Posts tagged: Hu Jintao

I Pledge Allegiance to the CCP….Chinese Lawyers’ New Oath Requirements

By , March 22, 2012

I Pledge Allegiance....

In its ongoing efforts to tie the Chinese legal profession as tight as possible to the Chinese Communist Party (CCP), China’s Ministry of Justice (MOJ), the government agency that oversees the legal profession, announced its new initiative on Wednesday: every new lawyer in China must pledge allegiance to the CCP.

Lawyers’ oaths are not unique to China: almost every state in the United States requires newly-admitted attorneys to recite an oath to uphold the Constitution and the laws of the state.  And this is not the first time that a lawyers’ oath has been required in China.  In 2000, the All China Lawyer’s Association (ACLA), the national bar association that all lawyers must be members of, first instituted an oath of office for all lawyers.  But in a Wednesday Legal Daily interview with an unnamed MOJ official, the MOJ determined that the ACLA oath was too general and ineffective.  As a result, the MOJ issued a new oath that must be sworn to in a formal ceremony (translation courtesy of Siweiluozi Blog):

I volunteer to become a practicing lawyer of the People’s Republic of China and promise to faithfully perform the sacred duties of a socialist-with-Chinese-characteristics legal worker (中国特色社会主义法律工作者); to be faithful to the motherland and the people; to uphold the leadership of the Chinese Communist Party and the socialist system; to safeguard the dignity of the constitution and the law; to practice on behalf of the people; to be diligent, professional honest, and corruption-free; to protect the legitimate rights and interests of clients, the correct implementation of the law, and social fairness and justice; and diligently strive for the cause of socialism with Chinese characteristics!

Compare this with the New York State oath taken by newly-admitted lawyers:

I do solemnly swear that I will support the Constitution of the United States, and the New York Constitution, and that I will faithfully discharge the duties of the office of attorney and counselor at law of the Supreme Court of the state of New York according to the best of my ability.”

There are aspects of the Chinese oath that are laudable: to be professionally honest, to be corruption-free, to serve the people, and to properly implement the law.  All of these requirements are ostensibly value-neutral and are good for the profession.  But what is decidedly different between the New York oath and the China one is that allegiance to the CCP is required.  According to the MOJ official, this was intentional.  One of the major reasons that the MOJ issued the new oath was to increase the quality of lawyers’ political thought as well as their professionalism.

That alone would not necessarily be problematic in a country where the Party is the State and let’s face it, people take oaths all the time and rarely listen to or abide by their words.  But this new oath comes in the midst of a major crackdown on China’s public interest lawyers and presumably will be used as a warning signal to this portion of the profession.

The CCP’s Increased Use of Socialist Rhetoric to Police Lawyers

Last fall, I published a law review article discussing the use of increased socialist rhetoric to step up the CCP’s control of China’s growing public

The Three Supremes

interest lawyers (China’s Rule of Law Mirage: The Regression of the Legal Profession Since the Adoption of the 2007 Lawyers Law).  The beefed-up socialist rhetoric began quietly with a speech given by President Hu Jintao at a Chinese Communist Party conference in December 2007.  In his speech, Hu announced the doctrine of “the Three Supremes:” “always regard as supreme the Party’s cause, the people’s interest, and the Constitution and laws.”

Although initially unclear if the Three Supremes were listed in hierarchical order and if the doctrine was even applicable to lawyers, Justice Minister Wu Aiying addressed the issue in August 2009.  Calling upon lawyers to “above all obey the Communist Party and help foster a harmonious society”(emphasis added),Wu stressed the need for lawyers to “pay attention to politics, take into consideration the big picture, and observe proper discipline.” Absent is any mention of “law” or the need to develop the institutions—such as an independent judiciary or a competent legal profession—integral to a rule of law society.

Further confirmation of this shift in rhetoric is found in the October 2008 MOJ pronouncement opening the new government-sponsored campaign of lawyers as “Chinese-style socialist legal professionals.”  In 2010, the MOJ went further with its rhetoric by directly stating the need for greater Party leadership of the legal profession.  In an interview with an unnamed MOJ official, the Legal Daily reported the forthcoming pronouncement of MOJ “Opinion Regarding the Further Strengthening and Improvement of Lawyers’ Work.” Like prior pronouncements, the 2010 MOJ Opinion contains flowery language detailing the need for lawyers to “always hold high the banner of socialism” and to “strengthen [their] political thought.”  But unlike previous statements, the 2010 MOJ Opinion candidly states the role that the Party will play in leading the legal profession.

Through the Party and the MOJ, the 2010 MOJ Opinion states the need for daily supervision and management of the profession, the need for standardization in how cases are handled, and the need to consider “political quality,” “professional quality,” and “ethical quality” in the yearly license renewal procedures

The CCP Re-institutes Party Cells

Party Cells in Law Firms....How Retro!

Finally, the CCP – as reported in a Legal Daily article – has successfully infiltrated most law firms, instituting Party cells in a throwback to the Cultural Revolution days when loyal party members set up “cells” within each work unit to guarantee the proper political ideology of the workers and to report any infractions in thought to the local Party.  While the 1980s saw a decline in Party cells, a 1995 Party Opinion called for the creation of more Party organizations within law firms.   In 2002, President Hu Jintao stressed that the legal profession could only become strong through Party leadership.  But in general, such efforts were met with strong resistance from the profession and law firms largely ignored the directives. However, all of that changed in 2008.

In March 2008, the CCP’s Organization Department and the MOJ’s corresponding Party organization issued a joint opinion announcing the need to improve and strengthen the Party apparatus in the legal profession. As if to indicate to the legal profession that this time the Party was serious about a greater Party presence in law firm life, Justice Minister Wu Aiying declared in July 2008 that more Party cells needed to be created within law firms as a way to better indoctrinate the profession.  This effort has largely succeeded.  Between April 2008 and April 2009, the number of Party cells found in law firms more than doubled.  Today, over 90 percent of all law firms in China maintain a Party cell.(all information can be found in the Legal Daily article).

The Oath Fits the Pattern of Greater CCP Control Over the Legal Profession

In 2007, China amended its Law on Lawyers, ostensibly to give greater independence to the profession.  As my article China’s Rule of Law Mirage points out, on paper, the amendments did in fact give the profession greater control and reduced the supervision of the MOJ.  However, as the article goes on to demonstrate, as public interest lawyers have had more success in their cases, the CCP has exerted greater control of the profession, undermining whatever promises of greater professional independence that is found in the 2007 Law on Lawyers.

Ironically, and as if to give the new oath requirement some sort of semblance of legality, the unnamed MOJ official in Wednesday’s Legal Daily interview attempts to argue that the new oath requirement is in-line with the edicts of the 2007’s amended Law on Lawyers.

Nothing could be further from the truth.  Compared to recent CCP pronouncements, the 2007 Law on Layers is largely devoid of Party allegiance.  Article 1 does require a commitment to a “building of a socialist legal system” but that is sort of like requiring U.S. lawyers to assist in building a democratic legal system.  Additionally, the new structure of law firms and the establishment of solo practitioners were both perceived as an effort of MOJ to relinquish some of its supervisory role in exchange for greater supervision by the bar associations (see China’s Rule of Law Mirage for a more detailed explanation of these provisions).

But MOJ’s new oath, which overrides ACLA’s oath, reflects its effort to maintain control of the profession.  And its requirement that lawyers pledge allegiance to the CCP is eerily reminiscent of Nazi Germany where lawyers took a similar Party allegiance oath: “I swear to remain loyal to the Fuehrer of the German Reich and people, Adolf Hitler, and to fulfill conscientiously the duties of a German attorney, so help me God” (See Matthew Lippman, Law, Lawyers, and Legality in the Third Reich: The Perversion of Principle and Professionalism, 11 Temp. Int’l & Comp. L.J. 199, 218 n. 185 (1997)).

Ultimately, the oath won’t impact the daily work of most of China’s lawyers.  In fact, it is only applicable to new lawyers or those who are re-applying for their licenses (首次取 得或者重新申请取得律师执业证书的人员); MOJ’s announcement makes no mention of its applicability to current lawyers at their yearly re-registration (年度注册); presumably current lawyers will not be subject to the oath.  But in a society where rhetoric has served as important signaling device as to what behavior is politically acceptable, the new oath could potentially have a chilling effect on current public interest lawyer’s work and could discourage new lawyers from representing individuals and issues that are perceived as politically dangerous.  It’s this chilling effect of the new oath that is the greatest threat to a rule of law in China.

NYC Event – Human Rights Watch Discusses New Report on Feb. 9

By , January 25, 2011

In April 2009, the Chinese government released its first  National Human Rights Action Plan (2009-2010) ostensibly to better protect the civil rights and civil liberties enshrined in the Chinese Constitution, such as the right to a fair trial, the right to question the government and the need to eliminate torture in police interrogations.  With such a bold plan, the question remains – how did China do in fulfilling the promises of its first Human Rights Action Plan. 

Human Rights Watch (“HRW”), in its recent report, “Promises Unfulfilled: An Assessment of China’s National Human Rights Action Plan,” attempts to answer that question and to explain how a country which promotes economic freedom has seen a recent regression in terms of civil liberties. 

HRW China researcher Phelim Kine will present the findings of “Promises Unfulfilled” in a discussion at Seton Hall School of Law in Newark New Jersey on February 9, 2011.  Hosted by Chinese legal expert and Seton Hall Law Professor Margaret K. Lewis and with participation from the Open Society Institute’s China Program Director, Thomas Kellogg, the discussion should prove to be an interesting conversation of an issue that was front and center at President Hu Jintao’s recent visit to the U.S.  RSVP is appreciated (http://law.shu.edu/chinahumanrights). 

And just as a shout out to HRW – their reports are pretty amazing and there are only a few other organizations that are able to produce such accurate and informative reports regarding what’s happening on the ground in China.  Phelim Kine is not to be missed!

Wednesday, February 9
1:45 p.m. – 3:45 p.m.
Seton Hall School of Law
1109 Raymond Blvd.
Newark, NJ
RSVP here: http://law.shu.edu/chinahumanrights
Directions: Seton Hall School of Law is a 5 minute walk from Newark Penn Station which is accessible from NYC via the PATH train or NJ Transit.  More specific directions can be found here – http://law.shu.edu/About/Directions.cfm

A Jersey Shore Analysis of the Hu Jintao State Visit

By , January 23, 2011

Welcome to the Jersey Shore!

State visits never produced tangible results, and last Wednesday’s visit of President Hu Jintao to Washington, D.C. was no exception.  True a series of business contracts  and joint ventures were announced, but not much else.  Really though, that’s not why we watch state visits – especially ones involving leaders of the two largest economies in the world.

We watch them more because they are a reality show of sorts – watching two world leaders from vastly different cultures walk the fine line between appearing strong for one’s own country’s interests but at the same time, not completely trampling the other country’s interests.  But unlike the Jersey Shore where one might just be sent home from the beach for misbehaving (think Angelina Season 1 AND Season 2), the consequences are much more serious when you are dealing with two countries whose future relationship can easily determine the fate of the world.

Fortunately, this State visit proved a lot more peaceful and face-saving than anything being shown on the Jersey Shore these days.  While there were some surprises, especially on the Chinese side, there were no fist-a-cuffs.  Overall, the visit seemed to show an improved relationship, at least rhetoric-wise, between the United States and China.

But this is a Jersey Shore analysis so enough of the feel goodness; the question still remains – who won?  Below is a point-by-point analysis of President Hu Jinato’s State visit.

Point for China – Hu Finally Gets a State Visit

The fact that there was a State visit at all was a huge point for China.  It’s been 13 years since a sitting Chinese president

Ceremony on the South Lawn, Jan. 19, 2011

was invited for a State visit and President Hu’s last visit to Washington in 2006 consisted of a lunch with President George W. Bush.  Could anything be more embarrassing for a world leader than to just be offered the lunch menu at the White House?

Unfortunately, yes.  Hu’s 2006 “official” (not state) visit was marred with embarrassing moments for the Chinese.  First, China was introduced as the Republic of China – the official name for Taiwan – sort of a huge gaffe in U.S.-China relations.  Second, a Falun Gong practitioner, a religious order that the Chinese government considers a threat to its rule, was able to obtain press credentials for Hu’s 2006 visit and protest at the event.

But for this visit, the Obama Administration pulled out all of the stops, making it a State visit to outdo all other State visits.  President Hu was greeted at the airport by Vice President Joe Biden and quickly ushered to the White House for an intimate dinner with President Obama.  At all times, China was introduced by its correct name and there were no protests on the South Lawn.

Michelle Obama at the State Dinner for President Hu Jintao

Culminating the event was Wednesday night’s State dinner, perhaps the most anticipated affair this winter.  In addition to a fun and interesting guest list, Michelle Obama chose an amazing dress in homage to one of fashion’s favorite designers – the late Alexander McQueen – making the event the talk of the town of both politicos and fashionistas.

Point for the U.S. – China Gets (a little bit) Tougher on North Korea

North Korea is proving to be a particularly troubling aspect of U.S.-China relations.  No one – including China – particularly cares for North Korea and its saber-rattling as Kim Jung-il’s son takes the rein of perhaps the world’s worst dictatorship.  North Korea’s bellicose activities interfere with China’s economic relations with its Asian neighbors.  But China has yet to take a strong stance against North Korea’s actions even though such actions upset the stability that China needs to continue its rise.  China’s hesitance comes from the fact that it fears a collapsed North Korea; not only would there be the demise of another communist ally, but a collapsed North Korea would mean an influx of starving Korean refugees into China as well as sharing a border with the democratic and U.S.-military-backed South Korea.

For its part, the United States has begun to see North Korea as an increasingly real threat against its allies and itself.  As a result, at Tuesday night’s intimate dinner between the two leaders, President Obama explained to President Hu that unless China takes a stronger stance against North Korea, the U.S. will be left with no choice but to rebuild a stronger military presence on the Korean peninsula.

That argument eventually carried the day.  In the Joint Statement issued on Wednesday, China, for the first time,

Kim Jong-il, Beijing's friend or foe?

“expressed concern” regarding North Korea’s nuclear build-up.  Additionally, while China has urged the resumption of “six party talks” with North Korea, the U.S. has hesitated, seeing it as a reward for North Korea’s bad behavior.  Evidently China and the U.S. were able to reach a compromise: before any six-party talks resume, the two Koreas must first resume their dialogue (see paragraph 18 of the Joint Statement).  On Thursday, South Korea agreed to low-level talks with the North.

Half a Point for the U.S. –Human Rights Makes the Agenda but an Odd Assortment of “Human Rights Advocates” Advise President Obama

Human rights loomed large during Hu’s State visit.  After meekly raising the issue during his State visit to China in November 2009, President Obama was having no criticism of his commitment to human rights.  Secretary of State Hillary Clinton made that apparent in her speech on January 14, 2011 when she not just raised the issue of human rights but also mentioned specific human rights advocates that the U.S. believed were been unlawfully detained.

President Obama continued to publicly press the issue of human rights.  President Obama publicly declared the universality of certain human rights as well as the need for the Chinese leadership to meet with the Dalai Lama.  Perhaps the most surprising of all was when President Hu admitted that China still had a ways to go in better protecting human rights (see the Q&A portion of the Joint Press Conference).

Normally, this should receive a full point.  But the U.S. loses a half a point because of form.  Prior to President’s Hu’s visit, President Obama met with five China human rights advocates.  These “advocates” included Prof. Andrew Nathan of Columbia University; Prof. Paul Gewirtz of the Yale China Law Center; author Zha Jianying; the wife of former Ambassador Winston Lord, Bette Bao Lord; and research scholar at the University of Maryland, Li Xiaorong.

While these five are likely well-informed on issues of human rights, there seems to be some missing names from the list of “human rights advocates.”  Sharon Hom of Human Rights in China has dedicated her life – and at times has risked her safety – to advocate for greater human rights protection; one can’t think of anyone else more qualified.  And if one wants to stick with academics (three of the five study human rights), it is questionable why Prof. Jerome Cohen of NYU School of Law was not in attendance.  Prof. Cohen continues to lambast China on its human rights record on an almost bi-weekly basis in his South China Morning Post articles and actively supports many human rights attorneys in China.

But most of all, why weren’t the Chinese human rights activists themselves invited?  Currently, the wife of missing human rights lawyer Gao Zhisheng is in the United States as is the wife of imprisoned human rights lawyer Guo Feixiong.  Why not invite either of them to speak with the President of the current human rights situation in China?  Or exiled dissident Yang Jianli currently residing in the U.S.?  Or better yet – why not have a Skype chat with any of the human rights lawyers presently in China (Teng Biao, Mo Shaoping, Tang Jitian, Liu Wei)?  The latter might be a bit too much to ask, but the list of human rights advocates invited to speak with President Obama should have been longer.

Point for China – U.S. Promises to Rein in Spending

As the largest holder of U.S. debt, China is very concerned about the U.S.’ spending habits.  The Federal Reserve’s announcement of injecting more cash into the U.S. economy through “quantitative easing” only worsened China’s fear that its U.S. dollar reserves would lessen in value.  So when President Obama, in response to a reporter’s question during the joint press conference, stated that the U.S. must take greater responsibility in saving and cutting the U.S. deficit, China was very happy.

Half a Point for the U.S. – Government Procurement

China’s closed government procurement market and its indigenous innovation policy has been a issue for U.S. businesses.  China is not a member of the WTO’s Government Procurement Agreement (“GPA”) and as a result is not required to have an “open” government procurement market.  China has submitted two bids in the past few years to be a member of the GPA, most recently this past summer.  However, both applications have fallen far short and as a result, China remains outside of the GPA.

But surprisingly, in the U.S.-China Joint Statement (paragraph 27), China agreed to resubmit an application to the GPA by the end of 2011 and include sub-central government entities as subject to its proposal.  Such an agreement was unexpected and likely a welcome development to the U.S. business community.

So why half the point?  Seeing is believing in this case.  It’s not completely in China’s self-interest to be a member of the GPA at this stage so anticipate that its renewed application will still fall short of GPA requirements.  And even if it becomes a member, it’s questionable if China will enforce laws to promote an equitable government procurement market.

Point for U.S., Point for China – 100,000 Strong Initiative Articulated

Study Abroad in China!

During President Hu’s visit, Michelle Obama, in a speech before a thousand DC-area students, reaffirmed the Administrations’ commitment to sending 100,000 U.S. students to China on various study abroad programs (the “100,000 Strong Initiative”).  In 2008, less than 15,000 U.S. students (on both the college and high school levels) studied abroad in China. The U.S. has a long way to go before we reach 100,000 students but its commitment to achieving that goal is a win-win for both China and the U.S.

Americans’ knowledge of China is abysmally low; as China rises, our lack of our understanding its history, culture or language becomes dangerous.  Study abroad programs can help bridge that gap.  While very few U.S. students will continue on their China path after their study abroad program, just being exposed to the culture and the difficulties that the nation faces is important.  But there will also be some students that will continue on that path, providing an invaluable resource to the American government as China continues its rise as a global power.

The “strong” in the 100,000 Strong Initiative is more about strengthening the cultural ties and understanding between our two nations.  While China sends 10 times the number of students to the Untied States, it is important that U.S. students go to China for those Chinese who will never come to America.  What’s even more important is that the 100,000 Strong Initiative reaches out to community colleges and historically black colleges and universities, both of which have been underrepresented in China study abroad programs.  It is important that the students the U.S. sends to China reflect our great diversity.

Sec. Gates, not a happy camper on US-China military ties

No Points for Anyone – Military-to-Military Ties Remain the Same

There doesn’t seem to be a change in military-to-military ties.  After the U.S. sold arms to Taiwan last January, China broke off military ties and the relationship has barely warmed.  When Secretary of Defense Robert Gates visited Beijing a few weeks ago, a stealth jet fighter was flown unbeknown to even President Hu Jintao.

The Joint Statement (paragraph 9) includes language on improving and deepening communication between the two militaries.  But it appears to be boilerplate language similar to the language found in the Joint Statement issued after President Obama’s visit to China in November 2009.  The fact that China’s military remains non-transparent, secretive and slightly threatening is a serious issue.  The fact that President Hu did not seem to have control of the military, even though he is the nominal Chairman of the Central Military Commission, is even more troubling, for both the U.S. and China.

The U.S. military is stationed through out China and patrols many international waters.  The Chinese military is becoming increasingly assertive at times.  Small incidents have occurred in the past.  But without good communications between the two militaries, it is easy for any small incident to become an international one that could upset the stability in the Pacific.  Hopefully the promised high-level military visits between the two countries will soon produce results.  Then both the Chinese and American people will find it easier to sleep at night.

Winner?

It’s a tie. As far as State visits go, this was a pretty good one.  Everyone got something they wanted and can bring back positive results to their respective people.  Aside from military relations, U.S.-China rhetoric seems to be improving.  Hopefully this trend can continue.

Clinton on U.S-China Relations – A Changed Approach

By , January 17, 2011

Secretary of State Hillary Clinton delivers the Richard Holbrooke Inaugural Lecture

The Obama Administration has a new China policy, or at the very least has gotten better at articulating it. In preparation for President Hu Jintao’s January 19 State visit, key officials in the Obama Administration outlined their goals for the U.S.-China relationship through a series of speeches last week. 

While Secretaries Tim Geithner and Gary Locke each focused on specifics (currency, market access, intellectual property), Secretary of State Hilary Clinton’s speech on Friday (click here for speech transcript) provided a new framework by which to view the U.S.-China relationship. Rest assured this isn’t the same soft China policy that accompanied President Obama on his visit to China in November 2009. 

In her speech, Clinton acknowledged the importance of the U.S.-China relationship to each country and the world at large. But while it values its relationship with China, the United States still has choices and the U.S. would “firmly and decisively” address its differences with China. Friday’s speech, which was also the inaugural Richard C. Holbrooke Annual Lecture, in honor of former State Department official and an important peace envoy (key player in the Dayton Peace Accords and envoy to Afghanistan), has already received criticism from China’s leadership.  

Clinton Announces a New Paradigm By Which to View China’s Rise

Perhaps the greatest obstacles in the relationship – at least for the U.S. – have been China’s currency manipulation and China’s protection of domestic industries at the expense of international trade rules and norms.  What the U.S. asks of China – to stop pegging its currency to the U.S. dollar and to open its markets to foreign competition in accordance with international standards – inevitably means that in the short-term, Chinese domestic companies will suffer.  By allowing its currency to float, Chinese exports will become more expensive, hurting the manufacturing backbone of its economy.  Opening its markets to more competition from foreign companies and products – particularly the government procurement market – could impair the development of many of China’s nascent industries. 

Needless to say, it has been difficult to find a convincing argument to make Chian’s leaders willing suffer short-term hurt. In the past, U.S. officials have repeatedly discussed how in the long-run these changes will eventually better promote China’s economic growth and power. But this appear disingenuous since in the short-term, it is the U.S. that will most greatly benefit from changes to Beijing’s current policies.  Additionally, telling Beijing what’s good for it in the long-run is sort of like parents telling their kids what is best. 

But Clinton’s speech took on a decidedly different approach and offers a more convincing, even slightly threatening argument.  Clinton did not bother with a “what is best for China” argument to try to convince the Chinese government; instead Clinton provided an entire new way by which to view China’s rise.  Clinton acknowledged the hard work of China’s people and the far-sightedness of its leaders in creating the world’s second largest economy in just over 30 years.  But Clinton also stressed the important role the United States played in China’s rise; without the United States, which guaranteed military security in Asia and equitable rules to govern the global economy, China’s current success would have been impossible.  

By tying China’s rise to the stability the United States provided in the region for the past 30 years, Clinton makes a much stronger argument as to why China’s leaders should make some changes on currency and market access – basically, these are the rules of the game that allowed you to succeed and now you think you can just change them? 

No rest for Robert Gates

The United States Will Remain a Pacific Power

But if logic isn’t enough to better protect U.S.’ interests, Clinton put China on warning that it is not the only fish in the sea.  Repudiating any notion of a G-2 relationship, Clinton gave a shout out to the other countries in the region, stating that the United States intends to remain a Pacific military power, strengthen its bonds with its allies in the region (e.g. Japan, South Korea, Philippines) and deepen its ties with developing Asian countries (e.g. India, Vietnam, Indonesia).

On some level, this should not come as a surprise to China.  This past summer, the United States involved itself in a long-running dispute between China and Vietnam over the control of a group of rock islands, stating that the U.S. has a national interest in mediating the dispute.  Additionally, recent bellicose developments on the Korean peninsula and China’s ambivalent response to the North’s unprovoked attack on South Korea, makes it apparent that the United States must maintain a strong military presence in the region.  China’s response shows that it is not yet ready to take on the responsibility of maintaining peace in the Pacific region since its loyalties to North Korea still dominate. 

Finally, Clinton noted that China’s non-transparent military build-up leaves one wondering what exactly are China’s intentions.  Military-to-military ties between the

China launches its Stealth fighter jet during Robert Gates visit to Beijing

 United States and China are at all-time low, mostly at the fault of China.  China’s military continues to shroud itself in secrecy and the recent visit of Secretary Robert Gates to China was a complete debacle.  While Gates visited with President Hu Jintao in Beijing, the People’s Liberation Army (PLA) tested – in a very public way – its own stealth fighter jet.  Hu’s admission that he was unaware of the PLA’s planned test fight, is not particularly reassuring.  Not only does the PLA continue its secrative military build-up, but it’s even a secret to China’s own President, making one wonder, what power does Hu still have?  If history is a guide, whoever is in charge of the Chinese military is in charge of China.  If not Hu, then who?

Getting Serious About Human Rights

Clinton was surprisingly blunt when it came to China’s human rights record and didn’t just portray human rights as a peculiar aspect of the American culture (see President Obama’s talk to Shanghai students in November 2009 for this approach).  Instead, Clinton emphasized the universality of certain human rights and highlighted the fact that China is a signatory to many United Nations human rights treaties.  The United States is not interfering with China’s domestic politics; instead the United States is merely requesting that China fulfill its human rights obligations, obligations it voluntary agreed to. 

But Clinton went further and mentioned specific dissidents, including the recent Nobel Peace Prize winner, Liu Xiaobo who is currently languishing in a Chinese prison; rights defending attorney Chen Guangcheng who since his release from prison has been subject to repeat police harassment; and missing rights defending attorney Gao Zhisheng.   Clinton stressed that as long as people like these three continue to advocate peacefully within the confines of the law, China should not persecute them.  Clinton poetically commented that the empty seat for Liu Xiaobo at last month’s Nobel Peace Prize ceremony symbolizes China’s unrealized potential.  Clinton stressed that these human rights are necessary to China’s success; freedom of speech is essential to fostering free thought that leads to technological and scientific advancement and a vibrant civil society addresses social-economic problems that are currently one the regime’s biggest fears. 

The Obama Administration has a new policy on China – it’s tougher, more logical and stresses the importance of human rights.  The Chinese government has already responded.  President Hu Jintao, in an interview with the Washington Post, commented that the United States should not interfere with the internal affairs of China. 

Wednesday’s meeting between Presidents Hu and Obama should prove to be perhaps some of the most important conversations in the U.S.-China relationship since Kissinger secretly visited Beijing in 1971 in preparation for President Nixon’s visit.

Gary Locke’s Take on U.S.-China Relations – “Trenton Makes the World Takes”

By , January 13, 2011

I used to think I was the only one who noticed the huge, weird, angry sign “Trenton Makes the World Takes” plastered on the Delaware Bridge just outside the New Jersey city of Trenton.  So imagine my surprise when this slogan was featured in Commerce Secretary Gary Locke’s speech about U.S.-China relations before the U.S.-China Business Council (USCBC) on Thursday.  For Locke, the manufacturing center of Trenton during the early 20th Century is China today; it’s China that now makes and the world takes.

But the status quo must change Locke argued.  While noting some successful U.S.-China commercial relations, Locke raised the issue of market access in China, particularly in light of China’s indigenous innovation policies and its lax protection of intellectual property (which makes one wonder why didn’t he continue to play with the Trenton theme and say “China makes AND takes”; that would have elicited laughs from the USCBC for sure),  Between Locke’s speech, reprinted below, and Treasury Secretary Tim Geithner’s speech Wednesday, there is some serious saber-rattling coming from the American delegation in preparation of President Hu Jintao’s State visit next week.

Commerce Secretary Gary Locke Delivers Policy Speech

on U.S.-China Commercial Relations

Thank you John, for that kind introduction.  And thank you for having me here today.

We are today less than a week away from an important State visit by Chinese President Hu Jintao.

More than two decades ago, on my first trip to mainland China, I could not imagine that the U.S.-China relationship would eventually become so consequential.

Nor could I have imagined a scene like we witnessed a few days ago: Defense Secretary Gates joining together with his Chinese counterpart to stress the need for stronger military ties between China and the United States.

In 1989, I came in from Shanghai’s airport on a rickety, Russian-made bus, and stepped into that city’s dimly lit streets into a world very different than the one I left in the U.S.

There were swarms of bicycles – young men with their dates balanced on handlebars, grandparents pedaling to the market, boys and girls with white-knuckle grips on their parents’ shoulders. Bikes everywhere.

Shanghai then was a gritty, industrial city filled with low-rise buildings.

There were no skyscrapers. Few cars.

There was little sign of what was to come.

Today, Shanghai’s skyline is dotted by more than 400 skyscrapers.  Go to the Shanghai World Financial Center – one of the tallest buildings in the world – and you can stay at a Park Hyatt Hotel with a lobby on the 79th floor.

Those bike paths I saw on my first visit have been replaced by elevated freeways shuttling people and commerce at a frenetic pace.

To see it is to be awed, and I am every time I go back to China.

The explosive growth in places like Shanghai has helped lift almost 200 million people out of poverty.  In the years ahead, hundreds of millions more Chinese citizens will join the middle class.

The United States welcomes this growth, because it’s good for the people of China; it’s good for the global economy; and it’s important for U.S. companies who offer world-class products and service, products and services that can improve the quality of life for the Chinese, while providing jobs for American workers back home.

With the U.S.-China Business Council’s help, this has become perhaps the most important bilateral trading relationship in the world.

China is the top destination for American exports, behind just Canada and Mexico.  And America is the number one national market for Chinese exports.

In the past 20 years, U.S. exports to China have increased by a factor of 12; imports from China have increased more than 30-fold.

However, we are at a turning point in the U.S.-China economic partnership.  Last year, China became the second largest economy in the world.  And the policies and practices that have shaped our relations over the past few decades will not suffice over the next few decades.

So today, I’d like to talk a bit about how we can move forward and ensure that we can unlock the full potential of the U.S.-China commercial relationship in the early 21st century.

The gross trade imbalances between our countries are a good place to start, because they have the potential to threaten global stability and prosperity.

And I think a great illustration of that can be found in, of all places, Trenton, New Jersey.

Many of you have likely taken Amtrak up to New York, and when you pass by the Delaware River in New Jersey, you see that famous sign: Trenton Makes and the World Takes.

Well, replace Trenton with China, and you have a simplistic, but pretty accurate description of the global economy over the last few decades.

China and the United States benefited tremendously from this arrangement in recent years.

American consumers got an impressive array of low-cost goods.  And in its transition into one of the world’s top exporters, China was able to lift millions of its citizens into a fast-growing middle class.

But it’s not sustainable.  The debt-fueled consumption binge in developed countries like America is over.

And countries like China are beginning to realize that there are limits to purely export-driven growth.

That’s why we need a more equitable commercial relationship.  And it is within our reach.

The United States is doing its part to facilitate global adjustments by increasing private savings and exports, as well as taking steps to bring down its long-term fiscal deficits to a sustainable level.

And the Chinese leadership is making the rebalancing of its economy one of the cornerstones of its forthcoming five-year plan.

China is aiming to promote domestic consumption through a variety of measures, such as boosting the minimum wage for its workers and building an improved social safety net. Changes like these will hasten the rise of a middle class that wants the same cars, appliances, fashion, medical care and other amenities that have long been enjoyed by consumers in the Western world.

The Chinese government is also putting an intensive focus on strategic emerging industries, with more high-value work in areas like healthcare, energy and high technology.

And the Chinese have signaled that they want foreign businesses to help develop these sectors by entering joint ventures and by conducting more research and development in China.

This is assistance that U.S. companies are eager to provide, so long as China deals meaningfully with concerns about intellectual property protection, as well as a variety of other issues I will talk about later.

Such cooperative projects can serve as the foundation for a stronger economic relationship between China and the U.S.

But China’s long-term success at addressing the concerns of international businesses will help determine whether it realizes its economic vision – a vision in which China is a leader in innovation and a producer of higher-value goods and services.

Here’s the good news: we are already seeing examples of just how this future could play out, as our businesses and our governments collaborate to tackle some of the world’s greatest challenges.

Just look at what’s happening with the new Energy Cooperation Program that Secretary Chu and I announced while in China in October 2009 to promote more collaboration between Chinese and American companies on energy issues.  One of the founding corporate members of the program, Boeing, is partnering with Air China and Petro China to research a new generation of aviation biofuels that don’t rely on food crops.

If this venture is successful, it could reduce the carbon footprint of airplane travel, and avoid the negative impact that other biofuels have on the global food supply.

Or look at what’s happening with Duke Energy, one of America’s leading utilities, which has signed an agreement for joint research with China’s largest energy company, Huaneng, and with the Chinese government’s Thermal Power Research Institute.

Today, there are scientists and researchers shuttling between the companies and the research institute, working to develop cutting-edge solutions for cleaner-burning coal and carbon sequestration.

The Chinese and American governments are also working together on a variety of transportation issues, including how to spur the deployment of more high-speed rail.  China has embraced high-speed rail and has developed its infrastructure at a tremendous rate.  Starting from scratch, China has constructed and put into service over 4,000 miles of high-speed routes in the last decade – making China’s the longest high-speed rail network in the world.

In meetings last year, officials and experts from the Department of Transportation and China’s Railway Ministry met in Cambridge, Massachusetts, to share information on the development of high-speed rail standards.  And at the state level, the Chinese government has signed cooperation agreements with the State of California on its high-speed rail project to link Anaheim and San Francisco.

There is, however, a sobering side to U.S.-China commercial relations: For every story like Duke Energy’s or Boeing’s, there are many more that are never written.

When I talk to business leaders across America, they continue to express significant concerns – shared by business around the world –about the commercial environment in China – especially China’s lax intellectual property protection and enforcement, lack of transparency in government decision-making and numerous indigenous innovation policies that often preclude foreign companies from vying for Chinese government contracts.  These policies mandate that products must be made, conceived and designed in China.

It’s important to note that since China formally joined the WTO nine years ago, it has made important progress opening its market.  Tariffs have come down, private property rights are steadily evolving and great strides have been made to free the flow of commerce across China’s borders.

On balance, the competitive playing field in China is fairer to foreign firms that it was a decade ago.  And we commend the Chinese for that.

It is also not lost on countries in the West that on our march towards industrialization, we sometimes protected native industries with policies that today would mobilize an army of WTO lawyers in opposition.

But those policies were folly then, and they are surely folly now.  After World War II, the United States and a growing community of nations painstakingly built a global trading system based on the freer flow of goods, ideas and services across borders.

And the creation of the World Trade Organization in 1995 ensured that countries would be held accountable for their commitments to open markets and lower barriers.

China has benefited tremendously from this international trading system, especially since it joined the WTO in 2001.  The United States and other foreign nations have every right to seek more meaningful commitment and progress from China in implementing the market-opening policies it agreed to when it joined the WTO.

From our experience, there are usually five things that need to happen to turn these promises into reality.

It starts with the easiest step: a statement of principle from Chinese officials that action will be taken to solve a market access issue.

Next, that agreement has to be codified into binding law or regulations.

Third, the law or regulation needs to be faithfully implemented by the central government.

And fourth, it needs to be implemented at the local and provincial levels.

Only after all these things have happened can you arrive at the fifth, final and most important step, which is where this new law or regulation becomes a norm – an accepted way of doing business in China’s commercial culture.

When it comes to indigenous innovation, intellectual property or a variety of other market-access issues, an enduring frustration is that in too many cases only the earliest steps are taken, but not all five.

Perhaps an agreement is made, but it never becomes binding.  Or perhaps there’s a well-written law or regulation at the national level, but there’s lax enforcement at the provincial or city level.

A few weeks ago, the Commerce Department and the office of the U.S. Trade Representative welcomed Vice Premier Wang Qishan and other leading Chinese officials for the 21st Joint Commission on Commerce and Trade, where we worked through a variety of specific trade issues.

It was a productive meeting.  Vice Premier Wang and his team were responsive to our concerns and they pledged action in a variety of areas critical to American businesses.

They agreed to remove administrative and regulatory barriers discriminating against American companies selling everything from industrial machinery and telecom devices; to those that restrict U.S. participation in the development of large-scale wind farms in China.

They also agreed to revise one of their major government procurement catalogues to ensure a level playing field for foreign suppliers and to reduce the use of counterfeit software in government offices and state-owned enterprises.

Additionally, Vice Premier Wang asked the Commerce Department and the U.S. Trade Representative to partner with him on a public campaign to reduce intellectual property rights violations in China, which he is leading.

The American government welcomes these commitments from China.

But to be clear, they are only a first step.  What was agreed to at the JCCT were important statements of principle and policy – but they must be turned into concrete action with results.

Take last year’s JCCT, when the Chinese agreed to remove a local content requirement for wind turbine suppliers – a positive step forward.

But soon after, China’s government employed a rule that required foreign businesses seeking to build large scale wind farms in China to have prior experience with such projects in China.  The rule might have been different than the local content requirement, but it had the same effect – making it tougher for foreign companies to compete with China’s domestic companies.

At this year’s JCCT, we persuaded the Chinese to modify that rule as well.

Or look at the issue of intellectual property. We have heard Chinese leaders condemn IP-theft in the strongest terms, and we’ve seen central government laws and regulations written or amended to reflect that sentiment.

But American and other foreign companies, in industries ranging from pharmaceuticals and biotechnology to entertainment, still lose billions of dollars from counterfeiting and IP-theft in China every year.

For example, in the United States, for every $1 in computer hardware sales there is about 88 cents in software sales.  But in China, for every dollar in hardware sales there is only eight cents in software sales.

According to the Business Software Alliance, that discrepancy is largely explained by the fact that nearly 80 percent of the software used on computers in China is counterfeit.

So America welcomes Vice Premier Wang’s pledge to accelerate China’s crackdown on intellectual property violations.  And China will have a very willing partner in this endeavor in the United States.  But we will be focused on meaningful outcomes.

I recognize I’m not the first foreign official to express concern over the commercial environment in China.  But it would be a mistake to portray this concern solely as U.S. self-interest masquerading as advice.

The Chinese economy is increasingly moving up the global economic value chain, where growth is created not just by the power of a country’s industrial might, but also by the power of its people’s ideas and their inventions.

In the long run, economies with poor intellectual property protections and inconsistent application of market access laws will lose out on generating great new ideas and technologies.  And they’ll lose out on the jobs that come with producing new products – jobs critical to an expanding middle class.

The damage won’t happen overnight.  I freely admit that companies and countries can gain short-term advantages from lax rules in the commercial space.

But over time, if innovators fear that their inventions or ideas will be stolen or discriminated against, one of two things will happen – they’ll either stop inventing, or they’ll decide to create or sell their inventions elsewhere.

Ultimately, all that the United States seeks is a level playing field for its companies, where the cost and quality of their products determines whether or not they win business.

That is the ideal we strive for in the United States.

And our commitment to open and competitive markets is a big reason why we remain the number one destination for foreign direct investment in the world.

We understand that China’s modernization and evolution towards a more market-oriented economy is a process that will take time.

China has 1.3 billion people.  Seven hundred million of them still live in rural areas; many with little electricity or running water.  It took the United States over 100 years to build the electrical transmission capacity it has today.

To meet the rising demands of its own consumers, China will have to build a similar amount of capacity in just 15 years.

These are enormous undertakings.  And it’s understandable if, in the past, China’s immediate development goals took precedence over other concerns.

With millions of Chinese coming in from the countryside looking for work, it isn’t necessarily an easy decision to close down a factory producing counterfeit goods, when that factory is providing badly needed jobs.

So what we’re discussing here are real and significant challenges. For market reforms to continue, it will take constant vigilance – not just from the United States, but from all countries and businesses around the world that benefit from rules-based trading.  And from Chinese business and government leaders, who themselves have a strong stake in ensuring that China is friendly to global innovation and international competition.

In front of us is the opportunity for China and the United States to lead the world economy in the early 21st century to create a new foundation for sustainable growth for years to come.

We can’t tell exactly what that future will look like.

But we can be certain that it will be a better future if the Chinese and American governments pursue cooperation over confrontation in the economic sphere.

Cooperation that will put millions of our people to work.

Cooperation that will develop technologies to solve the most pressing environmental, economic and social challenges facing the world today.

This is the great opportunity before China and the United States.  We just have to seize it.

Thank you.

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Treasury Secretary Geithner Speaks on China Relationship

By , January 13, 2011

Treasury Secretary Tim Geithner

In preparation for President Hu Jintao’s State visit next week, Secretary of the Treasury, Timothy Geithner, provided his thoughts on the future of the U.S.-China economic relationship at John Hopkins School of Advance International Studies (SAIS) on Wednesday, January 12.  While the speech provided the usual platitudes of a shared economic future, the tone was at times cautionary about the current state of the economic relationship.  Geithner spoke frankly of China’s barriers to market access and concerns over currency.  With Commerce Secretary Gary Locke and Secretary of State Hillary Clinton to each give their own speeches in the coming days, Hu’s State visit to the U.S. next week might not be the polite rhetoric of before.  See below for Geithner’s full comments.

Secretary of the Treasury Timothy F. Geithner

“The Path Ahead for the U.S.-China Economic Relationship”

Remarks As Prepared for Delivery

It’s a pleasure to be here at SAIS.

SAIS is a leader in one of the most important challenges in public policy and education – that of helping Americans understand the world and the role we play in it.  This is important because we cannot effectively pursue our national interests unless we understand the objectives, the intentions, and the capabilities of other nations.

Next week, President Obama will host President Hu Jintao at the White House.

This State Visit takes place at a time of important transition for the world economy, the Chinese economy, and the U.S. economy.

The global economy is emerging from the financial crisis, but that crisis has left lasting scars that will take years to repair.  And it has left a growing gap between the growth trajectories of the large developed economies and the rapidly growing emerging economies.

While many of the major economies are still confronted with the challenge of rebuilding after crisis, many of the emerging economies are at the early stage of what should be a long period of very rapid economic growth, with rising incomes creating growing demand for resources and for investment capital.

The growth of the United States stands between these two divergent paths.  We are likely to grow at about half the rate of the major emerging economies, but about twice the rate of Europe and Japan.

These dynamics will fundamentally change the balance in the world economy, forcing changes in the architecture of the trade and financial systems.

In this new global context, China’s principal economic challenge is how it will manage the next stage in its transition from a state-dominated developing economy, dependent on external demand and technology, to a more market-oriented economy, with growth powered by domestic demand and innovation.

Today, I want to talk about the implications of these changes for our economic relationship with China and for U.S. economic policy.

China presents enormous economic opportunities for the United States and for the world, but its size, the speed of its ascent, and its policies are a growing source of concern in the United States and in many other countries.

To put those concerns in context, I’d like to begin by stating a few fundamental propositions about our economic relationship.

First, the economic relationship between the United States and China provides tremendous benefits to both our nations.  Even though we compete in many areas, our economic strengths are largely complementary.

Second, China faces a very complicated set of challenges as it transitions toward a more open, market oriented economy.  It is very much in our interest that the Chinese manage these challenges successfully.

Third, our priorities in our economic relationship with China – from its exchange rate to its treatment of intellectual property – reflect changes that are fundamentally in China’s interest.  Ultimately, China will need to make these changes in order to promote its own long-term prosperity.

Fourth, and finally, I want to emphasize that the prosperity of Americans depends overwhelmingly on the economic policies we pursue to strengthen American competitiveness. Even as we work to encourage further reforms in China, we need to understand that our strength as a nation will depend, not on choices made by China’s leaders, but on the choices we make here at home.

Now, over the last few decades, China has emerged as a major economic force.

That growth was unleashed by China’s economic reforms, a growing labor force, and one of history’s greatest economic migrations from farms to factories.

But China’s growth was also made possible by the access China enjoyed to the markets, the investments, and the technology of the United States and the other major economies.

The open, multilateral system of trade and investment, with its balance of rules and responsibilities, was built with the leadership of the United States decades before China opened up to the world.

The opportunities created by the system were fundamental to China’s economic ascent, and they remain vital to China’s ability to continue to grow.

China needs the United States, but the United States also benefits very substantially from our rapidly expanding economic relationship with China.

The benefits of this relationship are hard to capture in any one statistic, but remember this.

The United States is on track to export more than $100 billion of goods and services to China this year.  Our exports to China are growing at twice the rate of our exports to the rest of the world.

These exports are supporting hundreds of thousands of jobs across the nation in all sectors – from high technology to soybeans, aircraft to autos, and forklifts to financial services.

We have a great deal invested in each other’s success.

In our economic relationship with China we have focused on two principal objectives.

The first is to expand opportunities for U.S. companies to export and sell to the Chinese market.  This requires a more level playing field for U.S. companies that compete with Chinese companies in China, in the United States, and around the world.

Our second objective is to promote reforms that will reduce China’s reliance on export led growth and encourages a shift to domestic consumption and investment.  As part of this, China’s exchange rate needs to strengthen in response to market forces.

I want to provide a quick review of some of our concerns and the extent of progress, as we see it, in each of these areas.

First, on the broader competitive landscape in China and the opportunities and challenges we face competing in China:

The commanding heights of China’s economy and its financial system are still dominated by the government.

Chinese companies and workers are able to take advantage of a range of preferences and subsidies and operate behind trade barriers that give them a competitive advantage relative to U.S. and other foreign firms and workers.

They get access to low-cost finance, land, and energy.  They enjoy preferences in terms of access to government contracts.

Next, theft of intellectual property remains widespread in China, across many industries.

And the Chinese government has introduced a range of new policies to encourage innovation in China that are designed to favor Chinese technology over foreign technology, including in the enormous Chinese government procurement market.

Where these practices violate China’s international commitments, we are actively using the remedies available under U.S. and international trade laws to protect our interests.

And China has been gradually moving to address some of our concerns.

The government recently launched a new enforcement effort to combat the theft of intellectual property and to force Chinese companies to pay for the intellectual property they use.

The Chinese leadership has committed to expand opportunities for U.S. firms in access to procurement by government entities.

And the government has committed not to discriminate against U.S. companies that operate in China.

We welcome these commitments.  They don’t address all our concerns, but they are something we can build on.  And we will continue to press the Chinese to translate these commitments into further progress.

Doing so is in their interest.  Government domination limits competitiveness within the Chinese economy and prevents the private sector from contributing to growth at its full potential.  And you can’t promote innovation if you don’t protect intellectual property.

Alongside the reforms I’ve mentioned, we want to encourage China to move definitively away from the export driven growth model of the last few decades to a growth model driven by domestic consumption.

The Chinese leadership recognizes that China is now too large relative to the world economy for it to continue to rely on foreign demand to grow.  And the government has adopted a comprehensive program of reforms to rebalance the economy and shift growth to domestic demand.

This requires reforms to increase public spending on health and education, raise and enforce minimum wages, remove barriers to investment in services, expand access to financial products for individuals and entrepreneurs, and remove subsidies for investment in the sectors that drove the initial decades of growth.

This transition will take time, but it is already having a major impact on the shape of Chinese growth, and providing increased opportunities for American companies.  Domestic demand is contributing more to growth, and as a consequence, U.S. exports to China are growing more rapidly, and U.S. companies operating in China are seeing more opportunities.

Finally, and importantly, China still closely manages the level of its exchange rate and restricts the ability of capital to move in and out of the country.

These policies have the effect of keeping the Chinese currency substantially undervalued.

They also impose substantial costs on other emerging economies that run more flexible exchanges rates, and as a result have experienced a substantial loss of competitiveness against China.

This is not a tenable policy for China or for the world economy.

If China does not allow the currency to appreciate more rapidly, it will run the risk of seeing domestic inflation accelerate and face greater risk of a damaging rise in asset prices, both of which will threaten future growth.  And sustaining an undervalued currency will undermine China’s own efforts to rebalance growth toward domestic consumption and higher-value-added production.

Since June of 2010, when Chinese authorities announced they would resume moving toward a more flexible exchange rate, they have allowed the currency to appreciate only about 3 percent against the dollar.  This is a pace of about 6 percent a year in nominal terms, but significantly faster in real terms because inflation in China is much higher than in the United States.

We believe it is in China’s interest to allow the currency to appreciate more rapidly in response to market forces.  And we believe China will do so because the alternative would be too costly – for China and for China’s relations with the rest of the world.

These are our main priorities.  China’s objectives are focused on the following areas:

  • China wants more access to U.S. high technology products.
  • China to take greater advantage of investment opportunities in the United States.
  • China would like to be accorded the same terms of access that market economies enjoy.

We are willing to make progress on these issues, but our ability to move on these issues will depend of course on how much progress we see from China.

As China reduces the role of the state in the economy, reforms policies that discriminate against U.S. companies, removes subsidies and preferences for domestic firms and technology, and allows its exchange rate to reflect market forces, then we will be able to make more progress on China’s objectives.

In any discussion of China, I think it is important for Americans to understand the solutions to our challenges in the United States rest first and foremost in the policies of Washington, not of Beijing.

Fundamentally, how many jobs and how much wealth we create will be the result of the choices we make in the United States – not the choices of others.

In our efforts to rebuild and put Americans back to work, we have to make sure we are making the investments and reform that will be essential to our capacity to grow in the future.

As countries like China, India, Brazil and other emerging economies grow and expand, we want the American economy, American workers, and American companies to play a major role in – and gain substantial benefits from – that growth.

We want to see a substantial part of that growing demand outside of the United States met by goods and services that are created and produced in the United States, and fueled by investment in the United States.

If we are successful in doing that, we will be stronger as a nation.

But to be successful in meeting that challenge, there are things we must do.

We must invest more in research and development.

We must invest more in educational reforms.

We must invest more in public infrastructure.

We must create stronger incentives for investment in the United States, by both American and foreign companies.

We must be more forceful and effective in promoting American exports.

And we must restore fiscal responsibility.  This will require the government to spend less and spend more wisely, so that we can afford to make the investments that are critical to future growth.  And it will require tax reform that produces a system that is more simple and more fair, that encourages growth and investment, and that will help restore fiscal sustainability.

These are our challenges.  And they are not just an economic imperative, they are a national security imperative.  Our strength as a nation depends on the ability of our political system to move quickly enough to put in place solutions to our long-term problems.

Our great strengths as a country have been in our openness to ideas and talent, our capacity to innovate, our excellence in higher education, a willingness to invest public resources strategically in scientific research and discovery, and the political will to confront challenges with wisdom and force.

If we preserve and build on these strengths, and if China successfully continues on its path to a more open, market economy, then both our countries and the world economy will be in a much stronger position.

The President recently said, “We should feel confident about our ability to compete, but we are going to have to step up our game.”

China’s rise offers us the opportunity of dramatic growth in demand for things Americans create and produce.  But it also will force us to raise our game.

We should welcome both the opportunity and the challenge.

Thank you.

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President Hu Jintao to Visit the U.S.

By , December 23, 2010

Yesterday, the White House announced that President Hu Jintao will make a State visit to the U.S. on Wednesday, January 19, 2011.  President Hu’s visit is long overdue; at the end of President Barack Obama’s State visit to China in November 2009, it was expected that President Hu would visit the U.S. by the summer of 2010.

Needless to say, President Hu’s visit will come at an interesting time.  The State visit was not the only China-related news that the Administration announced on Wednesday; the Obama Administration also supported the United Steelworkers’ contention that China is illegally subsidizing its wind turbine industry by filing a suit in with the World Trade Organization.  And as trade issues continue to plague U.S.-China relations, North Korea’s recent bellicose actions against the South reflect the importance of China in maintaining peace in Asia while North Korea undergoes a leadership change.  Given the importance of the two nations to each other as well as to the rest of the world, a one-day State visit seems a bit short.  It will be interesting to see what deliverables emerge from the visit.

THE WHITE HOUSE

Office of the Press Secretary

______________________________________________________________________________

FOR IMMEDIATE RELEASE                                                                     December 22, 2010

Statement by the Press Secretary on the Visit of President Hu Jintao of the People’s Republic of China

The President will host Hu Jintao, President of the People’s Republic of China, at the White House on January 19 for an official State visit.  This will be the third State visit of the administration and reciprocates President Obama’s State visit to China in November 2009.

President Hu’s visit will highlight the importance of expanding cooperation between the United States and China on bilateral, regional, and global issues, as well as the friendship between the peoples of our two countries.  The President looks forward to welcoming President Hu to Washington to continue building a partnership that advances our common interests and addresses our shared concerns.

The President and Mrs. Obama will host President Hu for an official state dinner on the night of January 19.

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U.S.-China Strategic & Economic Dialogue Will Be Anything Less than Dull

Only a handful of the 200 U..S. officials at today's Strategic & Economic Dialogue in Beijing

Only a handful of the 200 U..S. officials at today's Strategic & Economic Dialogue in Beijing

The second U.S-China Strategic & Economic Dialogue (S&ED) is off to an interesting start in Beijing.  The U.S.’ agenda for the talks – agreement on Iran sanctions, change in China’s currency policy, and greater openness of China’s procurement market for foreign companies – was largely overshadowed this morning by South Korea’s announcement that it will hold North Korea responsible for the torpedo attack on a South Korean war ship, the Cheonan, in March 2010 which resulted in the death of 46 sailors.

As the S&ED was set to open in Beijing, South Korea’s president, Lee

Chinese President Hu Jintao greets U.S. Secretary of State Hillary Clinton at Monday's opening of the S&ED

Chinese President Hu Jintao greets U.S. Secretary of State Hillary Clinton at Monday's opening of the S&ED

Myung-Bok, issued the strongest statement against North Korea in decades and announced that all trade between the Koreas would be suspended, investment would be stopped, and North Koreans would not be permitted to visit South Korea.  Additionally, South Korea will also reinstall megaphones at the border between the two countries and resume anti-North Korean broadcasting, a practiced it stopped in 2004 when tensions were easing between the two Koreas.  Previously, North Korea stated that any retaliation by South Korea in response to the Cheonam incident would be seen as an act of war; today it announced planned attacks on any South Korean megaphones at the border.

In her remarks during the S&ED’s opening ceremony, Secretary of State Hillary Clinton, who is accompanied by 200 U.S. officials on this trip, brought up the issue of North Korea’s increasing “belligerent” actions and the need for the U.S. and China to work together in regards to North Korea.  Chinese President Hu Jintao did not mention North Korea in his speech.

But President Hu did bring up the currency issue in his remarks, to the surprise of most.  In his speech, President Hu promised that China would continue to reform its currency policy, but noted it would be on China’s terms and such reform would be gradual.

With the delay of the Treasury Department’s report on China’s currency policy and recent op-eds in the state-controlled Chinese press regarding the need to give more flexibility to China’s currency — the yuan — it appeared that China would make some sort of concession on the currency issue.  However, the recent crisis in Greece and the European Union, which has resulted in a 20% drop in the value of the Euro against the dollar, changed that opinion.  By effectively tying the yuan to the dollar, as the dollar gets stronger against the Euro, Chinese goods become more expensive in the European Union, China’s largest export market.  So President Hu’s promise to do something about China’s currency policy was a bit of a surprise.  And the public nature of the comment was even more surprising since the revaluation of the yuan is a hot-button issue for the Chinese domestically: Beijing does not want to appear to be placating to U.S. demands.

But what remains to be seen is when: when will China adjust its currency policy.  Don’t expect that question to be answered at the S&ED which concludes Tuesday afternoon.

Adam Segal Discusses U.S.-China Relations in a Cyber World

By , April 14, 2010

World leaders met this week in Washington, DC to discuss the danger of nuclear war.  But as the world becomes increasingly reliant on the internet and increasingly connected through it, another threat is beginning to loom large – cyberwar.  When noted technology giant Google is susceptible to cyber-attacks, that does not bode well for the rest of us.  How safe is the U.S. from a large-scale cyber-attack?  Today Chinese hackers attack Google’s servers, but what about tomorrow?  Will the next attack be on something more critical, like a U.S. power grid?

Dr. Adam Segal, Ira A. Lipman Senior Fellow, Council on Foreign Relations

Dr. Adam Segal, Ira A. Lipman Senior Fellow, Council on Foreign Relations

To understand the complex issues underlying the world of hacking and cyber-espionage, and how it relates to U.S.-China relations, China Law & Policy sat down with a noted expert on both China and cyber-security, Dr. Adam Segal, the Ira A. Lipman Senior Fellow at the Council on Foreign Relations.   In this exclusive interview, Dr. Segal discusses the nature of the attacks on Google, the involvement of the Chinese government in the hacking world and the danger China poses to the U.S.’ cyber-security.  But as Dr. Segal makes clear, it is not a one-sided affair; the U.S. also plays a very active role in hacking and cyber-espionage, making it difficult to challenge China when something like the Google incident arises.  Dr. Segal also explores the need for international cooperation on these issues and the role that international law can play in containing the threat.  Unfortunately, as he points out, the world community is far from reaching any sort of agreement, leaving all nations susceptible.

Click here to listen to the interview with Dr. Adam Segal (read below for transcript)

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ELCan you just give our listeners a little bit of background on the hacking which lead to Google’s announcement in January that it was looking to leave China?  How widespread and sophisticated was the attack and what was the theft that Google referenced in its press release if you know at all?

AS: Google announced that it was going to be shutting down its business in China.  And what they said drove them to that decision was a hacking incident which seems to have two main components.  The first was, as you said, a kind of attack on Google’s intellectual property, its corporate knowledge and corporate property.  And the second was attacks on the G-mail accounts of human rights dissents.  Google said it traced those attacks back to China; it didn’t implicate the Chinese government.  Others, like the New York Times have traced it back to Shanghai Jiaotong University and a computer training institute but the source of it still remains a bit of a mystery.

There is some debate about how sophisticated the attacks actually were.  They were referred to as the Aurora attacksHacker hackingGoogle has consistently said that they were extremely sophisticated but a number of other security analysts have said that in fact they were fairly basic, that much of the code used has been floating around for a long time.  What the IPR that the Chinese got or were trying to get is unclear, Google hasn’t specifically said.  Some people seem to believe that it was basically that it was the data and databases that Google collects on its own users.  So basically the kind of core knowledge that Google extracts from what Google users do, how they do it, when they do it, which would be one of the most important kind of assets that Google has.

ELIn tracing back, or Google saying that the attacks were traced back to China, why is that difficult to ascertain?  To what degree…Can you put a percentage on how accurate you can trace back an attack?

AS:  The problem is that you can continually trace back the attacks to certain computers or to certain networks or IP addresses, but often once you get there, some more poking around leads you to another computer behind that.  And the other thing is the hackers themselves can spoof the address that they are using.  I think there becomes a fairly high degree of certainty about where the attack might have come within a national network.  In some cases, even down to specific IP addresses.  But even then you don’t know who the hacker was that was involved and you don’t know the hackers relationship to any state organization or anybody else for that matter.

ELAnd in terms of China specifically, the cyber-hacking, how prevalent is cyber-hacking from China compared to other countries like Russia or even the United States?  Is China being singled out here?

AS:  I think China is being singled out in a sense.  I mean given that it was a high profile attack on a company like Google, but also given the state of U.S.-China relations right now, that it fed into a worsening tenor in the bilateral relationship.  But in raw numbers, for criminal activity, clearly Russia is very high up there and we saw the political uses of cyber-hacking in the case of the Georgian war and Estonia and some other high profile political cases.  And there is a large amount of hacking that comes from the United States and that’s actually one of the big complaints on the Chinese side – is that the Chinese are being scapegoated and they themselves are often victims of attacks and many of those attacks come from servers in the United States.  When you look at the number of bad ISP – Internet Service Providers – that are hosting botnets and other kind of zombies that are attacking, there are a large number of them that are in the United States.  So, China is also a victim.

ELJust focusing on just China and the hacking there, can you explain maybe a little bit more what the hacker community is like in China.  Is it an organized community?  And what motivates the hackers – do they do this just for fun or are they ever “hired” for their skills?  And also how do they determine targets – how was Google determined?  Was that just something for fun or for profit?

hacked-computer-june08AS:  I think the community itself is incredibly hard to characterize.  It’s very diverse, it’s, I think, very decentralized.  The community represents kind of the similar community that there is in the United States and Russia.  There are what they called script-kiddies – people, teenagers who are doing it for fun or to show off or to see what they can actually accomplish.  There are criminals – people that are just hacking for financial gains.  There are what are called patriotic hackers – people that hack websites out of a kind of nationalistic feeling.  Then there are hackers that are probably employed by the Chinese government, probably by the military and the security agencies that are used to attack specific targets for political reasons.  And then there are hackers in the military that are thinking about how cyber would be used in an actual military conflict.

Of course, the important question is the relationship about all of these people and I don’t think we really have a very good idea.  Clearly, there is some blurring of boundaries of patriotic hackers and criminal hackers.  The system itself seems to be in many ways a kind of mirror of the system that has made China such a power in the global manufacturing which is that there are kind of contracts and subcontracts and subcontracts of what people do.  Somebody might be in charge of writing a very low-level code and that code is then packaged up and used by people above them, who may then might contract for a specific project or may sell it on the open market.  Certain things are just put out there on hacker websites and you can just download them and buy them just for your own thing.

Why Google was targeted.  If, as Google says that they were part of an attack that seems to have included at least 30 other technology companies, there does seem to be a push from Chinese intelligence community, from its espionage community, to try and get advanced technology from foreign companies.  So we have seen for at least five years, if not longer, pretty concentrated, focused attacks on defense contractors and other U.S. technology providers.  And then, once you add the attack on the dissidents as well, then that also seems to be one of the interests of the attacks.  But who was, who within the Chinese government organized it or put it in a larger strategy, I think that we really have no idea. 

EL:  I guess that raises kind of the other issue that has been floating around there with the Google incident and cyber-hacking in general, is to what degree is the Chinese government involved in some of these incidences?  I know Northrop Grumman issued a report last year to the US-China Economic and Security Commission analyzing the link between, hacking for military purposes, but this general hacking of corporations, could it be that the Chinese government is behind it?  And also, when you make this distinction of political hackers, would that be motivated by the Chinese government or is it just a by-product of the nationalism that seems very active in China right now?

AS:  I don’t think we know.  I think the most we can say is on the espionage side, it just matches, or it pushes in the OLYMPICS/SECURITY-PLAsame direction of a general concern we know that China has about technological dependence and wanting to gain as much technology from the West as possible.  That strategy I think has been in place for fifteen, twenty years.  That includes perfectly harmless, normal technology policy about how China is going to increase its own technological capabilities, goes from that to espionage and theft.  You would expect that that would include the normal type of espionage or bribing, stealing, theft of secrets from corporations, to now including cyber-espionage and attacks and those things.  So I would say that the government has a role in the sense that it has set this general direction of the policy and these concerns about technology and China’s desire for it.

Clearly the intelligence agencies probably have a sense of specific technology that they are concerned about and want to know more about.  So the hacking of the F-35 and the F-22 and those kind of things, those are clearly probably driven by government agencies who are looking at a potential conflict with the United States and want to know what those capabilities are.

But once you get to the level of Google – is there a government official that says, well if we hack Google, then we can give that information to Baidu [the popular Chinese search engine] and we can have a competitor, I don’t think we can know.  That clearly is a possibility but at this point, it may just be criminal.  It may be a criminal that turns around and says to Baidu – we can sell this to you.

On the dissident side, I think it is probably very similar also.  I think in some cases the security agencies may have….are targeting specific individuals who are using those capabilities.  In other cases criminal hackers go after people and then turn around and say to the intelligence agencies – we’ve got this person so either do something for us or pay us for the information.

ELIn the press it has often been the Chinese government attached to this cyber-hacking, but does the Chinese government ever see this cyber-hacking as a threat to its own rule either from domestic hackers or from hackers in the U.S.?  Are the government agencies ever a victim of the cyber-hacking and cyber-espionage either domestically or from abroad?

national-security-agency-sealAS: Yeah, I would think all of the time. I think, from the international perspective the Chinese basically assume that the United States is engaged in cyber-espionage all of the time.  And that given our capabilities, in particular the capabilities that exist in the NSA – the National Security Agency – that they are….we are probably getting more from them then they are getting from us, in the Chinese perspective, and that we are constantly hacking them.  So they point to that as well as to the discussions in the United States about creating a cyber-command in the military and discussions about controlling the commons and all these other things as kind of a representation of American hypocrisy.  We are talking about militarizing cyber-space while they are being hacked.  So I think yes, that’s clearly and issue from outside of China.

On the domestic front I think yes, that Chinese government agencies and corporations are being hacked.  There’s been a number of prominent cases of Chinese hackers spreading malware to try and steal identity numbers and virtual money from these multiple player games.  Very prominent hackers have been arrested and eventually imprisoned.  So I think that is part of the threat.

The other threat is of course is that, dealing with these patriotic hackers is a double-edged sword for the Chinese government.  There is a fear that while they are focusing externally, U.S. corporations or U.S. government websites, in the case of the Olympics on French websites and things like that.  But if their ire is turned inward then those people could hack Chinese government websites.   I think the Chinese government is very concerned and you can see that in discussions about their own cyber-security but also trying to develop new types of software.  The problem is that the Chinese is hyper-reliant in Microsoft, something like 90% of Chinese government offices use Windows.  A lot of that is pirated which means that it is not updated regularly for security patches.  So there is a lot of vulnerability.

EL:  You make this distinction between patriotic hacking, criminal hacking, commercial hacking, but under Chinese law itself, is hacking in general illegal?

AS:  It is.  There are laws on the books against hacking, criminal hacking, privacy laws.  Those were strengthened in

Cute & Cuddly until he infests your computer

Cute & Cuddly until he infests your computer

December 2008 and then again in February of this year I think.  The Chinese announced that they were going again to try to strengthen anti-hacking laws, in particular the kind of punishment for hackers.  Also on-line privacy issues and some tort issues about privacy and defamation.  Like I said, there are prominent cases of hackers who have been arrested and fined.  This guy who wrote this malware called Panda malware I think it was, and was sentenced to I think 3 years and fined $18,000.  So there are domestic laws against it.

ELAnd do you think the domestic laws are sufficient in dealing with this?  And also how do Chinese laws compare to laws in the United States against hacking?

AS:  I think they’re comparable.  I think the issue is with all laws in China has to do with implementation.  Clearly the issue for the United States or other countries, investigating hacking requires more cooperation from the Chinese about, who’s behind the attacks and actually following up on prosecution.  But I think within China, I suspect the issue is not the law per se but expertise….all the things we have in the United States about how do you prosecute cyber-crimes – expertise at the local level, resources, enough people staffing these kinds of issues.  From the Chinese perspective also, the U.S. hasn’t been all that helpful either.  I have heard a number of cases where the Chinese have turned around to the FBI and said –we think this hacking is coming from the United States.  And the United States has not been all that responsive from what I’ve heard.

EL: I guess cyber-hacking, it’s definitely a crime more without borders.  So how do you see international law or treaties coming into play here to battle the threat of cyber-espionage?

AS:  I don’t think there’s much to be done about espionage.  There’s no international treaties against espionage.  We engage in it, they engage in it, our allies engage in it.  I think that is likely to happen.  I think espionage we have to figure out how we are going to defend ourselves against.  The problem with espionage of course though is that it is hard to differentiate espionage from what could become vandalism or an attack.  So I think what we want to kind of agree on with the Chinese is that we know espionage is going to go on, but things like probing electricity grids, that should not be occurring or other kind of critical infrastructure.  We should be working on how do we declare those off limits.

On the criminal front there is a…the Council on Europe has this convention on cyber-crime.  I can’t remember how treatymany countries have signed it now, it’s about I think 20 or 40, I can’t remember exactly.  But part of the problem is that most of the major players haven’t signed it; the U.S. has signed it, Japan has signed it but Russia hasn’t signed it.  Which goes a long way in defining consistent standards across national borders about what a cyber-crime is, how do you punish hacking, create a deterrent.  The problem with Russia, China things that we see as freedom of speech they see as a cyber-crime so that has been a problem in the case of Russia.  But the Chinese seem to be at least studying the Council on Europe convention which often kind of the first sign that the Chinese are moving toward international standards.  So I think that is a way to move forward.  And within Asia itself, ASEAN has had a couple of discussion about creating a similar kind of convention on cyber-crime in the region.

And then the other issue is this international convention on arms control, on cyber-war.  The United States has entered into discussions with the Russians about it.  That I think is very difficult and I think unlikely to be very useful because in the kind of traditional terms of arms control verification, inspection, those are all impossible with cyber-weapons.  So, that I think is useful just for talking for talking’s sake but will not result in any kind of concrete agreements.

EL: Just to follow-up on the convention on cyber-crime, you said that one of the problems is definition of terms.  Is that the only thing that would hold back a country like China or Russia from signing on to this kind of convention?  Or are there other factors?

AS: I think that’s a big one but I do think also that right now at least China and Russia find it politically and strategically useful to kind of have this arms-length relationship with hackers.  As we talked about earlier, this ties the government’s willingness to directly use or indirectly use hackers for their own political purposes makes it….right now that’s a reason for them not to crackdown too hard on criminal hacking.  So that is I think another reason why it has been hard to create a common ground.

ELDo you think that there is any space for having maybe a bi-lateral agreement between U.S. and China or a tri-lateral agreement between U.S., China and Russia about issues of cyber-espionage like not probing electricity grids or things like that?  Or do you think it would have to be global?

AS:  Well I think any convention would have to be global.  But I think there is a benefit for having these bi-lateral discussions only if because this area is newly emerging and policymakers I don’t think are particularly cognizant of all the risks and problems involved in any of these issues.  So just having a discussion with the Russians and the Chinese and others about what the potential rules of the road might I think are probably pretty useful.

EL: Absent any kind of global agreement, how best should the U.S. government and U.S. corporations deal with this issue of their own?  How can they better prevent it from happening?  Or can they?

Howard Schmidt - Cyber Czar

Howard Schmidt - Cyber Czar

AS: That’s what we are struggling with now.  The United States finally has the cyber-czar in place, Harry Schmidt.  I think one of the big things that is still occurring in the United States is kind of a debate about what the best metaphor for this is, how do you think about this cyber-issue.  You have those like, the op-ed in the Washington Post several weeks ago by the former head of NSA, McConnell, about basically cyber-war and we’re losing it and his response was very much a militarization of cyber-space.  In fact he calls for something like the re-engineering of the internet so we can basically see where any attack is coming from.

And then you have Schmidt at a conference a couple of weeks ago saying – I don’t believe in cyber-war, I don’t think cyber-war is the right metaphor.  And you have those people talking about resilience and more of a public health model for how you respond to these things – you have to defend, you have to respond, you have to quarantine.

So I think we have this broad outline, we have this debate to settle in the States.  But the way we are moving is probably closer to the public health, well actually probably both tracks at the same time.  From the defense side I think you are beginning to see more traction on private-public cooperation, about definitions of standards – what does secure actually mean and how should it be implemented, more spending on R&D for cyber-security, more training of people and that’s a major issue is about getting people trained, more public awareness.  These are all domestic issues.

EL: And just a final question.  Since President Hu Jintao is in the United States, in Washington today, do you think in his side talks with President Obama, the issue of cyber-hacking and cyber-espionage will be coming up?  How important do you think the Administration views this issues especially in light of the fact that Secretary of State Clinton has openly talked about it?

AS:  I suspect it wasn’t brought up in these meetings if only because over the last two and a half weeks it has been a clear effort on both sides to try to get the relationship back on track.  Clearly the Administration’s major strategic concern right now is Iran and then with the currency being the second concern.  So those are the two issues, from what I’ve heard, were discussed in the meeting.  I suspect there were no reasons to bring up the cyber-issues because there are no solutions or discussion that is helpful to both sides at this point.  So other than just poking them in the eye with it, I don’t see why they would bring it up.  So I suspect it was not discussed.

EL: Thank you very much.  This was very interesting and I appreciate your time.

AS:  Thank you.

Warming Relations? China & the U.S.

By , April 2, 2010

In just a day, it appears that the bad blood that seemed to be spill between the U.S. and China is behind us.  Yesterday morning, China announced that it will participate in talks about sanctions against Iran, by late afternoon, President Hu Jintao of China announced that he will be visiting Wasnhington DC at the end of April, and this evening, the White House just issue a press release summarizing President Obama’s call with President Hu (text below).  Interesting turn events.  Does this signal a changed attitude between the two countries or perhaps just the natural ups and downs in a relationship between two powerful countries?

THE WHITE HOUSE

Office of the Press Secretary

______________________________________________________________________________

For Immediate Release                                                                                   April 1, 2010

Readout of the President’s Call with President Hu of China

Tonight, President Obama spoke with President Hu of China for about an hour. President Obama welcomed the decision by President Hu to attend the upcoming Nuclear Security Summit which will be an important opportunity for them to address their shared interest in stopping nuclear proliferation and protecting against nuclear terrorism.  They also discussed the importance of developing a positive bilateral relationship.  President Obama underscored the importance of working together to ensure that Iran lives up to its international obligations.  He also emphasized the importance of the United States and China along with other major economies implementing the G20 commitments designed to produce balanced and sustainable growth.

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