Sec. 3401. Findings and sense of Congress regarding the PRC’s industrial policy
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Congress makes the following findings: The People’s Republic of China, at the direction of the Chinese Communist Party, is advancing an ecosystem of anticompetitive economic and industrial policies that— distort global markets; limit innovation; unfairly advantage PRC firms at the expense of the United States and other foreign firms; and unfairly and harmfully prejudice consumer choice. Of the extensive and systemic economic and industrial policies pursued by the PRC, the mass subsidization of PRC firms, intellectual property theft, and forced technology transfer are among the most damaging to the global economy.
Through regulatory interventions and direct financial subsidies, the CCP, for the purposes of advancing national political and economic objectives, directs, coerces, and influences in anti-competitive ways the commercial activities of firms that are directed, financed, influenced, or otherwise controlled by the state, including state-owned enterprises, and ostensibly independent and private Chinese companies, such as technology firms in strategic sectors. The PRC Government, at the national and subnational levels, grants special privileges or status to certain PRC firms in key sectors designated as strategic, such as telecommunications, oil, power, aviation, banking, and semiconductors.
Enterprises receive special state preferences in the form of favorable loans, tax exemptions, and preferential land access from the CCP. The subsidization of PRC companies, as described in paragraphs
(3)and (4)— enables these companies to sell goods below market prices, allowing them to outbid and crowd out market-based competitors and thereby pursue global dominance of key sectors; distorts the global market economy by undermining longstanding and generally accepted market-based principles of fair competition, leading to barriers to entry and forced exit from the market for foreign or private firms, not only in the PRC, but in markets around the world; creates government-sponsored or supported de facto monopolies, cartels, and other anti-market arrangements in key sectors, limiting or removing opportunities for other firms; and leads to, as a result of the issues described in paragraphs
(A)through (C), declines in profits and revenue needed by foreign and private firms for research and development. The CCP incentivizes and empowers PRC actors to steal critical technologies and trade secrets from private and foreign competitors operating in the PRC and around the world, particularly in areas that the CCP has identified as critical to advancing PRC objectives. The PRC, as directed by the CCP, also continues to implement anti-competitive regulations, policies, and practices that coerce the handover of technology and other propriety or sensitive data from foreign enterprises to domestic firms in exchange for access to the PRC market. Companies in the United States and in foreign countries compete with state-subsidized PRC companies that enjoy the protection and power of the state in third-country markets around the world. The advantages granted to PRC firms, combined with significant restrictions to accessing the PRC market itself, severely hamper the ability of United States and foreign firms to compete, innovate, and pursue the provision of best value to customers. The result is an unbalanced playing field. Such an unsustainable course, if not checked, will over time lead to depressed competition around the world, reduced opportunity, and harm to both producers and consumers. As stated in the United States Trade Representative’s investigation of the PRC’s trade practices under section 301 of the Trade Act of 1974 ( 19 U.S.C. 2411 ), conducted in March 2018, When U.S. companies are deprived of fair returns on their investment in IP, they are unable to achieve the growth necessary to reinvest in innovation. In this sense, China’s technology transfer regime directly burdens the innovation ecosystem that is an engine of economic growth in the United States and similarly-situated economies. . In addition to forced technology transfers described in this subsection, the United States Trade Representative’s investigation of the PRC under section 301 of the Trade Act of 1974 ( 19 U.S.C. 2411 ) also identified requirements that foreign firms license products at less than market value, government-directed and government-subsidized acquisition of sensitive technology for strategic purposes, and cyber theft as other key PRC technology and industrial policies that are unreasonable and discriminatory. These policies place at risk United States intellectual property rights, innovation and technological development, and jobs in dozens of industries. Other elements of the PRC’s ecosystem of industrial policies that harm innovation and distort global markets include— advancement of policies that encourage local production over imports; continuation of policies that favor unique technical standards in use by PRC firms rather than globally accepted standards, which often force foreign firms to alter their products and manufacturing chains to compete; requirements that foreign companies disclose proprietary information to qualify for the adoption of their standards for use in the PRC domestic market; and maintenance of closed procurement processes, which limit participation by foreign firms, including by setting terms that require such firms to use domestic suppliers, transfer know-how to firms in the PRC, and disclose proprietary information. The Belt and Road Initiative
(BRI)and associated industry-specific efforts under this initiative, such as the Digital Silk Road, are key vectors to advance the PRC’s mercantilist policies and practices globally. The resulting challenges do not only affect United States firms. As the European Chamber of Commerce reported in a January 2020 report, the combination of concessional lending to PRC state-owned enterprises, nontransparent procurement and bidding processes, closed digital standards, and other factors severely limit European and other participation in BRI and make competition [with PRC companies] in third-country markets extremely challenging . This underscores a key objective of BRI, which is to ensure the reliance of infrastructure, digital technologies, and other important goods on PRC supply chains and technical standards. On January 9, 2021, the Ministry of Commerce of the PRC issued Order No. 1 of 2021, entitled Rules on Counteracting Unjustified Extraterritorial Application of Foreign Legislation and other Measures , which establishes a blocking regime in response to foreign sanctions on Chinese individuals and entities. That order allows the Government of the PRC to designate specific foreign laws as unjustified extraterritorial application of foreign legislation and to prohibit compliance with such foreign laws. It is the sense of Congress that— the challenges presented by a nonmarket economy like the PRC’s economy, which has captured such a large share of global economic exchange, are in many ways unprecedented and require sufficiently elevated and sustained long-term focus and engagement; in order to truly address the most detrimental aspects of CCP-directed mercantilist economic strategy, the United States must adopt policies that— expose the full scope and scale of intellectual property theft and mass subsidization of Chinese firms, and the resulting harm to the United States, foreign markets, and the global economy; ensure that PRC companies face costs and consequences for anticompetitive behavior; provide options for affected United States persons to address and respond to unreasonable and discriminatory CCP-directed industrial policies; and strengthen the protection of critical technology and sensitive data, while still fostering an environment that provides incentives for innovation and competition; the United States must work with its allies and partners through the Organization for Economic Cooperation and Development (OECD), the World Trade Organization, and other venues and fora— to reinforce long-standing generally accepted principles of fair competition and market behavior and address the PRC’s anticompetitive economic and industrial policies that undermine decades of global growth and innovation; to ensure that the PRC is not granted the same treatment as that of a free-market economy until it ceases the implementation of laws, regulations, policies, and practices that provide unfair advantage to PRC firms in furtherance of national objectives and impose unreasonable, discriminatory, and illegal burdens on market-based international commerce; and to align policies with respect to curbing state-directed subsidization of the private sector, such as advocating for global rules related to transparency and adherence to notification requirements, including through the efforts currently being advanced by the United States, Japan, and the European Union; the United States and its allies and partners must collaborate to provide incentives to their respective companies to cooperate in areas such as— advocating for protection of intellectual property rights in markets around the world; fostering open technical standards; and increasing joint investments in overseas markets; and the United States should develop policies that— insulate United States entities from PRC pressure against complying with United States laws; counter the potential impact of the blocking regime of the PRC described in subsection (a)(12), including by working with allies and partners of the United States and multilateral institutions; and plan for future actions that the Government of the PRC may take to undermine the lawful application of United States legal authorities, including with respect to the use of sanctions.
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Sec. 3401
Findings and sense of Congress regarding the PRC’s industrial policy
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