and T echnology Plan,â€ Physics
Today, December 2006; The National Medium - and Long-Term Program for Science and Technology Developm ent
(2006- 2020), State Council of the Peopleâ€™s Republic of China, https://www.itu.int/en/IT U-
D/Cybersecurity/Documents/National_Strategies_Repository/China_2006.pdf .
30 Barry Naughton, The Rise of Chinaâ€™s Industrial Policy 1978 to 2020, Universidad Nacional Autonoma de Mexico,
2021 (See Chapters 4 and 5); Ngor Luong, Zachary Arnold, and Ben Murphy, â€œ Understanding Chinese Government
Guidance Funds: An Analysis of Chinese-Language Sources,â€ Center for Security and Emerging T echnology, March
2021; Yifei Gong, Peiyue Li, and Ziqiao Shen, â€œ Research on Operating Efficiency of Government Industry Guidance
Funds,â€ Theoretical Econom ics Letters, February 2020.
31 Jennifer Hughes, â€œChinaâ€™s Communist Party Writes Itself Into Company Law,â€ Reuters, August 14, 2017; Scott
Livingston, â€œT he Chinese Communist Party Targets the Private Sector,â€ CSIS, October 2020; Christopher Balding and
Donald Clarke, â€œWho Owns Huawei?;â€ April 19, 2017, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3372669.
32 â€œState-Owned Enterprise Policy Reform,â€ T he China Dashboard, Asia Society Policy Institute and the Rhodium
Group, Winter 2020 (Note: Chinaâ€™s National Bureau of Statistics data on SOEs does not include data for stock
companies or other types of ventures that involve SOEs or are state financed or tied. See Edimon Ginting and Kaukab
Naqvi, Reforms, Opportunities, and Challenges for State-Owned Enterprises,â€ Asian Development Bank, July 2020,
pp. 190-224); Karen Jinrong Liu, Xiaoyan Lu, Junsheng Zhang, and Yin g Zheng, â€œ State-Owned Enterprises in China:
A Review of 40 Years of Research and Practice,â€ China Journal of Accounting Research, Volume 13, Issue 1, March
2000; Lingling Wei, â€œChinaâ€™s Xi Ramps Up Control of Private Sector,â€ The Wall Street Journal, December 10, 2020;
Scott Livingston, â€œT he New Challenges of Communist Corporate Governance,â€ CSIS Brief, January 15, 2021.
33 Chinaâ€™s national champions are firms that have a dominant or leadership position in Chinaâ€™s market and receive
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 Chinaâ€™s economic and industrial policy plans. U.S.
Chamber of Commerce, â€œCompeting Interests in Chinaâ€™s Competition Law Enforcement: Chinaâ€™s Anti-Monopoly Law
Application and the Role of Industrial Policy,â€ August 2014.
34 James McGregor, â€œChinaâ€™s Drive for â€˜Indigenous Innovationâ€™: A Web of Industrial Policies,â€ U.S. Chamber of
Commerce and APCO Worldwide, July 2010.
35 Jeremie Waterman and T ami Overby, â€œChinaâ€™s Approval Process for Inbound Foreign Direct Investment: Impact on
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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
Chinaâ€™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,
making it difficult for U.S. companies to seek similar redress in China. Chinaâ€™s state support for
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
addressed.37
New Laws and Regulations
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
Chinaâ€™s economic competitiveness and national security and that align with Xi Jinpingâ€™s concepts
of national security and the priorities set in Chinaâ€™s 14th Five-Year Plan. These laws and measures
also focus on the governmentâ€™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
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.
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
might signal how China could try to justify particular unilateral actions, press for membership in
multilateral organizations that currently exclude China, or pursue alternative agreements or
mechanisms. Provisions in the Ministry of Commerceâ€™s blocking measures (Articles 3 and 13),
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 Chinaâ€™s new Data Security Law cal s for
China to handle foreign judicial or law enforcement requests for data according to relevant

Market Access, National T reatment and T ransparency,â€ U.S. Chamber of Commerce, November 11, 2012.
36 Pittman P. Potter, â€œ The Chinese Legal System: Continuing Commitment to the Primacy of State Power,â€ The China
Quarterly, February 12, 2009; Jamie P. Horsley, â€œ Party Leadership and Rule of Law in the Xi Jinping Era: What Does
an Ascendant Chinese Communist Party Mean for Chinaâ€™s Legal Development?,â€ T he Brookings Institution,
September 2019; Moritz Rudolf, â€œ Xi Jinping T hought on the Rule of Law: New Substance in the Conflict of Systems
with China,â€ Stiftung Wissenschaft und Politik, SWP Comment, April 2021.
37 T he opacity of Chinaâ€™s system can make it hard to secure evidence, prolong litigation, and impose significant costs
on U.S. investors asserting their rights. State backing and support for Chinese firms in U.S. courts could create
potential asymmetric advantages in their resources over U.S. counterparts. Even when a U.S. entity is directed and
controlled by an SOE 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) has tried to deny direct ties to its U.S.
affiliates and twice tried to assert immunity under the Foreign Sovereign Immunities Act ( P.L. 94-583) to thwart
commercial litigation despite Chinaâ€™s World T rade Organization accession commitment that its state firms would
operate on a commercial basis. AVICâ€™s actions put the evidence burden on the U.S. party to show how the China parent
is tied to its U.S. affiliates and why PRC st ate firms should not have immunity in commercial deals. See CRS In Focus
IF11803, U.S. Capital Markets and China: Issues for Congress, by Michael D. Sutherland and Karen M. Sutter Jamie
P. Horsley, â€œParty Leadership and Rule of Law in the Xi Jinping Era: What Does an Ascendant Chinese Communist
Party Mean for Chinaâ€™s Legal Development?,â€ Global China Report, T he Brookings Institution, September 2019.
38 Chinaâ€™s Ministry of Commerce, MOFCOM Order No. 1 of 2 021 on Rules on Counteracting Unjustified Extra-
territorial Application of Foreign Legislation and Other Measures,â€ January 9, 2021,
http://english.mofcom.gov.cn/article/policyrelease/questions/202101/20210103029708.shtml (English),
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
reciprocity.39
Export Control Law
In October 2020, the Standing Committee of Chinaâ€™s legislature, the National Peopleâ€™s Congress
(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.
governmentâ€™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
jurisdiction (Article 44).41 The United States and other governmentsâ€”such as those in Japan
Taiwan, and Europeâ€”have tightened Chinaâ€™s access to sensitive technology through strengthened
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
measures that enhance their ability to address emerging dual-use technologies, including cyber-
surveil ance 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
number of countries that have sought to ban or impose conditions on the participation of Chinaâ€™s
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
to deny and impose terms on foreign commercial transactionsâ€”both inside and outside of
Chinaâ€”on the grounds of Chinaâ€™s national security and national interest (Articles 12 and 13).
The Chinese government traditional y has sought to direct, condition, and restrict foreign
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
coke, fluorspar, and rare earth elements.44 The law gives the government new rationales and

39 Data Security Law of the People'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).
40 T he law realizes a longstanding Chinese government goal of elevating and consolidating ministry -level export
control authorities under one national-level legal and policy framework. See http://www.xinhuanet.com/2020-
10/18/c_1126624518.htm (Chinese text and https://www.cov.com/
/media/files/corporate/publications/file_repository/prc_export_control_law_ 2020_10_cn_en_covington.pdf (unofficial
English translation).
41 See CRS In Focus IF11627, U.S. Export Control Reforms and China: Issues for Congress, by Ian F. Fergusson and
Karen M. Sutter.
42 â€œCommission Welcomes Agreement on the Modernisation of EU Export Controls,â€ European Commission Press
Release, November 9, 2020.
43 Mark Scott, â€œHow T rump Won Over Europe on 5G, Cutting China Out,â€ Politico, February 4, 2021; Laurens
Cerulus, â€œGermany Falls in Line with EU on Huawei,â€ Politico, April 23, 2021.
44 T he United States won two separate World T rade Organization (WT O) cases against China in 2009 and 2014
regarding 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 state firms such as Minmetals and
used production quotas to control REEs in China. â€œWT O Case Challenges Chinaâ€™s Export Restraints on Raw Materials
Inputs, UST R, June 2009; â€œ DS431: Chinaâ€”Measures Related to the Exportation of Rare Earths, T ungsten and
Molybdenum,â€ WT O Dispute Settlement, https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds431_e.htm ; Wang
Zhuoqiong, â€œGovernment Approves Rare Earth Conglomerates,â€ China Daily, August 6, 2014. Also see CRS Report
R42510, Chinaâ€™s Rare Earth Industry and Export Regim e: Econom ic and Trade Im plications for the United States, by
Wayne M. Morrison and Rachel Y. T ang.
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processes to impose terms on transactions among firms, within joint ventures and other
partnerships, and on exports and offshore transactions (Articles 3 and 44) (see Table 1).
Key factors in the issuance of export licenses include not only the particular technology, end use,
and end user, but also an entityâ€™s â€œcreditâ€ rating, highlighting how the scope of Chinaâ€™s
implementation of its authorities are potential y much broader than how the U.S. government and
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 Chinaâ€™s corporate
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 countriesâ€™ actions (Article 48), to
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
press for Chinaâ€™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
China could become more active in trying to set global rules and norms that advantage China.46
Table 1. Key Provisions of Chinaâ€™s Export Control Law
Ef ective December 1, 2020
ARTICLE 2
Defines controlled items to include dual-use items, military items, nuclear items and other goods,
technologies, services and items relating to the maintenance of national security and national
interests, and performance of nonproliferation and other international obligations
ARTICLE 3
Defines transfer to include any transaction outside the PRC or involving foreign organizations or
individuals (implying it includes transactions inside China that involve foreign entities)
ARTICLE 4
Defines control list to include lists, catalogues, and directories
ARTICLE 5
Defines export control authorities to include a consultative mechanism of State Council and
Central Military Commission units that perform export control functions
ARTICLES 6 & 32
Cal for strengthening international cooperation and participating in global rules related to
export controls; cooperating and communicating with other countries and international organizations
in accordance with international treaties concluded or ratified by China or on the basis of
principles of equality and reciprocity
ARTICLE 7
Encourages companies to work through industry groups and chambers of commerce to
perform export control duties
ARTICLES 8 & 9
Mention both country and product lists and determinations
ARTICLE 9
Al ows for temporary controls (up to 2 years in duration) for products not on a control list
ARTICLES 12 & 13
State that license decisions wil consider national security and the national interest. Other
factors include: international commitments; type of export; sensitivity of the items; destination
country or region of the export; end users and end use; credit record of the entities; and other
factors provided in Chinaâ€™s laws and administrative regulations
ARTICLE 14
Includes provisions for internal compliance systems and general licenses
ARTICLE 16
Includes provisions for end-users and end-use; includes restrictions on altering end-use
ARTICLES 34-40
Outline fines and actions in response to various types of violations

45 Chinaâ€™s Corporate Social Credit System is a network of national and provincial data-sharing initiatives and legal
provisions wit h the common goal of regulating corporate behavior in China. See CRS In Focus IF11342, Chinaâ€™s
Corporate Social Credit System , by Michael D. Sutherland.
46 See CRS Insight IN11524, China Issues New Export Control Law and Related Policies, by Karen M. Sutter, and
CRS In Focus IF11627, U.S. Export Control Reform s and China: Issues for Congress, by Ian F. Fergusson and Karen
M. Sutter.
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ARTICLE 44
Scopes jurisdiction to include transfers that occur outside of China
ARTICLE 45
Addresses trade and transfer via Chinaâ€™s bonded zones (a separate area in China with special
trade policies, particularly those related to customs clearance)
ARTICLE 48
Provides justification for tit-for-tat retaliatory action:
â€œIf any country or region abuses export control measures to endanger the national security and national
interests of the Peopleâ€™s Republic of China, the Peopleâ€™s Republic of China may, based on the actual situation,
take reciprocal measures against that country or region.â€
Source: Export Control Law of China, effective December 1, 2020, available at
http://www.xinhuanet.com/2020-10/18/c_1126624518.htm (in Chinese).
Note: CRS has bolded key provisions.
Catalogue of Prohibited and Restricted Technologies
To buttress the new export law, Chinaâ€™s Ministry of Commerce and Ministry of Science and
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
had last been updated in 2008. Many of the covered technologies are prioritized in Chinaâ€™s
national industrial plans for key sectors, such as aerospace, medical equipment, and advanced
manufacturing. Other technologies relate to emerging geospatial, autonomous systems, and
artificial intel igence capabilities with a wide range of applications, including Chinaâ€™s BeiDou
satel ite navigation system, as wel as technologies for autonomous vehicles.48(See Table 2.) The
Chinese government prohibits or restricts foreign investment in many of these areas, while
simultaneously seeking technology transfer in these areas through foreign partnerships and
acquisitions.
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
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 ByteDanceâ€™s social media platform,
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
after al .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,
influence U.S. decision-making, and potential y constrain or seek to override U.S. authorities
over Chinese companiesâ€™ trade and operations in the United States.
In December 2020, Chinaâ€™s Ministry of Commerce, State Cryptography Administration, and
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 Chinaâ€™s Ministry of Commerce, â€œ Catalogue of China's Export Prohibited and Restricted T echnologies,â€
Announcement No. 38, August 28, 2020, http://www.gov.cn/zhengce/zhengceku/2020 -
08/29/5538299/files/135c5cdd6baa46a986ac5e51a1a49ac3.pdf (in Chinese). For a summary of technologies, see CRS
Insight IN11524, China Issues New Export Control Law and Related Policies, by Karen M. Sutter.
48 For a summary of the new technologies added to the catalogue, see CRS Insight IN11524, China Issues New Export
Control Law and Related Policies, by Karen M. Sutter.
49 â€œChinaâ€™s New T ech Export Controls Could Give Beijing a Say in T ikT ok Sale,â€ Reuters, August 30, 2020.
50 Arjun Kharpal, â€œByteDance Applies for Export License from China as T ikT ok Deal Waits for Approval,â€ CNBC,
Sept ember 24, 2020.
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Encryption 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
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
measures established the Ministry of Commerceâ€™s central role over a new licensing process and
places these products under the purview of Chinaâ€™s new Export Control Law. In a move to create
parity and an ability to retaliate in response to U.S. export control actions, on April 28, 2021,
Chinaâ€™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
related guidelines outline best practices for internal compliance programs for both domestic and
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
Amended August 28, 2020
ï‚·
biotechnology, pharmaceuticals, and medical equipment
ï‚·
3D printing
ï‚·
construction, petroleum, and power equipment, including technology relating to equipment and materials for
Generation III & IV nuclear reactors and the design of Generation III nuclear power plants
ï‚·
machine tools
ï‚·
high speed wind tunnel design
ï‚·
aerospace bearings
ï‚·
unmanned aerial vehicles (UAVs)
ï‚·
spaceâ€“related remote sensing image acquisition, measurement instruments, and data transmission
ï‚·
vacuum technology
ï‚·
mapping
ï‚·
information processing technologies (e.g., personal interactive data algorithms, speech synthesis, artificial
intel igence-based interactive interface, voice evaluation, and intel igent scoring)
ï‚·
cryptographic and cyber-related technologies
Source: Catalogue of Technologies Prohibited or Restricted from Export, Chinaâ€™s Ministry of Commerce and Ministry
of Science and Technology, Amended August 28, 2020, http://www.gov.cn/zhengce/zhengceku/2020-
08/29/5538299/files/135c5cdd6baa46a986ac5e51a1a49ac3.pdf.
Unreliable Entity List
Chinaâ€™s Ministry of Commerce on September 19, 2020, issued a State Council-approved Order
on Provisions on the Unreliable Entity List that cal s for establishing a new system to identify and

51 Jenny (Jia) Sheng, Jack Ko, Ph.D., Chunbin Xu, â€œChina Publishes Import License List and Export Control List for
Commercial Encryption,â€ Pillsbury Alert, December 16, 2020, https://www.pillsburylaw.com/en/news-and-
insights/import -export -control-license-lists-commercial-encryption.html.
52 Jenny (Jia) Sheng, Jack Ko, Ph.D., Nancy A. Fischer, Matthew R. Rabinowitz, Chunbin Xu, Fang Wang, T oochi L.
Ngwangwa, â€œ Chinaâ€™s MOFCOM Issues Internal Export Control Program Guidelines,â€ Pillsbury Alert, May 12, 2021,
https://www.pillsburylaw.com/en/news-and-insights/china-mofcom-issues-internal-export -control-program-
guidelines.html.
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respond to entities that endanger Chinaâ€™s sovereignty, security, or development; violate â€œnormalâ€
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
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
foreign personnel entry, work, stay, and residence in China. The government is expected to issue
implementing regulations and update its control lists. The Unreliable Entity List would
presumably closely align with new blocking measures (see below) and al ow the Chinese
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
entities. It also would al ow 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
also potential y al ows the Chinese government an additional policy tool to institutionalize its tit-
for-tat retaliation against specific corporate actors to punish and pressure corporate decision-
making on broader political and economic Chinese interests. As discussed above, Chinaâ€™s
provisions imply a broader application of export controls than those of the United States that are
relatively narrowly applied with regard to discrete national security concerns.
Blocking Measures
In January 2021, Chinaâ€™s Ministry of Commerce issued blocking measuresâ€”rules designed to
counter the extraterritorial reach of foreign government sanctions and related foreign court
rulingsâ€”in accordance with Chinaâ€™s National Security Law.54 The measures represent an effort
by China to build formal capacity to directly chal enge sanctions imposed by the United States,
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
applications of foreign laws or policies â€œviolate international law and basic principles of
international relationsâ€ or â€œunjustifiablyâ€ prohibit or restrict PRC entities from engaging in trade
with a party from a third country or region.
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
differences in Chinaâ€™s approach as defined in these measures and Chinaâ€™s Anti-Foreign Sanctions
Law (see below). In particular, the scope, potential consequences for violators, and broader levers
over trade and investment of Chinaâ€™s measures are significantly broader than Europeâ€™s laws,
which target U.S. unilateral sanctions taken against a smal group of countries (e.g., Cuba, Iran,
and Russia), with relatively narrow applications that aim to al ow certain European firms to
continue to conduct some business with these countries. The scope of Chinaâ€™s measures, in
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,
Chinaâ€™s penalties are to be applied within Chinaâ€™s legal system in which Chinaâ€™s firms enjoy the

53 Chinaâ€™s Ministry of Commerce, â€œMOFCOM Order No. 4 of 2020 on Provisions of the Unreliable Entity List,â€
September 19, 2020, http://english.mofcom.gov.cn/article/policyrelease/questions/202009/20200903002580.shtml.
54 Chinaâ€™s Ministry of Commerce, MOFCOM Order No. 1 of 2021 on Rules on Counteracting Unjustified Extra-
territorial Application of Foreign Legislation and Other Measures,â€ January 9, 2021,
http://english.mofcom.gov.cn/article/policyrelease/questions/202101/20210103029708.shtml (English),
http://www.mofcom.gov.cn/article/b/c/202101/20210103029710.shtml (Chinese).
55 Mary E. Lovely and Jeffrey J. Schott, â€œCan China Blunt the Impact of New U.S. Sanctions,â€ Policy Brief 21 -13,
Peterson Institute for International Economics, June 2021.
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special protections and preferences of Chinaâ€™s courts, al owing the government additional leeway
to pressure companies to adhere to Chinaâ€™s rules.
Chinaâ€™s measures cal 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,
including whether other countriesâ€™ laws and policies infringe on Chinaâ€™s sovereignty, security,
and development interests. The measures authorize the Chinese government to adopt
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
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
countermeasures. Article 9 discusses the imposition of penalties on entities that comply with the
foreign actions, including legal proceedings in Chinese courts, rights to compensation for losses,
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
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
These provisions appear to seek to chal enge the extraterritorial reach of U.S. policy actions by
pressuring U.S. and other firms operating in Chinaâ€”under the threat of potential sanctions and
civil and criminal prosecutionâ€”to adhere to Chinese measures that may contravene U.S. policy
actions and could violate U.S. laws.
Anti-Foreign Sanctions Law
China moved to broaden the scope and jurisdiction of the initial Ministry of Commerceâ€™s
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
the traditional three readings a draft law typical y undergoes, and there was no public comment
period, in a sign of Chinaâ€™s capacity and interest in accelerating the development and passage of
national security-related legislation.58 The law centralizes existing authorities and formalizes the
Chinese governmentâ€™s ability to sanction and â€œcountersanctionâ€ individuals, entities, and
governments, as wel as impose countermeasures in response to other countriesâ€™ sanctions on
PRC individuals 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
sanctions, the new law al ows 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
and Macau as part of China. 59 The Chinese government explains the new law, in Article 1, as an
effort to â€œsafeguard national sovereignty, security, and development interests, and protect the
legitimate rights and interests of Chinaâ€™s citizens and organizations.â€ Article 3 asserts Chinaâ€™s

56 Chinaâ€™s Ministry of Commerce, â€œMOFCOM Order No. 1 of 2021 on Rules on Counteracting Unjustified E xtra-
territorial Application of Foreign Legislation and Other Measures,â€ January 9, 2021,
http://english.mofcom.gov.cn/article/policyrelease/questions/202101/20210103029708.shtml (English),
http://www.mofcom.gov.cn/article/b/c/202101/20210103029710.shtml (Chinese).
57 â€œAnti-Foreign Sanctions Law of the Peopleâ€™s Republic of China,â€ June 10, 2021,
http://www.npc.gov.cn/npc/c30834/202106/d4a714d5813c4ad2ac54a5f0f78a5270.shtml .
58 Lester Ross, Jeffrey I. Kessler, Kenneth Zhou, and T ingting Liu, â€œChina Enacts Anti-Sanctions Law,â€ WilmerHale
Client Alert, June 11, 2021.
59 Ibid.
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right to adopt countermeasures when another country â€œviolates international law and basic norms
of international relationsâ€ or â€œadopts discriminatory restrictive measures against Chinese citizens
and organizations, and interferes in Chinaâ€™s internal affairs.â€60 This law and related developments
present â€œpotential y irreconcilable compliance problems,â€ according to Greg Gil igan, chair of the
American Chamber of Commerce in China.61
Other major provisions include:
ï‚· The law directs the State Council to set up a mechanism to implement the law
and al ows the State Council to place individuals and entities that â€œdirectly or
indirectly participate in the formulation, decision, and implementation of
discriminatory restrictive measures [on China]â€ on a â€œcounter control listâ€
(Article 4). This list may include spouses and immediate family members; senior
staff or â€œactual controllersâ€ of organizations; organizations in which targeted
persons serve in senior positions; and organizations involved in the creation and
operation of sanctions on China (Article 5).
ï‚· Other potential countermeasures include restrictions on visas and country entry
and exit; seizure or freezing of movable and immovable property; and prohibition
or restrictions on certain transactions, cooperation, and activities (Article 6).
ï‚· The law restricts individuals and entities from implementing or assisting in the
implementation of foreign countriesâ€™ restrictive measures and al ows for Chinese
citizens and organizations to file a lawsuit in China to determine infringement
and compensate for losses (Article 12). This provision creates a pathway for
Chinaâ€™s courts to potential y chal enge U.S. actions with rulings in China that
seek to overturn U.S. policy actions, as wel as U.S. court decisions.
ï‚· The law also al ows for China to prosecute any organization or individual who
fails to implement or cooperate with Chinaâ€™s countermeasures (Article 14) or that
implements, assists, or supports acts that engage Chinaâ€™s sovereignty, security,
and development interests (Article 15).
Even before the enactment of the new anti-sanctions law, the Chinese government had been
testing U.S. redlines in chal enging the enforcement of U.S. sanctions and invoking
countersanctions in response to foreign governmentsâ€™ sanctions on PRC individuals and entities.
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
Chamber of Commerce in Beijing.62 In February 2021, a Chinese state media editor warned that
the Chinese government would countersanction any country that was to boycott Chinaâ€™s hosting
of the 2022 Winter Olympics.63 In January 2021, China sanctioned ten former Trump
Administration 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
â€œcompanies and institutions associated with them from doing business in China.â€64 This followed

60 â€œAnti-Foreign Sanctions Law of the Peopleâ€™s Republic of China, June 10, 2021,
http://www.npc.gov.cn/npc/c30834/202106/d4a714d5813c4ad2ac54a5f0f78a5270.shtml .
61 â€œHow China Is T rying to Fight Back Against Sanctions,â€ Bloomberg News, July 28, 2021.
62 â€œChina Sends Sanctioned Official to AmCham Dinner in Beijing,â€ Bloomberg News, December 10, 2020.
63 Jonathan White, â€œBeijing 2022: â€˜China Will Seriously Sanctionâ€™ Any Country that Boycotts Winter Olympics, says
State-backed Media Chief,â€ South China Morning Post, February 8, 2021.
64 â€œForeign Ministry Spokesperson Announces Sanctions on Pompeo and Others,â€ Chinaâ€™s Ministry of Foreign Affairs,
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Chinaâ€™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,
including Chinaâ€™s policies in Xinjiang, and in retaliation to U.S. sanctions on certain Chinese
officials over Chinaâ€™s actions in Hong Kong.65
Foreign Investment Review
China has formalized its foreign investment authorities as they relate to national security concerns
in an effort to normalize the governmentâ€™s approach to national economic security, seek parity
with the United States, and extend the governmentâ€™s jurisdiction overseas. In December 2020,
Chinaâ€™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
January 2021.66 The measures implement provisions in Chinaâ€™s 2015 National Security Law
(Article 59) and 2020 Foreign Investment Law (Article 35) that provide a legal framework for
Chinaâ€™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
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
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.
governmentâ€™s Committee on Foreign Investment in the United States (CFIUS) process and may
aim to create a sense of parity and facilitate Chinaâ€™s ability to pressure CFIUS through retaliatory
responses to CFIUS determinations on PRC transactions.69 The timing of Chinaâ€™s measures may

January 20, 2021, https://www.fmprc.gov.cn/mfa_eng/xwfw_665399/s2510_665401/2535_665405/t1847554.shtml .
65 Cate Cadell and T ony Munroe, â€œChina Imposes Sanctions on 28 T rump -era Officials Including Pompeo,â€ Reuters,
January 20, 2021; Keith Bradsher, â€œ China Imposes T it-for-Tat Sanctions on T hree American Lawmakers,â€ The New
York Tim es, July 13, 2020; â€œ Foreign Ministry Spokesperson Zhao Lijian's Regular Press Conference,â€ Chinaâ€™s Ministry
of Foreign Affairs, August 10, 2020,
https://www.fmprc.gov.cn/mfa_eng/xwfw_665399/s2510_665401/2511_665403/t1805288.shtml ; â€œ Foreign Ministry
Spokesperson Hua Chunying's Regular Press Conference,â€ Chinaâ€™s Ministry of Foreign Affairs, July 13, 2020,
https://www.fmprc.gov.cn/mfa_eng/xwfw_665399/s2510_665401/t1797455.shtml; â€œ Foreign Ministry Spokesperson
Hua Chunying's Regular Press Conference,â€ Ministry of Foreign Affairs of the PRC, November 30, 2020,
https://www.fmprc.gov.cn/mfa_eng/xwfw_665399/s2510_665401/2511 _665403/t1836732.shtml.
66https://www.bakermckenzie.com//media/files/insight/publications/2021/01/foreign_investment_security_review_mea
sures.pdf?la=en (English), https://www.bakermckenzie.com/-/media/files/insight/publications/2021/01/china-enacts-
new-foreign-investment -security-review-measures.pdf?la=en (Chinese language).
67 Lester Ross, Kenneth Zhou, and T ingting Liu, â€œChinaâ€™s New Investment Security Review Measures,â€ Wilmer Hale
Client Alert, December 22, 2020.
68 Howard Hao Wu and T racy Wut, â€œChina Enacts New Foreign Investment Security Review Measures,â€ Baker
McKenzie Insight, January 4, 2021; Z. Alex Zhang, Vivian T soi, Charlie Zhu and Chunlei Pang, â€œT he New FISR
Measures: A Step Further in Chinaâ€™s National Security Review of Foreign Investments,â€ White & Case Alert, January
21, 2021; for discussion of VIE structure, see CRS In Focus IF11803, U.S. Capital Markets and China: Issues for
Congress, by Michael D. Sutherland and Karen M. Sutter.
69 CFIUS 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) th ey threaten
to impair the national security; (2) the foreign investor is controlled by a foreign government; or (3) the transaction
could affect homeland security or would 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
threaten to impair the national security, the use of this authority is still relatively rare. See CRS 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 CFIUSâ€™ purview and
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
Committee appears to have imposed on certain PRC-tied transactions since that time.70
The new foreign review measures cal for the creation of a government mechanism to review
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
declaration for foreign investment in sectors related to national defense and security, including in
agriculture, energy, critical materials, equipment, infrastructure, transportation, culture,
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
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
foreign purchases of listed shares in Chinese companies through â€œstock exchanges or other
securities trading venues approved by the State Council.â€72
The Chinese government says the measures fil gaps in its review system as it shifts to a negative
list approach for approving foreign investment under which foreign investment is general y
al owed 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
form and practice, Chinaâ€™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.
National economic security interests already inform Chinaâ€™s industrial policies and related trade
and investment policies and decisions. Chinaâ€™s foreign investment catalogues and negative lists
establish the sectors in which foreign investment wil be encouraged, allowed, restricted, or
prohibited, and calibrate terms of market access (including technology transfer and partnership
requirements) based on Chinaâ€™s national development goals and related industrial plans.74 Under
Chinaâ€™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
referred to as the â€œnegative listâ€) and the Catalogue of Encouraged Industries for Foreign
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 In Focus IF10952, CFIUS Reform Under FIRRMA, by James K. Jackson and Cathleen D. Cimino-Isaacs
and CRS In Focus IF11334, CFIUS: New Foreign Investm ent Review Regulations, by Cathleen D. Cimino-Isaacs and
James K. Jackson.
71 Yan Luo, T imothy P. Stratford, and Eric Carlson, â€œ China Issues Measures on National Security Review of Foreign
Investment ,â€ Covington & Burling LLP.
72 â€œImproving the Foreign Investment Security Review System to Encourage a Higher Level of Opening to the Outside
World,â€ 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.
73 â€œImprove the Foreign Investment Security Review System to Accompany a Higher Level of Opening to the Outside
World,â€ NDRC press briefing on the Foreign Investm ent Security Review Measures, December 19, 2020,
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
restricted with the idea that, unless a sector is listed, the economy should be open to foreign investment. â€œ How to Use
Chinaâ€™s Negative Lists and Foreign Investment Encouraged Catalogue,â€ China Briefing, Dezan Shira & Associates,
December 10, 2019.
75 Foreign Investment Law of the Peopleâ€™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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condition foreign investment in sectors designated as restricted (see Table 3), and has a range of
other authorities that facilitate setting terms beyond the specific sectors identified in this list.
Table 3. Selected Highlights of Chinaâ€™s Investment Restrictions by Sector
Drawn from Chinaâ€™s Negative Investment List, Updated December 10, 2020
Sector
Details
Agriculture
ï‚·
cultivation of plants for production, management, testing, or trade of seeds
ï‚·
agricultural related transportation, including fresh milk
ï‚·
production, sale or trade of food
ï‚·
GMO research, production, processing, or import
ï‚·
production or operation of genetic materials from livestock
ï‚·
fisheries
ï‚·
animal diagnosis and treatment
ï‚·
pesticides
ï‚·
animal husbandry
ï‚·
transfer of land management rights
ï‚·
cultivation or production of tobacco related products
Mining, Energy, and
ï‚·
exploration, exploitation, production, or operation of mineral resources
Resources
ï‚·
trade and sale of agriculture, crude oil, and other designated commodities,
technologies, and services
Manufacturing,
ï‚·
production, sale, and trade of pharmaceuticals, medical devices, and
Retail/Wholesale, and
cosmetics
Trade
ï‚·
production of certain metals, shipbuilding, aerospace, rail, motor vehicles,
and related components and equipment
ï‚·
â€œspecialâ€ equipment and â€œimportantâ€ industrial products
ï‚·
telecommunications, radio, and computer related products and systems
ï‚·
encryption
ï‚·
warehousing and logistics
Infrastructure and
ï‚·
construction, engineering, and related technical services
Transportation
ï‚·
electric power and public utilities
ï‚·
road, rail, and water transport services
ï‚·
water resource management

https://www.chinalawtranslate.com/en/implementation -regulations-for-the-foreign-investment-law/0 (unofficial
English translation of the implementation measures); Catalogue of Industries for Encouraging Foreign Investment
(2020), effect ive January 27, 2021 https://www.ndrc.gov.cn/xxgk/zcfb/fzggwl/202012/P020201 228567029819518.pdf;
New Special Administ rative Measures for Foreign Investment Access (â€œ Negative Listâ€) (2020),
https://www.dezshira.com/library/legal/special-administrative-measures-access-foreign-investment-2020-edition-
national-negative-list.html?1593598930 (unofficial English translation); new Special Administ rative Measures for
Foreign Investment Access to Pilot Free T rade Zones (â€œ FT Z Negative List â€) (2020), effective July 23, 2020,
https://www.dezshira.com/library/legal/FT Z-free-trade-zone-special-administrative-measures-foreign-investment-2020-
national-negative-list.html?1593599181 (unofficial English translation); Angel Huang, Jessie Chenghui T ang, Ross
Keene, Patrick H. Hu, â€œChina Further Opens its Market with New â€˜Foreign Investment Law,â€™â€ Jones Day, February
2020.
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Sector
Details
Services
ï‚·
hotel operations
ï‚·
financial services
ï‚·
real estate
ï‚·
medical services
ï‚·
educational institutions and services
ï‚·
wide range of other business services
Research, Testing, and
ï‚·
scientific research
Surveying
ï‚·
use of human genetic resources
ï‚·
geographic surveying, mapping, and remote sensing
ï‚·
exploration, inspection, testing, certification, and accreditation or
assessment
ï‚·
meteorological and seismic services
Publishing, Media, and
ï‚·
printing and publishing
Entertainment
ï‚·
media, news, and broadcasting
ï‚·
sports, culture, entertainment, and film
Communications Services;
ï‚·
radio, telecom, and satel ite services
Internet and Internet-
ï‚·
Based Services

wide range of businesses including news, social media, gaming, financial
services, ride sharing services, and apps
Source: â€œChina Releases 2020 Negative List for Market Access,â€ China Briefing, Dezan Shira & Associates,
December 23, 2020, https://www.china-briefing.com/news/china-2020-negative-list-market-access/; â€œMarket
Access Negative List (2020),â€ PRC National Development and Reform Commission, Notice (2020) No. 1880,
December 10, https://www.ndrc.gov.cn/xxgk/zcfb/ghxwj/202012/t20201216_1252897_ext.html.
Notes: This list is designed to il ustrate certain areas of restrictions. It is not comprehensive. In addition to
formal sectoral-based restrictions, the PRC government also uses procurement, technical standards, and other
domestic requirements to restrict or otherwise 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 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, Chinaâ€™s Ministry of
Industry and Information Technology (MIIT) issued draft Regulations on Rare Earth
Management that cover Chinaâ€™s entire REEs supply chain, limit the export of REEs, and put the
management of these exports under the jurisdiction of Chinaâ€™s new Export Control Law.76 The
draft regulation also cal s for creating a strategic reserve and tracking system across the supply
chainâ€”including information on mining, processing, production, and salesâ€”that seeks to
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,
samarium, europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium, lutetium, scandium, and
yttrium. REEs are essential in a wide range of industries including electronics, telecommunications, clean energy
technologies, aerospace, automotive, and defense. See CRS Report R46618, An Overview of Rare Earth Elem ents and
Related Issues for Congress, by Brandon S. T racy.
77 T om Daly, â€œChina Hikes Half-Year Rare Earth Output Quotas to Record Level,â€ Reuters, February 19, 2021.
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link to page 57 Chinaâ€™s Countermeasures to U.S. Economic Policy Actions and Authorities

2020 version of Chinaâ€™s negative investment list, foreign investment in exploration, mining, and
processing 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
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
following a clash in disputed waters near the Senkaku (Diaoyu) Islands in the East China Sea,
China held REE shipments bound for Japan (see Appendix). China has also used export
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
featured a visit by Chinaâ€™s leader Xi to an REE magnet production facility in Ganzhou, a city in
Chinaâ€™s Jiangxi province in a potential warning about Chinaâ€™s ability to leverage REE supply
chains.80
Ad Hoc Trade Measures and Economic Coercion81
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
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, Chinaâ€™s behind-the-
scenes pressure can sometimes make it difficult to discern to what extent a U.S. companyâ€™s
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
and business partners.83 Certain provisions in Chinaâ€™s new national security and trade measures
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
instances, the threat of potential action could potential y be as powerful as the imposition of costs.
The Chinese 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, â€œChina T ightens Control Over Management of Rare Earths,â€ China Briefing, Dezan Shira and
Associates, February 25, 2021.
79 See CRS Report R42510, Chinaâ€™s Rare Earth Industry and Export Regime: Economic and Trade Implications for
the United States, by Wayne M. Morrison and Rachel Y. T ang
80 Alexandra Ma, â€œ 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,â€ Business Insider, May 21, 2019.
81 T his section includes contributions by Caitlin Campbell and Michael Sutherland at the Congression al Research
Service.
82 â€œFindings of the Investigation into Chinaâ€™s Acts, Policies, and Practices Related to T echnology T ransfer, Intellectual
Property, and Innovation Under Section 301 of the T rade Act of 1974,â€ Office of the U.S. T rade Representative, March
22, 2018, https://ustr.gov/sites/default/files/Section%20301%20FINAL.PDF.
83 â€œChina Urges U.S. Companies to Lobby Washington on T rade,â€ CBS News, July 12, 2018; Jeanne Whalen, â€œChina
Hawks Encounter Powerful Opponent: U.S. Companies,â€ The Washington Post, October 12, 2020.
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related to regulations. The Chinese government appears to also use sanctions, and
countersanctionsâ€”including measures targeting certain foreign parliamentarians and academic
researchers, and institutesâ€”in an effort to stifle criticism of its policies and advance its
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
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.84 The uptick in
Chinaâ€™s economic pressure on trading partners is amplifying ongoing concerns about Chinese
trade practices and industrial policies more broadly, and prompting policy discussion about
supply chain diversification away from China, developing alternative markets for global
production, and the need for collective trade action among like-minded countries.85
After China joined 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
raising of tariffs, for example. Chinaâ€™s economic coercive and retaliatory measures instead were
more informal, indirect, or not official y articulated, providing Chinaâ€™s government flexibility in
their application and plausible deniability. More recently, China has become more active and
direct in its demands and related economic coercion and trade brinkmanship, demonstrating a
potential wil ingness to jeopardize economic ties with major trading partners.86 While WTO
members can and do chal enge China on certain practices that may violate its WTO obligations
through WTO dispute settlement, some analysts assess that this process may be inadequate, given
the growing frequency of Chinaâ€™s actions. It can take two to three years for a dispute process to
run its course, al owing China the time it needs to impose pressure before being potential y
disciplined.87
In November 2020, Chinaâ€™s Embassy in Canberra provided Australian media with a document
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
then imposed tariffs and other trade restrictions on Australian exports to Chinaâ€”including barley,
coal, cotton, lobster, meat, and timberâ€”when the government refused to submit to Chinaâ€™s
demands.88 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. Â§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, â€œDowning Street Plans New 5G Club of Democracies,â€ The Daily Times, May 29, 2020; Jonas Parello-
Plesner, â€œ An â€˜Economic Article 5â€™ to Counter China,â€ The Wall Street Journal, February 11, 2021; â€œ Australia, Japan
and India Form Supply Chain Initiative to Counter China,â€ Bloomberg News, April 28, 2021; â€œ G7 Foreign and
Development Ministersâ€™ Equitable Access and Collaboration Statement,â€ London, May 5, 2021.
86 Jonathan Kearsley, Eryk Bagshaw, and Anthony Galloway, â€œIf You Make China the Enemy, China Will Be the
Enemyâ€™: Beijing's Fresh T hreat to Australia,â€ The Sydney Morning Herald, November 18, 2020.
87 Jacob M. Schlesinger, â€œHow China Swallowed the WT O,â€ The Wall Street Journal, November 1, 2017; Jikon Lai,
â€œAustraliaâ€™s WTO Complaint: Whatâ€™s the Point?,â€ T he Diplomat, January 5, 2021.
88 Ibid. Saheli Roy Choudhury, â€œHereâ€™s a List of the Australian Exports Hit by Restrictions in China,â€ CNBC,
December 17, 2020.
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Australiaâ€”the last meeting held in 2017â€”in response to the Australian governmentâ€™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 custodyâ€”arguably in an arbitrary mannerâ€”two Canadian
citizens since December 2018 in apparent retaliation for the Canadian governmentâ€™s arrest of
Huaweiâ€™s Chief Financial Officer Meng Wanzhou.90 Ahead of a Canadian courtâ€™s decision
expected in fal 2021 on whether to extradite Meng to the United States, the Dandong
Intermediate Peopleâ€™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
documents and evidence in support of U.S. government charges against Huawei and Meng. In
February 2021, Huawei applied to the UKâ€™s High Court to require the handover of certain HSBC
records related to the U.S. government case against Huawei and Meng. Huaweiâ€™s application
focuses on U.S. allegations that are based on a presentation that Meng reportedly gave to an
HSBC executive about Huaweiâ€™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.92
Following a decision by Swedenâ€™s courts to uphold a ban on Huaweiâ€™s participation in the
countryâ€™s 5G telecommunications market because of national security concerns, China Mobile
Ltd., a Chinese government-owned wireless carrier, retaliated by reducing Sweden headquartered
Ericssonâ€™s share in its latest 5G equipment tender from 11% in 2020 to 1.9% in the August 2021
awards. 93
Data Localization and Control
Chinaâ€™s efforts to promote data sovereignty appear to be central to advancing its broader
economic security policies. China has expanded data localization requirements and placed data
under new trade authorities, such as export controls and security review requirements for Chinese
firms listing or operating overseas. Chinaâ€™s new measures enhance the Chinese governmentâ€™s
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
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
information security related to critical infrastructure, the government has been strengthening
requirements to localize certain technology, IP, research, and data in China.94 Chinaâ€™s 2015
National Security Law requires information systems in China to be â€œsecure and controllable.â€
Chinaâ€™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

89 Gabriel Crossley and Kristy Needham, â€œChina Suspends Economic Dialogue with Australia as Relations Curdle,â€
Reuters, May 6, 2021.
90 Christian Shepherd, â€œT wo Canadians Held in China Over Arrest of Huawei CFO Go on T rial,â€ Financial Times,
March 19, 2021.
91 Eva Xiao, â€œChina Sentences Canadian Citizen to 11 Years for Espionage in Case at Heart of Diplomatic Standoff ,â€
The Wall Street Journal, August 11, 2021.
92 â€œHuawei T akes HSBC to UK Court for Docs in Extradition Fight ,â€ Associated Press, February 12, 2021.
93 Stu Woo, â€œBeijing Shuns Ericsson, Nokia as the West Curbs Huawei,â€ The Wall Street Journal, August 3, 2021.
94 Nick Marro, â€œ T he 5 Levels of Information Security in China,â€ China Business Review, December 5, 2016.
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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
State Council issued Scientific Data Management Measures to strengthen the governmentâ€™s
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
China and disclosure of data, including trade secrets, to Chinaâ€™s Ministry of Science and
Technology.97
Recent Measures and Actions
Priorities in 2021 for Chinaâ€™s legislature, the National Peopleâ€™s Congress (NPC), include several
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.98 China is proposing to
use these new laws and measures to strengthen Chinese government control and curtail U.S.
extraterritorial reach over data subject to Chinaâ€™s control. Unlike the U.S. approach to data trade
that has sought market opening through a set of shared principles and best practices, Chinaâ€™s laws
and measures include data localization 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.
New requirements could further limit the ability of the U.S. government to implement measures ,
such as Securities and Exchange Commission (SEC) requirements that Chinese-listed firms
disclose details about their owners and subsidiaries. In July 2021, for example, Chinaâ€™s
Cybersecurity Administration 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
York Stock Exchange could prompt greater public disclosure and release of the companyâ€™s data
as part of U.S. listing requirements 99 The new laws and measures expand the scope of Chinaâ€™s
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 Chinaâ€™s longstanding goals of
requiring data localization as a key step in developing its digital economy.100 Some Members of
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.101 In July 2021, the

95 â€œNew Chinese Cybersecurity and Data Privacy Requirements,â€ Jones Day Insight, December 2020.
96 Stephen Nellis and Cate Cadell, â€œApple Moves to Store iCloud Keys in Ch ina, Raising Human Rights Fears,â€
Reuters, February 24, 2018.
97 Chinaâ€™s State Council â€œScientific Data Management Measures,â€ March 17, 2018,
http://www.gov.cn/zhengce/content/2018-04/02/content_5279272.htm (in Chinese).
98 Mary Lam, â€œPRC Legal Update: Key T akeaways from Chinaâ€™s T wo Sessions 2021,â€ Bryan Cave Leighton Paisner,
March 16, 2021; Jihong Chen, Peng Cai, Jiawei Wu, Yating Jiao, and Jiabin Sun, â€œ New Legislative T rend of
T ightening ICV Data Regulation in China,â€ Zhong Lun Law Firm, June 1, 2021.
99 Lingling Wei and Keith Zhai, â€œ Chinese Regulators Suggested Didi Delay Its U.S. IPO,â€ The Wall Street Journal,
July 5, 2021.
100 â€œChina Unveils Internet Plus Action Plan to Fuel Growth,â€ Xinhua, July 4, 2015; â€œ Chinaâ€™s Digital Economy: T he
Shape of T hings to Come,â€ China Briefing, Dezan Shira and Associates, January 4, 2018; â€œ Digital Economy
Development in China 2020,â€ China Academy of Information and Communications T echnology (CAICT ), July 2020,
http://www.caict.ac.cn/english/research/whitepapers/202007/P020200728343679920779.pdf ; Cheng Yu and Zheng
Yiran, â€œChina Eyes 6G as Next T ech Frontier,â€ China Daily, March 20, 2021.
101 Kiran Stacey and James Politi, â€œSenators Call on U.S. Securities Regulator to Investigate Didi IPO,â€ The Financial
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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.102 CRS
estimates that about two-thirds of PRC firms listed on U.S. exchanges use a VIE structure.103
Data Security Law
On June 10, 2021, the NPC passed a new law on data security that entered into force on
September 1, 2021.104 The law seeks to classify, manage, and protect data according to its
importance to state interests, including a stated focus to protect the â€œlegitimate rights and interests
of individuals and organizationsâ€ and safeguard Chinaâ€™s â€œnational sovereignty, security, and
development interestsâ€ (Article 1). The law covers data processing in China and outside of China
if it â€œharms the national security, public interest, or the legitimate rights and interests of citizens
or organizations of the PRCâ€ (Article 2). The lawâ€™s definition of covered data includes the
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
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
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 sec urity
(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
disagrees. Article 26 al ows the Chinese government to retaliate in kind when a foreign
government â€œadopts discriminatory prohibitions, restrictions, or other similar trade and
investment measures against China related to data as wel as data development and utilization
technologies.â€ 105
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
the creation of a data classification system based on the importance of the data to Chinaâ€™s
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 â€œimportant dataâ€ that
could be subject to Chinese export controls (Article 25).106 The law also cal s for establishing

Tim es, July 8, 2021.
102 â€œStatement on Investor Protection Relat ed to Recent Developments in China,â€ Public Statement by SEC Chair Gary
Gensler, 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 use a VIE structure. A VIE structure involves the owners of a Chinese
firm creating an offshore holding company to which foreign investors can purchase an equity claim. T he holding
company is tied t o the â€œ parentâ€ 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. -listed firms. See CRS In Focus
IF11803, U.S. Capital Markets and China: Issues for Congress, by Michael D. Sutherland and Karen M. Sutter.
103 See CRS In Focus IF11803, U.S. Capital Markets and China: Issues for Congress, by Michael D. Sutherland and
Karen M. Sutter.
104 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).
105 Ibid.
106 Masha Borak, â€œChina to Punish Data Exports to Overseas Courts as Beijing Beefs up Defence Against US Long
Arm,â€ South China Morning Post, April 28, 2021.
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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 liability for data processing parties. According to the
provisions, Chinese authorities have the right to inspect, impose fines, revoke business licenses,
and potential y bring civil and criminal charges against parties found in noncompliance. The
scope of potential violations is broad and includes a â€œviolation of the national core data
management system;â€ â€œendangering [Chinaâ€™s] national sovereignty, security and development
interests;â€ and the â€œunauthorized transfer of data overseas.â€108 Unauthorized transfer of data
includes existing provisions and laws regarding Chinaâ€™s state secrets and military laws,
forthcoming personal data legal requirements, and providing data to a foreign judicial or law
enforcement agency without the approval of the competent Chinese authority.109 The broad scope
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.
Critical Information Infrastructure
The Chinese government continues to tighten its cybersecurity measures which include purview
over networks overseas. In July 2021, Chinaâ€™s State Council issued new Regulations on the
Security Protection of Critical Information Infrastructure that it adopted in April 2021, which
became effective on September 1, 2021.110 The new regulations build on Chinaâ€™s 2016
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
public communication and information services, energy, transportation, water conservancy,
finance, public services, e-government, national defense science and technology industries, and
other important industries and network facilities and information systems. (Article 2).These
categories are the same as those in Chinaâ€™s 2016 Cybersecurity Law with the addition of â€œdefense
science and industry technologies.â€ The regulations require network operations to report major
incidents and intrusions (Article 15) and cal for the joint military and civilian protection of CII
(Article 38). The regulations reinforce Chinaâ€™s April 2020 Cybersecurity Review Measures in
prioritizing the purchase of â€œsecure and trustedâ€ network products (Article 19), which could favor
PRC vendors over foreign suppliers.111
Automotive-Vehicle Data
China is increasing the governmentâ€™s control over data generated by automotive vehicles in
China, including foreign firmsâ€™ vehicles, and the cross-border export of data generated by
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 "Regulations on the Security Protection of Critical Information Infrastructure,â€ State Council Order No. 745, July
30, 2021, http://www.cac.gov.cn/2021-08/17/c_1630785976988160.htm (in Chinese language).
111 T ingting Liu, Lester Ross, and Kenneth Zhou, â€œ China Rolls Out Critical Information Infrastructure Security
Protect ion Regulations,â€ WilmerHale, August 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 wil be effective October 1, 2021.113 These measures
focus on data collection, analysis, storage, use, and export.
The provisions require personal information and other â€œimportant dataâ€ to be stored within China
and for CAC to provide a security assessment for any cross-border data transmission. The
definition of â€œimportant dataâ€ 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
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
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
responsible parties is also broad and moves beyond critical infrastructure providers to al data
processers, including vehicle manufacturers, component and software providers, auto dealers,
maintenance and repair providers, online car-hailing companies, and insurance companies.114
Certain data are not to leave China â€œunder any circumstances.â€ Chinaâ€™s draft National Standard
of Safety Requirements for Collecting Data of Connected Vehicles, which the government
released on April 28, 2021, restricts the cross-border transfer of data on roads, buildings, terrain,
traffic participants and other data collected from connected vehiclesâ€™ external environment
through cameras, radar or other sensors, and data related to a vehicleâ€™s location and trajectory.115
The Chinese government has already applied these rules to Tesla, a California-headquartered
electric vehicle company, potential y restricting the companyâ€™s ability to collect, transmit, and
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
autonomous driving capabilities. U.S. reports indicate that some U.S. auto companies already
store data domestical y 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
announced in May 2021 that it would create a new data center in China, and that â€œal data
generated from the sales of vehicles in the China market wil be stored domestical y.â€ 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.
113â€œFive Departments Including the State Internet Information Office issued the Regulations on the Security
Managem ent of Autom obile Data (for Trial Im plem entation)," Jointly issued by the State Internet Information Office,
the National Development and Reform Commission, the Ministry of Industry and Information Technology, the
Ministry of Public Security, and the Ministry of T ransportation, August 20, 2021, http://www.cac.gov.cn/2021-
08/20/c_1631049984834616.htm (in Chinese language).
114 Draft Provisions on the Management of Automobile Data Security, May 12, 2021, http://www.cac.gov.cn/2021-
05/12/c_1622400511898266.htm.
115 Lester Ross, Kenneth Zhou, and T ingting Liu, â€œ China Issued Draft Provisions on the Management of Automobile
Data Security,â€ WilmerHale Client Alert, June 11, 2021, https://www.wilmerhale.com/en/insights/client -
alerts/20210611-china-issued-draft -provisions-on-the-management-of-automobile-data-security.
116 T refor Moss, â€œ T esla to Store China Data Locally in New Data Center,â€ The Wall Street Journal, May 26, 2021.
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Personal Information
In August 2021, Chinaâ€™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
companies can collect, the provisions are in some ways similar to what the European Union has
proposed. Chinaâ€™s law, however, differs in significant ways, particularly in not imposing any
restrictions on what data government entities may collect.118 The law requires foreign firms
conducting business in China that processes personal data to implement provisions on
extraterritorial jurisdiction â€” including reporting requirements to government agencies in
China.119 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
security and protection matters (Article 52). The process requires a security assessment by
Chinaâ€™s cyberspace authorities and the storage of personal information collected and generated
from China to be stored in China (Article 40). The provisions give Chinaâ€™s regulators broad
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).120
Data and Offshore Operations
Implementation of Chinaâ€™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
taking actions to exert more control over its national technology championsâ€”such as Alibaba,
Tencent, and ByteDance (the parent company of TikTok)â€”and requiring these firms to share the
data they collect through their business operations with the Chinese government.121 These firms
also operate outside China, including in the United States, raising questions about what
information the Chinese government could access.122 There are now public examples that show
how censorship controls extend outside of China, and data access and col ection capabilities
could follow a similar trajectory. In August 2021, the Chinese government became a direct
shareholder in ByteDance and joined the companyâ€™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
software-tied operators such as Sina Weibo.123 In June 2021, former TikTok employees said that

117 â€œChina Issues Second Version of the Draft Personal Information Protection Law for Public Comments,â€ 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, â€œChina Passes Data Protection Law,â€ TechCrunch, August 20, 2021.
119 Ibid.
120 â€œChina Releases Draft Personal Information Protection Law,â€ Greenberg T raurig Alert, The National Law Review,
Volume XI, Number 21, January 21, 2021.
121 Lingling Wei, â€œ Chinaâ€™s New Power Play: More Control of T ech Companiesâ€™ T roves of Data,â€ The Wall Street
Journal, June 12, 2021.
122 â€œChina-Based Executive at U.S. T elecommunications Company Charged with Disrupting Video Meetings
Commemorating T iananmen Square Massacre,â€ Office of Public Affairs, U.S. Department of Justice, December 18,
2020.
123 Juro Osawa and Shai Oster, â€œBeijing T ightens Grip on ByteDance by Quietly T aking Stake, China Board Seat ,â€ The
Inform ation, August 6, 2021; Rita Liao, â€œ China Roundup: Beijing T akes Stake in ByteDance, Amazon Continues
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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
algorithms and provide customer support for its U.S. operations.125 In its March 2021 annual 10-
K filing to the SEC, the company said that it â€œemploy(s) a product development team that has a
relatively significant footprint in China today,â€ which â€œcarries out the design and architecture
decisions made by our U.S. engineering team.â€ The company identified potential risks with this
structure: â€œWe 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 wel as market and
media scrutiny regarding the actual or perceived integrity of our platform or data security and
privacy features.â€126
Trade Agreement Provisions
China has negotiated specific data policy flexibilities in its free trade agreements that al ow it to
continue these restrictive data practices. In the Regional Comprehensive Economic Partnership
(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
exceptions, al ows parties to require data localization and does not prevent a party from taking
any measures that it considers necessary for the protection of its â€œessential security interestsâ€ in
the â€œcross border transfer of information by electronic means.â€127 Significantly, the agreement
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
trade agreements.128

China Crackdown,â€ TechCrunch, August 21, 2021.
124 Salvador Rodriguez, â€œT ikT ok Insiders Say Social Media Company is T ightly Controlled by Chinese P arent
ByteDance,â€ CNBC, June 25, 2021.
125 Arjun Kharpal, â€œZoom to Halt Direct Sales of Products to Users in China and Switch to Partner-only Model,â€
CNBC, August 3, 2020.
126 T he company also said that, in September 2019, the Chinese government turned off its service in Ch ina without
warning and required the firm to designate an in-house contact for law enforcement requests and transfer China-based
user data housed in the United States to a data center in China. â€œ Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934,â€ for the fiscal year ended January 31, 2021, Zoom Video Communications, Inc., filed
on March 18, 2021, https://investors.zoom.us/node/8631/html.
127 RCEP signatories include the Asia-Pacific nations of Australia, Brunei, Cambodia, China, Indonesia, Japan, Laos,
Malaysia, Myanmar, New Zealand, the Philippines, Singapore, South Korea, T hailand, and Vietnam. Patrick LeBlond,
â€œDigital T rade: Is RCEP the WT Oâ€™s Future?â€ Centre for International Governance Innovation, November 23, 2020.
See CRS Insight IN11200, The Regional Com prehensive Econom ic Partnership: Status and Recent Developm ents, by
Cathleen D. Cimino-Isaacs and Michael D. Sutherland.
128 See CRS In Focus IF10770, Digital Trade, by Rachel F. Fefer.
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The Changing Role of Hong Kong
Since the promulgation of the Law of the Peopleâ€™s Republic of China on Safeguarding National
Security in the Hong Kong Special Administrative Region in June 2020, the economic role of
Hong Kongâ€”including with regard to Chinaâ€™s trade and data security measuresâ€”has changed
significantly. Chinaâ€™s blocking measures and anti-sanctions law, among other actions, arguably
undermine Hong Kongâ€™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 Kongâ€™s judiciary more
closely with the PRC system and views. In June 2021, the Director of Hong Kongâ€™s Office for
Safeguarding National Security warned that Hong Kongâ€™s judiciary would be â€œthe biggest
loophole in the rule of law if national security is not safeguardedâ€ and said it â€œmust highly
manifest the national wil and national interestâ€ or it would lose its legal authority granted by
Chinaâ€™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
business advisory that warned U.S. businesses about emerging â€œoperational, financial, legal, and
reputational risksâ€ to their operations and activities in Hong Kong.130 This followed earlier U.S.
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
would no longer treat Hong Kong as a jurisdiction separate from China for purposes of trade. The
E.O. specifical y determined that, pursuant to section 202 of the United States-Hong Kong Policy
Act of 1992, â€œthe Special Administrative Region of Hong Kong (Hong Kong) is no longer
sufficiently autonomous to justify differential treatment in relation to the Peopleâ€™s Republic of
China (PRC or China) under the particular United States laws and provisions thereof set out in the
order.â€131 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
Kong trade authorities.132
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
to Chinaâ€™s failure to meet its international obligations related to Hong Kong133 In March 2021, the
U.S. government designated the 14 vice chairs of the NPCâ€™s Standing Committee to also be
subject to sanctions.134 On July 16, 2021, the U.S. State Department issued a business advisory
warning about deteriorating conditions in Hong Kong.135 In response, on July 23, 2021, the

129 Helen Davidson, â€œHong Kongâ€™s Courts Should Reflect Chinaâ€™s Will, Says Official,â€ The Guardian, June 30, 2021.
130 â€œIssuance of a Hong Kong Business Advisory,â€ Fact Sheet, Office of the Spokesperson, U.S. Department of State,
July 16, 2021.
131 â€œT he Presidentâ€™s Executive Order on Hong Kong Normalization,â€ Executive Order 13936, July 14, 2020,
https://www.federalregister.gov/documents/2020/07/17/2020 -15646/the-presidents-executive-order-on-hong-kong-
normalization.
132 â€œRemoval of Hong Kong as a Separat e Destination Under the Export Administration Regulations,â€ Rule, Bureau of
Industry and Security, U.S. Department of Commerce, December 23, 2020.
133 â€œIdentification of Foreign Persons Involved in the Erosion of the Obligations of China Under the Joint Declaration
or the Basic Law,â€ Report, Bureau of East Asian Affairs, U.S. Department of State, October 14, 2020.
134 Yew Lun T ian, â€œChina Passes Law to Counter Foreign Sanctions,â€ Reuters, June 20, 2021.
135 â€œIssuance of a Hong Kong Business Advisory,â€ Office of the Spokesperson, U.S. Department of State, July 16,
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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
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
authorities to implement the lawâ€™s provisions.137 In July 2020, TikTokâ€™s parent company
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,
that while the Chinese version of TikTok, Douyin, does not official y operate in Hong Kong, it
â€œhas lots of users in Hong Kong and [we] wil continue to serve the users there.â€ In April 2021,
media reports indicated that ByteDance might be considering an IPO for some of its businesses,
particularly, Douyin, in Hong Kong or New York, potential y scaling back original IPO plans to
list al of ByteDance.138 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-
protection laws required them to disclose individualsâ€™ information online so that they could be
harassed by others, a practice cal ed â€œdoxing.â€ The companies reportedly expressed concern that
the new rules could put their staff at risk of criminal charges related to what the companies â€™ users
post online.139 In May 2021, Hong Kong government authorities froze assets belonging to jailed
Hong Kong media tycoon Jimmy Lai, including al shares in his company, Next Digital. This
marked the first reported instance of China targeting a listed firm in Hong Kong under the new
National Security law provisions.140 Hong Kong authorities reportedly arrested 117 people and
charged 60 people under the new national security law between June 2020 and June 2021.141

2021.
136 â€œForeign Ministry Spokesperson's Remarks on China's Decision to Impose Sanctions on Relevant US Individuals
and Entity,â€ Ministry of Foreign Affairs of the Peopleâ€™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, â€œT ech Companies Grapple with Hong Kong's New Security Law,â€ Data Center Dynamics, July 8,
2020. See CRS Report R46473, Chinaâ€™s National Security Law for Hong Kong: Issues for Congress, by Susan V.
Lawrence and Michael F. Martin.
138 Anusuya Lahiri, â€œByteDance Ditches IPO Plans For T he T ime Being,â€ South China Morning Post, April 23, 2021;
Yingzhi Yang and T ony Munroe, â€œT ikTok Owner ByteDance Launches Share Buyback After Shelving IPO P lans,â€
Reuters, May 26, 2021.
139 Newley Purnell, â€œ Facebook, T witter, Google T hreaten to Quit Hong Kong Over Proposed Data Laws,â€ 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,â€ Reuters,
May 14, 2021.
141 Pak Yiu and Anand Katakam, â€œIn One Year, Hong Kong Arrests 117 People Under New Security Law,â€ Reuters,
June 29, 2021.
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Regulatory and Legal Activism142
Chinaâ€™s leadership is cal ing for the expanded use of domestic authorities in IP, technical
standards, procurement, and competitionâ€”both domestical y and global yâ€”to advance Chinaâ€™s
national development goals. China is pressing for its courts to more actively promote Chinaâ€™s IP
and other commercial interests and for the adoption of Chinaâ€™s legal and judicial pronouncements
overseas, in part through broad judicial reforms and specific judiciary actions. On September 25,
2020, Chinaâ€™s Supreme Peopleâ€™s Court issued Guiding Opinions on Service Guarantees to
Further Expand Opening to the Outside World, which focuses on building Chinaâ€™s judicial
competencies, as part of a broader effort to expand the global influence of Chinaâ€™s judicial
system.143 The guidance cal s for coordinating international and domestic actions to defend
Chinaâ€™s judicial sovereignty and national security. The Supreme Courtâ€™s Five-Year Judicial
Protection Plan (2021-2025) cal s for â€œfurther maturationâ€ of Chinaâ€™s IP judicial system â€œwith
Chinese characteristics, in line with rules of innovation, and meeting the needs of national
development goals,â€ and â€œto resolutely defend national sovereignty and core interests.â€ The plan
cal s for â€œpromoting the extraterritorial application of Chinaâ€™s laws and regulations on IP rights,â€
â€œeffectively protecting the overseas security and legal rights of Chinese citizens and enterprises,â€
â€œproperly resolving international paral el litigation,â€ and â€œsafeguarding national security in the
field of IP rightsâ€ (Articles 16 and 17).144
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 chal enge U.S. government actions that impose trade,
investment, and procurement restrictions.145
ï‚· In early 2019, Huawei sued the U.S. government in U.S. federal court in the
Eastern District of Texasâ€” where Huaweiâ€™s U.S. headquarters is locatedâ€” over
its ban on the federal purchase of the companyâ€™s products, but the case was
rejected by a federal judge who determined that the U.S. government had acted
within its rights to ban Huawei.146 Huawei has also sought to advance its IP
interests in the United States and has pressed its case in foreign courts including
in Australia, Canada, and Sweden.147
ï‚· 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

142 T he analysis on standards in this section includes a contribution by Michael Sutherland at the Congressional
Research Service.
143 China Supreme Peopleâ€™s Court, Fafa (2020) No. 37, https://mp.weixin.qq.com/s/zC5p4zojHVo8VDvBRiruUw (in
Chinese).
144 Marc Cohen, â€œ T hree SPC Reports Document Chinaâ€™s Drive to Increase its Global Role on IP Adjudication ,â€ 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/.
145 Dan Strumpf, â€œ Huawei Files U.S. Lawsuit Disputing T hat It Is a Security T hreat ,â€ The Wall Street Journal,
February 10, 2021. See CRS Report R46693, Huawei and U.S. Law, by Stephen P. Mulligan and Chris D. Linebaugh.
146 Steven Overly, â€œCourt Rejects Huawei's Lawsuit Over Federal Defense Spending Law,â€ Politico, February 18,
2020.
147 Johan Ahlander and Supantha Mukherjee, â€œSwedish Court Upholds Ban on Huawei selling 5G Network Gear,â€
Reuters, June 22, 2021; Moira Warburton, â€œ Canada Court Rejects Huawei CFO Push for Publication Ban on New
Evidence in U.S. Extradition Case,â€ Reuters, June 25, 2021; Paul Mozur and Austin Ramzy, â€œ Huawei Sues U.S.
Government Over What it Calls Unfair Ban,â€ The New York Times, March 6, 2020;
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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. governmentâ€™s investment ban
on Xiaomi, ruling that the Defense Departmentâ€™s explanation for the ban was
â€œinadequateâ€ and â€œlacked substantial evidence.â€149 In May 2021, a U.S. federal
court also blocked implementation of the ban on Luokang.150 Some experts assess
that the U.S. government did not advocate effectively on its behalf in
consideration of the potential evidence and arguments it could have leveraged.151
GOWIN rescinded its lawsuit in June 2021, after the Defense Department
removed it from its list of PLA-tied firms.152 The Defense Department has
removed al three companies from its list of PLA-tied firms.153
In its 2021 Special 301 Report released in April 2021, the USTR highlighted â€œstrong concerns
about the emerging practice in Chinese courts of issuing anti-suit injunctionsâ€â€”court orders that
prevent a party from initiating or continuing a patent rights proceeding in another jurisdictionâ€”
â€œin standards essential patents (SEP) disputes.â€154 USTR noted that â€œsince the first issuance of
such an anti-suit injunction in August 2020, Chinese courts have swiftly issued additional anti-
suit injunctions in other SEP cases.â€ Chinese semiconductor companiesâ€”such as Fujian Jinhua
Integrated Circuit Co. Ltd. and Advanced Micro-Fabrication Equipment Inc. (AMEC)â€”have
chal enged foreign companiesâ€™ exclusive use of certain proprietary technologies and pressed for
better licensing terms by initiating copycat versions of U.S. cases in Chinaâ€™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, â€œ Xiaomi Sues U.S. Government Over
Inclusion on Pentagon Blacklist ,â€ The Financial Tim es, January 29, 2021; â€œ Granting Plaintiffsâ€™ Motion for Preliminary
Injunction; Granting Plaintiffsâ€™ Motion for Leave to File Supplemental Declaration,â€ 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 â€œGranting Plaintiffsâ€™ Motion for Preliminary Injunction; Granting Plaintiffsâ€™ Motion for Leave to File Supplemental
Declaration,â€ 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.pdf .
150 Karen Freifeld, â€œNasdaq Withdraws Listing Ban on Luokung after U.S. Judge's Decision,â€ Reuters, May 6, 2021.
151 Dan Strumpf, â€œXiaomi Wins Court Ruling Halting U.S. Investment Ban,â€ The Wall Street Journal, March 12, 2021;
Patrick Jenevein, â€œLast Week, Xiaomi Group Won â€“ and the U.S. Departments of Defense and Justice Lost â€“ a Round
in U.S. District Court in Washington, D.C.,â€ Pointe Bello Insights, June 2021, at
https://www.pointebello.com/insights/balance-sheet -battlefields; Emily Weinstein, â€œ U.S. Investment in Chinaâ€™s Capital
Markets and Military-Industrial Complex,â€ T estimony before the U.S. China Economic and Security Review
Commission, March 19, 2021.
152 Chad Bray, â€œChina's Luokung T echnology Sues U.S. Government over T rump's Investment Blacklist,â€ South China
Morning Post, March 5, 2021; â€œ GOWIN Removed from CCMC List, Withdrawing Lawsuit,â€ GOWIN Company Press
Release, June 25, 2021; https://www.gowinsemi.com/en/about/detail/latest_news/70/.
153 U.S. Department of Defense â€œ Notice of Designation of Chinese Military Companies Under the William M. (Mac)
T hornberry NDAA for FY21,â€ 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.
154 Office of the U.S. T rade Representative, Special 301 Report, April 30, 2021.
155 â€œAMEC Wins Injunction in Patent Infringement Dispute Involving Veeco Instruments (Shanghai) Co., Ltd,â€ PR
Newswire, December 8, 2017; â€œ Veeco, AMEC and SGL Settle MOCVD Wafer Carrier Patent Litigation,â€
Semiconductor T oday, February 8, 2018; and â€œ Micron Provides Statement on Fujian Province Patent Litigation,â€
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currently trying to leverage an anti-suit injunction in Chinaâ€™s Wuhan Intermediate Court against
Delaware-headquartered InterDigital, Inc. to chal enge Interdigitalâ€™s ability to bring patent
infringement charges against Xiaomi in U.S. and other courts outside China.156 Chinaâ€™s SEP effort
has become increasingly complex as non-Chinese parties have pressed for U.S. courtsâ€™ 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, â€œrecent high-level statements have raised concerns about whether
the proliferation of such anti-suit injunctions has been purposeful, including statements from
President Xi about promoting the extraterritorial application of Chinaâ€™s IP law and from Chinaâ€™s
IP appel ate court about how issuance of Chinaâ€™s first SEP-related anti-suit injunction accelerated
global settlement in a SEP dispute and was an example of the court â€˜servingâ€™ the â€˜overal workâ€™ of
the Chinese Communist Party and the Chinese state.â€ As part of its judicial reforms, China has
advocated that judges closely use certain previous cases as guidance. In this regard, Chinaâ€™s
Supreme Court has emphasized the importance of 10 â€œbig casesâ€ as important models. Two of
these cases involve anti-suit injunctions (Huawei v. Conversant and OPPO vs. Sharp).158
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. Chinaâ€™s
antimonopoly law states that IP should be shared when it promotes the public interest of creating
common standards or meeting industrial goals.159 In April 2021, a Chinese court ruled that certain
Hitachi Metals REEs patents are â€œde-factoâ€ essential and said that the company's refusal to
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.160 Chinaâ€™s state-controlled Rare
Earth Al iance has targeted Hitachiâ€™s rare earth magnet patents since at least 2014.161
More broadly, the Chinese government is using its competition authorities to commercial y
pressure and impose terms on U.S. and foreign firms in ways that advance Chinaâ€™s industrial
policies. Specifical y, the Chinese government is leveraging U.S. technology companiesâ€™ need for
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
pattern of behavior has become particularly prominent and potential y consequential in the
semiconductor sector:

Micron Company News Release, July 5, 2018.
156 Konstanze Richter, â€œPost-ASI Battle: InterDigital Sues Xiaomi for Patent Infringement in Munich,â€ JUVE Patent,
May 19, 2021; John Z.L. Huang, James H. Jiang, and Ya-Chiao Chang, â€œ Wuhan D/B/A Chicago of China, Now
Epicenter of Anti-Suit Injunctions,â€ Winston and Strawn LLP, April 22, 2021.
157 Gene Quinn, â€œ Ericsson Wins T emporary Restraining Order Over Samsung in ED T X FRAND Litigation ,â€ IP
Watch Dog, December 29, 2020.
158 Marc Cohen, â€œT hree SPC Reports Document Chinaâ€™s Drive to Increase its Global Role on IP Adjudication,â€ 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 Peopleâ€™s Republic of China, August 3, 2008,
http://english.mofcom.gov.cn/article/policyrelease/Businessregulations/201303/20130300045909.shtml .
160 Jacob Schindler, â€œCourt Rules Against Hitachi Metals in Chinaâ€™s First â€˜Essential Facilitiesâ€™ Patent Case,â€ Global
Competition Review, April 29, 2021.
161 â€œChina T akes on Hitachi as 17-year-old Rare Earth Patent Ends,â€ Bloomberg News, July 28, 2014.
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ï‚· Chinaâ€™s review in 2015 of the Dutch firm NXPâ€™s acquisition of the U.S. firm
Freescale set terms that forced the sale of NXPâ€™s RF power transistor business to
JAC Capital, a company-controlled by Chinaâ€™s State Council.162 Under this
Chinese government direction, JAC Capital acquired NXPâ€™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 UKâ€™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 UKâ€™s Advanced Propulsion
Centre.163 In response to political pressure from members of Parliament, UK
Prime Minister Boris Johnson announced on July 7, 2021, that the UK
government would review the investment transaction.164
ï‚· China imposed antitrust terms on Qualcomm in 2015, which required Qualcomm
to pay a $975 mil ion fine, as wel as license its 3G and 4G patents to Chinese
companies and enter into a joint venture with the government of Chinaâ€™s Guizhou
Province to jointly manufacture server chips in order for Qualcomm to access the
wireless market in China.165
ï‚· In 2020, China reportedly leveraged its antitrust purview to complicate Applied
Materialâ€™s bid for Kokusai Electric and NVidiaâ€™s bid for Japanâ€™s SoftBank-
controlled ARM.166 China also is complicating the potential use of foreign
investment review and antitrust authorities in the United States, Japan, and the
UK over ARMâ€™s business in China by facilitating a dispute about whether certain
ARM businesses in China were included in Softbankâ€™s purchase of ARM in
2016. The head of ARMâ€™s joint venture business in China is suing ARM China
for control of ARMâ€™s China operations, with reported backing of the Shenzhen
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
through its joint positions. The Shenzhen government is also partnered with
ARM through SoftBankâ€™s joint venture with the Hopu Fund.167

162 Chester Yung and Archie van Riemskijk, â€œNXP Semiconductors Sells Unit to Chinese Firm for $1.8 Billion,â€ The
Wall Street Journal, May 28, 2015.
163 Sam Shead, â€œUK's Largest Chip Plant to be Acquired by Chinese-Owned Firm Nexperia Amid Global
Semiconductor Shortage,â€ CNBC, July 2, 2021; â€œ Newport Wafer Fab Profile,â€ Manufacturing-Today, Issue 183.
164 David Wilcock, â€œBoris Johnson U-turns to Confirm National Security Adviser Will Probe Sale of UK Microchip
Maker Newport Wafer Fab to Chinese firm Nexperia,â€ Daily Mail, July 7, 2021.
165 â€œT he Complete Administrative Sanction Decision for the Qualcomm Case, National Development and Reform
Commission of the Peopleâ€™s Republic of China,â€ March 2, 2015; Noel Randewich and Matthew Miller, â€œQualcomm to
Pay $975 million to Resolve China Antitrust Dispute,â€ Reuters, February 9, 2015; â€œQualcomm and Guizhou Province Sign
Strategic Cooperation Agreement and Form Joint Venture to Design and Sell World-Class Server Chipsets in China,â€ Qualcomm
Press Release, January 17, 2016; Lewis Ho and Monique Lee, â€œA Case Study: How the Record Breaking Antitrust Penalty Against
Qualcomm Transforms the Landscape of SEPs Licensing in China,â€ Dechert LLP, March 27, 2015.
166 â€œApplied Materials T erminates $2.2 Billion Deal for Japanâ€™s Kokusai Electric,â€ Reuters, March 29, 2021; â€œNvidiaâ€™s
Acquisition of ARM T hrows Company into T ech Spat Between U.S. and China,â€ Reuters, September 14, 2020; Ryan
McMorrow and Richard Waters, â€œNvidia Asks Chinese Regulators to Approve $40bn Arm Deal,â€ The Financial Times,
June 8, 2021.
167 Debby Wu and Ian King, â€œARM Battle With China CEO Escalates, Complicating SoftBank Sale,â€ Bloomberg,
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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 Chinaâ€™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 Chinaâ€™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 disadvantage foreign
firms. A core tenet of Chinaâ€™s cybersecurity certification, as outlined in various regulations and
Chinaâ€™s 2017 Cybersecurity Law, is a set of â€œsecure and controllableâ€ standards formulated by
Chinaâ€™s National Information Security Standardization Technical Committee more widely known
as â€œTechnical Committee 260â€ or â€œTC260.â€170 China appears to be using these domestic standards
to require U.S. firms to share key technologies with Chinese government agencies and industry
associations.171 Under these policies, U.S. technology firms since 2015 have increasingly
partnered in China with state companies, institutes, and the Chinese government.172
China-Controlled Global Networks and Platforms
Chinaâ€™s national government and related overseas projects under its One Belt, One Road initiative
aim, in part, to develop alternatives to U.S. trade networks and technical standards.173 These
alternative Chinese-led technology, supply chain, and financial networks could facilitate Chinaâ€™s
ability to create alternatives to U.S. global networks and platforms and deepen Chinaâ€™s influence
in setting global market terms, rules, and standards. Many of Chinaâ€™s investments in ports, rail,
and telecommunications networks involve the creation of infrastructure on which China can
develop related and interoperable products and services.174 In a March 2021 discussion of the 14th

April 9, 2021; Peter Clarke, â€œARM in Struggle for Control of Chinese Subsidiary,â€ 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, â€œT he Political Economy of Standards Coalitions: Explaining Chinaâ€™s Involvement in
High-T ech Standards Wars,â€ Asia Policy No. 2 (July 2006): pp. 41-62; Valentina Pop, Sha Hua, and Daniel Michaels,
â€œFrom Lightbulbs to 5G, China Battles West for Control of Vital T echnology Standards,â€ Wall Street Journal,
February 8, 2021.
169 U.S. China Business Council (USCBC), â€œChina in International Standards Setting: USCBC Recommendations for
Constructive Participation,â€ February 2020,
https://www.uschina.org/sites/default/files/china_in_international_standards_setting.pdf ; Melanie Hart and Jordan
Link, â€œT here Is a Solution to the Huawei Challenge,â€ Center For American Progress, October 14, 2020.
170 Samm Sacks, â€œHow Chinese Cybersecurity Standards Impact Doing Business In China,â€ Center for Strategic and
International Studies, August 2, 2018, https://www.csis.org/analysis/how-chinese-cybersecurity-standards-impact -
doing-business-china; Clara Wang, â€œ Hereâ€™s who has the ear of Chinaâ€™s most active cyber regulator,â€ Protocol, January
27, 2021, https://www.protocol.com/china/tc260-china-cyber-regulator-companies.
171 European Chamber of Commerce in China, â€œStandards and Conformity Assessment Working Group Position Paper
2019/2020,â€ September 24, 2019, https://www.europeanchamber.com.cn/en/publications-
archive/710/Standards_and_Conformity_Assessment_Working_Group_Position_Paper_2019_2020.
172 Eva Dou, â€œ Chinaâ€™s T ech Rules Make It Hard for U.S. Firms to T ake Control,â€ The Wall Street Journal, June 2,
2016.
173 See CRS In Focus IF11735, Chinaâ€™s â€œOne Belt, One Roadâ€ Initiative: Economic Issues, by Karen M. Sutter,
Andres B. Schwarzenberg, and Michael D. Sutherland.
174 Ashley Dutta, â€œIntroduction to Chinaâ€™s Digital Silk Road: Economic and T echnological Implications,â€ Roundtable
in Asia Policy 15.1, National Bureau of Asian Research, January 2020.
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Five-Year Plan, Zhang Yuyan, Director of the Institute of World Politics at the Chinese Academy
of Social Sciences, emphasized the importance of â€œseeking to advance Chinese rules and
standards overseas,â€ â€œintroducing and going out on the basis of fair and reasonable institutional
arrangements,â€ and â€œcontinuously strengthening the coordination and integration of rules,
regulations, management, standards with other countries.â€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, Chinaâ€™s BeiDou Navigation Satel ite System provides an alternative to U.S. GPS
navigation technology, including an alternative technology foundation on which China can build
a vertical y integrated Chinese commercial ecosystem in a range of products, services, and
technologies that rely on these geolocation technologies. In transportation, overland routes that
China is developing through One Belt, One Road projects offer alternative trading routes to U.S.-
controlled sea lanes. Chinaâ€™s creation of One Belt, One Road arbitration centers in China aim to
formulate arbitration rules, set up a platform to provide legal services, and settle disputes in ways
that may give China an upper hand.177 In a potential conflict of interest, the Wuhan Arbitration
Panel that China set up to arbitrate commercial disputes involving One Belt, One Road projects
includes the heads of legal departments of Chinaâ€™s major state firms most active in One Belt, One
Road projectsâ€”including, China State Railway Group, China State Construction Engineering
Corporation, Power Construction Corporation of China, China Communications Construction
Company, and Sinohydro Corporation.178
Central Bank Digital Currency
Chinaâ€™s central bank, the Peopleâ€™s Bank of China (PBOC), is developing a digital currency and
piloting its adoption domestical y, as wel as through pilot trading with Hong Kong, Thailand, and
the United Arab Emirates (UAE).179 Chinaâ€™s development of a digital currency could leverage
financial technology architecture that Chinaâ€™s leading companies, such as Alibaba, are developing
overseas.180 The dominance of the U.S. dollar in cross-border trade and international financial
transactions al ows the United States unique visibility and levers of influence through policy

175 â€œEconomists Interpret the â€˜14th Five-Year Planâ€™ and the Outline of Long-T erm Goals for 2035,â€ 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/2020 -
11/03/c_1126693293.htm (Chinese text); https://cset.georgetown.edu/wp-
content/uploads/t0237_5th_Plenum_Proposal_EN-1.pdf (unofficial English translation).
177 T ianshu (Susan) Lu and Yisha He, â€œ Recent Developments In Chinaâ€™s Cross-border Dispute Resolution Under the
â€˜Belt and Road Initiative,â€™â€ The American Review of International Arbitration, Columbia Law School, February 1,
2018.
178 â€œChina Establishes â€˜One Belt, One Roadâ€™ Arbitration Court,â€ China Go Abroad,
http://www.chinagoabroad.com/en/article/21685 . For a list of the arbitrators,
seehttp://www.wiac.org.cn/index.php/arbitrator/index/p/1.html.
179 Frank T ang, â€œChina Digital Currency: China, Hong Kong Begin T esting Digital Yuan as Beijing Ramps up
Research into Cross-Border Use,â€ South China Morning Post, April 2, 2021; â€œ Joint Statement on Multiple Central
Bank Digital Currency (m-CBDC) Bridge Project , â€œ Hong Kong Monetary Authority, February 23, 2021,
https://www.info.gov.hk/gia/general/202102/23/P2021022300482.htm.
180 Barry Naughton, â€œChinese Industrial Policy and the Digital Silk Road: T he Case of Alibaba in Malaysia,â€
Roundtable in Asia Policy 15.1, National Bureau of Asian Research, January 28, 2020.
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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 Chinaâ€™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 Chinaâ€™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
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.182
China arguably might use its digital currency to secure a global leadership role in setting global
financial rules and standards. At the Bank of International Settlements (BIS) Innovation Summit
in March 2021, China submitted a Global Sovereign Digital Currency Governance proposal that
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 PBOCâ€™s
Digital 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
internationalization of the RMB, and reduce dependence on the global U.S. dollar system. Mu
said that, â€œOur 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.â€183 Chinaâ€™s
payments network also could give China greater visibility and control of certain global financial
flows.
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
relied on global y for its facilitation of electronic financial transactions. The scope of the joint
venture includes creating a storage center in China to al ow the government to monitor and
analyze cross-border payment messaging and to build a localized network in China that would
â€œensure a more stable, resilient and secure connection to the main SWIFT network.â€ Other
shareholders of the venture include Chinaâ€™s Cross-border Interbank Payment System (CIPS)â€”
Chinaâ€™s domestic payment system which offers clearing and settlement services for participants
in cross-border RMB payments and tradeâ€”and the Payment & Clearing Association of Chinaâ€”a
PBOC affiliate tasked with creating and operating Chinaâ€™ online payment clearing platform for
non-banking payment institutions.184

181 Martin Chorzempa, â€œChinaâ€™s Pursuit of Leadership in Digital Currency,â€ T estimony before the U.S.-China
Economic and Security Review Commission, April 15, 2021.
182 See CRS In Focus IF11885, De-Dollarization Efforts in China and Russia, by Rebecca M. Nelson and Karen M.
Sutter; CRS In Focus IF11471, Financial Innovation: Central Bank Digital Currencies, by Marc Labonte, Rebecca M.
Nelson, and David W. Perkins and CRS In Focus IF11707, The U.S. Dollar as the Worldâ€™s Dom inant Reserve
Currency, coordinated by Rebecca M. Nelson.
183 â€œChina Proposes Global Rules for Managing Sovereign Digital Currencies,â€ China Briefing, Dezan Shira and
Associates, April 4, 2021; â€œChina Suggests Principles for Cross Border CBDC to â€˜Avoid Dollarization,â€™â€ Ledger
Insights, March 25, 2021.
184 â€œChina Central Bank Says New SWIFT JV Will Set Up Localized Data W arehouse,â€ Reuters, March 23, 2021.
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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. Chinaâ€™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. Chinaâ€™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 practicesâ€”that were detailed in USTRâ€™s Section 301 report
from March 2018â€”of concern to the U.S. government, including many in Congress.186
Specifical y, Chinaâ€™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
aspects of Chinaâ€™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
technology in relation to investment transactions, or as a condition for parties to receive or
continue to receive any advantages conferred by China.187
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
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.188 Details in
Chinaâ€™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 fil critical gaps and realize
these goals. In January 2021, Jiang Jinquanâ€”the head of the CPC Central Committeeâ€™s Policy
Research Officeâ€”published a commentary in Study Times, the newspaper of Chinaâ€™s premier
Communist Party training academy, that cal ed for Chinaâ€™s national mobilization to counter what
he described as a â€œU.S. technology blockade.â€ He cal ed for a â€œnew development patternâ€ in
which China would aim for greater self-sufficiency, focus on â€œindigenous innovationâ€ and look to
overcome serious technology gaps and dependencies.189

185 See CRS Report R46767, Chinaâ€™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 Â§Â§2411 -2420), UST R concluded that Chinaâ€™s policies
and practices relat ed 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 acquisition of U.S. assets
were unreasonable or discriminatory. See â€œ Findings of the Investigation Into Chinaâ€™s Acts, Policies, and Practices
Related to T echnology T ransfer, Intellectual Property, and Innovation Under Section 301 of the T rade Act of 1974,â€
Office of the United States T rade Representative, March 22, 20 18, https://ustr.gov/sites/default/files/
Section%20301%20FINAL.PDF.
187 â€œEconomic and T rade Agreement Between the Government of the United States of America and the Government of
the Peopleâ€™s Republic of China,â€ January 15, 2020, https://ustr.gov/sites/default/files/files/agreements/
phase%20one%20agreement/Economic_And_Trade_Agreement_Between_T he_United_States_And_China_Text.pdf.
9; and CRS Insight IN11208, U.S. Signs Phase One Trade Deal with China , by Karen M. Sutter.
188 Xinhua, â€œT he 14th Five Year Plan and 2035 Long-T erm Development Objectives,â€ March 11, 2020,
http://www.xinhuanet.com/fortune/2021-03/13/c_1127205564.htm.
189 Che Pan, â€œUS-China T ech War: Beijingâ€™s T op Policy Official Lays Out Strategy to Address Washingtonâ€™s
â€˜Strangleholdâ€™ Over China,â€ South China Morning Post, January 26, 2021; Jiang Jinquan, â€œç‰¢ç‰¢æŠŠæ¡ä¹ è¿‘å¹³æ–°æ—¶ä»£ä¸
å›½ç‰¹è‰²ç¤¾ä¼šä¸»ä¹‰æ€æƒ³çš„åŸºæœ¬ç«‹åœºè§‚ç‚¹æ–¹æ³• (â€œFirmly Grasp the Basic Standpoint , Views, and Methods of Xi Jinpingâ€™s
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Chinaâ€™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 Chinaâ€™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 Chinaâ€™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,
Huawei announced its fifth R&D center in France that is to focus on advanced computing and
leverage advanced mathematics talent and capabilities.192 Many of Chinaâ€™s top technology
firmsâ€”including Alibaba, Baidu, and Tencentâ€”operate research centers in the United States,
al owing them to partner with U.S. universities and access U.S. technology and talent.193
Chinaâ€™s State Talent Programs
China operates state talent programs to acquire targeted cutting-edge technologies and
capabilities at their development point through foreign research and researcher ties. These
programs are specifical y targeted to advance the goals and fil the gaps identified in Chinaâ€™s
industrial plans and advance Chinaâ€™s economic, technological, and military competitiveness.194
The Chinese government runs hundreds of talent recruitment programs, including the Recruitment
Plan for Global Experts, which is more commonly known as the Thousand Talents Plan. Program
participation can involve contract terms that create â€œconflicts of commitment and/or conflicts of
interest for researchers,â€ according to the White Houseâ€™s Office of Science and Technology
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
talent recruitment plan members, circumventing merit-based processes; and requirements to
replicate or transfer U.S.-funded work to China.195 Chinese science and technology (S&T)
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
of S&T capabilities prioritized by the Chinese government.196

T houghts on Socialism with Chinese Characteristics in the New Era),â€ 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 â€œHuawei to Build an Optoelectronics R&D and Manufacturing Centre in Cambridge,â€ Huawei Company Press
Release, June 25, 2020.
192 â€œHuawei Opens Research Center in France,â€ Xinhua, October 10 , 2020.
193 T hilo Hanneman, Daniel H. Rosen, Cassie Gao, and Adam Lysenko, â€œT wo -Way Street: US-China Investment
T rends-2020 Update,â€ Rhodium Group, May 11, 2020; Michael Brown and Pavneet Singh, â€œ Chinaâ€™s T echnology
T ransfer Strategy,â€ Defense Innovation Unit Experimental (DIUx), January 2018.
194 Glenn T iffert, â€œGlobal Engagement: Rethinking Risk in the Research Enterprise,â€ Hoover Institution, July 30, 2020;
Jeff Stoff, â€œChinaâ€™s T alent Programs,â€ in Chinaâ€™s Quest for Foreign Technology: Beyond Espionage, William C.
Hannas and Didi Kirsten T atlow, eds., Routledge, 2021.
195 â€œEnhancing the Integrity of Americaâ€™s Research Enterprise,â€ the White House Office of Science and T echnology
Policy Office, July 2020, https://trumpwhitehouse.archives.gov/wp-content/uploads/2020/07/Enhancing-the-Security-
and-Integrity-of-Americas-Research-Enterprise.pdf.
196 Ryan Fedasiuk, Emily Weinstein, and Anna Puglisi, â€œChinaâ€™s T echnology Wishlist,â€ Center for Security and
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Growing awareness of Chinaâ€™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.
academic institutions, U.S. researchers, and PRC researchers failing to disclose sources of PRC
funding and institutional ties, even when legal y required to do so.198 Initial oversight since 2018
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
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
which published research indicated that U.S. government grantees also were receiving Chinese
government support. 199 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
confidential, and repaid NIH â€œhundreds of thousands of dollarsâ€ in grants as a result of rule
violations, according to Michael Lauer, head of NIHâ€™s extramural research program.200
In January 2020, the Department of Justice (DOJ) charged Charles Lieber, Chair of the
Department of Chemistry and Chemical Biology at Harvard University, with making a
â€œmaterial y false, fictitious, and fraudulent statementâ€ in failing to disclose to his U.S.
government funders his contractual arrangements and funding sources from China, including the
Wuhan University of Technology (where he served as â€œstrategic scientistâ€ and developed a
nanotechnology lab) and Chinaâ€™s Thousand Talents Program. The Justice Departmentâ€™s
indictment documents include copies of the original contracts and details about the scope of work
and funding amounts, and al eged efforts to hide his China affiliations and payments.201
Following the Justice Departmentâ€™s indictment in July 2020 of five PRC nationals for failing to
disclose ties to Chinaâ€™s military and the shuttering of the PRC Consulate in Houston (which had

Emerging T echnology, May 2021.
197 â€œInstitutional Compliance with Section 117 of the Higher Education Act of 1965,â€ Office of the General Counsel,
U.S. Department of Educat ion, October 2020; â€œ Financial Conflict of Interest: Investigator Disclosures of Foreign
Financial Interests,â€ National Institute of Health Notice, NOT -OD-18-160, March 30, 2018; â€œ Federal Research
Agencies Need to Enhance Policies to Address Foreign Influence,â€ GAO Report to the Chairman, Committee on
Finance, U.S. Senate, December 2020; and â€œRecommended Practices for Strengthening the Security and Integrity of
Americaâ€™s Science and T echnology Research Enterprise,â€ Subcommittee on Research Security, Joint Committee on the
Research Environment, National Science and T echnology Council, January 2021.
198 â€œT he China Initiative: Year-in-Review (2019-20),â€ Office of Public Affairs, U.S. Department of Justice, November
16, 2020; â€œ Institutional Compliance with Section 117 of the Higher Education Act of 1965,â€ Office of the General
Counsel, U.S. Department of Education, October 2020; â€œFederal Research Agencies Need to Enhance Policies to
Address Foreign Influence,â€ GAO, December 2020; and â€œT hreats to the U.S. Research Enterprise: Chinaâ€™s T alent
Recruitment Plans,â€ Staff Report, Permanent Subcommittee on Investigations, U.S. Senate, November 18, 2019.
199 Jeffrey Mervis, â€œNIH Probe of Foreign T ies Has Led to Undisclosed Firingsâ€”and Refunds from Institutions,â€
Science, June 26, 2019; and Jeffrey Mervis, â€œ Fifty -Four Scientists Have Lost T heir Jobs as a Result of NIH P robe into
Foreign T ies,â€ Science, June 12, 2020.
200 Ibid.
201 â€œHarvard University Professor and T wo Chinese Nationals Charged in T hree Separate China Related Cases,â€ Office
of Public Affairs, U.S. 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-
release/file/1239796/download (Charging documents).
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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 governmentâ€™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
requirements on sources of foreign funding outlined in Section 117 of the Higher Education Act
of 1965, arguing that requirements are unclear and burdensome.204 Many experts agree that the
U.S. government should not conduct ethnic profiling but stress that the security chal enges China
poses to U.S. research are serious and should be addressed.205 Some experts warn that Beijing is
seeking to leverage U.S. societal tensions, including race issues, and is â€œexploiting identity
politics by promoting any changes in U.S. policy as ethnic profiling, and offering a narrative
about being merely a proponent of â€˜developmentâ€™ and science, in order to divert attention from its
own questionable behavior.â€206
Some Members warn that the U.S. government is not doing enough to address the risks that
Chinaâ€™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
report, determined that it was not in the U.S. national security interest to fund Chinaâ€™s economic
and military development with U.S. taxpayer dollars. The report cal ed on the university
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
have relevant vetting authorities that they use to ascertain scientific rigor, al egations of
plagiarism, research aptitude, and prior publications. The Subcommittee found that, rather than
overreacting, â€œthe federal government has failed to stop China from acquiring knowledge and
intel ectual property from U.S. taxpayer funded researchers and scientists. Nor do federal
agencies have a comprehensive strategy to combat this threat.â€207 The Subcommittee found that
members of Chinaâ€™s state talent plans sign legal y binding contracts with Chinese institutions that
often have nondisclosure provisions and can â€œincentivize members to lie on grant applications to

202 Ryan Fedasiuk, Emily Weinstein, and Anna Puglisi, â€œChinaâ€™s T echnology Wishlist,â€ Center for Security and
Emerging T echnology, May 2021; and Aruna Viswanatha, â€œ U.S. Drops Visa Fraud Cases Against Five Chinese
Researchers,â€ The Wall Street Journal, July 21, 2021.
203 â€œResearching while Chinese American: Ethnic Profiling, Chinese American Scientists and a New American Brain
Drain,â€ 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, â€œCriminalizing China,â€ 11 1, T he Journal of Criminal Law and
Criminology 145 (2020).
204 Letter from T ed 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.
205 Ken Dilanian, â€œAmerican Universities are a Soft T arget for China's Spies, say U.S. Intelligence Officials,â€ CNBC,
February 2, 2020
206 Anna B. Puglisi, â€œT estimony before the U.S. Senate Select Committee on Intelligence,â€ August 4, 2021.
207 â€œT hreats to the U.S. Research Enterprise: Chinaâ€™s T alent Recruitment Plans,â€ Staff Report, Permanent
Subcommittee on Investigations, U.S. Senate, November 18, 2019.
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link to page 46 link to page 60 Chinaâ€™s Countermeasures to U.S. Economic Policy Actions and Authorities

U.S. grant-making agencies, set up â€˜shadow labsâ€™ in China working on research identical to their
U.S. research, and, in some cases, transfer U.S. scientistsâ€™ hard-earned intel ectual capital.â€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
platformsâ€”such as RISC-V, the Open Compute Project (OCP), and the O-RAN Al ianceâ€”as
alternative vehicles to obtain the technology and expertise it needs to advance its industrial and
technology goals. (See â€œOpen-Source Technologyâ€ 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
institutesâ€”including Huawei and ZTE, both of which are on the U.S. Department of Commerceâ€™s
Bureau of Industry and Security (BIS)â€™s export-restrictive Entity Listâ€”to access U.S. technology
and capabilities to design semiconductor chips and access semiconductor tools and software.209
Open-Source Technology
Open source originated from the term, open source software (OSS), which is software built on publicly accessible
code designed to be modified and distributed. OSS is often developed in a decentralized and col aborative way,
relying on peer review and community production.210 Segments of the technology research community use open
source technology platforms to share technology with a community of experts that they seek to adapt and
develop through an open and col aborative model that proponents argue can more quickly advance technological
developments and breakthroughs.211 The open source technology approach has grown in popularity and influence
over the past several years in a range of technologies related to hardware, software, fifth-generation
telecommunications (5G), and artificial intel igence (AI) due to a combination of factors. These factors include the
emergence of next generation technologies, organized movements by key U.S. technology firms that utilize other
firmsâ€™ hardware and software to standardize and commoditize the industry to bring down costs, and the search
for alternative col aboration vehicles in response to U.S. government technology restrictions on China.
Members of these platforms include prominent PRC government institutesâ€”such as the Chinese
Academy of Scienceâ€™s Institute of Advanced Computing, the Beijing Academy of Edge
Computing, Chongqing Universityâ€™s Industrial Technology Research Institute, and Tsinghua
Universityâ€”as wel as government funds and consortiums, such as the Xiamen Semiconductor
Industry Group.212 The platforms include Chinaâ€™s national technology championsâ€”such as

208 Ibid.
209 Jeffrey Burt, â€œAlibaba on the Bleeding Edge of RISC-V with XT 910,â€ T he Next Platform, August 21, 2020. Iain
Morris, â€œChina's Role in Open RAN is a Looming P roblem,â€ Light Reading, December 17, 2020. For a list of RISC-
Vâ€™s members, see https://riscv.org/members/. For the U.S. Department of Commerceâ€™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, â€œT he Difference Between ARM, MIPS, x86, RISC-V And Others In Choosing A Processor
Architecture, Forbes,â€ April 5, 2108, https://www.forbes.com/sites/tiriasresearch/2018/04/05/what -you-need-to-know-
about-processor-architectures/#5b4c51324f57.
211 Nitin Dahad, â€œCan ARM Survive RISC-V Challenge?â€ 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 companyâ€™s website at
http://xmsig.com/en/about .
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Alibaba, Baidu, and Tencentâ€”as wel as Inspur Group and GigaDevice, who are state champions
in Chinaâ€™s computer server and flash memory semiconductor markets respectively.213
Many PRC firms are leveraging expertise and technology shared on these platforms to develop
technology capabilities that China says are â€œindigenous.â€ In 2019, Pingtouge, the chip subsidiary
of Chinese company Alibaba, worked with RISC-V to develop its first processorsâ€”Xuantie 910
and Hanguang 800.214 Under Chinaâ€™s new semiconductor policies, the Chinese government is
incentivizing the creation of new companies and development of â€œindigenousâ€ capabilities; the
number of new registrations for semiconductor firms increased three-fold in the first 5 months of
2021 over 2020.215 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
reportedly working with RISC-V to develop a 7 nanometer graphics processing unit (GPU) chip
for high performance computing applications in China.216 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 membersâ€”such as Horizon
Robotics, Huawei, Semiconductor Manufacturing International Company (SMIC), and the
Chinese Academy of Scienceâ€™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 Chinaâ€™s semiconductor firms.218

213 Clark Edward Barrett, â€œ Chinaâ€™s â€œServer Sinificationâ€ Campaign for Import Substitution: Strategy and Snowden
(Part 1 and Part 1),â€ China Brief, Volume 14 , Issue 24 and Volume 15, Issue 2, T he Jamestown Foundation, December
19, 2014 and January 23, 2015; Paul Mozur and Jane Perlez, â€œU.S. T ech Giants May Blur National Security
Boundaries in China Deals,â€ The New York Times, October 20, 2015; Daniel Nenni, â€œ Chinaâ€™s First Self-Developed
Memory Chip Maker Scores Financing,â€ SemiWiki.com, December 21, 2020; Jeffrey Ding, â€œ Chinaâ€™s AI â€˜National
T eam,â€™â€ ChinAI Newsletter Number 51, May 20, 2019; Keith Zhai and Lingling Wei, â€œ China Lays Plans to T ame T ech
Giant Alibaba,â€ The Wall Street Journal, March 11, 2021.
214 Jeffrey Burt, â€œAlibaba on the Bleeding Edge of RISC-V with XT 910,â€ T he Next Platform, August 21, 2020.
215 Josh Ye, â€œNew Chinese Semiconductor Firms Have T ripled in 2021 as Beijing and Washington Jockey Over
T echnological Supremacy,â€ South China Morning Post, June 9, 2021; See CRS Report R46767, Chinaâ€™s New
Sem iconductor Policies: Issues for Congress, by Karen M. Sutter.
216 â€œX-EPIC Announces Dr. T C Lin as Chief Scientist,â€ Company Press Release, October 16, 2020, https://www.x-
epic.com/en/nd.jsp?id=38#_np=2_506; Anton Shilov, â€œ Chinese Company to Send 7nm GPU to Production Next
Quarter,â€ Tom â€™s Hardware, June 26, 2021.
217 For details on Boelinkâ€™s work see the companyâ€™s website at http://en.boelink.com/.
218 CASPA eLetter: No. 94, October 19, 2016, http://www.caspa.com/news/publications/news-
list/582d2c6860cb84c2124259be; â€œ Announcing the Grand Opening of Silicon Power T echnology Industry: Luminary
David French and Silicon Valleyâ€™s Silicon Catalyst partner to Launch Incubator for Power Semiconductor Startups,â€
Silicon Catalyst Company Announcement, January 17, 2019; https://siliconcatalyst.com/announcing-the-grand-
opening-of-silicon-power-technolog. For a list of CASPAâ€™s corporate members, see http://www.caspa.com/members.
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Examples of Corporate Countermeasures to U.S.
Restrictions
Huawei and Honor
Chinese companies are restructuring themselves potential y to circumvent U.S. export and
investment restrictions. Current U.S. government 5G-related export control restrictions, for
example, are specific to Huawei and its affiliates. In November 2020, Chinaâ€™s government, acting
through the Shenzhen branch of the State-owned Assets Supervision and Administration
Commission of the State Council (SASAC), took control of Huaweiâ€™s smartphone business,
Honor. 219 Honor CEO Zhao Ming moved over from Huawei to head the new SASAC-controlled
company. In addition, Honor inherited Huaweiâ€™s R&D teams from Shenzhen, Beijing, and Xi'an,
together with the â€œhighest quality assets of the Huawei system,â€ including the most advanced
technology and design, according to Zhao Ming.220 Zhao said that Huawei had divested from
Honor to ensure its survival amid the U.S. export controls that prevented the company from
making chips. Unnamed â€œindustry insidersâ€ told Chinaâ€™s Global Times newspaper that Honor
may capture Huaweiâ€™s lost ground overseas once â€œeverything is back in place.â€221 Since
restructuring, Honor has resumed cooperation with Huaweiâ€™s original suppliers, including Intel,
MediaTek, Micron, Microsoft, Qualcomm, and Samsung.222 In June 2021, Honor launched a
premium smartphone that is powered by Qualcomm's new Snapdragon 778G 5G chip. 223
Honor, having been restructured as a separate entity, may fal outside current U.S. government
restrictions in the absence of further clarification or action from the U.S. Department of
Commerceâ€™s BIS. While Huawei and its affiliates are listed on BISâ€™ Entity List, subjecting U.S.
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
assesses that Honor fal s 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
2021, the Chair of the House GOPâ€™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)
designate Honor Device Co. Ltd. to the Department of Commerce Entity List.224 Also in August

219 Scott Livingston, â€œHuawei, HONOR, and Chinaâ€™s Evolving State Capitalist T ool Kit,â€ CSIS Brief, December 2020;
Chen Qingqing and Shen Weiduo, â€œUpdate: Former Chief Executive of Honor Zhao Ming becomes CEO of 'New'
Company After Sub-brand Sold by Huawei,â€ Global Tim es, November 17, 2020; â€œ Huawei Officially Sold Glory to
Shenzhen Zhixinxin: T he Shareholder Structure Behind it is Disclosed,â€ Sina Technology, November 17, 2020.
220 Zhao Juecheng and Shen Weiduo, â€œHonor 50 Series Handset Powered with Qualcomm Chips Launched in
Shanghai,â€ Global Tim es, June 16, 2021.
221 Ibid.
222 Kelsey Cheng, â€œ Huawei Spin-off Brand Honor Working with Qualcomm to Launch New 5G Phone in Coming
Months,â€ Pan Daily, January 7, 2021; Celia Chen, â€œExclusive: Honor CEO Speaks Out: Unburdened by U.S. Sanctions
on Huawei, the Budget Smartphone Brand Looks to T ake on Apple and Former Parent,â€ South China Morning Post,â€
January 27, 2021; Anniek Bao, â€œ Honor Inks Deal With Microsoft in Post -Huawei Rush to Rebuild Links to U.S.
Companies,â€ Caixin, December 25, 2020.
223 David Kirton, â€œChinese Phone Maker Honor Partners with Key Chip Suppliers after Huawei Split,â€ Reuters,
January 21, 2021.
224 â€œHouse GOP China T ask Force Letter to U.S. Commerce Secretary Gina Raimondo,â€ 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-
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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 Huaweiâ€™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 Chinaâ€™s
policies also cal for strengthening ties with foreign industry associations potential y to work
around U.S. restrictions.228 In January 2021, BlackBerry Limited, a Canadian headquartered
software company, announced it sold 90 smartphone patentsâ€”including some security-related
patentsâ€”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.229 U.S.
and other governmentsâ€™ restrictions of Huawei do not cover the companyâ€™s participation in 6G
research and applications. In January 2021, Huawei executives initiated a public relations push
with the Australian government that advocates for Huaweiâ€™s participation in the Australian
governmentâ€™s 6G standards-setting process and 6G-related R&D.230 In response to requests from
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.231 In
addition, U.S. and other governmentsâ€™ 5G restrictions do not currently apply to some other
prominent Chinese telecommunications vendors that may also raise concerns, such as Oppo,
Vivo, or Xiaomi.
Applied Materials and Jingsheng
Other examples show how Chinese firms may be seeking to use offshore structures to obtain U.S.
technologies and potential y bypass U.S. authorities. In August 2021, Chinaâ€™s Jingsheng
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,

entity-list/.
225 â€œLetter from Senator Roger F. Wicker to Jeremy Pelter, Acting Undersecretary of BIS,â€ August 11, 2021,
https://www.commerce.senate.gov/services/files/776D4787 -7260-42C2-9BEB-EFA3C7683780.
226 Ellen Nakashima and Jeanne Whalen, â€œKey Security Agencies Split Over Whether to Blacklist Former Huawei
Smartphone Unit,â€ 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. Â§ 730 et seq.
227 â€œHuawei Focusing on Cloud Business Which Still Has Access to U.S. Chips,â€ Reuters, August 29, 2020; and Karen
Freifeld, â€œHuawei Gets U.S. Approvals to Buy Auto Chips, Sparking Blow Back,â€ Reuters, August 25, 2021.
228 Ramish Zafar, â€œU.S. Chip Firms to Coordinate with Chinese Firms on IP Security, Other Areas,â€ WCCF T ech Inc.,
March 11, 2021.
229 Sean Silcoff, â€œBlackBerry Sells 90 Patents to Huawei, Covering Key Smartphone T echnology Advances,â€ The
Globe and Mail, January 12, 2021.
230 Joseph Waring, â€œHuawei Pushes Australia for 6G Role,â€ Mobile World Live, January 6, 2021.
231 â€œRelease of â€˜T echnologyâ€™ to Certain Entities on the Entity List in the Context of Standards Organization , U.S.
Department of Commerceâ€™s Bureau of Industry and Security,â€ 85 Federal Register 36719, June 18, 2020,
shttps://www.federalregister.gov/documents/2020/06/18/2020 -13093/release-of-technology-to-certain-entities-on-the-
entity-list-in-the-context-of-standards.
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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 Xiâ€™an, China.232 Jingsheng says that the
businesses in the deal have â€œno assets, operations or personnel in the United States.â€233
Jingshengâ€™s business focuses on semiconductor research and manufacturing equipment related to
silicon and silicon carbide.234 The firm participates in Chinaâ€™s National Science and Technology
Major 02 Special Project, which directs and funds the development of Chinaâ€™s â€œindigenousâ€
semiconductor materials, tools, and equipment capabilities.235 Some experts anticipate that next
generation semiconductor capabilities could benefit from breakthroughs in silicon and silicon
carbide, materials that also have defense applications.236 By transferring semiconductor IP and
capabilities to a Chinese firm, Applied Materials (and Jingsheng) may be seeking to qualify for
Chinaâ€™s semiconductor policy incentives.237 The deal could also be in response to less visible
Chinese government pressure. In March 2021, Applied Materials announced that its agreement to
acquire Kokusai Electric Corporation expired because Applied Materials â€œdid not receive
confirmation of timely approval from the regulator in China.â€238
U.S. technology companies, such as Advanced Micro Devices, Inc. (AMD), previously responded
to Chinese pressures to sel core x86 semiconductor capabilities to a Chinese state consortium by
using a set of separate but interrelated commercial transactions to avoid CFIUS jurisdiction.239
Concerns about these types of joint venture deals motivated some Members of Congress to
expand CFIUSâ€™ jurisdiction with the passage of FIRRMA in 2018.240 A new provision in
FIRRMA gives CFIUS jurisdiction over â€œany other transaction, transfer, agreement, or
arrangement, designed or intended to evade or circumvent the CFIUS review process.â€241

232 Mike Rosa, â€œ Xiâ€™an Center Advances More-than-Moore T echnology Development,â€ Applied Materials Company
Website, March 2018, https://www.appliedmaterials.com/nanochip/nanochip-fab-solutions/march-2018/xian-center-
advances-more-than-moore-technology-development.
233 â€œZhejiang Jingsheng (300316 CH),â€ Company Update, China Merchants Bank International Securities, Equity
Research, August 2, 2021, at https://pdf.dfcfw.com/pdf/H3_AP202108021507573507_1.pdf?1627903003000.pdf .
234 For further information see the companyâ€™s website at http://www.jsjd.cc/ and the companyâ€™s 2020 Annual Report
available at https://vip.stock.finance.sina.com.cn/corp/view/vCB_AllBulletinDetail.php?stockid=300316&id=7113943 .
235 â€œNational Science and T echnology Major Specialized Enterprisesâ€”01 Special and 02 Special Enterprises
Concentrated at IC China 2014,â€ August 22, 2014, China Semiconductor Industry Association. See details at the
companyâ€™s website at http://www.jsjd.cc/casesinfo.aspx?id=38 and in the companyâ€™s stock notice from May 4, 2017 at
http://pdf.dfcfw.com/pdf/H2_AN201705030551346515_01.pdf .
236 Brad Bergen, â€œSemiconductor Breakthrough: Scientists Just Widened the Gap with New T iny Chips,â€ Interesting
Engineering, May 20 2021; Julissa Green, â€œ An Overview of Silicon Carbide Ceramic Materials,â€ Advanced Ceramic
Materials.
237 See CRS Report R46767, Chinaâ€™s New Semiconductor Policies: Issues for Congress, by Karen M. Sutter.
238 â€œApplied Materials Announces T ermination of Kokusai Electric Acquisition Agreement,â€ Globe Newswire, March
29, 2021.
239 Kate Oâ€™Keeffe and Brian Spegele, â€œHow a Big U.S. Chip Maker Gave China the â€˜Keys to the Kingdomâ€™,â€ The Wall
Street Journal, June 27, 2019.
240 Kate Oâ€™Keeffe and Siobhan Hughes, â€œCongress to T oughen Foreign Investment Reviews Amid T rade Fight With
China,â€ The Wall Street Journal, July 19, 2018.
241 See CRS In Focus IF11334, CFIUS: New Foreign Investment Review Regulations, by Cathleen D. Cimino-Isaacs
and James K. Jackson.
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Policy Implications and Issues for Congress
Chinaâ€™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
most likely wil require sustained policy focus, bureaucratic agility, and political resolve to be
effective. Longstanding and emerging patterns of Chinaâ€™s economic and trade behavior show that
the United States should expect and be prepared at both a strategic and tactical level to counter
Chinaâ€™s measures and countermeasures as U.S. officials seek to work with al ies and partners to
address the concerns posed by Chinaâ€™s behavior. Relatedly, the United States should anticipate
Chinaâ€™s likely 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
goals. Chinaâ€™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,
including areas involving digital trade rules and standard-setting. Some of these behaviors may
require new rules and approachesâ€”at the unilateral, plurilateral, and multilateral levelsâ€”and
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
make broader and discriminatory use of these tools in advancing Chinaâ€™s national economic,
industrial, and political goals; promoting national champions; and pressuring foreign firms and
governments. An important consideration in U.S. government policies and actions is the role of
the state in Chinaâ€™s business ecosystem and the control and influence the Chinese state may have
over Chinaâ€™s corporate actors. This state role arguably al ows the Chinese government to align
with or potential y compel its leading companies in undertaking joint action in China and
overseas to advance Chinaâ€™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
consideration is how U.S. policies and authorities view Chinese corporate entities, including how
they are defined, as wel as views on their role and rights in the United States.242
Some U.S. experts, companies, universities, and Members of Congress view some of the recent
U.S. trade restrictions on Chinaâ€”such as the imposition of tariffs, expanding the number of
Chinese firms on the BIS Entity List, and increased scrutiny of Chinaâ€™s funding and research
activities in the United Statesâ€”as complicating and adversely impacting the ability to do business
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
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
scale of the chal enges that China poses, the United States must protect its interests and address
the asymmetry and vulnerabilities in how commercial relationships, investment, research ties
with China are developing Chinaâ€™s capabilities in ways that may disadvantage the United States.
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
of concern with respect to market access and other discriminatory barriers in China and Chinaâ€™s
state-led policies that may create many of these barriers. This viewpoint general y supports
continued negotiation in concert with like-minded nations and other advanced economies to

242 T om Westbrook, Pei Li, John Mccrank, and Alexandra Alper, â€œNYSE May Make Second U-turn on China T elecom
Delistings Amid Confusion over Policy,â€ Reuters, January 4, 2021.
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advance more reciprocal economic relationships with China, and to take stronger action using
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
continue the Trump Administrationâ€™s framing of China as a strategic competitor. In this context,
and in consideration of Chinaâ€™s recent trade measures and countermeasures, Congress might
consider whether, and, if so, how to address the following:
U.S. legislation and policymaking on China concerns:
ï‚· 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
prioritizes, scopes, structures, and acts on its concerns about China to advance
U.S. national interests. Congress may further review U.S. government decision-
making on China trade and economic security issues and the use of existing
authorities and tools to address Chinaâ€™s practices of concern to determine if
existing policies and tools are sufficient. Key questions include whether the U.S.
government bureaucracy is sufficiently agile and effective in its response to
Chinaâ€™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
coordinated so that agenciesâ€™ authorities are mutual y reinforcing on crosscutting
issues. Congress might explore, for example, how various U.S. government
agencies collaborate to address crosscutting concerns such as U.S. technology
transfer to China.
ï‚· 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
economic security issues to assess implementation. Congress may consider how
it is leveraging its own reports and findings. How is Congress organizing and
collaborating to address crosscutting concerns that may fal across different
committee jurisdictions? Should Congress utilize more actively the role of its
Designated Congressional Advisors and Congressional Advisory Groups on
Negotiations that it established in Trade Promotion Authority legislation enacted
in 2015 (P.L. 114-26), to represent congressional views on U.S.-China trade and
economic issues to the Executive Branch?243
ï‚· Another area for ongoing congressional scrutiny is the U.S. governmentâ€™s
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
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
issues, such as cloud computing, 5G connected vehicles and devices, 6G
development, and other advanced Chinese technology. A related issue is the
efforts and outcomes of ongoing cooperation with U.S. al ies and partners
regarding U.S. concerns about Huawei and whether such approaches should be
applied to other concerns.
Chinaâ€™s Trade and Economic Coercion:
ï‚· Congress may examine how Chinaâ€™s exercise of its new measures and
countermeasures could chal enge 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.
policies and authoritiesâ€”including those related to recently passed legislationâ€”
and consider whether, and, if so, how to address this issue. Should Congress
enhance U.S. government enforcement provisions to counter Chinaâ€™s pressures?
Are there existing laws and authorities that could be used to address these
chal enges posed by China? Has the U.S. governmentâ€™s defense of its policy
decisions in U.S. courts been adequate?
ï‚· Congress may look at whether companies should be required to report or disclose
when they are subject to pressure or benefit from Chinaâ€™s measures, including
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
companies to counter how China may be using ad hoc trade measures against the
United States and its al ies and partners. In this regard, Congress might consider
whether it should restrict companies from participating in or benefitting from
(either directly or indirectly) Chinaâ€™s commercial boycotts and other ad hoc trade
restrictions, and accepting Chinese government subsidies and preferences that
advance Chinaâ€™s industrial policies of concern. Should Congress require that IP
and technology transfer to China and Chinese entities tied to these policies 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
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
economic coercion.
ï‚· Congress could consider whether, and if so, how, to enhance and support
concerted trade action with U.S. al ies and partners to help counter Chinaâ€™s
economic coercion. For example, Congress might encourage or seek the
negotiation of similar anti-boycott provisions with like-minded countries and of
other options to counter Chinaâ€™s economic and trade coercion with joint actions
that impose commensurate trade policy repercussions and economic costs,
beginning with sectors China is leveraging, such as raw materials, energy, and
agricultural commodities.
ï‚· Another area of potential congressional focus might be to articulate the ways in
which Chinaâ€™s approach and behaviors undermine global trade rules, norms, and
principles and consider the range of U.S. options, including in the WTO. For
example, what is the feasibility of cal s by some experts for the United States and
other countries to bring a WTO nullification and impairment case against China?
Could such action help to address the growing range of concerns that the United
States and others have with Chinaâ€™s trade measures?244 Should the USTR
prioritize and accelerate the negotiation of agreements that address issues, such
as state funding and subsidies and nondiscriminatory trade rules and disciplines
for digital trade?
Technology, Data, and Research

244 Jennifer Hillman, â€œT he Best Way to Address Chinaâ€™s Unfair Policies and Practices is T hrough a Big, Bold,
Multilateral Case at the WT O,â€ T estimony Before the U.S.-China Economic and Security Review Commission, June 8,
2018; Stephen Ezell, â€œ False Promises II: T he Continuing Gap Between Chinaâ€™s WT O Commitments and Its Practices,â€
Information Technology and Innovation Foundation, July 26, 2021.
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ï‚· 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
what ways, U.S. technology trade and two-way investment are strengthening
Chinaâ€™s capabilities in areas that may undermine U.S. national security and
economic competitiveness. Congress might examine, for example, the effects of
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
been added, and the licensing of controlled technologies to China (including
companies on the BIS Entity List), as wel as how U.S. government technology
licensing and investment review decisions align with U.S. policy objectives on
China.
ï‚· An area for further congressional oversight and action could be to seek
accelerated U.S. multilateral action on export controls, in line with pending
legislative proposals in the United States Innovation and Competition Act of
2021 (S. 1260 and H.Amdt. 3535). These measures would require the Executive
Branch to strengthen collaboration among members of the Wassenaar
Arrangement and jointly impose and enforce technology controls on China.
ï‚· Chinaâ€™s role and technological gains from participation in U.S. open source
technology platforms and whether, and if so how, this activity should be
addressed is another area for ongoing congressional oversight. As the Department
of Defense and some in Congress look to open source technology solutions and
al iances (e.g., ORAN) as a way to lessen dependence on Chinese companies,
Congress might address Chinese membership and roles in these platforms.
ï‚· Congress could also further deepen its understanding of trends, and the benefits
and risks of Chinaâ€™s participation in U.S. research, including additional review of
the findings and recommendations of the staff report, Threats to the U.S.
Research Enterprise: Chinaâ€™s Talent Recruitment Plans, which the U.S. Senateâ€™s
Permanent Subcommittee on Investigations released in November 2019. A key
issue is whether U.S. government activity to date has been excessive or whether
further oversight, transparency, and restrictions should be considered with regard
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
Chinaâ€™s participation in U.S. federal y funded research may be developing
particular capabilities in the United States and China and whether the U.S.
government should cultivate enhanced U.S. talent and alternative foreign talent.
Additional y, should the U.S. government conduct greater examination of
outbound U.S. government and university funding and university IP and
technology licensing for China-tied research and commercial activities?
ï‚· Congress may examine the potential effects of Chinaâ€™s measures on data and
digital trade to ascertain whether U.S. government approaches to data protections
and Chinaâ€™s corporate operations are adequate. Congress might also assess
whether, and if so, how, to achieve nondiscriminatory trade rules and disciplines
in digital trade. Key issues that could be examined include how Chinaâ€™s new
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.
data, including cyber metadata, through commercial operations in the United
States or commercial ties to U.S. firms. In light of recent concerns, Congress
might consider whether to examine prominent corporate examplesâ€” such as
WeChat, TikTok, or Zoomâ€”to ascertain the effectiveness of U.S. policy
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approaches, including the Biden Administrationâ€™s proposed timeline and
framework for assessing potential risks posed by Chinese software firms
operating in the United States. Relatedly, Congress might consider whether
Chinaâ€™s new trade measures could undermine the risk mitigation measures and
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
would require additional U.S. government oversight over outbound U.S.
investments, technology licensing, and data transfers to China and PRC entities
by both the private sector and U.S. government agencies.245
Industrial Policies and the Role of the State
ï‚· Congress may continue to consider and address the chal enges that the Chinese
governmentâ€™s formal and informal levers of control over companies may pose for
U.S. authorities. Such issues might include state control, influence, funding, and
access; market restrictions; and other distorting and potentially anti-competitive
practices. Congress might examine specific examples to ascertain how U.S.
authorities distinguish between state and corporate actors; how U.S. incorporated
firms have acted on behalf of the Chinese government; and whether the legal
chal enges posed by China in the United States expose any gaps in U.S
authorities or a need for new approaches.246
ï‚· Congress might consider how the Chinese government uses competition
authorities to advance its industrial policies, including by requiring the
divestiture and sale of targeted businesses and technologies to Chinese firms.
Congress might investigate why the U.S. government rarely, if ever, has
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
instances of potential Chinese anticompetitive behavior.
ï‚· An area for further congressional oversight might include elevating
biotechnology and agriculture as key concerns with regard to China. China
identifies agriculture as a national security priority, including in its investment
restrictions, national development plans, and ad hoc trade retaliation. Congress
could, for example, add the U.S. Department of Agriculture to CFIUS as a full
member. Congress might inquire on large potential y high impact transactions to
assess whether current U.S. authorities are sufficient.
ï‚· Another area for potential congressional examination is the lack of reciprocity in
U.S. and Chinaâ€™s investment terms and how Chinaâ€™s market barriers
disadvantage the United States. Do Chinaâ€™s market restrictions in strategic

245 See proposed example by Senator Wyden, Protecting Americansâ€™ Dat a from Foreign Surveillance Act , at
https://www.wyden.senate.gov/imo/media/doc/Protecting%20Americans%20Data%20from%20Foreign%20Surveillan
ce%20Act%20of%202021%20Bill%20Text.pdf; and proposed legislation by Senator Casey and Senator Cornyn, T he
National Critical Capabilities Defense Act , https://www.casey.senate.gov/imo/media/doc/casey -
cornyn_nccda_amendment.pdf. Also see the Genomics Data Security Act introduced by Senator Rubio, S. 1744.
246 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 used a California-based company that he controlled to funnel funds
provided by Chinese entities, which were subsequently placed on the BIS Entity List, to finance the manufacturing of
the military integrated circuits by the victim company. See â€œ Electrical Engineer Sentenced to More T han Five Years in
Prison for Conspiring to Illegally Export to China Semiconductor Chips with Military Uses,â€ Office of Public Affairs,
U.S. Department of Justice, July 22, 2021.
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sectors incentivize Chinaâ€™s acquisitions and ability to set joint venture and
technology transfer terms? Do Chinaâ€™s requirements that U.S. software firms,
such as Microsoft, share source code and cyber patches with the Chinese
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
same firms to provide U.S. critical infrastructure?247 Congress might examine
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,
cloud computing, and software-tied services in health, finance, information,
media, and retail. Is there sufficient visibility and oversight of Chinaâ€™s activity in
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
other like-minded countries to align approaches.
ï‚· Congress could seek to address China concerns through oversight of the June
2021 agreement with the European Union on aircraft subsidies, under which both
sides agreed to coordinate and cooperate to diminish Chinaâ€™s ability to require
technology transfer in aerospace.248 Congress could share its views about how the
agreement could address transfer risks with regard to particular technological
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.,
semiconductors and advanced materials), and with other countries to prevent
China from coercing technology transfer.

247 Sumner Lemon, â€œChina Gets Access to Microsoft Source Code,â€ IDG News Service, March 3, 2003; Kartikay
Mehrotra, â€œHack Pushes Microsoft to Rethink How it Discloses Code-Sharing Plan After Suspected Leak,â€ Bloomberg,
April 27, 2021.
248 In the agreementâ€™s Annex on Cooperation on Non-Market Economies, the two sides agreed â€œto coordinat e and
explore common approaches and enhanced cooperation regarding the screening of new outward investments in joint
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
actions, that lead to the transfer of technology or jobs to the detriment of market-oriented actors.â€ â€œ UST R Announces
Joint U.S.-E.U. Cooperative Framework for Large Civil Aircraft ,â€ Office of the U.S. T rade Representative, June 15,
2021. T he Agreement and Annex are available at
https://ustr.gov/sites/default/files/files/FINAL%20Understanding%20on%20Principles%20relating%20to%20Large%2
0Civil%20Aircraft.pdf.
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Appendix.
Table A-1. Select Instances of Chinaâ€™s Ad Hoc Economic and Trade Coercion 249
Date
Event
2020-2021
China effectively restricted imports of Australian coal, barley, beef, cotton, copper, sugar,
timber, beer, wine, seafood, wheat, and wool beginning in May 2020. Observers view these
restrictions as a response to Australian leadersâ€™ public cal s for an investigation into the origin
of the Coronavirus Disease 2019 (COVID-19) pandemic.250
In June 2021, Chinaâ€™s General Administration of Customs confiscated, destroyed, or returned
several imported shipments of H&M, Gap, and Nike products that it claimed posed a potential
health hazard to consumers. Some experts contend that this was an escalation in a broader
campaign of retaliation against Western clothing brands fol owing statements released by Nike,
H&M, and other companies regarding forced labor in Xinjiang.251
2019-2020
After Daryl Morey, General Manager of National Basketbal Association (NBA) team the
Houston Rockets, tweeted an image with the caption â€œFight for Freedom. Stand with Hong
Kong,â€ the PRC consulate in Houston demanded the team â€œcorrect the errorâ€ and â€œeliminate
the adverse impact.â€252 Soon thereafter, Chinese brands suspended cooperation with the
team.253 China Central Television, Chinaâ€™s state broadcaster, stopped broadcasting NBA
preseason games in China and did not resume them until October 10, 2020, more than a year
later.254 ESPN reported in September 2020 that the NBA had incurred â€œat least $200 mil ionâ€
in estimated losses from the China market as a result of the controversy.255

249 T his chart was prepared by Caitlin Campbell and Michael Sutherland at Congressional Research Service.
250 Megan Ophel, â€œWarning from Australia: Meet the T hreat of Chinese Economic Coercion to Democracy,â€ Center
for a New American Security, February 9, 2021; Bonnie S. Glaser, â€œT ime for Collective Pushback Against Chinaâ€™s
Economic Coercion,â€ Center for Strategic and International Studies, January 13, 2021; Paul Karp and Helen Davidson,
â€œChina Bristles at Australiaâ€™s Call for Investigation into Coronavirus Origin,â€ The Guardian, April 29, 2020.
251 General Administration of Customs of the Peopleâ€™s Republic of China, General Administration of Customs Reports
on the Safety of Childrenâ€™s Products, June 1, 2021,
http://www.customs.gov.cn/customs/xwfb34/302425/3692320/index.html;â€œ China accuses Western firms over
â€˜harmfulâ€™ kidsâ€™ goods,â€ BBC, June 3, 2021.
252 Consulate-General of the Peopleâ€™s Republic of China in Houston, â€œ Chinese Consulate General Spokespersonâ€™s
Remarks on the Erroneous Comments on Hong Kong by General Manager of the Houston Rockets,â€ October 6, 2019,
http://houston.china-consulate.org/eng/sgxw/t1705494.htm.
253 Paul Simao and Josh Horwitz, â€œNBA Stirs U.S. Hornetâ€™s Nest, Faces China Backlash over Hong Kong T weet,â€
Reuters, October 6, 2019; Iain Marlow and Jon Herskovitz, â€œ NBA Chief Defends Freedom of Expression in Face Off
with China,â€ Bloomberg, October 8, 2019; Zhang Jianfeng, â€œMorey Owes the Chinese an Apology,â€ CCT V, October 8,
2019.
254 â€œA T imeline of the Daryl Morey NBA-China Saga,â€ South China Morning Post, at
https://multimedia.scmp.com/widgets/vert_timeline/?id=darylmorey -nba-china-saga; CCT V, â€œ Central Radio and
T elevision General Station CCT V Sports Channel Statement ,â€ October 8, 2019.
255 Kevin Arnovitz, â€œInside the Longest, Most Unpredictable Year in NBA History,â€ ESPN, September 29, 2020.
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Date
Event
April 2018
The Civil Aviation Administration of China (CAAC) issued a letter directing foreign airlines,
including U.S. carriers, to refer to Taiwan as a region of China on their public websites and
applications. For airlines that failed to comply within 30 days, CAAC threatened to designate
them as â€œseverely untrustworthyâ€ companiesâ€”an apparent reference to Chinaâ€™s emerging
attempt to establish a social credit system to shape individual and corporate behavior256â€”and
to report companies to the Cyberspace Administration of China for further sanctions.257
According to Reuters, by August 2018, al targeted U.S. airlines had either complied or had
begun taking steps to comply.258
January 2018
Marriott International, Inc., announced it would temporarily take down its Chinese-language
websites and apps in China â€œat the request of the [PRC] Governmentâ€ in order to â€œmake the
necessary correctionsâ€ fol owing two incidents: the hotel chain listed Hong Kong, Tibet, Macau,
and Taiwan as â€œcountriesâ€ in an email survey and on its app, and an employee operating the
hotelâ€™s official Twitter account â€œlikedâ€ a tweet by an organization that advocates for Tibetan
independence. The hotel company issued an apology, pledged to complete a â€œful investigationâ€
of the incidents, and later fired the employee who â€œlikedâ€ the tweet.259
November
The PRC State Tourism Bureau reportedly issued a directive to Chinese travel agencies
2017
mandating the cancel ation of al tours and advertisements for tours to the Vatican and St.
Peterâ€™s Basilica due to the Vaticanâ€™s maintenance of diplomatic relations with Taiwan.260
2016-2018
In an effort to pressure South Korea to abandon its plans to deploy (jointly with the United
States) a Terminal High-Altitude Area Defense (THAAD) missile defense system, China took
measures that included the fol owing: (1) restricted South Korean entertainment and other
cultural exports from entering China, including cancel ing South Korean pop music events,
banning South Korean television shows from airing on a state-owned television channel, and
withholding regulatory approvals for South Korean online video games; (2) banned the sale of
such South Korean household products as cosmetics, high-tech toilet seats, air purifiers, and
food; (3) restricted tourism between the two countries by ordering travel agencies not to
provide South Korea tour packages and by rejecting Korean airlinesâ€™ applications to increase
charter flights between the two countries; and (4) targeted the China business of Lotte, the
South Korean conglomerate that agreed to provide land for the missile defense systemâ€™s
deployment site. Chinaâ€™s efforts to disrupt Lotteâ€™s business reportedly included suspending new
factories, launching cyberattacks against Lotteâ€™s website, and closing 75 of 99 Lotte Mart stores
in China for al eged safety violations.261 The campaign against Lotte also reportedly caused
hundreds of mil ions of dol ars or more in losses to the company, with revenues dropping 77%
in 2017.262

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

Discount Store China in China by June,â€ Yonhap News Agency, March 16, 2018.
263 T ourism Bureau, Ministry of T ransportation and Communications, Republic of China (T aiwan), â€œ 2016 and 2017
Visitor Arrivals by Residence;â€ â€œ Xinhua Insight: What Has DPP Brought to T aiwan Over the Past Year?â€ Xinhua, May
20, 2017.
264 Peter Harrell et al., â€œChinaâ€™s Use of Coercive Economic Measures,â€ Center for a New American Security, June 11,
2018, p. 47.
265 Clare Baldwin and Kristina Cooke, â€œSpecial Report: How Sony Sanitized Adam Sandler Movie to Please Chinese
Censors,â€ Reuters, July 24, 2015.
266 Peter Harrell et al., â€œChinaâ€™s Use of Coercive Economic Measures,â€ Center for a New American Security, June 11,
2018, p. 43.
267 Willard Cheng, â€œChina Lifts T ravel Warning on PH after Duterte Meets Xi,â€ ABS-CBN News, October 20, 2016;
Jason Gutierrez, â€œChina Issues Warnings on Philippines,â€ AFP, May 11, 2012.
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Date
Event
September
After the Japan Coast Guard arrested and detained the captain of a Chinese fishing vessel
2010
fol owing a clash in disputed waters near the Senkaku (Diaoyu) Islands in the East China Sea,
China threatened â€œstrong countermeasures.â€268 A few weeks later, China held exports of rare
earth shipments bound for Japan at Chinese ports.269 The Japanese government reportedly was
forced to spend at least $1 bil ion to address and compensate for Chinaâ€™s restrictions.270
2010-2016
After the Norwegian Nobel Committee awarded the 2010 Nobel Peace Prize to Chinese
writer and pro-democracy activist Liu Xiaobo while he was imprisoned in China, the PRC
halted a trade deal under negotiation and restricted Norwegian salmon imports. This caused
Norwayâ€™s share of Chinaâ€™s salmon imports to drop from 94% in 2010 to an average of 16%
from 2013-2016.271 Relations normalized and the salmon trade resumed in 2016, with Norway
pledging not to â€œsupport any actions that undermineâ€ Chinaâ€™s core interests and to â€œdo its best
to avoid any future damage to the bilateral relations.â€272 Liu Xiaobo died in prison in 2017.273
Source: Compiled by Caitlin Campbel , CRS Analyst in Asian Affairs, and Michael D. Sutherland, CRS Analyst in
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,
and CASPA
ï‚·
Alibaba Group
ï‚·
ArrayComm (Chengdu Airi Wireless Technology)
ï‚·
Alibaba Group
ï‚·
Beijing Academy of
ï‚·
AsiaInfo Holdings, Inc.
ï‚·
Baidu, Inc.
Edge Computing
ï‚·
ASTRI (Hong Kong Applied Science and Technology ï‚·
Beijing Auphi Bi
ï‚·
Chongqing University
Research Institute)
Software,
Industrial Technology ï‚· Cambridge Industries Group Ltd.
ï‚·
Biren Technology
Research Institute
ï‚·
ï‚·
ï‚·

CertusNet Inc.

Chengdu Silicon Power

Huawei Technologies
Technology
Co., Ltd.
ï‚·
China Mobile
ï‚·
ï‚·
ï‚·

Chizhou HISEMI

Inspur Group

China Telecommunications Corporation
Electronic Technology
ï‚·
ï‚·

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

Nanjing SemiDrive
ï‚·
China Information Communication Technologies

Huawei Technologies
Technology Ltd.
Group
Co., Ltd.
ï‚·
Rockchip
ï‚·
ï‚·

Digigate (Nanjing Diange Communication Technology)
InnoGrit
ï‚·
ï‚·

China GrenTech Co., Ltd.

Inspur Group

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

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

X-EPIC
ï‚·
Institute, CAS
ï‚·

Lenovo Group Limited

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

Author Information

Karen M. Sutter

Specialist in Asian Trade and Finance

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Chinaâ€™s Countermeasures to U.S. Economic Policy Actions and Authorities

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

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Congressional Research Service
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