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"While China has taken some steps to engage the international community, by and large the Communist Party of China has continued to steer policy in its own narrow self-interest at home and abroad, often without regard for international rules and norms," said a report of the United States-China Economic and Security Review Commission.
"As a result, worldwide concern about China is growing as more people see the implications of the rise of a powerful authoritarian state," said the voluminous 414-page report sent to the Congress on Wednesday.
The Commission Chairman William Reinsch said China has yet to create a system that effectively protects intellectual property; something that is required of all World Trade Organisation members. But US business software companies still report that China is the world's largest source of pirated software.
"Even more disturbing, China has stepped backward from its original promise to lower trade barriers and to treat foreign products and services fairly," he alleged.
"When combined with the military's excessive focus on other disruptive military capabilities, such as counter space operations, it presents an image of Chinese intentions that diverges significantly from Beijing's official policy of peaceful development," Reinsch said.
"As a result of China's growing economic and military strength, Beijing increasingly acts with greater assertiveness on the international stage," he added.
In its set of 43 recommendations, the commission urged the Obama administration to conduct an agency-wide comprehensive review of the US economic and security policies toward China to determine the need for changes to address the increasingly complicated and serious challenges posed by China to US international and domestic interests. It also recommended the Congress to urge the administration to employ all necessary remedies authorised by WTO rules to counter the anticompetitive and trade-distorting effects of the Chinese government's extensive subsidies for Chinese companies operating in China and abroad.
It asked the Congress to direct the US Department of Commerce to report annually on Chinese investment in the US including, among other things, data on investment in the US by Chinese state-owned enterprises and other state-affiliated entities.
The Congress should assess the adequacy of Department of Defence capabilities to conduct major operations in a degraded command, control, communications, computer, intelligence, surveillance, and reconnaissance environment for an extended period of time, the report said.
The commission recommended the Congress to investigate whether US sanctions have been imposed on all Chinese firms that have violated the sanction laws by investing in Iran's petroleum industry or providing Iran with refined petroleum products or advanced conventional weapons. It also recommended that the Congress urge the administration to sell Taiwan the additional fighter aircraft it needs to recapitalise its ageing and retiring fleet.