U.S. Should Be Wary of China's Supply Chain Threat, Panel Says

(Bloomberg) -- The U.S. faces an expanding risks from China, including threats to the technology supply chain, Beijing’s military expansion in the Indo-Pacific region and the country’s efforts to undermine sanctions on North Korea, according to an annual report by a bipartisan congressional panel.

Chinese state support for critical developing technologies combined with “the close supply chain integration between the United States and China, and China’s role as an economic and military competitor to the United States create enormous economic, security, supply chain and data privacy risks for the United States,” the panel said in the report published Wednesday.

The U.S.-China Economic and Security Review Commission’s report comes as tensions between the world’s two biggest economies have soared over trade, with both sides placing hundreds of billions of dollars in tariffs on imported goods. President Donald Trump and President Xi Jinping are expected to discuss trade tensions at a meeting on the sidelines of the G-20 meeting in Buenos Aires in late November.

Created by Congress in 2000, the commission has reported on China’s economic and military rise, usually in critical assessments accompanied by recommendations for counter-actions such as trade sanctions. Among this year’s findings and recommendations are:

Trade and Economics

  • Congress should require the Office of Management and Budget to prepare an annual report to ensure supply chain vulnerabilities from China are adequately addressed.
  • The National Telecommunications and Information Administration and Federal Communications Commission “should identify steps to ensure the rapid and secure deployment of a 5G network, with a particular focus on the threat posed by equipment and services designed or manufactured in China.”
  • The U.S. Trade Representative should file a complaint against China at the World Trade Organization under a rarely used tool that can be used to pressure Beijing over alleged violations of U.S. intellectual property.

Security

  • China’s military continues to deepen its partnerships with Russia, Iran and Pakistan and leverage those relationships to challenge U.S. dominance.
  • China’s military expansion and force improvements mean that by 2035, “if not before, China will likely be able to contest U.S. operations throughout the entire Indo-Pacific region.”

Belt and Road

  • Politically, the Belt and Road Initiative could pose a significant challenge for U.S. interests and values because it may enable China to export its model of authoritarian governance and encourages and validates authoritarian actors abroad.
  • The director of national intelligence should produce a report detailing “the impact of existing and potential Chinese access and basing facilities along the Belt and Road on freedom of navigation and sea control, both in peacetime and during a conflict.”
  • The Belt and Road Initiative is likely to expose China to major risks, including terrorism and instability, and political fallout in partner countries.

Taiwan

  • China is “intensifying its political warfare activities in Taiwan.” That includes supporting opposition political parties and spreading disinformation using social media and other online tools.

North Korea

  • “China and North Korea share a complicated relationship marked by both pragmatic coordination and deep strategic mistrust.”
  • Echoing a concern of the Trump administration, and a warning it mentioned last year, the panel says Beijing “appears to have already started to loosen enforcement of sanctions on North Korea.”
  • China has prepared for a rapid flow of refugees across the border from North Korea in the event of an emergency, but how North Korea’s military “might respond to a Chinese intervention is unknown.”
  • There is “no evidence” that Chinese and U.S. military commanders have discussed the “operational planning” required for any contingency on the peninsula in the case of another Korean conflict.