CHINA'S ROLE IN THE WORLD

[Pages:3261]CHINA'S ROLE IN THE WORLD: IS CHINA A RESPONSIBLE STAKEHOLDER?

HEARING

BEFORE THE

U.S.-CHINA ECONOMIC AND SECURITY REVIEW COMMISSION

ONE HUNDRED NINTH CONGRESS SECOND SESSION _________ AUGUST 3-4, 2006 _________

Printed for use of the United States-China Economic and Security Review Commission

Available via the World Wide Web:

UNITED STATES-CHINA ECONOMIC AND SECURITY REVIEW COMMISSION WASHINGTON : September 2006

U.S.-CHINA ECONOMIC AND SECURITY REVIEW COMMISSION

LARRY M. WORTZEL, Chairman CAROLYN BARTHOLOMEW, Vice Chairman

Commissioners: GEORGE BECKER DANIEL BLUMENTHAL PETER T.R. BROOKES Hon. C. RICHARD D'AMATO THOMAS DONNELLY

KERRI HOUSTON Hon. PATRICKA.MULLOY Hon. WILLIAM A. REINSCH Hon. FRED D. THOMPSON MICHAEL R. WESSEL

T. SCOTT BUNTON, Executive Director KATHLEEN J. MICHELS, Associate Director

The Commission was created on October 30, 2000 by the Floyd D. Spence National Defense Authorization Act for 2001 ? 1238, Public Law No. 106-398, 114 STAT. 1654A-334 (2000) (codified at 22 U.S.C.? 7002 (2001), as amended by the Treasury and General Government Appropriations Act for 2002 ? 645 (regarding employment status of staff) & ? 648 (regarding changing annual report due date from March to June), Public Law No. 107-67, 115 STAT. 514 (Nov. 12, 2001); as amended by Division P of the "Consolidated Appropriations Resolution, 2003," Pub L. No. 108-7 (Feb. 20, 2003) (regarding Commission name change, terms of Commissioners, and responsibilities of Commission); as amended by Public Law No. 109-108 (H.R. 2862) (Nov. 22, 2005) (regarding responsibilities of Commission and applicability of FACA).

The Commission's full charter and Statutory Mandate available via the World Wide Web

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CONTENTS _________

Thursday, August 3, 2006

CHINA'S ROLE IN THE WORLD: IS CHINA A RESPONSIBLE STAKEHOLDER?

Opening statement of Vice Chairman Carolyn Bartholomew, Hearing Cochair ... 6 Prepared statement......................................................................... 7

Opening statement of Commissioner Daniel Blumenthal, Hearing Cochair......... 8 Prepared statement......................................................................... 10

PANEL I: CONGRESSIONAL PERSPECTIVES

Statement of James M. Inhofe, a U.S. Senator from the State of Oklahoma ........ 11 Prepared statement ........................................................................ 14

Panel I: Discussion, Questions and Answers ............................................ 16

PANEL II: ADMINISTRATION PERSPECTIVES

Statement of Dr. Thomas Christensen, Deputy Assistant Secretary of State for East Asian and Pacific Affairs, Washington, D.C........................................ 20

Prepared statement ........................................................................ 24 Panel II: Discussion, Questions and Answers............................................ 28

PANEL III: THE IMPACT OF CHINA'S DIPLOMATIC STRATEGIES ON U.S. INTERESTS

Statement of Dr. Ernest J. Wilson, III, Professor of Government and Politics, Senior Scholar, Center for International Development and Conflict, University of Maryland, College Park, Maryland ..................................................................... 45

Prepared statement........................................................................ 48 Statement of Dr. John Calabrese, Scholar-in-Residence, The Middle East Institute, Assistant Professor, American University, Washington, D.C......................... 54

Prepared statement....................................................................... 56 Statement of Dr. Cynthia A. Watson, Professor of Strategy, The National War College, Washington, D.C............................................................................. 63

Prepared statement........................................................................ 65 Panel III: Discussion, Questions and Answers.......................................... 66

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PANEL IV: CHINA'S INVOLVEMENT IN THE SHANGHAI COOPERATION ORGANIZATION

Statement of Dr. Ariel Cohen, Senior Research Fellow, Russian and Eurasian Studies and International Energy Security, The Heritage Foundation, Washington, D.C............................................................................ 84

Prepared statement........................................................................ 86 Statement of Dr. Dru Gladney, Professor of Asian Studies, University of Hawaii at Manoa, Honolulu, Hawaii................................................................. 89

Prepared statement.......................................................................... 89 Panel V: Discussion, Questions and Answers............................................ 89

PANEL V: CHINA'S ACTIVITIES AND DIPLOMACY IN ASIA

Statement of RADM Michael McDevitt, USN (Ret.), Director, Center for Strategic Studies, the Center for Naval Analyses, Alexandria, Virginia........................ 101

Prepared statement........................................................................ 103 Statement of Dr. Robert Sutter, Professor of Asian Studies, Edmund A. Walsh School of Foreign Service, Georgetown University, Washington, D.C............ 110

Prepared statement....................................................................... 112 Statement of Dr. Karl D. Jackson, School for Advanced International Studies, Johns Hopkins University, Washington, D.C................................................... 119

Prepared statement........................................................................ 121 Panel IV: Discussion, Questions and Answers.......................................... 126

PANEL VI: CHINA'S RELATIONSHIP WITH COUNTRIES OF CONCERN

Statement of Mr. Jared M. Genser, Visiting Fellow, National Endowment for Democracy, Washington, D.C.............................................................. 152

Prepared statement.......................................................................... 155 Statement of Dr. Eric Reeves, Professor of Language and Literature, Smith College, Northampton, Massachusetts............................................................... 155 Prepared statement........................................................................... 157 Statement of Dr. William Ratliff, Research Fellow, Curator, The Hoover Institution, Stanford University, Stanford, CA.......................................................... 165 Prepared statement............................................................................ 167 Panel VI: Discussion, Questions and Answers........................................... 174

Friday, August 4, 2006

Opening Statement of Commissioner Michael R. Wessel, Hearing Cochair....... 198 Prepared statement......................................................................... 199

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PANEL VII: ADMINISTRATION PERSPECTIVES Ms. Katherine Ann Fredriksen, Principal Deputy Assistant Secretary, Office of Policy and International Affairs, U. S. Department of Energy, Washington, D.C........... 200

Prepared statement......................................................................... 203 Panel VII: Discussion, Questions and Answers......................................... 203

PANEL VIII: CHINA'S ENERGY REQUIREMENTS AND POLICIES Dr. Erica S. Downs, China Energy Fellow, The Brookings Institution, Washington, D.C.............................................................................. 221

Prepared statement......................................................................... 223 Panel VIII: Discussion, Questions and Answers........................................ 227

PANEL IX: CHINA AND THE GLOBAL PETROLEUM SUPPLY Dr. Amy Jaffe, Wallace S. Wilson Fellow in Energy Studies and Matthew E. Chen, Energy Research Assistant, James A. Baker III Institute for Public Policy, Rice University, Houston, Texas........................................................... 244

Prepared statement......................................................................... 246 Dr. Martha Brill Olcott, Senior Associate, Carnegie Endowment for International Peace, Washington, D.C..................................................................... 249

Prepared statement......................................................................... 252 Dr. David Gates, Senior Advisor, PFC Energy, Chatham, New Jersey

Prepared statement.......................................................................... 258 Panel IX: Discussion, Questions and Answers........................................... 258

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CHINA'S ROLE IN THE WORLD: IS CHINA A RESPONSIBLE STAKEHOLDER?

_________

THURSDAY, AUGUST 3, 2006

U.S.-CHINA ECONOMIC AND SECURITY REVIEW COMMISSION

The Commission met in Room 385 Russell Senate Office Building, Washington, D.C. at 8:37 a.m., Chairman Larry M. Wortzel and Vice Chair Carolyn Bartholomew, Commissioners Daniel A. Blumenthal and Michael R. Wessel (Hearing Cochairs), presiding.

OPENING STATEMENT OF VICE CHAIRMAN CAROLYN BARTHOLOMEW, HEARING COCHAIR

COMMISSION VICE CHAIR BARTHOLOMEW: Good morning, everyone. I'm Carolyn Bartholomew, the Vice Chairman of the Commission. Welcome to our panelists and our guests. Today we are focusing on China's role in the world. It is admittedly a big topic to fit into a day and a half of hearing.

Rather than an exhaustive review, we hope to bring to the forefront a number of common questions and themes that are raised by Chinese government strategy and actions around the world.

China is playing a greater and greater role on the world stage. As it does so, the scrutiny of its actions and its intentions is, not surprisingly, also growing.

There is much to question. The Chinese government likes to characterize itself as engaging in a "peaceful rise." Yet, its active engagement with and assistance to countries which others in the international community have condemned as human rights abusers or threats to international peace raise serious questions about its intentions.

And the world's understanding of China's intentions globally, like most of its governmental affairs, suffers from its lack of transparency.

Today's experts will try to break through some of the lack of transparency, testifying on China's economic diplomacy, its energy diplomacy, and its engagement with pariah states. We will consider the nature of the relationships China is establishing with countries around the world and the impact of those relationships on U.S. interests.

In Africa, for example, China seems focused on resource-rich states buying up oil, natural gas and other minerals from the Sudan, Chad, Nigeria, Angola, Algeria, Gabon and Equatorial Guinea.

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In 2005, Chinese official sources reported total investment of $175 million in African countries, primarily on oil exploration and infrastructure projects. When China signs an oil contract, development aid often follows in the form of medical supplies, infrastructure investment, debt relief and lowered trade barriers.

International organizations have reported more than a few cases where China has ignored standards of international law, humanitarian concerns, and human rights when these conflict with China's resource acquisition needs.

How are Chinese investment practices affecting U.S. initiatives to increase the effectiveness of foreign assistance to promote transparency and accountability and to end human rights abuses?

As part of our mandate to advise Congress whether China is likely to be a reliable diplomatic partner, we will explore these issues as part of the broader theme of how trade and energy security are linked in China's diplomatic strategy in countries around the world.

Despite the press of world events, the U.S. must remain focused on nuclear proliferation in Iran and North Korea. Success in addressing those threats requires Chinese cooperation. This Commission attaches such importance to China's actions regarding those countries that we will devote a separate hearing in September to this topic.

As today's panelists address China's relationships to countries of concern including North Korea and Iran, I look forward to hearing their views on China's alignment with other regimes and governments including those in Sudan, Venezuela, and Burma. How do we reconcile those relationships with China's supposed interest in being a dependable partner for the United States?

Thank you again to our witnesses, to our guests. I look forward to the statements that we'll be hearing today and at this time I'll turn the microphone over to Commissioner and Hearing Cochair Dan Blumenthal for his opening remarks. [The statement follows:]

Prepared Statement of Vice Chair Carolyn Bartholomew Hearing Cochair

Welcome to our panelists and guests. Today, we are focusing on China's role in the world. It is admittedly a big topic to fit into a day and a half of hearings. Rather than an exhaustive review, we hope to bring to the forefront a number of common questions and themes that are raised by Chinese government strategy and actions around the world.

China is playing a greater and greater role on the world stage. As it does so, the scrutiny of its actions and its intentions is, not surprisingly, also growing. There is much to question.

The Chinese government likes to characterize itself as engaging in a "peaceful rise." Yet, its active engagement with and assistance to countries which others in the international community have condemned as human rights abusers or threats to international peace raise serious questions about its intentions. And the world's understanding of China's intentions globally, like most of its governmental

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affairs, suffers from its lack of transparency. Today's experts will try to break through some of that lack of transparency, testifying on China's

economic diplomacy, its energy diplomacy, and its engagement with pariah states. We will consider the nature of the relationships China is establishing with countries around the world and the impact of those relationships on U.S. interests.

In Africa, for example, China seems focused on resource-rich states, buying up oil, natural gas, and other minerals, from the Sudan, Chad, Nigeria, Angola, Algeria, Gabon and Equatorial Guinea. In 2005, Chinese official sources reported total investment of $175 million in African countries, primarily on oil exploration and infrastructure projects. When China signs an oil contract, development aid often follows in the form of medical supplies, infrastructure investment, debt relief and lowered trade barriers. International organizations have reported more than a few cases where China has ignored standards of international law, humanitarian concerns, and human rights when these conflict with China's resource acquisition needs. How are Chinese investment practices affecting U.S. initiatives to increase the effectiveness of foreign assistance, to promote transparency and accountability, and to end human rights abuses?

As part of our mandate to advise Congress whether China is likely to be a reliable diplomatic partner, we will explore these issues as part of the broader theme of how trade and energy security are linked in China's diplomatic strategy in countries around the world.

Despite the press of world events, the U.S. must remain focused on nuclear proliferation in Iran and North Korea. Success in addressing those threats requires Chinese cooperation. This Commission attaches such importance to China's actions regarding those countries that we will devote a separate hearing in September to this topic.

As today's panelists address China's relationships to countries of concern including North Korea and Iran, I look forward to hearing their views on China's alignment with other regimes and governments including those in Sudan, Venezuela, and Burma. How do we reconcile those relationships with China's supposed interest in being a dependable partner for the U.S.?

Thank you, again, Mr. Chairman and our witnesses. I look forward to their statements. At this time, I will turn over the microphone to Commissioner and Hearing Co-Chair Dan Blumenthal for his opening remarks.

OPENING STATEMENT OF DANIEL BLUMENTHAL, HEARING COCHAIR

HEARING COCHAIR BLUMENTHAL: Thank you, Commissioner Bartholomew, and thank you to all of you in attendance today.

Last year former Deputy Secretary of State Robert Zoellick laid out a sophisticated framework for U.S.-China policy. He urged China to become a, quote, "responsible stakeholder in the international community." China, he said, "has a responsibility to strengthen the international system that has enabled its success."

For the United States and the world, he said, the essential question is how will China use its influence? At the hearing today and tomorrow, we're going to ask this question: how is China using its influence?

Though Zoellick identified concerns about China's domestic behavior, today our topic will be China's international behavior. The Deputy Secretary pointed to concerns about China seeking to "lock-up" energy supplies. He urged China to play a constructive role in ending the genocide in the Sudan. He spoke of regional anxiety about China's military modernization and threats to Taiwan, concerns that China is not merely engaging with the Southeast Asian nations but positioning for a

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