U.S.-China Economic and Security Review Commission, "Hearing: China’s Global Quest for Resources and Implications for the United States," January 26, 2012

Thursday, January 26, 2012
Dirksen Senate Office Building, Room 562
Washington, DC 20510

Opening Statement of Chairman Dennis Shea

Good morning, and welcome to the first hearing of the U.S.-China Economic and Security Review Commission's 2012 Annual Report cycle. As this year's Chairman, I want to thank you all for joining us today. We appreciate your attendance and we encourage you to attend our other public hearings throughout the year.

Our next hearing is scheduled for February 15th. At this hearing, we will examine China’s state-owned and state-controlled enterprises and explore the competitive challenges they may pose to the United States.

Future hearing topics this year will include EU-China relations, China’s civil and military nuclear capabilities, and developments in cyberspace. More information about the Commission, its annual report, and its hearings is available on the Commission's website at www.USCC.gov. With that, let's turn to this hearing's co-Chair, Commissioner D’Amato, for his opening statement.

Opening Statement of Commissioner C. Richard D’Amato

Thank you, Chairman Shea. Today’s hearing will examine “China’s Global Quest for Resources and Implications for the United States.” In particular, our panel discussions will focus on water, fuel and non-fuel mineral resources, and fish.

These are the resources upon which the Chinese “economic miracle” depends. Although Mao-era policy emphasized economic, energy, and political self-reliance, China’s endowment of natural resources no longer sustains its massive population and export-driven economy. China has been a net-importer of oil since 1993, and is aggressively seeking mineral resources overseas to supplement its domestic supply. With the exhaustion of traditional Chinese fishing grounds, China’s fleets have operated further and further afield, in places as far away as Africa and Latin America, and in disputed waters as well. China’s consumption of these resources has global implications.

In the case of water, China’s management of this domestic resource has significant, and potentially devastating, impacts on the region. The largest river systems in Asia all originate on the Tibetan Plateau, in China. These rivers are the lifeblood of Asia, sustaining agriculture, commerce, industry, and nutrition throughout the region. China’s heavy damming activities and water diversion projects threaten the natural flow of these rivers to downstream states like India, Pakistan, and the Mekong River nations. Bangladesh in particular is dependent upon rivers originating in China and India for 90 percent of its water.

While the United States and other countries around the world are party to regional or international water-sharing agreements to ensure the equitable distribution of this vital resource, China has not entered into any such agreements with its downstream neighbors. Some analysts have posited that this leaves China in the advantageous upstream position of being able to effectively “turn off the tap” for countries in South and Southeast Asia. Beijing’s management of transboundary rivers will be a key indicator of whether China is willing to be a responsible global player.

Today, we will focus on these and other questions. We have asked our witnesses for recommendations for Congressional action that can be suggested by the Commission to address the resource management issues raised today, and I am pleased that in the testimony we have received, our witnesses have provided a number of such recommendations for our consideration.

Before I turn to my co-Chair for the hearing, Commissioner Slane, to deliver his remarks, I want to thank Dr. David Menzie, Chief of Minerals Analysis from the U.S. Geological Survey, for taking time out of his busy schedule to join us here today.

I would also like to point out that Congressman Mike Coffman from Colorado will be submitting written testimony to the Commission for this hearing. His remarks will be posted to the Commission’s website shortly.

Opening Statement of Commissioner Daniel Slane

Thank you, Commissioner D’Amato, and good morning, everyone. I would like to begin by acknowledging and thanking Senator Ben Nelson and his staff for securing this room for us today.

China’s demand for natural resources highlights the growing interconnectedness of resource security and national security. In recent years, China’s resource policies have had significant security consequences worldwide. The United States recently sanctioned Chinese national oil company Zhuhai Zhenrong for its oil trade with Iran. Chinese mineral investments in African states like Zambia, Zimbabwe, and the Democratic Republic of the Congo have drawn criticism from human rights groups and governments worldwide for their opaque and exploitative nature. And China’s unofficial ban on rare earth exports to Japan in 2010 indicated to the world that China was willing to use critical resources as leverage in its diplomatic relationships.

Nowhere is this relationship between resources and national security more apparent than in the South China Sea. A hub of global commerce and a thoroughfare for 40 percent of the world’s oil, China is dependent on this region for the majority of its energy imports. Moreover, the region has potentially massive untapped oil and gas reserves, prompting Chinese analysts to refer to it as “the second Persian Gulf.” Fish is another valuable and disputed resource in the South China Sea, and fishermen and fishing activities have played an important role in the region’s territorial disputes. The South China Sea constitutes 10 percent of global marine catch, and the region’s fisheries are worth billions of dollars.

China’s naval modernization program is directed in part at ensuring Chinese access to these resources and shipping lanes. Fishermen and fisheries patrols are also significant actors in the disputes. China, in particular, uses the resources of its five maritime security agencies to enforce its claims in disputed waters, by escorting Chinese fishing vessels and enforcing seasonal fishing bans on foreign vessels. These civilian fleets allow Beijing to maintain a maritime presence in disputed waters without having a consistent or overt naval presence.

These policies and activities also affect the United States. As the U.S. implements its foreign policy “pivot” to Asia, the South China Sea is a natural focal point. Secretary of State Hillary Clinton stated in 2010 that freedom of navigation in the South China Sea is a “national interest” for the United States. Ensuring free transit along global sea lanes is vitally important to the United States and the world. Open lines of communication in global commons also enable U.S. military support for our friends and allies around the globe.

We look to our expert witnesses to shed light on these topics and provide recommendations for U.S. policies to ensure predictable, equitable, and secure management of these resources.

Finally, we regret that although the Commission extended invitations to the State Department’s Bureau of Oceans and International Environmental & Scientific Affairs, the State Department’s Bureau of Energy Resources, the Department of Energy’s Office of Policy and International Affairs, the Commerce Department’s National Ocean and Atmospheric Administration, and the Defense Department’s Defense Logistics Agency, all declined to testify.

Commissioners' Opening Statements
Chairman Dennis Shea
Hearing Co-Chair Dick D’Amato
Hearing Co-Chair Daniel Slane

Panel I:  Congressional Perspectives
[Members of Congress invited]

Panel II:  Administration Perspectives
Dr. W. David Menzie, Chief of Global Minerals Analysis, National Minerals Information Center, U.S. Geological Survey

Panel III:  Water Resources
Dr. Jennifer Turner, Director, China Environment Forum, Woodrow Wilson International Center for Scholars
Dr. Elizabeth Economy, Director of Asia Studies, Council on Foreign Relations
Ms. Grace Mang, China Program Director, International Rivers

Panel IV:  Oil, Gas, and Minerals
Dr. Mikkal Herberg, Research Director, Energy Security Program, National Bureau of Asian Research
Ms. Sarah Forbes, Senior Associate, World Resources Institute
Mr. Jeff Green, Esq., President and Founder, J.A. Green & Company

Panel V:  China’s International Fishing Activities
Dr. Lyle Goldstein, Associate Professor, China Maritime Studies Institute, U.S. Naval War College
Dr. Patrick Cronin, Senior Advisor and Senior Director of the Asia-Pacific Security Program, Center for a New American Security
Ms. Tabitha Mallory, PhD candidate, Johns Hopkins School of Advanced International Studies

Written Testimony:
Dr. Brahma Chellaney, Professor of Strategic Studies, Centre for Policy Research
Environmental and Development Desk, Central Tibetan Administration