China's use of U.S. capital raises security concerns

Reuters ^ | 14 July, 2002 | Carol Giacomo

[flamefront]

WASHINGTON (Reuters) - China has helped fuel its surging economy and military modernization by raising billions of dollars in American capital markets, raising serious concerns about the impact on U.S. national security, according to a Congressional commission.

In a 200-page report obtained by Reuters, the U.S.-China Security Review Commission disclosed the findings of a year-long study on Sino-American relations.

It recommended a tougher policy toward China, including possible limits on Beijing's access to U.S. capital markets, restrictions on its U.S. imports and increased reporting requirements for American companies doing business in China.

The report was made available as the Pentagon also released a long-delayed assessment of Chinese military trends, which concluded Beijing planned to bring Taiwan to its knees rapidly if it uses force to unite the island with the mainland.

A Bush administration official played down both reports as "a dime a dozen." Some of the commission's concerns repeat fears voiced previously by American hard-liners toward China.

But together the two documents suggest that while usually volatile U.S.-China relations have stabilized, scepticism about Chinese intentions runs deep in some quarters of Washington.

The commission report -- to be formally released on Monday -- is expected to be controversial, especially among U.S. firms heavily invested in propelling China's economic growth.

CAPITAL ACCESS

The United States has its largest trade deficit with China, is a premier investor in its markets and has permitted Chinese companies to raise more than $14 billion in U.S. capital markets through initial public offerings in the past three years, the commission said.

"The presence of Chinese debt and equity offerings in the U.S. capital markets raises U.S. national security concerns that have not been adequately examined to date."

The commission expressed concern about the identities and nature of Chinese companies accessing U.S. capital markets, including the extent to which they have ties to China's army, defence industry and intelligence services, and may be involved in the spread of weapons of mass destruction.

"U.S. investors, including sophisticated pension and mutual funds, may be unknowingly funding Chinese companies that pose a security risk to the United States through their purchases of overseas listed securities," the report suggested.

It said in "egregious cases" denying Chinese entities access to U.S. markets may be warranted, and recommended creation of a federally mandated corporate reporting system to try to better understand the U.S.-China trade and investment relationship.

The commission said China is attempting to acquire a vast array of advanced western technology. "The increasing transfers of U.S. research and manufacturing facilities to China could have a negative impact on the strength of our technological and industrial base as well as the relative military strengths of the two countries," it said.

In particular, the commission said the U.S. defence industrial base may be becoming dependent on Chinese imports or Chinese-owned companies and urged monitoring of this issue.

Policymakers "should prepare for all contingencies" in the complex U.S. relationship with China, the report said. But the government is "poorly organized" to manage this and does not dedicate enough resources to understanding China.

[flamefront]

This was never posted but now that the report has just become available today, some may be interested.

See

JULY 2002
- REPORT TO CONGRESS OF THE U.S. - CHINA SECURITY REVIEW COMMISSION -
THE NATIONAL SECURITY IMPLICATIONS OF THE ECONOMIC RELATIONSHIP BETWEEN THE UNITED STATES AND CHINA

BTW the CHINA SECURITY REVIEW COMMISSION has members critical of the existing policies.

[Eric in the Ozarks]

Sounds like the Red Chinese read Kruschev.

[Free the USA]

Index Bump

[bok]

But together the two documents suggest that while usually volatile U.S.-China relations have stabilized, scepticism about Chinese intentions runs deep in some quarters of Washington.

Good! China shouldn't be trusted. They threatened to Nuke american cities in the past!

[Ahban]

I pity the fools that invested $14 billion in Chinese equities. They won't get it back.

[Red Jones]

I agree certainly with the Bush argument that we did the right thing back after 1980 when both the chinese government and our nation also facilitated economic development in China. Reason is because in 1980 they had actual starvation in China, they were flat on their back. But we've gone way too far. We are enabling fascists today in China just as surely as Henry ford and others enabled the nazis in the 1930's. We don't know what china will doin the future, if their actions will match germany's circa 1939-1945, but the chinese government of today has a much worse human rights track record than the nazis did circa 1938. We are walking a very dangerous path with what we're doing.